James Hardie Appeal Arguments Are Underway - Should Outside Counsel Have Been a Witness ?

As described here in an Australian newspaper article, the James Hardie appeal is underway regarding disclosure issues regarding its asbestos risks and plans for managing the situation.  The case is one of two important cases on appeal in Australia.  For more background on the issues, see this long prior post or any of the many posts indexed under James Hardie.

An issue on appeal is whether ASIC (the Australian version of the SEC) should have called as a witness an outside lawyer to James Hardie. The newspaper article puts it this way:

"The appeal court found that ASIC had failed to call key witness David Robb, a former partner of Allens Arthur Robinson and one of James Hardie's main external legal advisers.


The court found Mr Robb would have been able to testify about whether the directors signed off on the misleading statement about the company's ability to fund asbestos claims."

More Bad News for James Hardie and Its Asbestos Compensation Fund

Managing legacy liabilities is never easy. For some, it can be a nightmare. Thus, James Hardie and its asbestos compensation fund took yet another hit yesterday through the loss of a tax appeal.  The loss is  described here in mass media in Australia. The mass media is focused on the fund's long term survival prospects in light of the adverse ruling and the continuing slumps in the building sector that buys product from James Hardie entities. 

The company issued a statement yesterday (go here to investor relations page), but did not include a link to the opinion. According to the statement. the loss will result in a charge of about $ 330 million (US) unless there is a successful further appeal. The company also says it will not violate loan covenants by taking the charge.

 

 

Hardie and CSR Avoid "Collusion" Charges for Trial This Week

Here is an article updating this prior post on the effort to amend "collusion" claims against James Hardie and CSR in an asbestos personal injury trial. In short, the court denied the motion to amend on the eve of trial in this particular case, but is said to have indicated that similar amendments might  be allowed in other cases not so close to trial. See the full text below.
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Judge denies late changes in asbestos case

LEONIE WOOD



February 10, 2010 .


THE Victorian Supreme Court has declined late changes to an asbestos damages case in which a Melbourne man, who is dying from mesothelioma, planned to accuse James Hardie and CSR of joining forces to disguise the dangers of asbestos.

Justice Terry Forrest said the proposed amendments in their present form would not be allowed.


Although the judge said the proposed pleadings in the case of Robert Berengo were deficient, he also made it clear that litigants in the future might well be able to allege joint liability if they properly set out the material facts and the case that is to be answered.

Mr Berengo wanted to allege that the Australian asbestos manufacturers deliberately did not put their brand names on their asbestos-related products during the 1960s and 1970s, making it harder to identify which of the two should bear liability in cases of injury and disease.


He also wanted to allege that the companies had agreed to co-operate to dissuade regulators from restricting the use of asbestos and to influence public opinion about the dangers of their product.


Mr Berengo's trial, in which he accused the two companies of negligence, begins on Tuesday

James Hardie and CSR - Allegations of "Collusion"

The asbestos litigation pot continues to boil in Australia. Over the last couple of weeks, CSR was denied the opportunity to split its business, a topic I keep hoping to get to, but life is busy. For now, here is a new article about plaintiff's seeking to amend a complaint to seek to prove up purported collusion between Hardie and CSR. How much does that sound like US litigation ?  The text also is pasted below.

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Hardie, CSR 'colluded', sufferer says LEONIE WOOD


February 8, 2010 .

THE building products manufacturers James Hardie and CSR have been accused in court of joining forces during the 1960s and '70s in a bid to dissuade regulatory authorities from restricting or controlling the use of their potentially lethal asbestos products.

The court has also heard allegations that James Hardie and CSR deliberately did not mark their company names on asbestos-laden products so that they could conceal which company manufactured them - a move which, the court heard, would make it harder to identify which company had liability for future claims of potential injury or disease.

The allegations emerged on Friday before Justice Terry Forrest in the Victorian Supreme Court during preliminary proceedings ahead of a trial in which a Melbourne man, Robert Berengo, is claiming damages from James Hardie's asbestos liability fund, Amaca, and from CSR.

The fresh allegations come just days after Justice Margaret Stone in the Federal Court in Sydney cruelled CSR's plans to spin off its sugar business, citing concerns about the company's future ability to meet asbestos-related claims.

Justice Forrest will decide tomorrow if Mr Berengo's lawyers can amend his statement of claim to incorporate the new allegations of collusive behaviour.

If the judge allows the allegations to proceed, it may pave a new route for claimants in asbestos-related cases who often struggle to prove which of the two Australian asbestos manufacturers was responsible for products that caused their asbestosis or mesothelioma.

Counsel for both James Hardie and CSR criticised the form of the proposed amendments, with Graeme Uren, QC, for CSR describing them in court as ''a porridge of assertions that don't lend easily to a legal conclusion''.

Mr Berengo was a young boy in the early 1970s when he accompanied his father, a builder, to properties where asbestos-cement sheeting and other asbestos products would be sanded, altered or removed.


The proposed allegations are that James Hardie and CSR, which owned Wunderlich, had an agreement or arrangement about how they would influence Australian public opinion and regulatory authorities in the 1970s, and that they co-ordinated their lobbying of authorities and responses to media articles to stifle public concerns about asbestos.

Counsel for Mr Berengo, John Gordon, told the court that his client planned to allege that ''over a considerable period of time, the two companies ... formed arrangements, agreements or an understanding to act together to influence the public debate on the dangers of asbestos, and to influence regulatory authorities on the control of, and the use of, the asbestos''.

He said that, as a result, the public was not warned by the companies of the risks and dangers of using asbestos products.

CSR sold Wunderlich to James Hardie in 1976. The case is due to begin on February 15.

Non-Dry Looks at Business History, Including James Hardie - A New Book: "Killer Company"

Back to Australia, asbestos and James Hardie.

As described in this prior post, a rather dry paper by KPMG describes the history of James Hardie and its many intersections with asbestos and asbestos-containing products. That dry look is of course needed and appropriate in the sense that decisions need to be made based on technical information.

There are other sides to the story. A new expose/investigative journalism book is out regarding James Hardie. A book review is set out below from the Ban Asbestos web site run by Laurie Kazan-Allen, sister of an American plaintiff's lawyer, Steve Kazan. The review is by Jock McCulloch, who also has written books on "asbestos companies."  The words of the book review are  worth reading as a counterweight to the dry story told by KPMG.
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Book Review: Killer Company - James Hardie Exposed

Matt Peacock. Sydney: ABC Books, 2009

Reviewed by Jock McCulloch

Australia has the highest recorded incidence of mesothelioma in the world because in the period from 1945 until the mid 1970s Australia was one of the highest users of asbestos based products. The local market was dominated by a single firm James Hardie Asbestos and to a large degree the Australian asbestos story is the story of James Hardie.

James Hardie shares much in common with Johns Manville, Eternit and Turner & Newall. Hardie was a vertically integrated company which enjoyed great commercial success in the decades after 1945. That success was built on an ever widening range of building and insulation materials. Hardie owned asbestos mines in Australia, Canada and briefly in Zimbabwe and manufacturing plants in Australia, New Zealand, Malaysia and Indonesia. Like Johns Manville, it has survived the asbestos scandal to re-invent itself as a non-asbestos building materials manufacturer. Like Johns Manville, James Hardie has used a variety of strategies to inure itself from the people it has injured.

Killer Company is a major contribution to the literature on the asbestos industry. The book has grown out of Matt Peacock's sustained engagement with the issue of asbestos and health. It is based on long hours of archival work sorting through Hardie's internal correspondence. Peacock has also interviewed many of the key players. The result is an insight into the mentality and behaviour of an important asbestos company.

Matt Peacock has played a major role in publicising the risks of asbestos in Australia. In his work as a journalist he has helped to expose the behaviour of the asbestos industry toward its employees, and the consumers of its products. In 1977 Peacock broke the story of Baryulgil, a small chrysotile mine which Hardie operated in northern New South Wales. The work force at Baryulgil was drawn from the indigenous Bundjalung people who lived and worked under conditions every bit as severe as those endured by black workers in South Africa. It was Matt Peacock not James Hardie who warned the community of the risks of asbestos disease. He was also instrumental in forcing a Parliamentary enquiry into the operation of the Baryulgil mine.

In Killer Company Peacock reviews the extent to which Hardie's senior management engaged in the same kind of behaviour that has been documented in British and US courts about Cape Asbestos, T&N and Johns Manville. Hardie knew far more about the risks of asbestosis, lung cancer and mesothelioma than did regulatory authorities or trade unions. Armed with that knowledge it refused over a period of decades to reduce the risks faced by its employees or the users of its products. When a flood of litigation began in the mid 1970s Hardie avoided bad publicity by settling cases out of court. When that failed it sought to move its assets out of the reach of potential claimants. The bad publicity surrounding a move of assets to The Netherlands in 2004 has seen James Hardie become probably the most reviled corporation in Australia. Peacock shows that such a reputation is well deserved.

The health risk of asbestos has taken many forms from workplace exposure, to the dumping of waste and the use of fibre in the most unlikely of products such dental amalgam and children's play dough. Until the 1970s it was common for waste from Hardie's Adelaide factory to be used to dress domestic driveways, pathways and garage floors. In New South Wales thousands of tonnes of waste was dumped into rivers and creeks and on roadways and football ovals. Such waste is virtually indestructible but at least when deposited outdoors by-stander exposure to airborne fibre is sporadic.

Each year thousands of tonnes of crocidolite, amosite and chrysotile arrived at Hardie factories which resulted in the accumulation of hundreds of thousands of hessian bags. In Sydney and Melbourne the bags were recycled by market gardeners to carry potatoes, carrots and onions. In Western Australia wheat farmers received fertiliser in the same bags. Over the period from 1944 to 1966 the Wittenoom crocidolite mine in Western Australia produced 160,000 tonnes of fibre. That fibre was transported in 45 kilograms hessian bags. Matt Peacock has discovered that hundreds of thousands of those bags ended up in domestic dwellings as carpet underlay. Consequently, an unknown number of Australian homes have been contaminated and an unknown number of residents continue to live at risk, every hour of every day.

There is no easy way to estimate the human and commercial cost of the asbestos industry. That is because in parts of Asia and SE Asia the industry is alive and well. It is also because as Matt Peacock has shown the extent of by-stander exposure in the OECD states is still unfolding.

Killer Company is an important book.

Jock McCulloch

School of Global Studies

RMIT University,

Melbourne,  Australia.

January 21, 2010


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There are several other "business history" books related to "asbestos companies." Most of them include significant footnotes and bibliographies:


Blue Murder, by Ben Hills, describes in detail the situation related to the Wittenoom crocidolite mine in Australia, a mine owned for decades by CSR. The book discusses many things, including corporate fiber purchasers and uses.

Asbestos House - The Secret History of James Hardie Industries, by Gideon Harris, is a comprehensive account of that company. Numerous mentions are made of relationships between James Hardie, Turner & Newall, Cape Industries, Johns-Manville, and CSR.

The Way From Dusty Death, by Peter Bartrip, is a comprehensive discussion of Turner & Newall and asbestos regulations in the UK from the 1890s through 1970. This book also discusses interactions between various industry titans, including Cape Industries.

Jock McCulloch has written two books on asbestos, focused primarily on mines in South Africa that were the sources for all of the world's amosite fiber, and much of the world's crocidolite fiber. The mines were owned by Cape Industries entities and various other entities. One book is: Asbestos: It's Human Cost, and was published in 1986. McCulloch's second book was published in 2002, and is titled: Asbestos Blues, Labour, Capital, Physicians and the State in South Africa.

Mr.  McCulloch and Geofrey Tweedale combined to write a 2008 book, Defending the Indefensible, the Global Asbestos Industry and It's Fight for Survival.

In addition, Mr. Tweedale also has written extensively regarding Cape Industries and Turner & Newall/T & N. One of his publications is the book titled Magic Mineral to Killer Dust, Turner & Newall and the Asbestos Hazard.

The James Hardie Saga - Tax Regulator Will Gain Access to Asbestos Papers

James Hardie's asbestos trust continues to create issues. Here is an article regarding the Australian tax regulator seeking and gaining access to asbestos-related papers, apparently including papers exchanged with its accountants. Trusts are plainly an excellent concept for resolving asbestos and other toxic tort claims without massive litigation waste, but they are indeed complex undertakings.

Update: The Difficulties of Managing Contingent Liabilities - Now James Hardie Is Hit with the Burden of $ 14 Million Verdict for Antitrust Violations

The Australian version of the WSJ has an interesting article by a McKinnsey consultant writing about corporate reputation risk, with the article somewhat tied back to James Hardie. An interesting read.

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Contingent liabilities are not easy to manage, as exmplified by this month's events for James Hardie. To begin with, its business is down due to the housing slump. Them its directors this month lost their trial on securities law violations regarding disclosures related to its asbestos trust, and its asbestos trust announced it is underfunded at present. Now comes the word that former subsidiaries of the the company lost a $ 14 million antitrust verdict in Chile, and that Hardie has idemnification obligations for the verdict due to terms of prior m & a transactions. According to the same article, the company has set May 20 to release numbers for its fiscal year end, which was as of March 30.


All of the above is tough enough. Now consider various other implications. One wonders, for example, whether some or all of these events have caused defaults on loan covenants for corporate financing. Even if there are no present defaults, one must wonder what its lenders will be thinking when the company next seeks access to capital or loan markets. Consider also that it will at some point probably need insurance renewals, including d & o coverage. Overall, the point is that contingent liabilities are tough to manage, and the success (or not) of risk managers may be critical to the future of a company.

James Hardie Judge Did Not Believe the Directors

Reading the trial judge's opinion makes it plain he did not believe the Hardie Directors when they made denials or professed a lack of memory. For summaries of key aspects of the evidence and the ruling, go here or here.

Opinion/Judgment Regarding James Hardie and Its Private Asbestos Trust

The James Hardie opinion/judgment is available here. The link also was added to the prior post containing links to the charges and a helpful summary of the outcomes.

Updated - James Hardie - Links to the Opinion/Judgment, the Charges by the AU SEC and a Tally on the Outcomes

The Australian SEC - known as ASIC - has posted on its website the charges it filed, and a document summarizing which charges were sustained and which were dismissed. All of the charges relate in one way or the other to James Hardie's contingent risks regarding asbestos claims.

Update: The opinion/judgment is available here.