Search
This area does not yet contain any content.
Justinian News

Fresh upsets ... Hunt & Hunt writes to a judge ... Unwarranted correspondence slapped down ... Failure to reply to email from judge's chambers ... Impertinence ... ART Deputy President birched ... Failure to understand the law of legal professional privilege ... Ginger Snatch reports ... Read more >>

 

Politics Media Law Society


The rotten fruit issue ... Corruption busters busted for bias, concealment, and conflicts … Mistress of the office couch more damaged than the rape victim … Next round for Linda Reynolds … Reputation damaged by former attorney general … Miranda Devine smooches Trump ... Read on >> 

This area does not yet contain any content.
Free Newsletter
Justinian Columnists

From the cutting room floor...Handsy Heydon goes to Perth ... Celebrity tour ... Conferenceville ... Dicey's job application speech from 2002 ... Other High Court judges mocked as "vegetables" ... Mason CJ ridiculed ... Speech bowdlerised for public consumption ... Courage of conviction MIA ... From our National Affairs Correspondent ... Read more >> 

Blow the whistle

 

News snips ...


 

Lib-Nat government of Queensland appoints two new senior judges ... Court of Appeal and Northern Supreme Court ... Doyle KC and Johnstone KC ... Both from the same chambers ... Diversity at work ... More >>

Justinian's Bloggers

Letter from London ... Weather report ... Starmer sinking ... Farage rising ... Fake law firm ... Fake cases ...  NHS employee cleans up with woke case for hurt feelings ... Floyd Alexander-Hunt files from Blighty ... Read more >> 

"If there’s one family that hasn’t profited off politics, it's the Trump family."

Eric Trump, reported in the Financial Times, June 27, 2025 ... Read more flatulence ... 


Justinian Featurettes

Holding onto Hope ... Gina Rinehart's Bleak House ... Seeking chunks of the huge iron ore pit, Hope Downs ... Tracing the tangled Wright, Hancock, Rinehart litigation ... Allegations of fraud against the family trust ...Manoeuvring ... Tax "advice" ... Shifting vesting date ... Money, the root of unhappiness ... Anthony-James Kanaan reports ... Read more >> 


Justinian's archive

The High Court of Queensland ... Where to now for Bookshelves Brandis? ... Banana Benders in charge ... Eleven names scratched by CJ from Sunshine silks list ... Prosecutors dominate NSW Dizzo appointments ... Farewell to Equity Queen ... What life looked like nine years ago ... From Justinian's Archive, December 2, 2016 ... Read more >> 


 

 

« Bathurst backdown on "drones" | Main | A trickle breaks the drought »
Thursday
May102012

Spigelman trounced

The High Court comprehensively knocks for six the NSW Court of Appeal's most peculiar decision in the James Hardie directors' case ... Duties of disclosure could not be more clear, or more necessary ... from Professor Michael Adams, dean of the law school at the University of Western Sydney ... Is Twiggy Forrest next? 

Hellicar: fundamental breach

TEN days have passed since the High Court of Australia handed down its decision in the James Hardie case relating to the infamous media release in February 2001.

It is hard to calculate how many victims have died of asbestos-related diseases caused by products manufactured by James Hardie (and others) in the period since the "fully-funded" compensation announcement was made.

The impact has been enormous, particularly on employees and contractors hired by James Hardie to mine asbestos and manufacture building products, builders and building owners, and even families infected by the washing of clothes containing asbestos.

Of course, this case, was not about the merits of asbestos and whether the company did something legally or even morally wrong with a killer material.

The case is about the heart of directors - or more precisely officers' duties in a particular set of circumstances.

The original media release to the Australian Securities Exchange in 2001 had the unfortunate words "fully-funded" in respect of the amount of compensation put into a trust fund to cover future asbestos-related claims.

This important document was part of James Hardie group's restructure, by way of a scheme of arrangement, to move its domicile from Australia to the Netherlands - for tax and administrative purposes.

At the time there was concern as to the "real reasons" for moving the company off-shore, even though over half of James Hardie's business was being transacted in the USA.

There was little media criticism of what the company sought to do.

A few years later, the NSW Special Inquiry into the asbestos fund conducted by David Jackson QC found a short-fall of nearly $1.5 billion - and legal questions started to be raised in detail.

The High Court case is, in fact, two separate cases and in some ways has travelled through the Australian legal system relatively quickly.

One of the first decisions by the Australian Securities and Investments Commission was to determine if there was a civil penalty case against the officers and, more seriously, if there were any criminal charges.

The Director of Public Prosecutions determined early in the piece that there was insufficient evidence in respect of a criminal matter, so the case has had a strong focus on civil penalties.

The NSW Supreme Court in 2007, in a clear and forensic judgment of Justice Gzell, found there was certainly a series of breaches to the Corporations Act 2001 (Cth).

In particular, the companies had been misleading in making the "fully-funded" statement as part of the media release to the ASX.

The directors had received expert advice from the usual professional parties and they authorised a version of the media release, as recorded in the official minutes of the board meeting.

All the executive directors (CEO, CFO, company secretary/general counsel) were held to be in breach of their duties and all the non-executive directors, including the chairwoman, Meredith Hellicar, were held to be in breach of the fundamental s.180 duty of reasonable care.

Although a strong penalty of $350,000 plus a 15-year disqualification to taking part in the management of a company was imposed on the CEO Peter Macdonald, the other officers received relatively minor penalties - particularly the non-executive directors.

However, the reputational damage of being fined (sorry, incurring a civil pecuniary penalty) and a five-year disqualification, was effectively ruinous in boardroom circles.

All the non-executive directors appealed to the NSW Court of Appeal, as did the CFO and company secretary/general counsel, Peter Shafron (ex-Allens).

The Court of Appeal in 2010, just before Christmas, handed down what I would describe as a "surprise decision" - finding that Shafron as company secretary and general counsel was not necessarily an officer of the company and that there were evidential questions around the selection of witnesses by ASIC as a model litigant and the "duty of fairness".

There was no real question as to the fact that the companies in question had made a misleading statement. There was also great discussion over the value of the minutes and the correct procedures to be followed under the legislation.

ASIC received a devastating blow to its reputation and, in the light of some other high profile cases, meant it was correct to seek special leave to appeal to the High Court to determine this matter.

Shafron also appealed as to his role as an officer with the combined duties of the company secretary and providing legal advice as general counsel.

Consequently, two judgments were handed down on May 3 - ASIC v Hellicar & others and Shafron v ASIC

In both cases the High Court judgments provide a clear outcome.

All the non-executive directors were in breach of the basic requirement under s.180 of the Corporations Act - that as directors they did not apply reasonable care and diligence as officers of the company.

In just 86-pages (315 paragraphs) the HCA found the breach of law to be made out. Further, from an evidential point of few there was no requirement to call certain additional witnesses under a "duty of fairness". 

The actual penalties imposed by Gzell have been re-submitted to the NSW Court of Appeal and so the case is not actually over, yet. 

Similarly, in respect of Shafron, in a 14-pages (47 paragraphs) it was found that he was an officer of the company and the combined roles of company secretary and general counsel could not be distinguished - in fact are "indivisible and must be viewed as a composite whole".

The court found that he had failed to exercise the standard of care in advising the CEO and the board of directors in relation to the information to be sent to the ASX and the expert report produced by acturial consultants Trowbridge.

There are other lessons in respect of evidential matters, including the role of minutes and the degree of reliance on expert advice.

Justice has been done, in the sense that the officers of James Hardie at the relevant time have been held to account.

This has not provided any additional funding to the victims of asbestos, but must act as a wake-up call to all directors and officers in respect of their primary duties to the corporation, the shareholders and other stakeholders, such as innocent victims.

In the light of the Centro case decisions and the likely outcome by the High Court for Andrew Forrest in relation to Fortescue Metals Group, officers need to be on a very clear learning curve concerning their duties of disclosure.  

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.
Member Account Required
You must have a member account on this website in order to post comments. Log in to your account to enable posting.