James Hardie Industries SE (JHX), a seller of building products, misled investors about funding asbestos- related claims and seven directors breached their duties by approving the statements, Australia’s top court ruled.
The High Court of Australia today overturned an appeal court ruling that said the Australian Securities and Investments Commission, the country’s corporate regulator, failed to prove its case because it didn’t use James Hardie’s solicitor David Robb as a witness at trial.
“There was no basis for inferring that Mr. Robb may have given evidence favorable” to the company, the High Court said in a summary of its ruling today. “ASIC not calling him caused no unfairness.”
The charges arose from a 2001 restructuring of James Hardie and the creation of two subsidiaries to assume the company’s asbestos-related liabilities. The company established the units as part of plans to move its incorporation to the Netherlands from Australia.
The company started the Medical Research and Compensation Foundation to pay claims of people who were injured by asbestos products it used to produce and said it was “fully funded” to meet future claims. By 2009, the fund was running out of money and James Hardie said it might be unable to meet its claims within two years.
The High Court, in a separate decision, found that Peter Shafron, the company secretary and general counsel at the time of the announcements, failed to discharge his duties by not advising the board that a study he had commissioned to predict asbestos-related liabilities was incomplete.
The cases are: Peter James Shafron v. Australian Securities and Investments Commission. 2012/HCA18. High Court of Australia (Canberra). Australian Securities and Investments Commission v. Meredith Hellicar. 2012/HCA17. High Court of Australia (Canberra).
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