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Aug 13, 2009

Meredith Hellicar could be forced to pay up

Disgraced James Hardie directors, especially former chairperson, Meredith Hellicar, could be required to personally repay their legal and directors' fees.

While the former directors of James Hardie await their fate to be determined by the New South Wales Supreme Court, a serious issue has remained unanswered: Will the disgraced directors, especially former chairperson, Meredith Hellicar, be required by Hardie to repay their legal and directors’ fees after being found to have breached the civil penalty provisions from the Corporations Act?

On 23 April 2009, NSW Supreme Court judge Ian Gzell found that all ten former James Hardie directors had breached section 180(1) of the Corporations Act , which requires directors to exercise their duties with due care and diligence. The civil breach, which carries penalty provisions of up to a $200,000 fine and being banned from acting as a director, resulted from James Hardie directors approving a press release which wrongfully claimed that an asbestos trust was “fully funded” and said it “provided certainty for both claimants and shareholders”. (Former CEO, Peter MacDonald faces harsher sanctions, with ASIC seeking a $1.81 million fine, and the former executive being banned from acting as a company director for 16 years for more serious breaches of the directors’ duty provisions.)

Gzell was especially critical of Hellicar’s testimony, claiming that the former coal industry lobbyist (and one-time CEO of law firm, Corrs Chambers Westgarth) was “a most unsatisfactory witness” who at one stage “feigned shock” when she was shown a document in the witness box. Gzell also found that “there was a dogmatism in [Hellicar’s] testimony that I do not accept. She was proved to be inaccurate on a number (of) occasions.”

Shortly after the damning verdict was delivered, Hellicar resigned from her other board roles at AMP and Amalgamated Holdings, while fellow director, Peter Willcox, departed the board of Telstra.

Since the verdict was delivered in April, there has been hushed silence as to whether Hellicar and her fellow directors will be required to repay the extensive legal fees and significant directors’ fees which flowed their way from James Hardie coffers.

In February 2007, Hellicar (along with other directors, Michael Brown and Michael Gillfillan) resigned from the board of James Hardie. At the time, new Hardie chair, John Barr, stated that “the Board acknowledges that these three directors have put the best interests of the company ahead of their own personal circumstances in deciding to remove any conflict of interest by bringing forward their resignations.”

However, Crikey understands that there was a considerable amount of internal conflict in the Hardie boardroom, especially with regards to a 2007 payment to Hellicar of US$833,979 in retirement benefits. In total, Hellicar collected $1.07 million in 2007 — an extraordinary sum for a non-executive Chairman, especially one who was at the time being prosecuted by ASIC for a serious breach of directors’ duties.

James Hardie’s 2007 Annual Report noted that “the company discontinued a retirement plan that entitled some of our Supervisory Board Directors to receive upon their termination for any reason other than misconduct an amount equal to five times their average annual fees for the three year period prior to their retirement.”

Fortunately for Hellicar, she reigned from her role, rather than being terminated for misconduct — allowing her to retain more than US$1 million in directors’ fees. However, given that Hellicar has subsequently been found to have breached her duties to James Hardie, it would appear that the company would have an arguable case for return of the “golden handshake” provided to Hellicar.

A similar question has arisen with regards to the millions of dollars in legal fees incurred in the defence of the former directors. While those costs have so far been borne by James Hardie, the Corporations Act prohibits companies from indemnifying directors who are found to have breached their director duties in such a manner. In this regard, it would be expected that all defendants be legally required to not only repay the costs incurred in their defense, but also be pay a substantial proportion of ASIC’s legal costs.

James Hardie’s 2008 Annual Report stated:

Claims for payments of expenses incurred have been received from certain former directors and officers in relation to the ASIC investigation … the Company has and will continue to incur further costs under these indemnities which may be significant.

…currently, a portion of the defence costs of former directors are being advanced by third parties, with the Company paying the balance. Based upon the information available to it presently, the Company expects this to continue absent any finding of dishonesty against any former director or officer.

The Report continued:

Other recoveries may be available…including either as a result of a costs order being made against ASIC or, if ASIC is successful in securing civil penalty declarations, as a result of repayments by former directors and officers in accordance with the terms of their indemnities.

The Age reported earlier this year that James Hardie itself, which was also a defendant in the ASIC case, had disclosed more than $23 million in expenses already incurred.

Crikey contacted James Hardie to determine whether the company was taking active steps to recover the legal fees already incurred and the ‘golden handshake’ paid to Hellicar. A spokesperson for the company noted that he was not in a position comment on any potential recovery from the former directors, pending the final outcome of the Supreme Court matter.

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4 thoughts on “Meredith Hellicar could be forced to pay up

  1. Liz45

    “the Corporations Act prohibits companies from indemnifying directors who are found to have breached their director duties in such a manner. In this regard, it would be expected that all defendants be legally required to not only repay the costs incurred in their defense, but also be pay a substantial proportion of ASIC’s legal costs.”

    That says it all really!Make the directors comply with the Act. I think they should be charged with crimes that carry a hefty sentece. To take the (alleged)actions they did to try and deny extremely ill/dying people their right to compensation is beyond disgusting. It was known in the 1940’s (at least, could be earlier) that asbestos was a serious health issue – the Navy used it and knew of the results. I’ve known since 1978, when the ABC did an indepth series of stories on Background Briefing called, ‘Asbestos, Work as a Health Hazard’ (Matt Peacock) that miners and their family members were dying of asbestosis and mesotheileoma. I found out about white and blue asbestos; how the mining industry and other employers deliberately neglected workers’ safety and knew what the risks were. I also found out about the risks to wives and kids from being exposed to the fibres through contact with their husband/father or via doing the laundry. I can recall feeling horrified by the fact, that doing home renovations, or even one instance of cutting through fibrous cement sheeting(fibro) could cause the fibres to be injested into the lungs. All government houses used this in the bathrooms and laundry from the late 50’s to ??s. This had happened at least once, when a hot water service had been installed and the wall ‘cut’ to install the necessary plumbing?

    My mate who worked as a warfie remembers vividly the times he worked with asbestos; that down in the hull the air would be full of the white fibres, and they’d be dressed in a singlet and trousers only – the stuff could lie around waiting to be loaded or unloaded. No wonder he now has asbestosis, and has been to too many funerals where his mates died of cancer/s. I can’t recall any of his mates dying from heart attacks or strokes?

    The role played by these employees of James Hardie was beyond reprehensible. They should be denied the right to work in the same or similar capacity forever – never again! Freeze their assets, and make them pay every last cent for these legal fees. To offer to shake Bernie Banton’s hand knowing what they’d done was an insult. As usual, he showed his huge heart even when he was dying, and could only breathe via an oxygen tank that he had to carry around with him. An amazing human being!

  2. jose carreras

    You can’t seriously believe that the current corporate directors of James Hardie will persue former directors for any of the money they’ve been paid. That would be setting a company precedent that the current directors might one day also become subject to.

  3. ron newlands

    What approach should consumers take? I am enclined never to buy Hardie products but will that affect their finances so much that they don’t have the money to pay? The “black ban” on Shell made the company reconsider what it would do will obsolete drilling platforms. The determination of Scotch Whiskey drinkers brought about compensation for thalidomide victims (those who were too young to know about this the connection was that Johnny Walker was owned by Vesties – Vesties also manufactured thalidomide under licence for the British and Australian market – I could write volumes of their tax schemes and their rape of OZ pastoral company but I won’t. Hmm, yes I think an embargo on Hardies by ethical consumers would be worth a try.

  4. meski

    Yess, Hellicar’s a white collar criminal, but she’s a white collar criminal *after* the fact – I’m fairly sure she was not on the board when Hardie was mining/selling asbestos. Are the courts going after those that were?