Update CSR's $3 billion plan to split into two companies has been stopped by the Federal Court because the potential impact on asbestos disease sufferers is "inconsistent with public policy and commercial morality".
Justice Margaret Stone has rejected CSR's application for an order convening a shareholder meeting to vote on the demerger, meaning that the scheme of arrangement cannot proceed.
Concerns about the impact of the demerger on asbestos compensation were raised by the Australian Securities and Investments Commission, the NSW Government, the Asbestos Injuries Compensation Fund (a body set up by James Hardie after its compensation trust was found in 2004 to be grossly underfunded, which often shares liability for compensation with CSR) and James Hardie.
The judge said expert evidence put to the court by CSR and these objecting parties showed "divergent" opinions on whether CSR would be able to meet its liabilities to asbestos victims if the spin-off of its sugar business into a new company proceeded.
"It is not the role of the court to resolve such uncertainty however the degree of uncertainty evidenced by the divergent opinions has led the court to conclude that the draft statement explaining the implications of the proposed demerger to shareholders would not adequately disclose those uncertainties," Justice Stone said.
"Moreover, the court has also concluded that the potential disadvantage to those having asbestos related claims is such that the demerger is inconsistent with public policy and commercial morality," she said.
"After demerger CSR would be less likely to be able to meet its future asbestos liabilities."
CSR responds
CSR issued a statement, noting that the court's decision ''appears to have broad implications.''
''CSR will review the judgement and will advise the market when it has further considered all legal and commercial aspects of the matter,'' CSR said.
The company defended its handling of the asbestos issue: ''CSR has always taken its asbestos liabilities very seriously.''
''In developing the demerger proposal, the board has undertaken significant due diligence and given prudent and comprehensive consideration to conclude that CSR will continue to responsibly meet all asbestos claims, as it has for over 20 years.''
CSR shares had earlier gone into a trading halt ahead of the ruling, and were last trading at $1.845.
Last month, CSR rejected an approach by China's Bright Food Group, to buy its sugar and renewable energy division for $1.5 billion.
esexton@smh.com.au
SMH
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