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Special Commission of Inquiry into the MedicalResearch and Compensation Foundation

April 2004

CONTACT:

John GordonNational President

Phone: 03 9225 7064 Fax: 03 9225 8968Email: [email protected]

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Executive Summary

The history of asbestos disease in Australia is inseparable from the James Hardie group ofcompanies.

With scientific evidence available from as early as 1901, and government inspections andasbestos litigation common in the 1930s, James Hardie knew of asbestos harmful effects veryearly. Yet James Hardie ceased asbestos production only circa 1987.

Given the record, there can be no doubt that the James Hardie companies are morally andlegally responsible for their asbestos disease legacy in Australia, a legacy that will endure forat least a generation. But whether James Hardie will provide recourse to asbestos victims isanother question.

The James Hardie companies fought hard to resist litigation. Despite the difficulties, earlylawsuits were successful and established liability. In more recent years, James Hardie hasmore successfully frustrated claims by insulating holding companies from operating companies

divested of assets.

APLAs submission provides an analysis of case law tracing this history of litigation to thepresent. Recent experience in the UK illustrates that the movement of James Hardie off-shoreand assumption of liability by the Medical Research and Compensation Fund may presentinsuperable barriers to claimants.

In light of these analyses, APLA answers the Special Commissions key questions with a firm,No. The current state of the law does not provide adequate recourse to asbestos victimswhere the holding entity is inadequately resourced, nor does it provide clear access to parentcompanies, especially foreign parent companies.

In light of this conclusion, the APLA submission offers a legislative solution.

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Contents

1 Introduction............................................................................................................ 11.1 Structure........................................................................................................... 11.2 Background and issues.................................................................................... 21.3 History .............................................................................................................. 2

2 The Law Case Briefs .......................................................................................... 42.1 The duty owed by a product manufacturer, and those in 'identical' positions .. 42.2 The duty owed by party aware of foreseeable risk and in a position of

'proximity' apt to reduce or obviate the foreseeable risk to plaintiff's class ......52.3 Duty owed by proximate parent company and lifting the corporate veil ......... 92.4 Liability of foreign parent companies.............................................................. 10

3 Case Law Analysis .............................................................................................. 143.1 The Legacy..................................................................................................... 143.2 Does the present law permit recourse to all James Hardie Assets to

compensate victims of negligence? ...............................................................144 Issues Raised by the Special Commission....................................................... 16

4.1 Recourse under current law ........................................................................... 164.2 Analogy with unconscionability cases ............................................................ 164.3 Recourse under the Trade Practices Act....................................................... 17

5 Law Reform Proposal.......................................................................................... 185.1 Recovery under insurance policy from corporation in liquidation and recent

Government reforms of Corporations Law a model for corporate liabilityreform?........................................................................................................... 18

5.2 Proposed legislation....................................................................................... 186 Legal Costs .......................................................................................................... 207 Conclusion........................................................................................................... 22Appendix 1 .................................................................................................................. 24

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Special Commission of Inquiry into the Medical Research and Compensation FoundationAPLA Submission

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1 Introduction

APLA Ltd - Lawyers for the People (formerly the Australian Plaintiff LawyersAssociation) is an organisation comprising lawyers and others who advocate civil

justice and human and consumer rights protections and reforms. The organisation,given its origins, has a particular interest in protecting and enhancing the rights of theinjured to just compensation under our civil justice system.

Most, if not all of the lawyers in Australia who act for the victims of asbestos disease,and who are therefore involved in the disease legacy of the widespread use of JamesHardie products in Australia over six decades, are members of APLA.

Given this longstanding intimacy with clients and their suffering, APLA members havebeen uniquely placed to observe the consequences of James Hardie's negligence, thelegal processes that have ensued, and the manner in which James Hardie hasconducted itself within those legal processes, throughout Australia. If it were not for the

commitment of APLA members, it is unlikely that common law damages for personsnegligently exposed to asbestos would ever have been awarded in this country.

APLA members also have an acute knowledge of the expertise and evidence of a widerange of people who have been involved in James Hardie litigation over the years.

1.1 Structure

APLAs submission commences with a preliminary consideration of the issues that wesee arising from James Hardies conduct and the Special Commissions terms ofreference, and an historical outline of asbestos litigation in Australia.

Our submission then considers relevant case law:

in dangerous goods generally;

by which liability has been established against various James Hardie operativeand holding entities;

in which that liability has been challenged in recent years, and finally;

international cases in which claimants have attempted to recover damages fortort breaches from foreign parent companies.

Against the background of this case law, APLA considers whether current law allowsrecourse to James Hardie and its associated companies for the asbestos legacy theyhave left, and addresses the specific issues foreshadowed in the Special Commissionsinvitation to make a submission.

Having concluded that current law is inadequate, APLA submits a corporations lawreform proposal based on a recent Commonwealth government model.

In concluding the submission, APLA also challenges the spurious claim made byJames Hardie Internationals Chief Executive Officer that asbestos legal costs areunnecessarily increased by plaintiff lawyers: exactly the converse is true.

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1.2 Background and Issues

When the Medical Research and Compensation Fund (MRCF) announced its concernsabout shortfalls in funding last year, APLA entered the debate immediately, calling for,among other things, a review of potential abuse of the protection afforded by the"proprietary limited" or limited liability company. A copy of APLA's media release isattached as Appendix 1.

The following issues raised by the inquiry are of concern to APLA:

Compensation of the victims of James Hardies negligence;

Legal costs in delivering compensation to the victims of James Hardienegligence;

Historical conduct of James Hardie and its companies as background to thecorporate restructure which created the MRCF and moved the James Hardiecontrolling entity offshore;

Adequacy of the Corporations Law to protect the rights to compensation atcommon law of persons negligently exposed to harmful products and toxicsubstances, especially those with latent effect;

Steps taken by James Hardie to ignore the best evidence available in 2000-01relating to the likely future incidence of asbestos disease in Australia;

Desirability of reform to the Corporations Law (or statutory enhancement ofexisting common law principles) to protect the rights to compensation atcommon law of persons negligently exposed to harmful products and toxicsubstances, insofar as strategic divestment such as that apparently engaged in

by James Hardie threatens such rights and is incapable of being redressed bythe existing law;

Adequacy of the present system for delivery of compensation to personssuffering asbestos-related disease.1

1.3 History

James Hardie was the biggest manufacturer of products containing asbestos inAustralia, from the 1920s until it ceased using asbestos in about 1987.

In 1935 the Factories Inspectorate, operating under the auspices of the Factories andShops Act1920(WA) conducted inspections of the James Hardie plant at Rivervale. Itwas concerned by the seminal report of the UK Factories Inspectorate, which detailedmajor concerns about exposure to asbestos in industry, and set out means ofpreventing such exposures.

Having found cases of asbestosis among employees of James Hardie at Rivervale,and having raised the issue of compensation with the management,2 the FactoriesInspectorate notified the Western Australian Commissioner of Public Health. It is

1APLA is concerned to respond to these issues raised by James Hardie and its insurers, should the

Commission permit such issues to be raised: there seems to have been some discussion of these mattersin evidence to date.2Witzig, in Carroll, Brian,A very good business: one hundred years of James Hardie Industries Limited

1888-1988, Sydney : James Hardie Industries, 1987,p70.

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2 The Law Case Briefs

2.1 The duty owed by a product manufacturer, and those in 'identical'positions

"It is beyond doubt that a manufacturer of any product owes a duty to a consumer totake reasonable care to prevent the product causing injury or loss to the consumer. Asthe facts in the other judgments demonstrate, Dovuro's position was identical inprinciple with that of such a manufacturer... A manufacturer breaches its duty of care if,by exercising reasonable care it should have foreseen and avoided the loss."

(per McHugh J in Dovuro v Wilkins [2003] HCA 51at [29])

"In Wyong Shire Council v ShirtMason J emphasised:

"In deciding whether there has been a breach of the duty of care the tribunal of

fact must first ask itself whether a reasonable man in the defendant's positionwould have foreseen that his conduct involved a risk of injury to the plaintiff orto a class of persons including the plaintiff."

That passage was relied upon by the majority in Graham Barclay Oysters Pty Ltd vRyan as a basis for allowing the appeal by the oyster growers.

"A risk is real and foreseeable if it is not far-fetched or fanciful, even if it is extremelyunlikely to occur. The precise and particular character of the injury or the precisesequence of events leading to the injury need not be foreseeable: it is sufficient if thekind or type of injury was foreseeable even if the extent of the injury was greater thanexpected."

(per Gummow J in Dovuro at [59]-[60])

"In the past, in other areas of the law of negligence, this Court has insisted upon dutiesof notification to those affected of known risks to which they are exposed by the actionsof others with superior knowledge: Rogers v Whitaker(1992) 175 CLR 479; Chappel vHart(1998) 195 CLR 232; Rosenberg v Percival(2001) 205 CLR 434. The greater therisk, the higher the duty to notify. Involved in this principle is a respect for the autonomyof individuals to make informed decisions concerning their own interests when placedin a position of risk by the acts or omissions of others. Where there is potentially a high

risk...the importer with technical and scientific expertise available to it, will be held to ahigh standard of care for, and of notification to, the growers who were necessarilyreliant on being alerted to any unusual risks to which they are exposed."

(per Kirby J in Dovuro at [120])

"Although it did not grow the seed, Dovuro occupied a position in the chain ofdistribution from grower to farmer which was not significantly different from that of amanufacturer. Dovuro had the analyses of the seed and it knew, therefore, what was inthe seed. It was Dovuro that decided to import the seed into Australia and it wasDovuro that decided the regions of Australia in which it would sell the seed by sale to

distributors. It was Dovuro that supplied the bags in which the seed was sold. Obviousparallels can be drawn between Dovuro's role and that of the product manufacturerconsidered in Donoghue v Stevenson..."

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(per Hayne and Callinan JJ in Dovuro at [155])

See also the analysis of the duty of a manufacturer of a toxic product in Wright vDunlop Rubber Company Limited(1972) 13 KIR 255, at 271-3.

Wright v Dunlop Rubber Co was applied by the New South Wales Court of Appeal inCSR Limited v Wren (1997) 44 NSW LR 463; (1988) Aust Torts Reports 81-461, 64,811 and has been approved by the Supreme Court of Victoria in Thompson v Johnson& Johnson Pty Ltd[1991] 2 VR 475 at 490 to 491 and the Supreme Court ofQueensland in ME Wood v Glaxo Australia Pty Ltd(unreported) Supreme Court ofQueensland, Cooper J, 28 February 1992, at 33.

2.2 The duty owed by a party aware of a foreseeable risk and in a positionof 'proximity' apt to reduce or obviate the foreseeable risk to aplaintiff's class

2.2.1 Barrow & Heys v CSR Ltd & Midalco Pty Ltd(unreported) Supreme Courtof Western Australia, Rowland J, 4 August 1988 (BC8801016)

In this case, the plaintiffs worked at the Wittenoom blue asbestos mine in WesternAustralia. Both were employed by Australian Blue Asbestos Limited (ABA - laterMidalco Pty Ltd) a wholly owned subsidiary of CSR Ltd. Extensive evidence wasadduced as to the control and management of the asbestos mine, and the roleassumed by CSR in its operation. On the basis of that evidence, the plaintiffssubmitted that this was a case in which the corporate veil should be lifted so as toattribute to CSR Ltd the acts and omissions of its subsidiary.

The plaintiffs also pointed to the implementation of a reduction of Midalco's capital in

1975, affected by CSR, which had the effect of leaving the wholly owned subsidiarywith only $100,000 in assets (and, it turned out, limited insurance: 2,000 per claim)with which to meet any claim made against it.

Further, the plaintiffs submitted that although there was in existence an agencyagreement by which the parent was appointed managing agent of the subsidiary, ineffect the defendant was an agent of the parent, and the parent should be liable for the

The true context in which the capital of Midalco Ltd was reduced by the parent, CSR, emerged only afterjudgment, when internal CSR documents were leaked to Channel 9 journalist, Michael Gill.

The "Business Sunday" documents revealed that CSR was becoming concerned about the potential sizeof Wittenoom asbestos damages claims against it in 1974, and a debate raged within the company as towhether CSR should "stand behind" its subsidiary. CSR executives later became concerned that thereduction in Midalco's capital at that time could be "dynamite" if people found out.One infamous view urging that CSR strictly observe the separate corporate personalities of the companieswas that of personnel manager NE Irving, who said that even if the workers "die like flies", they would"never be able to pin anything on CSR."CSR's lawyers, Freehill, Hollingdale and Page urged that CSR do nothing to infer that it was standingbehind Midalco (such as putting more money into the capital-diminished company); "Midalco was theoperating company and it had insurance protection. The insurers (and society generally) should carry allthe liability. It is really not CSR's responsibility. " Any "moral and humanitarian [instincts] towardsemployees must be curbed", they urged.By 1983, the WA Attorney General told Parliament, in the context of dampening enthusiasm for pursuingCSR that, "only the assets of the operating company would be available to satisfy an award of damages inrespect of the mining at Wittenoom...(a) recent search of the corporate Affairs Offices indicates that net

assets of Midalco Pty Ltd in the last set of accounts filed, amounted to $337."For a complete analysis of the "Business Sunday documents see Vojakovic and Gordon, "The Victim'sPerspective" in Peters and Peters, Sourcebook on Asbestos Disease Volume 13, Michie, 1996.

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acts or omissions of the agents with respect to the asbestos exposure of theemployees.

Finally, it was contended that the position assumed by CSR with respect to the miningand milling operations put it into a position where it had clear knowledge of aforeseeable risk of injury to the plaintiffs, and a relationship which came within theestablished criteria for proximity so as to create a direct duty owed by CSR to the

workers at the Wittenoom mine.

Justice Rowland analysed each of those contentions and concluded (at 217 to 218):

In the words of counsel for the plaintiff, CSR had a hands on relationship inABA affairs. It had the legal right by virtue of the managing agents agreementto direct development at the mine and at times it exercised that right. It had thelegal right to exercise directive powers concerning expenditure, all of whichcould impinge on the day-to-day activities at Wittenoom, and at times itexercised that right. [CSRs] Brown conceded that ABA could not be funded bytraditional commercial means. The fact that it was funded by either equitycapital or loans for long periods on an ad hoc month-to-month basis to meetexpenses, all of which funding required approval from CSR, showed that,whether or not ABA operated or not from month to month, the extent of itsoperation was entirely in the control of CSR.

Now whether one defines all of the above in terms of agency, and in my view itis, or control, or whether one says that there was a proximity between CSR andthe employees of ABA, or whether one talks in terms of lifting the corporate veil,the effect is, in my respectful submission, the same. There was the necessarydegree of proximity of relationship between each plaintiff and CSR to give riseto a duty of care on the part of CSR to take reasonable care for the safety ofeach plaintiff commensurate with and identical to the duty owed by ABA. And it

failed to exercise such care. For the reasons I have previously outlined, theknowledge, actions and responsibilities of the directors of ABA are also those ofCSR. The CSR Board obviously relied upon its senior officers in BMD to havethe knowledge in their capacity as CSR officers to organise the wholearrangement of ABA and to ensure that it was carried through. Knowledgepossessed by Brown and King in particular must be knowledge acquired byboth companies. Each company had an interest and a duty to know theknowledge of its officers who had dual responsibilities to both. In the case ofABA, the duty was not only because Brown was a director, but also becauseABA relied upon his knowledge. In the case of CSR, as a senior employee inCSR, Brown had a duty of communication to CSR and CSR had a duty toreceive that communication. In my view, CSR is liable to each plaintiff.

2.2.2 Ross v CSR(unreported) Supreme Court Victoria 24 August 1988 (GobboJ)

In this case a former employee of Midalco sought an extension of time under theLimitation of Actions Act1958 (Vic) to bring a claim against CSR Limited with respectto asbestos disease suffered as a result of his exposure at Wittenoom.

On the evidence disclosed, which was largely derived from materials relied upon byRowland J in Barrow v CSR Limited, Gobbo J found that there was sufficient evidenceto establish a cause of action against CSR Limited.

2.2.3 CSR Limited v Wren (1998) 44 NSWLR 463; (1998) Aust Tort Reports 81-461

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Mr Wren was employed by Asbestos Products Pty Ltd. This company was a whollyowned subsidiary of CSR Limited.

The asbestos used at the plant was asbestos from the Wittenoom asbestos mine, or inother words, from Australian Blue Asbestos Limited (ABA), another wholly ownedsubsidiary of CSR Limited.

Mr Wren developed mesothelioma and sued CSR for breach of its duty of care to him,and also sued ABA for failing to warn of the dangers when supplying the product -asbestos - to Asbestos Products Pty Ltd.

At first instance, CSR Limited were found to have owed a duty to Wren by reason ofthe direction, control and involvement by CSR and its staff in the operations ofAsbestos Products Pty Ltd. But the product supplier subsidiary was not found liable forfailing to warn.

In the Court of Appeal (1997) 44 NSW LR 463: (1998) Aust Torts Reports 81-461 at 64,811,3 in a joint judgment, Beazley and Stein JJA found that CSR had breached a dutyowed and upheld the plaintiffs cross appeal.

Powell JA agreed that CSR owed Mr Wren a duty of care, but disagreed with thedispensation of the cross appeal. Powell JA seemed to find that CSRs duty of careexisted on the basis that it had assumed the mantle of employer of those employeesof Asbestos Products Pty Ltd who were engaged in the manufacturing processes beingcarried out in the factory (at 465). Powell JA considered the approach similar tosituations in which Courts had to determine what, if any, are the duties owed by a thirdparty to a person whose services have been lent by that persons employer to thethird party: see eg. Garrard v A E Southey & Co Limited andStandard Telephones &Cables Limited[1952] 2 QB 174.

Beazley JA and Stein JA considered that the essential question in the case waswhether the relationship between CSR and Mr Wren were such as to give rise to aduty of care in CSR to protect Mr Wren from the risk of foreseeable injury, at 64, 822.

Again, there was extensive examination of documents made available under discoveryby the defendant corporations. The majority in Wren made it clear that the decisionwas clearly based within the law of tort, and did not do violence to the principles ofcorporations law enshrined in Salomon v Salomon & Co. [1897] AC 22; that is to say,by avoiding the piercing of a corporate veil. Rather, the reason CSR was liable in thecircumstances here is because it brought itself into a relationship with the employees ofAsbestos Products Pty Ltd by placing its staff in the role of management at AsbestosProducts Pty Ltd. (at 485; 64, 823).

With respect to the plaintiffs cross appeal in the product liability claim, the majority held(at 64, 828 to 64, 830):

There can be no dispute that a manufacturer may owe a duty of care beyondthat owing to the direct purchaser of its goods . Donoghue v Stevenson wasitself an example of that as was Grant v Australian Knitting Mills (1935) 54 CLR49... it may be, however, that in a particular case the fulfilment of a duty of carewhich is owed to a person beyond the immediate purchaser can only be fulfilledby taking steps specifically directed to the end user. Wright v Dunlop RubberCo. (1972) 13 KIR 255 was such a case...Both AP and CSR were aware thatthere were dangers associated with the inhalation of asbestos. In fact, because

3Only the Aust Torts Report contains the judgments relating to disposition of the cross appeal brought by

the plaintiff against the finding that the product supplier was not liable.

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of the nature and extent of the inter-relationship between the three companies -AP, CSR & ABA - it is reasonable to infer that their knowledge was co-extensive. These additional factors are relevant to ABAs liability. The questionis therefore, whether in all the circumstances, ABA owed a duty of care directlyto Mr Wren and, if so, what the content of that duty was. The relevantcircumstances are these which need to be assessed to determine that question:

ABA supplied asbestos to AP. ABA knew that the product, if not handled in aparticular way, that is, so as to minimise liberation of fibres into the atmospherein circumstances where they were liable to be inhaled, was potentiallydangerous. Both AP and CSR were also aware of that danger...in thecircumstances, ABA as a supplier of goods known to be dangerous ifprecautions as to its use were not observed owed a duty to AP to warn it of thedangers associated with the product. In our opinion, ABA also owed a duty toAPs employees, it being obvious from the nature of the product and itsintended use, both being matters known to ABA, that APs employees would behandling the product either in its unprocessed or processed form. Given thenature of that risk, ABA was under a duty to warn that care should be taken soas to minimise the liberation of asbestos dust into the atmosphere in theproximity of persons who would be liable to inhale the dust.

2.2.4 CSR & Anor v Young( 1998) Aust Torts Reports 81-468

In contrast to Barrow, Ross, and Wren, the plaintiff in this case was neither anemployee, nor a user of manufactured product supplied by the defendant. In this case,the plaintiff was born in September 1959, shortly after her family moved to Wittenoomwhere her father worked. The father returned from work with asbestos on his clothingand their yard and much of the town of Wittenoom were covered in blue asbestostailings. At the age of 34, the plaintiff was diagnosed as suffering from mesothelioma.She sued CSR and ABA, contending that a duty of care was owed by each to the

plaintiff. CSR argued that if a duty of care was owed to the plaintiff, it was owed onlyby ABA, not by CSR, although CSR conceded that it owed a duty to the workers in themine and the mills. The trial judge found that CSR independently owed a duty to theplaintiff. Again, there appears to have been an extensive examination of documentarymaterial provided by way of discovery. In the New South Wales Court of Appeal, allthree judges found that CSR was itself conducting operations at Wittenoom. Again, theCourt of Appeal eschewed any suggestion that they were piercing the corporate veil incoming to this conclusion. The findings were based solely on tortious considerationsregarding the operations of CSR at Wittenoom, its responsibility for the environmentthus created, and the establishment of a duty of care. Giles AJA said (at 64 953):

Some mention was made of piercing the corporate veil and of CSR being

vicariously liable for the wrong of ABA, but there was no development of thesematters as a basis for CSRs co-extensive duty. The question in a case such asthe present is whether the dominant parent in all the circumstances, including thatthe dominance may have been such that the subsidiary was in truth merely aconduit for the parent see Craig v Lake Asbestos of Quebec843 F 2p 145 (1988)was in a relationship of proximity to the injured party. If it was, there was noquestion of piercing the corporate veil, a notion discussed in some detail by RogersAJA in Briggs v James Hardie & Co Pty Ltd(1989) 16 NSW LR 549 at 567 581.As his Honour pointed out (at 578 9), the tests of the kind extracted in Smith,Stone & Knight Limited v Birmingham Corporation (1939) 4 ALL ER 116 areinappropriate to actions in negligence. There is also no question of vicariousliability and the considerations such as those on which CSR rely for the submission

presently under consideration do not exclude the duty of care.

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2.3 Duty owed by proximate parent company and lifting the corporate veil

2.3.1 James Hardie & Co Pty Ltd v Hall as administrator of estate of Putt(1998)43 NSWLR 554

This case considered the liability of the James Hardie holding company for acts of thesubsidiary corporation that resulted in the contraction of asbestos-related disease byemployees of the subsidiary.

OMeally J at first instance, after examining in detail documentary evidence (560),found that by reason of various factors, including the control exercised by the parentcompany, its power to insist on proper workplace standards being maintained, and theappearance that but one enterprise was being conducted by the separate legal entities,the parent company, conscious of a foreseeable risk of injury, and being in a proximaterelationship to him by virtue of the above matters, owed a duty of care to the plaintiff,an employee of the subsidiary.

In the Court of Appeal, Sheller JA, with whom Beazley and Stein JJA agreed, seemed

to examine the issue solely from the perspective of the jurisprudence as to when it wasacceptable to withdraw the corporate veil. At 581, Sheller JA opined that what the trialjudge had done was to implicitly lift the corporate veil in conducting the analysis ofeffective control of the workplace.

With great respect, to reach that conclusion was to misunderstand the nature of theexercise undertaken below, which was to explicitly recognise the integrity of thecorporate veil but to find that the conduct of the parent company created another legalrelationship, that of neighbourhood or proximity between the parent entity and theplaintiff.

2.3.2 Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549

This case involved an application for extension of time under the Limitation Act1969(NSW), and thus consideration of the question as to whether the plaintiff, who hadbeen exposed to asbestos at Baryulgil mine operated by a subsidiary of James Hardie& Co Pty Ltd and James Hardie Industries Pty Ltd, had adduced evidence that mightestablish a cause of action against the parent companies.

It is, presumably, Hall/Putt, and this case, that James Hardie Industries today points toas absolving them from any legal liability to persons exposed to asbestos by acts oromissions of its subsidiaries.

Hope JA (at 552) noted that the plaintiff did not try to establish at this preliminary stage

that there was a relationship of proximity between the parent and himself of the kinddiscussed inBarrow & Hayes (sic) v CSR ...as well as by Gobbo J in Ross. HisHonour held that all that the plaintiff had done was to point to the possibility of therebeing evidence to make out this point (553) and that was all he needed to do. MeagherJA considered that more than the possibility of existence of such evidence wasnecessary and that the plaintiff had not discharged the burden. Rogers A-JAconsidered that proof of the availability of the evidence was the necessary burden(565), and after detailed consideration of what the plaintiff must prove to succeed in hisclaim, held that the judge at first instance had been wrong in rejecting the application(581).

Rogers A-JA considered that the plaintiff had to pierce the corporate veil in order tosucceed against the parent company, whether by showing the enterprise to have beenconducted by the parents, or that the subsidiary was but the agent of the parents (567).His Honours comprehensive analysis of the law relating to these principles, and the

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manifest difficulties confronting a party trying to establish them is unexceptionable.Rogers A-JA concluded (at 577);

In the result, as the law presently stands, in my view the proposition advancedby the plaintiff that the corporate veil may be pierced where one companyexercises complete dominion and control over another is entirely too simplistic.The law pays scant regard to the commercial reality that every holding company

has the potential and, more often than not, in fact does, exercise completecontrol over a subsidiary...It remains to be seen whether the time has come forthe development of a more principled approach than the authorities provide atpresent.

If that indeed was the only proposition advanced by the plaintiff, then the claim wasbeing mounted on a very different basis to Wren, Young, Barrow or Ross, and not onthe basis that a claimant today would be advised to essay liability against ABN 60. ButHope JAs reference to Barrowand Ross suggests that in fact a tort-based liabilitytheory had in fact also been advanced. Indeed, in permitting the claim to go aheadagainst the parent companies, Rogers A-JA seems to recognise that something a bitdifferent was being put (580);

The question of who may be liable to the plaintiff should be deferred until theconclusion of the evidence. It is in this context that it is of importance in thepresent case that the principles of liability of defendants in the position ofHardies and Wunderlich are still so uncertain. It seems to me that the veryuncertainty in the law demonstrates the possibility of Hardies and Wunderlichbeing held liable after a trial.

2.4 Liability of foreign parent companies

2.4.1 Lubbe v Cape PLC(2000) 1 WLR 1545 (HL)

In Lubbe v Cape PLC(2000) 1WLR1545 (HL), plaintiffs who suffered asbestos-relatedinjuries as a result of exposure to asbestos in the employ of subsidiary corporations ofthe respondent in South Africa, or exposure to environmental asbestos created bythose corporations in their asbestos mining operations, sought to sue the Englishparent in England. Lord Bingham noted that the main issue raised in the plaintiffsclaim was put in this way (at 1551):

Whether a parent company which is proved to exercise defacto control overthe operations of a (foreign) subsidiary and which knows, through its directors,that those operations involve risks to the health of workers employed by thesubsidiary and/or persons in the vicinity of its factory or other business

premises, owes a duty of care to those workers and/or other persons in relationto the control which it exercises over and the advice which it gives to thesubsidiary company?

The resolution of that issue did not fall for consideration in the series of cases thatresulted in the House of Lords considering the matter, questions of jurisdiction, forumand whether a permanent stay should be granted to bring the matter exercising theCourt at that stage. Their Lordships considered that a stay on forum grounds shouldnot be permitted. The matter was set down for trial in April 2002.

We note, however, reports of settlements between the plaintiffs and the holdingcompany: one in December 2001 for 7,500 plaintiffs in the sum of 21 million ("SouthAfrican Claimants Briefed on Cape Asbestos Settlement" Legalbrief1/2/02); and afurther settlement resulting in the payment of 7.5 million which was approved by the

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Court on 27 June 2003 (Cape Asbestos Settlement Gets Court Approval Legalbrief30/6/03).

2.4.2 Sithole v Thor Chemicals Holdings Ltd(unreported) 3 February 1999 (CAUK)

These cases involved similar issues to the Lubbe / Cape cases. In his judgment,Tuckey LJ (with whom Judge LJ agreed) said:

"The first defendants, Thor Chemical Holdings Limited ("Thor"), are an Englishcompany. They have a wholly owned South African subsidiary ("Thor SA"). Thatsubsidiary manufactured and reprocessed mercury compounds at factories inNatal in South Africa. The second defendant, Mr Cowley, was the chairman andcontrolling shareholder of Thor and took an active part in the management ofthe companies in the group of which Thor was the holding company.

The 21 plaintiffs, or those they represent, are or were employed by Thor SA atthe factories in Natal at various times from 1982. They claim damages forpersonal injuries caused by exposure to mercury during the course of theiremployment. The defendants are each alleged to be directly liable to theplaintiffs in tort for setting up and maintaining factories in South Africa whichthey knew or ought to have known would be unsafe for those who worked inthem.

Before dealing with the history of these proceedings I must refer to two earlieractions by other Thor SA employees against these defendants. The first ofthese started in October 1994. There were three plaintiffs. Although theirperiods of employment covered a shorter period than the plaintiffs in thepresent action, the injuries they suffered and the allegations they made against

the defendants were to all intents and purposes the same. The defendantsapplied to stay the proceedings on the grounds that they should be heard inSouth Africa. Their application was dismissed by Mr James Stewart QC sittingas a Deputy High Court judge on 11 April 1995. In a long judgment, in whichamong other things the judge summarised the allegations made in thestatement of claim against the defendants (which I do not propose to repeat butcan be found at pages 4 - 6 of his judgment) he concluded that the defendantshad failed to satisfy him that South Africa was clearly or distinctly the moreappropriate forum for the trial of those proceedings. In other words thedefendants had failed on the first stage of the two-stage test laid down inSpiliada [1987] AC 460. The defendants appealed but, ironically in view of whathas happened in this case, their appeal failed because in the meantime they

had served a defence and the Court of Appeal decided that in so doing theyhad submitted to the jurisdiction of the English court.

In the meantime, 17 other plaintiffs had started proceedings making virtuallythe same allegations against the defendants. In March 1996 the defendantsapplied to stay those proceedings but later abandoned the application. Thisaction was then consolidated with the earlier action. After an unsuccessfulattempt to strike out the consolidated action on the grounds that it disclosed nocause of action and other protracted procedural skirmishing in April 1997 thedefendants settled the plaintiffs' claims for 1.3million. By this time the trial ofthe consolidated action was only a few months away. Discovery had takenplace and witness statements had been exchanged. Experts' reports were to be

exchanged shortly.

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The present proceedings were started in January 1998 and served on Thor atits registered office in England. The second defendant, who is a British subject,was alleged by his solicitors to be resident in Spain so the proceedings weresmartly served on him under the provisions of the Brussels Convention. Heapplied to set aside service on the basis that he was resident in South Africabut that application was dismissed by Toulson J on 27 May 1998...

...I turn to the question of the appeal from Garland J's decision on the questionofforum non conveniens. The two-stage test in Spiliada fell to be applied by thejudge. It is not suggested that he misdirected himself about this. I only need torefer to the first stage of the test, which required the defendants to show thatSouth Africa was clearly a more appropriate forum than England for the trial ofthe action. In his judgment, after rehearsing the facts and the arguments whichhe had heard, the judge said:

" The present action is properly brought in this country and the onus ison the defendants to demonstrate that South Africa is a clearly moreappropriate forum. That in many respects it might be more appropriate itcannot be gainsaid, but the burden is to prove that it is clearly moreappropriate. I do not consider that this burden has been discharged."

That is as clear a finding as you could expect to have in a case of this kind.It is important to bear in mind that both limbs ofSpiliada involve the court in theexercise of a broad discretion. This court will only interfere with the judge'sexercise of that discretion on well-known grounds: (see Lord Brandon in TheAbidin Daver[1984] 1 AC 398 at page 420). Moreover, in Spiliada at page 465Lord Templeman said:

"An appeal should be rare and the appellate court should be slow tointerfere."

In applying for leave, Mr Ter Haar's submissions were admirably succinct. Hesaid that if you look at other passages in the judge's judgment it is not clear howhe came to reach the conclusion which he did in the passage which I havecited. He took first a passage in the judgment where the judge said:

"...it is strongly arguable that some of the breaches of duty occurred inSouth Africa."

After referring to the test in Distillers v Thompson [1971] AC 458, that a causeof action arises where the act or omission on the part of a defendant whichgives the plaintiff his cause of complaint has occurred, the judge said:

"....nearly everything of significance occurred in South Africa althoughthe argument remains that breaches of duty occurred in England.

Looked at in context, these passages are directed simply to the question whichthe judge was considering in this part of his judgment which was where, as amatter of law, the breaches of duty alleged occurred. This was a relevantconnecting factor which had to be considered but in no way decisive of themore general question which the judge had to answer on the first stage of theSpiliada test.

Mr Ter Haar then points to a passage just before the conclusion in the

judgment which I have quoted, where the judge said:

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"The arguments and considerations are, in my view, very finelybalanced. On first impression, the proposition that 21 plaintiffs residentin South Africa bringing an action in this country arising out of theiremployment in South Africa prompts the question, 'why are they notproceeding in South Africa?'"

The question which the judge posed was perfectly sensible. It shows that he

clearly appreciated the task he had to perform. But it is not difficult from thewhole of his judgment to discern the reasons why he reached the conclusionwhich he did. They are to be derived from his consideration of the parties'arguments between pages 23 and 26 of his judgment. They include the fact thatthe plaintiffs wished to call English expert evidence; the fact that the plaintiffsallege that the defendants had moved their factory from this country to SouthAfrica because the Health and Safety Executive were on to the lack of safety attheir factory here; that the applicable law might be English law but if it was notthere was no evidence that South African law was negligent and different fromour own.

There was one factor to which the judge referred which to my mind is importantand may distinguish this case from other cases where foreign employees try tosue English parent companies in this country. That is what the judge called "theCambridgeshire factor". That was a reference to the earlier actions which hadreached an advanced stage of preparation before they settled, and in which thesame solicitors were involved on behalf of the plaintiffs.

With respect to Mr Ter Haar's submissions, I think there were good reasons forthe judge's decision. At the very least, there are no arguable grounds uponwhich this court could be persuaded to interfere with it. "

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3 Case Law Analysis

3.1 The Legacy

The breaches of duty committed by one or more James Hardie company have left a

substantial legacy of asbestos-related disease. It is a legacy that those corporationsshould bear in full (subject to any right to obtain contribution from others, andsupplemented by whatever recourse they have to insurance).

All of the companies in the James Hardie group profited from the sale of asbestosproducts (in which area James Hardie held substantial, and often near-monopoly levelsof market share), and the present multinational company (JHI), with sales over $1billion, owes its existence and strength to its asbestos heritage.

In such circumstances the proposition that the James Hardie companies might escapethe responsibility to compensate those who have been harmed by the manufacture andsale of the products that have generated their wealth, by means of the limited liability

company and the creation of trusts, is antithetical to notions of common justice andconcepts of what is right.

There can, we submit, be no argument on the moral question of the culpability andresponsibility of the Hardie companies, jointly and severally, to redress the legacy thatthey have created, by ensuring that all those who have been injured are appropriatelycompensated.

3.2 Does the present law permit recourse to all James Hardie assets tocompensate victims of negligence?

Based upon the cases set out in the legal analysis contained above, there is at least anarguable case that the parent company might be liable in negligence to those affectedby its acts and omissions.

But if there be any doubt about that, then the doubt should be removed by legislation.

The courts, especially in Australia, have been reluctant to lift the corporate veil toattribute culpability to a parent or holding company, or shareholder, for the acts of asubsidiary or fully-owned entity. Where the courts have been prepared to lift or piercethe veil, it has been done where, in all the circumstances of the case, justice demandedthat it be done.

Generally, where this approach has been adopted, criteria such as those stated byAtkinson J in Smith Stone and Knight v City of Birmingham [1939] 4 KBD 116 at 121,were held to be applicable to answer the question (at 118), "To whom, in truth; did thebusiness belong?":

i. Were the profits treated as the profits of the parent company?

ii. Were the persons conducting the business appointed by the parent company?

iii. Was the company the head and brain of the trading venture?

iv. Did the company govern the venture; decide what should be done and what

capital should be embarked upon the venture?

v. Did the company make the profits by its skill and direction?

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vi. Was the company in effectual and constant control?

Instances of preparedness to lift the corporate veil, outside of the obviouscircumstances of fraud and deceit, include the following:

A. State of war: Daimler Co Ltd v Continental Tyre and Rubber Co (Great Britain)

Limited(1916) 2 AC 307 at 340;

B. Disturbance compensation: DHN Food Distributors Ltd v Tower HamletsLondon Borough Council[1976] 1 WLR 852; J.R McKenzie Ltd v Gianoutsisand Booleris [1957] NZLR 309; Smith, Stone and Knight v City of Birmingham[1939] 4 KBD 116;

C. Funds provided by private company but damages for loss awarded toindividual, being the 'alter ego' of the company: Esso Petroleum Ltd vMardon [1976] 1 QB 801;Patek v City of Melbourne (unreported) Federal Courtof Australia, Smithers J.,(20 August 1986); Walker v Hungerfords (1988) 19ATR 745: Malyon v Plummer[1962] 3 All ER 884; Musca v Astle Corporation(1988) 80 ALR 251;

D. Existence of agency agreement either expressly or where truerelationship is such that business carried on is other party's business:Tate v Freecorns Pty Ltd[1972] WAR 204 at 210;

E. Taxation (to Revenue's advantage): Littlewoods Mail Order Stores Limited vInland Revenue Commissioners [1969] 1 WLR 1241.

Against these cases are the judgments on the issue of piercing the corporate veilreferred to above in James Hardie & Co Pty Ltd v Hall as administrator of estate of Putt

(1998) 43 NSWLR 554 and Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR549, which suggest (but, importantly, only on the basis of the pleadings and materialsexamined in those cases) that the corporate veil might be difficult to pierce with respectto the various Hardie entities, on a strict application of corporations law.

But, as Ormerod LJ said in Esso v Mardon (at 830) in response to an argument that, asthe capital for the venture operated by Mr Mardon had been put up by a privatecorporation, Mr Mardon was not entitled personally to the damages for the losssuffered by the business:

It would be extremely unrealistic and a denial of justice in a case like this toallow [Esso], who were quite unaffected by the existence of the company, to

take advantage of a piece of legalistic purism. As Lord Reid once said; 'the lifeblood of the law is not logic but common sense', R v Smith [1975] AC 476, 500."

We would simply urge the converse in the case of hundreds of Australians whobought 'James Hardie' products, quite unaffected by the existence of theparent/subsidiary dichotomy, and who are now suffering fatal illnesses as aconsequence. It would be equally unrealistic, we would submit, and a denial of justice,to permit James Hardie Industries or ABN 60 or JHX to avail themselves of thelegalistic purism, to the detriment of common sense, and the dependants of those whowill die uncompensated.

If necessary, legislation should be enacted to ensure that they may not.

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4 Issues raised by the Special Commission

The Commission, in inviting APLA to make a submission, foreshadowed considerationof the following questions:

a) Does the law make adequate provision for managing the claims of present andfuture unascertained creditors of a company with assets that are inadequate tomeet anticipated but as yet unascertained future claims? If not, what reformwould be appropriate?

b) Does the law make adequate provision for a company that cannot meet claimsagainst it arising from its tortious conduct, to obtain indemnity and contributionin respect of those liabilities from a parent company, or for those liabilities to bereduced by permitting claimants to make claims directly against the parent? Ifnot, what reform would be appropriate?

The answer in each case, in light of the discussion above, is "No".

4.1 Recourse under current law

While the law may permit recourse to the parent in limited circumstances, where theplaintiff proves the existence of foreseeability and a proximate relationship between theparent and the injured plaintiff, or the even more limited circumstances in whichwithdrawal of the corporate veil is sanctioned, these are both difficult to prove,dependent upon full discovery or disclosure from both parent and subsidiary, and areforensically problematic.

Why should a dying plaintiff in the last weeks of his or her life have to carry the burdenof proving the facts necessary to establish liability against a company of whoseexistence the plaintiff, at the time the duty was breached, had no knowledge, norreason to enquire?

Indeed, the very failure of the entities, possessed of knowledge that should have beenmade clear to the plaintiff, to pass on that knowledge, ensured that the plaintiff wouldhave no reason to want to know who was behind the product; who was profiting from it;who was controlling the enterprise or who might have had the information or power toprotect the plaintiff from the harm that was suffered many years later.

They were given a product to use. It was a James Hardie product. There was nothingto alert them to any concern. They used the product as the James Hardie guides

directed (eg, cutting with power tools). Forty years on they are dying and are told thatthe company that could have warned them is in the Netherlands and cant be sued.

4.2 Analogy with unconscionability cases

The situation is not dissimilar from the legal and equitable doctrines enunciated in suchcases as Hawkins v Clayton (1988) 164 CLR 539, in which the Court would regard it asunconscionable for a party whose breach of duty had caused the plaintiff to beunaware of a claim, to avail itself of a defence founded on the statute of limitations.

In Hawkins v Clayton, the High Court held that the same wrongful (negligent) conductas constituted the breach of duty also prevented discovery of the breach, and thus held

the limitation provisions in abeyance until the plaintiff learnt of the wrong. The courtalso noted that equity could intervene to grant relief upon the notion of unconscionable

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reliance upon the provisions of a statute of limitations, in the case of concealment ofcause of action until after the limitation period had expired.

The application of the rule is illustrated by the decision of the Queensland SupremeCourt in Gorton v Commonwealth of Australia (1992) 2 Qd R 603, (1992) Aust TortsRep 81-162 . The plaintiff, while a member of the armed forces, was diagnosed andtreated for essential hypertension. The plaintiff was not told of this, nor was he

informed of his entitlement, as a consequence, to a war-service pension. It was 40years before the plaintiff first learnt that his condition was war-related, and he sued forthe lost pension and free medical care he had lost over that period. TheCommonwealth contended that the claim was statute-barred. Demack J in theSupreme Court rejected that application, and ruled that the defendants wrongful(though not fraudulent) conduct had effectively prevented the institution of proceedingsagainst the defendant.

There are obvious differences to the issue here, but the question of the conscionabilityof the conduct is similar:A fortioriif the conduct was intentional.

4.3 Recourse under the Trade Practices Act

The only other possible means of recourse is under the provisions of Part V of theTrade Practices Act1974 (Cth) relating to unconscionable conduct, or the misleadingconduct provisions, if someone relied on statements by the parent company that therewould be sufficient funds to meet all claims (plus medical research).

In this regard though, there are difficulties in the proof of the statements beingmisleading and deceptive, and in causation. But more critical, perhaps, is the intentionof the Commonwealth to abolish claims for injuries and death pursuant to Part V of theTPA (Trade Practices Amendment (Personal Injuries and Death) Bill2003).

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5 Law Reform Proposal

5.1 Recovery under insurance policy from corporation in liquidation andrecent Government reforms of Corporations Law a model forcorporate liability reform?

The Commonwealth Parliament addressed the recovery of funds by company creditorsagainst liquidated corporations by making available the funds of any insurance policydirected to the losses faced by the creditors. It finds expression in Section 601 AG ofthe Corporations Law.

APLA submits that a similar provision might address the specific problem contemplatedin this inquiry.

5.2 Proposed Legislation

APLA submits the following suggested legislative amendments to the corporations law.

"Definitions; In this section;-

"acts or omissions" means act or omission which has caused the injury for which theapplicant seeks or has been awarded damages;

"applicant" means a person who has suffered a physical or psychiatric injury ordisease as a consequence of any act or omission or any alleged act or omission by asubsidiary company, its officers, servants or agents and includes any legal personalrepresentative and any dependant of the applicant;

"benefit" means any fiscal or financial benefit including but not limited to transferredprofits, dividends, receipt of cash, property, loan funds, shares or any form of chose inaction; any financial or fiscal advantage including but not limited to taxation deductions,taxation benefits or the use of transferred losses which reduce net income, assets orprofits; or any guarantee or indemnity;

"parent company" means any company that at the time of the acts or omissions of thesubsidiary company owned, or held more than 50% of the issued shares of thesubsidiary company, and at any time received a benefit from or by reason of theexistence of the subsidiary company;

"subsidiary company" means any company that at the time of the acts or omissions

of that company, was owned by or had more than 50% of its issued shares held byanother company which other company, at any time received a benefit from, or byreason of the existence of the company;

"successor company" means any company that succeeds to the parent companyeither by acquisition of a majority of shares of the parent company, or is assigned bythe parent company or otherwise receives a benefit from the existence of thesubsidiary company that the parent company would have received; or is incorporatedby the parent company for the purpose (whether it be the sole purpose or otherwise) ofavoiding liability of the parent company for the acts or omissions of the subsidiarycompany or any acts or omissions of the parent company;

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xx)a) If any person suffers any injury as a consequence of acts or omissions of a

subsidiary company, and is unable to recover damages for that injury from thesubsidiary company, or from any insurer of the subsidiary company pursuant toSection 601 AG or otherwise, then the person ( hereinafter "the applicant") mayrecover the amount of such damages from the parent company of thesubsidiary company, or from any successor company of the parent company.

b) For the purpose of giving effect to the recovery of damages referred to in (a),the applicant may;

i) proceed to enforce any judgment obtained by the applicant from thesubsidiary company against the parent company or any successorcompany as if the judgment against the subsidiary company was ajudgment against the parent company or the successor company;

ii) proceed against the parent company or any successor company inany proceedings brought in relation to the acts or omissions, if itappears that the subsidiary company will be unable to satisfy anyjudgment ultimately obtained against it by the applicant.

c) In any proceeding of the kind referred to in b) i) brought by the applicant againstthe parent or any successor company, any acts or omissions of the subsidiarycompany are to be regarded as acts or omissions of the parent company andany successor company, and any judgment, but for the apparent inability of thesubsidiary to satisfy such judgment, that might have been entered against thesubsidiary, may be entered and enforced against any parent or successorcompany.

Such a scheme - a statutory piercing of the corporate veil - may be regarded as

somewhat radical, but it is unlikely to be often required, as historically judgments forinjuries are likely to be satisfied by tortfeasors or their insurers. But it does providecomfort in situations illustrated by the present James Hardie case, that an injuredperson, their family or dependants will not go uncompensated for corporate misconductbecause of the inability of the subsidiary to meet its obligations. Where a parent orsuccessor corporation has control over the subsidiary and has received a benefit fromhaving the structure in place, we consider that most in the community would regard itas fair that the liability flows up (and if necessary along) the corporate chain.

Were it otherwise, then the ability for a corporate group to restructure itself to avoidliabilities would be too easy, or becomes subject to injured creditors only through theproblematic blunt instrument of insolvency law.

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6 Legal Costs

The CEO of James Hardie International has publicly commented that the reason, or asubstantial reason, for the blow-out in costs payable by Amaca is legal costs. Withoutmore, the subtext of such a comment is that the lawyers of people making claims - our

members - are receiving exorbitant sums in legal costs to the detriment of the fund andits claimants.

We absolutely reject this unwarranted and unsubstantiated inference.

Without the efforts of the lawyers to expose the conduct of companies like JamesHardie, through strenuously fought test cases occupying many months in the 1980sand early 1990s there would be no common law liability established against asbestoscorporations.

Even in the most straightforward assessment of damages now, people who are undersignificant pressure from health problems in asbestos disease claims require careful

and experienced guidance to know what their entitlements are, and when to accept andreject offers made to them.

There are few claims that warrant the descriptor; "straightforward", and the greater thedifficulty with liability or damages issues (and all manner of available defences aretaken by defendants like James Hardie, including statute of limitations, contributorynegligence, divisibility) the greater the need for astute legal guidance.

But, ultimately, unless defendants through their own conduct put themselves at risk ofan indemnity or solicitor/client costs order, all that a defendant is required to pay areparty and party costs fixed by court scales. The potential for any costs blow outattributable to payment of such costs is impossible.

However, if Amaca has sustained a demonstrable increase in legal costs, we suggestthe reasons might include the following:

1. Failure to adopt a reasonable approach to liability and damages issues at asufficiently early stage in proceedings to avoid significant legal costs in its owndefence, and an unnecessary amount of party and party costs. Too many caseshave settled at the door of the court, or after a day of evidence, too many havebecome assessments of damages well after circumstances of exposures have beensworn to by plaintiffs in answers to interrogatories, with resultant increase in costsliability, and too many claims have resolved for figures that were put by plaintiffs

early in a claim, which were met by nonsensical and unrealistic assessments onbehalf of Amaca.

2. Certain cases have resulted in a payment of indemnity costs to plaintiffs because ofunrealistic assessments being made, unwillingness to negotiate, and plaintiffsultimately securing judgment for a higher award than they were prepared to acceptin compromise. One clear example is the case ofMcGilvrayin the WA SupremeCourt. In July 2001, some five months before trial, the plaintiff provided a scheduleof damages that indicated the value of the claim to be in excess of $850,000. Heoffered to accept $800,000 in July 2001. The plaintiff ultimately offered to settle for$775,000 shortly before trial but this offer was rejected. Despite evidence thatsuggested the plaintiff's assessments were well justified, Amaca did not revisit that

offer. The plaintiff was awarded $1,079,394 plus costs assessed on an indemnitybasis from July 2001, including for the costs of the trial. The approach adopted by

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Amaca in that case cost it about $400,000 including two sets of unnecessary costsand substantial damages.

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7 Conclusion

James Hardie and its insurers have been agitating for some alternative to the commonlaw as a way of resolving asbestos claims. This is manifestly against the interests ofclaimants for many of the reasons set out above in the submission on costs.

APLA is already on the record with respect to this issue. We reproduce hereunder theresponse made to the proposal by APLA President John Gordon to the InsuranceCouncil of Australia conference in Perth last July.

"I want to conclude by saying something about asbestos claims.

Let me declare an interest. I have acted for the victims of negligent asbestosexposure for 20 years as a solicitor and as a barrister.

I consider the epidemic of disease, pain, suffering and loss that such exposure hasprecipitated to be one of the most shameful things in this country's history.

Workers and their families at Wittenoom in the north-west of this state, workers inJames Hardie plants around the country, including at Welshpool and Rivervale herein Perth, builders and carpenters, waterfront workers, women washing theirhusband's clothes, children helping their dad cut a.c sheets for a garage or sleep-out; the list of those now suffering goes on and on.

And the diseases they suffer are not pleasant. Asbestosis is a scarring of the lungswhich stops oxygen getting into the blood. As it progresses, you graduallysuffocate. Mesothelioma is a cancer which crushes the lung and invades nervesand vital organs killing you slowly and with intense levels of pain. Lung cancer (is)much the same, but perhaps over a longer time.

The general damages that sufferers receive is small compensation for what theyand their families must endure. They usually require months of constant care in thelast six months of their lives. I can think of no other short-term injury that morewarrants complete compensation for the pain and suffering and gratuitous attendantcare.

Allianz Insurance, insurer for some of James Hardie's asbestos liabilities, on behalfof this association, the ICA, has written a submission calling on governments tolegislate for, among other things, a no-fault scheme for asbestos sufferers,exclusion of some heads of damages and caps on damages for general damages

and gratuitous attendant care.

The submission is obviously self-interested, is based on erroneous factual and legalassumptions, and is misleading and tendentious. It does this Association no creditat all to be associated with it.

More galling than these things, however, is the suggestion in the submission thatthe changes proposed should be made for the benefit of the sufferers themselves.

The fight to achieve justice for the victims of asbestos disease was one of the mosthard fought in Australian legal history. In the face of denials of the most appallingnegligence, long and difficult trials had to be run. One of them remains the longest

civil case in this state (WA) and one of the longest ever in Australia at 132 days(Barrow and Heys v CSR and Midalco Ltd). Many of the plaintiffs who sought somecompensation died before such epic fights could be concluded.

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Where were the insurance companies then? Where were the calls for support forthe sufferers of asbestos-related disease? Where were the demands for a no-faultscheme in which liability would be admitted?

I'll tell you where the insurers were then. Standing shoulder to shoulder withcompanies like CSR, and like Hardies, fighting tooth and nail to defend what was

ultimately proven to be indefensible.

Asbestos victims, more than perhaps any other group of injured persons, had tofight for their common law damages, when no one wanted to know them. Havingachieved the right to receive them, they are not going to be given up to benefit thebottom lines of companies that tried to deny them.

I understand that this is part of a campaign that is going on in Britain and in theUSA. But let me offer a suggestion. If insurers are genuinely aggrieved at having topay damages for the minimal premiums taken from negligent companies 30 and 40years ago, sue the companies for recovery. Don't try and take the damages fromthe asbestos sufferers as Allianz and the ICA propose. After all, the companieshave been proven to have been aware of the risks to which they were exposingpeople. The Commonwealth Health Department made it known in 1922 thatasbestos exposure was a workplace hazard. There was no excuse for ignorance.

I will conclude by reading to you a letter written to The Australian newspaper by thewife of a young man dying of mesothelioma, in the hope that it will give to you aninsight into the human perspective of this issue.

"When they told me there was no cure and he probably had only nine months left to

live and be with us, I became hysterical, and uncontrollable to the point where

Garry was apologising for causing me so much pain. What a guy! Facing death and

still thinking of others.

With the lack of oxygen as the mesothelioma strangled his left lung, he found it hard

to speak. He became nauseous, his hair fell out, he coughed constantly, spitting up

white frothy fluid and lost weight until he looked skeletal.

I remember every detail of Garry's last five hours with us and they continue to hauntme and cause me great pain and grief. Garry and I shared a room at the hospital. I

was awoken by movement from Garry's bed and saw Garry lying across the bed as if

he was trying to get out. I asked the nurse the time and Garry looked at his watchand told me it was 3am the last words I heard him speak.

The next morning he was making strange noises and the nurse told me he was'running out of puff'. I became anxious and rang my daughters, his mum and dad

and his brother. I sat next to him and cried my heart out, even though I knew thismoment was inevitable, I was not prepared when it happened.

At one stage he looked at me and tears rolled out of his beautiful eyes. As I sat closeto him I was completely saturated by his urine when his bladder emptied and I was

distraught to see my once proud and handsome husband had been robbed of all hisdignity by this horror of a disease."

The campaign by insurers continues.

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Appendix 1

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james hardie 220404

Documents