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. There were protests against the companies' operations near the small
Aboriginal Australian community of
Baryulgil on the
NSW North Coast, with
Lyall Munro Snr and the NSW
Aboriginal Legal Service taking an active part in actions against the company. 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. In 1978 the company began putting warning labels on its products explaining that inhalation of the dust could result in cancer. In March 1987 James Hardie ceased all asbestos manufacturing activities. 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.
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). 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. The Jackson Report found that this 'best estimate' was 'wildly optimistic' and the estimates of future liabilities was 'far too low'. After this separation, James Hardie moved offshore to the Netherlands for what it claimed were significant tax advantages for the company and its shareholders. To make this move, the company had to assure Australian courts (as it was listed on the
Australian Securities Exchange) that the MRCF would be able to meet future liabilities. The courts were assured of this and that more money would be made available to its Australian asbestos victims through the issue of partly paid shares to MRCF obliging the new Dutch parent company to meet a call for funds if it were needed. The value of the call at the time was $1.9 billion. The move to the Netherlands therefore proceeded. However, the tax benefits which James Hardie expected to receive as a result from its move did not eventuate following the revision of tax laws in the United States in 2001 and later with the United States signing a new trade agreement with the Netherlands in 2006. Shortly after the move, an actuarial report found that James Hardie asbestos liabilities were likely to reach $574 million. The MRCF sought extra funding from James Hardie and was offered $18 million in assets, an offer the MRCF rejected. The estimate of asbestos liabilities was promptly revised to $752 million in 2002 and then $1.58 billion in 2003. The funding shortfall became of increasing concern in 2004 as it became clear that eligible victims would miss out on receiving compensation after it was revealed that in March 2003 James Hardie had cancelled the partly paid shares that were intended to be a safety net for the fund. In discussing the shortfall with the MRCF, James Hardie refused to accept further responsibility for the liabilities on the basis that the MRCF and James Hardie were separate legal entities.
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. 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. Despite this finding, there was immense political and social pressure on James Hardie to negotiate a compensation deal; governments were boycotting James Hardie products and unions were threatening to instigate a global union movement against the company based on refusing to handle James Hardie products. Following the results of the inquiry, James Hardie entered into negotiations with governments and trade unions in an effort to establish some sort of compensation system for eligible victims of James Hardie's products. In December 2004, James Hardie agreed to pay compensation to the victims of its products through a voluntary compensation fund. The details of the fund were to be legally determined by June 2005 but progress was stalled and the company refused to disclose the date the deal would be finalised. Further conflicts between the company and the
federal government over tax deductibility of donations to the voluntary fund saw finalisation of the deal further delayed. It was not until November 2006, after the federal government had created 'black hole' tax legislation, which made the contributions of James Hardie into the voluntary fund tax deductible, and had granted the voluntary fund tax-exempt status, that James Hardie finalised the compensation deal. There was immense pressure on the Federal Government from state governments, union leaders and victims to remove the tax problem. The final step in giving the voluntary fund a legal structure was approval of the scheme by James Hardie shareholders. In February 2007, 99.6% of shareholders voted in favour of the scheme and it began operating days later.
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. 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. 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. 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. The former directors, excepting Macdonald, appealed and the
New South Wales Court of Appeal subsequently overturned the ruling against these directors in 2010. ASIC appealed against the ruling in the
High Court of Australia in October 2011. In May 2012 the High Court upheld the 2009 New South Wales court decision and found that seven former James Hardie non-executive directors did mislead the stock exchange over the asbestos victims compensation fund. In 2021, James Hardie a New Zealand court dismissed a lawsuit claiming Harditex cladding caused weathertightness problems in New Zealand homes. The judge found that bad building methods rather than James Hardie products caused the problems. == Timeline ==