In brief — Court of Appeal over­turns deci­sion in James Hardie case

On 17 Decem­ber 2010 the NSW Court of Appeal over­turned the 2009 Supreme Court deci­sion which found the direc­tors of James Hardie to be in breach of their duties.


James Hardie direc­tors in the Supreme Court

In April 2009, the Supreme Court of NSW found nine direc­tors of James Hardie to be in breach of their direc­tors’ duties by approv­ing a mis­lead­ing pub­lic state­ment to the effect that a new­ly set-up fund intend­ed for financ­ing claims from asbestos vic­tims was ful­ly fund­ed”. Infa­mous­ly, the fund was lat­er found to be under­fund­ed by approx­i­mate­ly $1.5 bil­lion. As a result the direc­tors were found to have breached their duties and were each banned from sit­ting on any board for peri­ods rang­ing from 5 to 15 years and were each fined between $30,000 and $350,000.

Supreme Court deci­sion overturned 

On 17 Decem­ber 2010 the NSW Court of Appeal over­turned the 2009 Supreme Court decision. 

In a unan­i­mous deci­sion Chief Jus­tice Jim Spigel­man and Appeal Judges Mar­garet Bea­z­ley and Roger Giles ruled that the Aus­tralian Secu­ri­ties and Invest­ments Com­mis­sion (ASIC) had failed to prove that the direc­tors actu­al­ly passed a res­o­lu­tion approv­ing the statement. 

Jus­tice Spigel­man held that one of the grounds for this con­clu­sion was a find­ing that ASIC had a duty of fair­ness to call a wit­ness whose role was such that there was a sig­nif­i­cant prob­a­bil­i­ty that he had rel­e­vant knowl­edge” of what hap­pened at the board meeting. 

ASIC’s fail­ure to call David Robb, a for­mer part­ner of Allens Arthur Robin­son who was one of James Hardie’s main exter­nal legal advis­ers on set­ting up the trust and who attend­ed the board meet­ing, under­mined the cogency of ASIC’s case that the res­o­lu­tion was passed”, Jus­tice Spigel­man said. 

Impli­ca­tions of the suc­cess­ful appeal 

The con­se­quence of the new­ly imposed duty of fair­ness is that it is now even hard­er for ASIC to bring a suc­cess­ful claim against a direc­tor. This has prompt­ed a series of heat­ed debates con­cern­ing ASIC and its use­ful­ness as our cor­po­rate regulator.

For fur­ther infor­ma­tion please contact:

If you would like to repub­lish this arti­cle, it is gen­er­al­ly approved, but pri­or to doing so please con­tact the Mar­ket­ing team at marketing@​swaab.​com.​au. This arti­cle is not legal advice and the views and com­ments are of a gen­er­al nature only. This arti­cle is not to be relied upon in sub­sti­tu­tion for detailed legal advice.

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