Thursday, May 3, 2012

James Hardie directors breached duties, High Court rules

The High Court has ruled that seven former James Hardie non-executive directors breached corporate law by making a misleading statement about the company's asbestos compensation fund.

In a major victory for the corporate regulator, the High Court upheld a landmark 2009 New South Wales court decision that the former board members, including high-profile former chairwoman Meredith Hellicar, breached their duties as company directors when they approved a misleading draft announcement to the stock exchange in 2001.

Listen to my interview with the chairman of the Australian Securities & Investments Commission, Greg Medcraft, broadcast on The World Today.

Read a summary of the High Court ruling here.

The statement said the company had established a fully funded compensation plan, the Medical Research and Compensation Foundation, to pay claims from people suffering asbestos diseases.

But the foundation was underfunded by more than $1.5 billion and faced bankruptcy.
The Australian Securities and Investments Commission (ASIC) won the first round in the New South Wales Supreme Court, when the directors were fined and banned from serving on boards for five years.

That ruling was then overturned by the New South Wales Court of Appeal in 2010.

But today the High Court ruled against the directors and ordered the case be returned to the appeal court to decide outstanding matters, including penalties.

In a statement, James Hardie took note of today's decision, but said it was too early to know how much the ruling would cost the company.

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