History
In 1978 the effects of pleural abnormalities and other asbestos-related diseases were beginning to show up in the former mine workers. While other companies were involved in similar asbestos-related activities, most notably CSR, more than 50% of claims made to the Dust Diseases Tribunal of New South Wales in 2002 were brought against companies in the James Hardie group.[23]
There were protests against the companies' operations near the small Aboriginal Australian community of Baryulgil on the NSW North Coast, with Lyall Munro Snr[24] and the NSW Aboriginal Legal Service taking an active part in actions against the company.[25][26]
James Hardie and its subsidiaries had been providing compensation for victims of its operations since the 1980s. Though some earlier claims had arisen, the proliferation of cases from the 1980s onwards forced James Hardie to acknowledge that it had known asbestos to be dangerous. James Hardie nonetheless maintained that it had done everything possible to protect workers.[27][28] In 1978 the company began putting warning labels on its products explaining that inhalation of the dust could result in cancer.[29] In March 1987 James Hardie ceased all asbestos manufacturing activities.[30]
As concern grew about the serious adverse health effects of asbestos, in the mid-1980s James Hardie developed an asbestos-free fibre cement technology, without the dangers associated with asbestos.[31]
The MRCF and move to the Netherlands
James Hardie had been structured as a parent company operating through subsidiaries since the 1930s. All asbestos operations, including the provision of compensation, were undertaken by James Hardie's subsidiaries, principally James Hardie and Coy and Hardie-Ferodo (later known as Jsekarb).[32] Between 1995 and 2000, James Hardie (the parent company) began to remove the assets of these subsidiaries (since renamed Amaca and Amaba respectively), while leaving them with most of the asbestos liabilities of the James Hardie group.[32]
In 2001 these two companies were separated from James Hardie and acquired by the Medical Research and Compensation Foundation (MRCF) which was essentially created in order to act as an administrator for Hardie's asbestos liabilities. Then CEO of James Hardie, Peter McDonald, made public announcements emphasising that the MRCF had sufficient funds to meet all future claims and that James Hardie would not give it any further substantial funds. Indeed, the net assets of the MRCF were $293 million, mostly in real estate and loans, and exceeded the 'best estimate' of $286 million in liabilities which had been estimated in an actuarial report commissioned by James Hardie.[33] The Jackson Report found that this 'best estimate' was 'wildly optimistic' and the estimates of future liabilities was 'far too low'.[34]
Inquiry
On 12 February 2004, a judicial inquiry into the matter was commissioned by the Government of New South Wales. The findings were very critical of James Hardie and its management.[40] Amongst other findings, it found that the actuarial reports commissioned by James Hardie which estimated liabilities at $286 million were inadequate because they used a financial model which made unfounded predictions on the value of investments held by Amaca and Amaba, the figures were subject to numerous unspecified conditions and they did not account for the effect of separating Amaca and Amaba from James Hardie.[33] However, the inquiry found that James Hardie was under no legal obligation to provide compensation.[41] Despite this finding, there was immense political and social pressure on James Hardie to negotiate a compensation deal;[42] governments were boycotting James Hardie products[43] and unions were threatening to instigate a global union movement against the company based on refusing to handle James Hardie products.
Legal action
After the inquiry in 2004, prosecutors were considering bringing civil and criminal charges against the CEO and other senior executives for making fraudulent statements as to the liquidity of the MRCF.[49] In February 2007 every member of the 2001 board and some members of senior management were charged by the Australian Securities & Investments Commission (ASIC) with a range of breaches of the Corporations Act 2001 including breach of director's duties by failing to act with care and diligence.[50]
ASIC also undertook investigations into possible criminal charges against the company's executives but in September 2008 the Commonwealth Director of Public Prosecutions decided there was insufficient evidence and charges were not pursued.[51]
In 2009, the Supreme Court of New South Wales found that directors had misled the stock exchange in relation to James Hardie's ability to fund claims. They were also banned from serving as board members for five years. Former chief executive Peter Macdonald was banned for 15 years and fined $350,000 for his role in forming the MRCF and publicising it.[52]
