Penalty push for Hardie board

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This was published 14 years ago

Penalty push for Hardie board

By Elisabeth Sexton

NO PENALTY ‘‘over and above what they have been through in this litigation’’ was needed to deter former James Hardie directors from future misconduct, the NSW Supreme Court heard yesterday.

Tom Bathurst, QC, representing four of seven directors found to have breached their duty to the company, said his clients had suffered enough ‘‘as a result of expressing a press release too strongly’’.

The Australian Securities and Investments Commission wants the seven non-executive directors and three former executives banned from company directorship for at least five years each and fined a total of $2.8 million to $3.4 million.

Mr Bathurst and other defence lawyers argued yesterday that careers had already been affected by adverse publicity, that the contravention was an ‘‘isolated aberration’’, and that no one suffered any loss or damage from the February 2001 release, which said a new asbestos compensation trust would be ‘‘fully funded’’.

In April Justice Ian Gzell found that the seven directors had breached their duties to James Hardie because the press release they approved was ‘‘too emphatic’’ about the trust’s funding.

Before the release was issued, ‘‘the board had had before it numerous statements of the uncertainty of prediction of the level of asbestos claims’’, the judge said.

He ruled that the three executives breached their duties by failing to advise the board of the release’s shortcomings.

ASIC’s barrister, Tony Bannon, SC, said the defendants were ignoring ‘‘the evidence and Your Honour’s findings’’ that the emphatic wording of the release was crucial to the success of ‘‘separating’’ the group’s asbestos liabilities into the new trust.

‘‘It’s hard to understand how a statement of the true position could have been made without the whole proposal collapsing under political pressure, as the board papers themselves had predicted would occur,’’ Mr Bannon said.

A 2004 special commission of inquiry found the trust was grossly underfunded. James Hardie has since agreed to meet the shortfall, estimated in March to be $1.8 billion over 40 years.

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The former managing director Peter Macdonald was the sole defendant to concede the seriousness of his breaches of duty.

His barrister, David Studdy, SC, said Mr Macdonald accepted that he should be banned from company directorship for five to seven years and fined ‘‘in the range of $200,000 to $250,000’’.

ASIC wants Justice Gzell to disqualify Mr Macdonald for 12 to 16 years and to impose a fine between $1.47 million and $1.81 million.

The regulator is seeking bans of at least five years and fines of $120,000 to $130,000 for former non-executive directors Michael Brown, Michael Gillfillan, Meredith Hellicar, Martin Koffel, Dan O’Brien, Greg Terry and Peter Willcox.

It wants the former general counsel Peter Shafron to be banned for at least eight years and fined $320,000 to $450,000 and the former chief financial officer Phillip Morley to be banned for a minimum of six years and fined $150,000 to $200,000.

All defendants other than Mr Macdonald asked to be excused from any penalty.

Since the April judgment, Ms Hellicar has resigned from the boards of AMP, Amalgamated Holdings, the Sydney Institute and the Garvan Research Foundation.

Mr Willcox, who had been touted as a chairman of Telstra, will leave that board in November. He resigned as chairman of the CSIRO when ASIC launched its suit in 2007.

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