James Hardie Commission of Inquiry
In March 2004 the then Carr New South Wales Government announced a Special Commission of Inquiry into the Medical Research and Compensation Foundation established by the James Hardie group to be heard by Commissioner David Jackson.
James Hardie was the largest manufacturer of asbestos products in Australia, manufacturing asbestos cement building products, insulation products, and asbestos brake linings in New South Wales, Victoria, Queensland, South Australia and Western Australia from 1917 to 1987. In February 2001 James Hardie set up the Medical Research and Compensation Foundation (MRCF). The purpose of the MRCF was to pay off all of James Hardie’s asbestos liabilities. James Hardie put $293m into the Fund for all future asbestos liabilities, with any left-over monies to be spent on research.
Despite outcries by unions, victims support groups and Turner Freeman, James Hardie assured the governments, unions, the stock exchange and the public that the MRCF was fully funded and had sufficient funds to meet all legitimate compensation claims anticipated for people injured by James Hardie’s asbestos products. James Hardie then entered into a scheme of arrangement whereby the company left Australia and relocated to the Netherlands leaving asbestos victims access only to the $293m of the MRCF.
In December 2003 the New South Wales Government announced an Inquiry into the setting up of the MRCP. The Commission sat for nearly 200 hearing days, hearing evidence from James Hardie’s former directors, employees, actuaries and solicitors. Following detailed submissions made by the parties, the Commissioner handed down a two volume report. The Commissioner found that James Hardie established the MRCF for commercial reasons, that is to rid itself of its asbestos liabilities so that it could raise capital and list on the US Stock Exchange. The Commissioner found that the MRCF was massively under-funded, a situation that James Hardie’s CEO, Peter McDonald knew and that the Board ought reasonably to have known. Commissioner Jackson found that James Hardie’s action and that of its CEO, Peter McDonald and CFO, Peter Schaffron, were in breach of the law.
Just prior to the closing submissions, James Hardie made a conditional offer to pay for future asbestos liabilities if the common law system of claims was abolished. This offer was rejected by the New South Wales Government, unions and support groups. Following the release of the Commission’s Report, and after pressure by governments, unions, media and the public, James Hardie agreed to fund all of its future asbestos liabilities for 40 years.
Months and months of negotiations then followed between the New South Wales Government, unions and asbestos support groups and James Hardie as to the mechanism by which James Hardie would fund its future asbestos liabilities. The agreement was finalised in 2007 with the first payment by James Hardie.
Turner Freeman acted for the coalition of the unions and asbestos support groups at the commission. Turner Freeman attended at the Commission hearings, cross-examined witnesses and made detailed submissions. Turner Freeman’s partners devoted their time over an eight month period to the Commission of Inquiry. Turner Freeman acted in the Commission on a pro bono basis.