The High Court of Australia has ruled that seven former non-executive directors of building products manufacturer James Hardie misled the Australian stock exchange about the adequacy of a fund set up in 2001 to compensate victims of asbestos related diseases.
As part of a corporate restructuring in 2001, the company set up the Medical Research and Compensation Foundation (MCRF) to compensate victims of asbestos related diseases.
Despite public assurances from the company at the time that the foundation was fully funded, it was revealed just two years later that the MCRF faced a shortfall of more than $1 billion.
Subsequently, the NSW Supreme Court found in 2009 that former chairwoman Meredith Hellicar and ex-directors Michael Brown, Michael Gillfillan, Martin Koffel, Dan O’Brien, Greg Terry and Peter Wilcox misled the stock exchange about James Hardie’s capacity to fund asbestos claims.
These directors were banned from serving on company boards for five years.
That ruling, however, was subsequently overturned by the NSW Court of Appeal in 2010, but on Thursday, following six months of deliberations, the High Court upheld an appeal by the Australian Securities Investments Commission (ASIC) against the Court of Appeal’s decision. The court referred the matter back to the NSW Court of Appeal to determine issues relating to liabilities, penalties and disqualification.
The issue of asbestos and safety continues to plague construction sites in Australia today. Last month, for example, asbestos related concerns at a former James Hardie manufacturing site in Sydney’s west prompted union members to ban construction work at the site.