"In light of today’s outcome, one must question how much have the victims paid already in asbestos liabilities with medical bills, litigation costs at the diseases tribunal/compensation fund and with their actual lives during this last decade," Professor Michael Adams, Dean of the UWS School of Law, said.
"At the end of the day, this whole problem should have never occurred in the first place if James Hardie were as focussed on Corporate Social Responsibility as they said they were."
"This will be an on-going case study for law schools and business schools around Australia - on what should not occur if a company really believes in corporate social responsibility and quality good corporate governance."
After an epic court battle between the Australian Securities and Investments Commission and the James Hardie directors, which has taken the case all the way to the NSW Court of Appeal, 'punishments' for the breach of directors' duties from that board meeting in February 2001 have finally been handed down.
"The five non-executive directors received a fine reduction, from $30,000 down to $25,000, and the disqualification period reduced from 5 years to just 3 years," Professor Adams said,
"The two US based directors, who did not fully participate in the misleading media disclosure to the ASX had their penalty reduced to just $20,000 each and their bans finish on 31st December 2012."
"In respect of Peter Shafron, the NSW Court of Appeal increased the fine the trial judge imposed of $50,000 to $75,000 and the disqualification period for seven years."
The circumstances of the case started in 2001 when James Hardie Industries released a document to the Australian Securities Exchange (ASX) stating that it was moving from Australia to the Netherlands and that all asbestos victims would be fully funded for compensation.
In fact, JHI had only provided approximately $250 million and in 2004 the Jackson QC Report noted the compensation fund needed to be at least $1.5 billion to cover future claims. ASIC brought an action against the company for misleading conduct and the directors for breach of their duties under the Corporations Act 2001.
The NSW Supreme Court held the directors to be in breach of their duties and imposed penalties of fines and disqualifications. The non-executives directors successfully appealed to the Court of Appeal.
ASIC then took the matter to the High Court which found the non-executive directors were in breach of section 180, but sent the penalty determination back to the NSW Court of Appeal.
The Chief Financial Officer and Company Secretary/General Counsel appealed as executive directors. Mr Morley, as CFO did not appeal the outcome by the Court of Appeal of the breach of duty, but Mr Shafron did. The High Court ruled that the executive director was in breach of his duties and his penalty should be determined by the Court of Appeal.
Professor Michael Adams is an internationally recognised specialist with over 25 years corporate governance experience and research.