Several law firms played a role in this month’s landmark funding agreement between James Hardie Industries and the NSW Government, which saw the company sign a $1.6 billion compensation package.
Gilbert + Tobin (G + T) acted for the state government, whose negotiating team was led by deputy director-general of the Cabinet office Leigh Sanderson. Hardie’s lawyers included Atanaskovic Hartnell on the funding agreement and Mallesons Stephen Jaques onthe refinancing and inter-creditor arrangements. Allens Arthur Robinson worked on the compensation scheme arrangements and Slater & Gordon represented the Australian Council of Trade Unions (ACTU).
Described as “an outstanding result” by G + T’s lead partner on the deal, Stephen Menzies, the agreement gives effect to the funding of the entire compensation scheme, to last across 40 years. G + T had a team of eight lawyers working on the agreement, which also included Tony Tobin, James Lewis and Paul Lam-Po-Tang, from January this year.
It took 15 drafts to reach the final funding agreement. “Each draft was itself fully negotiated in the sense of days of detailed face-to-face meetings around the draft,” Menzies said. The restricting provisions and the insolvency regime came under particular scrutiny.
“We also had to make judgements because if Hardie got into difficulty it might not be a normal liquidation — it would be a Chapter 11 administration under US law,” Menzies said.
“It was complex as to the rights of the fund if there was a US Chapter 11 administration.”
Now, with the agreement signed, its application depends on approval from both the Australian Tax Office (ATO) — the agreement hinges on Hardie’seligibility for a tax deduction — and Hardie’s shareholders. Although analysts are doubtful the ATO will come to the party, Menzies was confident of a favourable outcome.
“On ordinary principles the payments should be deductible because they are compensation,” he said. “There is no public policy reason why they should not be deductible.”
Menzies anticipated the shareholders’ meeting would be convened during the first half of the new year, assuming the tax issue was resolved. In the meantime, he was “delighted” with the outcome, particularly in light of the “immense amount of work” that had gone into the agreement.
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