A Sydney court has heard the former directors of construction company James Hardie misled investors about their ability to meet their liabilities to compensate asbestos victims.
Asbestos victims gathered with family and friends at a New South Wales Supreme Court to witness the start of the trial into 10 former James Hardie officials.
The Australian Securities and Investments Commission (ASIC) is pursuing civil penalties against the defendants, each of whom is facing maximum penalties of $200,000 and a possible ban from managing a corporation.
Opening ASIC's case, Tony Bannon, SC, said James Hardie executives – including former chief executive Peter Macdonald – bridged their obligations by issuing statements in 2001 claiming the company was able to meet all future compensation claims.
In one example, the company issued a statement to the Australian Securities Exchange (ASX) announcing the formation of its Medical Research and Compensation Fund (MRCF), in which it claimed the foundation had “sufficient funds to meet all legitimate compensation claims”.
Mr Bannon told the court this “unequivocal statement” came despite advice to the company that estimating the cost of future compensation liabilities was “fraught with difficulties”.
A consultancy firm, which spent two years researching asbestos-related compensation liabilities, wrote in a 1998 report to James Hardie that “future predictions remain difficult”.
The MRCF was handed $293 million in 2001 to cover compensation claims, but as soon as two years later it estimated claims could reach above $1.09 billion.
ASIC has called 58 witnesses in the trial which is expected to run for several months.
Around 20 members of the Asbestos Disease Foundation of Australia (ADFA) were present in the court this morning, including Karen Banton, the widow of asbestos campaigner Bernie Banton who died in November last year, aged 61.
The trial continues.