find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Closing Hardie judgment to leave lasting impact

Closing Hardie judgment to leave lasting impact

The end to the marathon legal battle involving former James Hardie directors is likely to alter how boards and individual board members conduct themselves, according to legal experts.

Yesterday (12 November), the NSW Court of Appeal handed down its judgment over the long-running James Hardie saga, reducing the penalties imposed by the High Court in May on the seven former non-executive directors involved.

The directors, who misled investors about the company’s asbestos compensation fund in 2001, have been fined $25,000 each and disqualified from serving on boards for two years.

After leaving court yesterday, Kemp Strang partner Alex Linden (pictured), who acted for Peter Willcox, told Lawyers Weekly that the importance of comments made by Justice Barrett about board conduct far outweighed that of the penalties imposed. 

Justice Barrett stated that “collegiate conduct leading to consensual decision making” - such as the chair saying ‘I think we are all agreed on that’ - is “dangerous unless supplemented by appropriate formality”.

Linden explained that now each director must vote in such a way that enables a specific and accurate recording of their particular position in relation to proposed resolutions.

“I think this will have an effect on the dynamics of boards,” said Linden. “Directors will now need to actively come to a decision, not by way of consensus, but individually, and the minutes will need to record that,” he added.  

Corrs Chambers Westgarth partner Mark van Brakel said the judgment provided "a stark illustration of the risk to individual directors”. 

“One clear implication is that the individual positions of board members will need to be clearly communicated and recorded in the minutes, to avoid the decision-making process being generally swept up and documented as a collective view,” he said.

Baker & McKenzie partner James Halliday agreed, stating that the decision shows that “simply voting on a consensus basis is a high-risk strategy”.

“The Court reiterated that the purpose of a board meeting is not to reach a consensus at all costs.  Rather, individual board members must form their own views on the issues and communicate these clearly to the board. The courts will not excuse a failure to exercise independent judgment on important issues,” said Halliday.

Technology issues

Justice Barrett also clarified that directors must expressly consent to the use of technology to facilitate remote attendance at board meetings, and this technology must be sufficient to allow full participation in the meeting by the remote attendees, which would include reviewing any documents that may be tabled at a meeting.

“It is interesting that the Court decided that the US-based directors should have a somewhat shorter period of disqualification then that of the Australian directors,” said Halliday.

The US-based directors, Michael Gillfillan and Martin Koffel, were given lighter sentences of a $20,000 fine and a ban until 31 December, compared with the Australian-based directors, who were fined $25,000 each and disqualified from serving on boards until 30 April next year.

“This was principally because they [the US-based directors] did not have the text of the draft ASX announcement in front of them when they voted to approve it because they joined the meeting by telephone,” said Halliday.

Van Brakel added that, while the penalties were reduced in this ruling, there were findings that the non-executive directors had made a “glaring failure to discharge their responsibilities” by approving a release without properly considering whether the representations could properly be made in view of the material presented to the board at that meeting and on previous occasions.

Linden revealed that in the NSW Court of Appeal there was liaising between the various legal teams representing the seven non-executive directors.

“Yes, there was definitely communication, but only to the extent of what the various parties arguments were,” said Linden. “At the end of the day, each party made their own submissions independently.

The same cast of lawyers involved in the High Court in May were back in court yesterday, with some minor personnel changes in counsel.

Leading the Clayton Utz team that acted for ASIC was Brigitte Markovic, the head of the firm's litigation and dispute resolution practice, with Tony Bannon SC and Sarah Pritchard instructed.

Atanaskovic Hartnell again acted on behalf of the same four non-executive directors: Meredith Hellicar, Michael Brown, Mike Gilfillan and Martin Koffel.

Managing partner John Atanaskovic led the firm’s team, barristers Justin Gleeson SC and Rohan Hardcastle instructed for Brown and Hellicar, while David Bennett QC and Rob Hollo SC instructed for the US-based directors, Gillfillan and Koffel.

The other three non-executive directors of James Hardie were represented by Arnold Bloch Leibler (APL), Kemp Strang and Ashurst.

ABL partner Jonathan Milner acted for Dan O'Brien, with instructed barristers Peter Wood and Michael Henry.

Greg Terry retained Ashurst partner Angela Pearsall, barristers Richard McHugh, Scott Nixon and Stephanie Patterson were instructed.

At 1pm EST today (13 October) James Hardie Industry shares were at $9, down 39 cents  on Monday (12 October) opening.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Closing Hardie judgment to leave lasting impact
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...