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Home | Our Asbestos Experience | The Hardie enquiry

In 2001 James Hardie (as it currently operates) attempted to separate itself from the liabilities created by its old asbestos businesses. They attempted to do this by creating a Fund that would pay all future asbestos liabilities, and then moving all the other companies overseas. They also undertook some corporate restructuring that had the effect of ensuring that there was no other part of the group, that still operated, that could have any claim brought against it. Despite very public statements that the Fund had sufficient money to cover all future claims, James Hardie massively under-funded the Fund. The under funding created such a scandal that a Special Commission of Inquiry was set up in 2004. As a result of the Special Commission of Inquiry, James Hardie entered into an agreement to continue to add money to the Fund to cover all future claims. ASIC also prosecuted the company and the directors at the time of the establishment of the Fund for numerous breaches to the corporations law. Turner Freeman acted for asbestos victims organisations and Unions during the Special Commission.

Poisonous history

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 Hardies’ asbestos liabilities. James Hardie put $293m into the Fund for all asbestos liabilities, with any leftover monies to be spent on research.

Despite outcries from 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 Hardies’ asbestos products.

James Hardie then entered into a scheme of arrangements whereby the company left Australia and relocated to the Netherlands, leaving asbestos victims with access only to the $293m of the MRCF.

The Commission

In December 2003 the New South Wales Government announced an Inquiry into the setting up of the MRCF.

The Commission sat for nearly 200 hearing days, hearing evidence from James Hardies’ 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 Hardies’ CEO, Peter McDonald knew and that the Board ought reasonably to have known. Commissioner Jackson found that James Hardies’ actions 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.

The New South Wales government, Unions and support groups rejected this offer.

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.

Months and months of negotiations then followed between the New South Wales government, Unions, asbestos support groups and James Hardie as to the mechanism by which James Hardie would fund it’s future asbestos liabilities. The agreement was finalized in 2007.

Pro bono

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.

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