In Australian Securities and Investments Commission v Macdonald (No 12)  NSWSC 714 Justice Gzell of the New South Wales Supreme Court refused to exonerate the former James Hardie directors and executives who contravened section 180(1) Corporations Act in Australian Securities and Investments Commission v Macdonald (No 11) NSWSC 287 relating to their approving the content of the Draft ASX Announcement at the February 2001 board meeting and related matters.
The 2 US directors who participated by phone were not exonerated even though they did not have a copy of the draft ASX Announcement as they did not request a copy and their abstention was not recorded.
Justice Gzell rejected requests for relief by the non-executive directors saying:
This was a serious breach of duty and a flagrant one. The non-executive directors were endorsing JHIL’s announcement to the market in emphatic terms that the Foundation had sufficient funds to pay all legitimate present and future asbestos claims, when they had no sufficient support for that statement and they knew, or ought to have known, that the announcement would influence the market.
Justice Gzell calculated disqualification periods having regard to the number of declarations made against each director or officer, with some periods being concurrent:
- former James Hardie chief executive Peter Macdonald was disqualified from managing a corporation for 15 years (11 contraventions) with a pecuniary penalty of $350,000;
- former general counsel Peter Shafron was disqualified for 7 years (3 contraventions) with a pecuniary penalty of $75,000;
- former chief financial officer Phillip Morley was disqualified for 5 years (1 contravention) with a pecuniary penalty of $35,000
- Former directors Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O’Brien, Mr Terry and Mr Willcox were each disqualified for 5years (1 contravention) with a pecuniary penalty of $30,000 each
- The company was ordered to pay to the Commonwealth of Australia a pecuniary penalty of $80,000 relating to the Final ASX Announcement.
An appeal is likely.
UPDATE: ASIC Media Release