APRIL 12, 2014
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IN 1994, James Hardie asbestos delivered Stephen Wickham a death sentence; it will probably be carried out within the next couple of years.

Fighting for justice

This week, Wickham sat patiently with his wife at the back of a Sydney courtroom, fighting for justice. He was waiting to take the stand in a bid to force an organisation whose board is dominated by James Hardie Industries appointees to pay him the sort of compensation it has paid hundreds of others in his predicament.

Wickham’s experience shows how the James Hardie asbestos disease compensation problem, which everyone thought had been solved nearly a decade ago after a massive fight, still lurks.

Australians are developing asbestos-related diseases from past exposure to Hardie products at a faster rate than before. But there are renewed doubts about whether future victims will get their full share of compensation.

“Everyone thinks of asbestos as a problem of the past, and it’s not, it a problem of the present,’’ says Partner with law firm Turner Freeman who represents Wickham.

Wickham, 52, migrated from England in 1987, a theatre lighting designer who says he knew in a general sense about the dangers of asbestos. He also knew that the house he and his Australian ballerina wife, Wendy, bought in Perth in 1994 was made of what Australians called “fibro’’.

What he did not know was that fibro could mean the post-1983 version Hardie made without asbestos or that which it manufactured for several decades before, with the killer fibre. With their first child a year old and another on the way, Wickham says, “we were very excited and eager to fix up the house”. He took down part of a fence and took a sledgehammer to an old shed. “Dust and pieces of sheet went into the air around me, all over my clothes, face and hair and I breathed in the dust,’’ he says.

Eighteen years later, Wickham started feeling a severe pain in his chest and found himself short of breath. In August last year, Wickham’s doctor told him he had mesothelioma, an aggressive chest cancer that is caused only by inhaling asbestos, usually takes about 20 to 40 years to develop after exposure, has no cure and usually kills within six months to two years of diagnosis.

Wickham’s story is far from unusual; in fact, it’s increasingly common.

In the asbestos compensation business it is known as “third wave’’ exposure.

The first wave covered those who fell victim after being exposed by mining asbestos, transporting it, milling it and manufacturing products from it.

The second wave covers those who worked with the material as builders, carpenters, electricians, plumbers and other tradesmen.

The third wave refers to exposures when home handymen renovate their homes: drilling, sawing or smashing through asbestos building materials.

What is unusual is that Wickham had to go to court to make the funding organisation, the Asbestos Injuries Compensation Fund, pay his damages claim.

There’s now more than three decades of case law when it comes to asbestos disease litigation, and the principle of Hardie’s liability is thought to be very well established: Hardie manufactured a product that could seriously damage health, and did not adequately warn about it even after its health officers developed a considerable degree of knowledge about those risks.

Nearly a decade ago, the legal structure was streamlined in NSW for handling asbestos disease claims with the establishment of a protocol to determine the value of claims as the basis for a settlement, eliminating the need for the parties to go to court in most cases.

That change followed the epic battle when the previous fund Hardie set up to hive off its asbestos liabilities, the Medical Research and Compensation Foundation, was found to not have enough money to meet future claims.

Hardie initially refused to put any more funds into the MRCF, but a NSW special commission of inquiry and a parallel public campaign involving unions, asbestos victims, and the state and federal governments eventually forced the Hardie board, then chaired by Meredith Hellicar, to buckle.

Under an agreement between Hardie and the NSW government, the MRCF was replaced with the AICF in 2006, with a board of five directors, three appointed by Hardie and two by the NSW government. Despite being chosen by Hardie and the state government, the board is presented by both as operating as an independent body.

Hardie poured an initial $184 million into the AICF and is required to put 35 per cent of its operating “free cashflow’’ into the fund each year. Since then, the process has operated fairly smoothly, Segelov says, with hundreds of claims going through the system and settled without a court battle — until Wickham’s claim.

“Tanya told me that the AICF would likely settle, like, 95 per cent of claims of this nature,’’ Wickham says. Instead, the AICF decided to vigorously defend the claim, Segelov says, and with a particularly disturbing argument: it wanted to deny the former Hardie asbestos subsidiaries bore liability for third-wave claims.

The AICF claimed the subsidiaries had no duty of care for Wickham since he had not bought the asbestos sheeting or installed it — he only bought a house that had the material in it.

Plaintiff lawyers believe this question in law was dealt with ages ago; Hardie was found to have not warned the general public of such dangers and was therefore liable. Segelov says she suspects the AICF defended Wickham’s claim because it has worked out that the third-wave claims have been underestim¬ated, the fund’s financial situation is parlous, and it may run out of money unless it can beat these claims in court.

Not one of the three players who could have contradicted this dire explanation would do so.
The AICF would not say why it defended the Wickham case or discuss the fund’s financial health.
NSW Attorney-General Greg Smith also passed up the opportunity to reassure future asbestos victims that they would have their claims paid. A spokeswoman said: “The NSW government continues to take an active interest in the AICF … and will seek to ensure it continues to serve its purpose.’’

The spokeswoman noted that in 2009 the NSW and federal governments jointly created a $320m loan facility when the AICF started to feel a financial squeeze, into which it has dipped once.

Hardie says that since actuary KPMG’s next report is due at the end of May, “any comment before then would be inappropriate and premature’’.

An analysis of the AICF’s financial reports suggests it is barely keeping its nose above water. The cash injections from Hardie — zero in some years — in most years have not been enough to meet compensation claims. Insurance recoveries and investment income have been just enough to make up the gap.

Sandra van der Laan, a professor of accounting at the University of Sydney who has studied the Hardie saga and examined the AICF’s finances, says “the word I would use is worrisome’’.

KPMG’s “central estimate’’ of the former Hardie subsidiaries’ liability going into the future has blown out enormously since the AICF was set up, rising from $1.36 billion in its 2007 projection to $1.69bn in its 2013 forecast.

The key mechanism for the blowout, van der Laan says, was an underestimation of when claims would peak, particularly the very expensive mesothelioma claims, which can attract payouts in the millions in the case of comparatively younger, professional victims.

“One of the critical assumptions used to derive the (claims) estimate is the estimated peak year of mesothelioma disease claims, which was targeted for 2010-11,” Hardie said in last year’s results report.

In fact, the 2013 financial year figures showed claims continuing to rise: 310 mesothelioma claims in 2012-13, compared with 260 claims reported in 2011-12.

Van der Laan and a colleague, Lee Moerman from the University of Wollongong, warned in an article in 2009 that the deal struck between the NSW government and Hardie had particular problems: under the agreement, Hardie was not made liable to provide enough money for all future asbestos disease claims, only to provide a portion of its free cashflow going forward, which might or might not prove enough.

On this occasion, the AICF rolled over and settled Wickham’s claim on the third day in court on Wednesday, just before he was to take the stand in his by then well-publicised case before the NSW Dust Diseases Tribunal.

Wickham is content with the result, but his fury with the company that made products that are going to see him die an early and probably very painful death is undiminished.