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Tuesday, 7 December 2004
Page: 116


Mr MELHAM (9:44 PM) —I rise to support the James Hardie (Investigations and Proceedings) Bill 2004. At the outset, I want to address a number of concerns that have been raised by the member for O'Connor and put him right in his misconceptions. The first point I make is that I agree with him in relation to the piercing of the corporate veil. The Treasurer, in his second reading speech, cited the Daniels case, in which:

... the High Court found that legal professional privilege is not merely a rule of substantive law but an important common law right that cannot be abrogated by statute without express words or an unmistakable implication.

He then went on to say:

Nevertheless, there are situations in which its abrogation is justified in order to serve higher public policy interests. One such situation is the effective enforcement of corporate regulation.

I think it should not be restricted to James Hardie, because there is that principle of effective corporate regulation. Why is this so? In another part of the second reading speech of the Treasurer, he said, especially in relation to this case:

It is expected that many crucial documents will be subject to claims of privilege by James Hardie. The transactions that will be the subject of investigation are of a complex nature, and were the subject of extensive legal advice and assistance. Materials documenting this advice may offer critical evidence as to the purpose and nature of certain transactions. Such evidence may be unavailable from any other source.

So that evidence may well assist James Hardie, but we need to learn from the mistakes of the past and the history of the past in relation to tobacco companies and the subterfuge that they went through in hiding material. I agree with you: it should not just apply to them. I think this is a power that ASIC is seeking.

The second point, which I think is a misconception, is that the member seems to think that we are automatically presuming that James Hardie is guilty and that compensation will flow. That is not the case at all. What we are allowing is for investigations to properly be undertaken, and each case will be determined on its merits. In the Dust Diseases Tribunal of New South Wales, Justice Curtis, in the case of the State Rail Authority of New South Wales v. Wallaby Grip Ltd—18 NSWCCR 193—found:

There is no evidence that between 1938 and 1950 the SRA had actual knowledge of the dangers to health posed by visible clouds of asbestos dust. Hardie did know. It is sufficient to refer to one exhibit only. SRA 26 reveals that on October 1938 Hardie's asbestos factory at Brooklyn in Victoria was the subject of tests carried out by the Victorian Department of Health to determine the concentration of asbestos particles in the air. The results were sent to Hardie. The report stated that: “Certain authorities regard 5,000,000 asbestos particles per cubic foot of air as the maximum concentration to which workers should be exposed” and advised that where workers were exposed to such concentrations, even intermittently, they should wear suitable dust respirators. Any visible cloud of asbestos dust contains a concentration above 5,000,000 particles per cubic foot.

That was stated in paragraph 108 of Judge Curtis's findings. So you had a situation there where the complainant had to prove his case, and that is what we have in relation to these matters.

I think it is an important matter of public policy that we do not have a situation where legal professional privilege is invoked to in effect stifle what are legitimate investigations, be they Hardie or any other company. I believe that one of the problems in the past is that those companies that go belly-up are using their lawyers in effect and the corporate veil. So I think the member has a legitimate point, but in this instance you cannot attack it for being used in James Hardie's case. My view is that this is a good precedent, and it is a precedent in public policy that should not be invoked lightly, but if you have a situation where—


Mr Tuckey —We think we know better.


Mr MELHAM —No, it is not a question of we think we know better. I understand where the member is coming from—I really do—but I think the problem here is that we have had a company that for years has sat on its hands, and it is now setting up corporate entities and engaging in evasion. The criticism of David Jackson QC that was implied by the honourable member I do not share. I know Mr Jackson—I have met him on a number of occasions. He is a highly regarded QC who is not necessarily a Labor supporter. I have never heard him talk politics. What I know is that he is respected on both sides of the political fence and by all in the legal profession. His report of the Special Commission of Inquiry into the Medical Research and Compensation Foundation, tabled in September 2004, had this to say on page 13, in paragraph 1.25, and this is the point:

The negligence of the James Hardie companies occurred in the past, but the liabilities flowing from that negligence only arise day by day, now and in the future, as the diseases are acquired or manifest themselves. The exposure to asbestos may not even yet have occurred. The position in February 2001 was, as it remains, that members of the public will contract asbestos-related diseases over many years because of the negligence of Amaca and Amaba. The notion that the holding company would make the cheapest provision thought “marketable” in respect of those liabilities so that it could go off to pursue its other more lucrative interests insulated from those liabilities is singularly unattractive. Why should the victims and the public bear the cost not provided for?

He goes on to say:

The second observation concerns the quite misleading statements made on behalf of JHIL at the time of separation, and the culture of denial adopted as the shortcomings in the Foundation's funding began to emerge. For nearly thirty years in this country we have had standards for business communications. Such communications are not to be misleading or deceptive. Those standards appear in the Trade Practices Act 1974 (Cth) and in its State equivalents, in the Corporations Laws and in the Corporations Act 2001. They have been maintained by governments of all political colours. In my opinion they were not here observed.

That is a fairly damning indictment.



The DEPUTY SPEAKER (Mr Wilkie)—Order! The member for O'Connor has had his say.


Mr MELHAM —The member for O'Connor would know that this is a commission of inquiry that has laid the foundation for this particular piece of legislation, which will lead to further inquiries. Events flow from there. The member talked about his visit to Blaxland, which is an adjoining electorate—I have the electorate of Banks. Banks is an old-style Labor seat with housing commission war service homes settled after the Second World War. Many of those homes are riddled with asbestos.

As I drove past when going to the shops a couple of weeks ago, there were a number of homes being demolished because they are going to be replaced by duplexes. It turned out that the demolition was not being done in accordance with the appropriate standards when it came to asbestos. That demolition was halted and the builders were told to do it the right way. This situation is going to be something which our community will have and interact with and which will impact upon it for many years to come.

I do not judge James Hardie guilty. That is not my role as a legislator. This is, in effect, the member's complaint. My complaint is: you are doing it to James Hardie; what about everyone else in relation to the corporate veil? My answer to that is that the threshold question has been reached in relation to investigations.



The DEPUTY SPEAKER Order! The member for O'Connor will cease interjecting.


Mr MELHAM —I say: let us pierce the corporate veil, which is what this legislation is about. In future, let us pierce the corporate veil as well if it is shown that, in effect, the corporate regulator requires it to get behind the purpose and nature of certain transactions. Behind us are the days when the community accepted us as legislators sitting on our hands while companies like James Hardie could use the corporate veil to conceal the truth, in effect. That is what this legislation will do—and that is why it should be warmly embraced.

Some of us have a view about James Hardie. I do. But my view is irrelevant. My view will not render James Hardie liable for one cent. But my view as a legislator will allow James Hardie to be properly investigated and allow a number of people, some of whom will never get to court because they will not survive long enough, to at least have a level playing field when it comes to investigating the causal connection of their illness or their death. If it is revealed that James Hardie sat on material—on medical evidence, reports and a whole range of other things—that would not have seen the light of day but for this legislation then I think we have done the right thing. I think it is a good thing that both sides of the House are supporting it.

The point the member makes is: why James Hardie and no-one else? It is because James Hardie is the first one in the queue where this has become a real live issue, courtesy of the report of Mr Jackson QC. I do not rest on the view that we should never pierce the corporate veil. In relation to that, I think the member for O'Connor and I have the same view. Having said that, you cannot turn around and say, `I don't think the corporate veil is sacrosanct, but I don't want to do it to James Hardie, because we are not doing it to anyone else.' I am sorry. What I hope is that, as a result of this case—and quite frankly some of the corporate entities need to be on notice that the old tricks of the lawyers and the accountants—


Mr Tuckey —Why are you picking on them?


Mr MELHAM —I will tell you why I am picking on them: because there is a piece of legislation introduced by a government of a different political persuasion, and I am arguing a principle. That is the thrust of this bill.


The DEPUTY SPEAKER —Order! The member for Banks will not respond to interjections and will refer his remarks through the chair. The member for O'Connor will cease interjecting.


Mr MELHAM —I think this is the problem that member for O'Connor has. If you take his objections to their natural conclusion, quite frankly he should be supporting the bill. He is raising objections, but the natural conclusion is to support the bill.

By this bill we do not say that you are automatically going to get a bag of money. What we have basically said to those people who want to take James Hardie on is that, as a result of this bill, we are not going to allow James Hardie to use the corporate veil to hide critical evidence that could go to the purpose and nature of certain transactions. It may well be that James Hardie can produce the material that abrogates their responsibility. Theoretically, they could say: `This is the advice we have acted on. We have acted in good faith and we have not been negligent or criminal. We have not maintained production of a product, knowing the consequences of that product being in the marketplace.'

I do not know what advice James Hardie has received, but I do know that someone like Mr Jackson—who has been around for many years, who at one stage was on the short list for a High Court appointment under this government and who has the enormous respect of all who know him and all in the legal community, irrespective of their political affiliations—cannot be ignored. We as a parliament cannot stand still in the light of this report and say that in this instance we are going to maintain legal professional privilege which could defeat legitimate claims.

I think it is a great piece of legislation in terms of the principles that I believe in and principles that should, in my view, be expanded because, at the end of the day, if James Hardie are not negligent or criminal and they acted in good faith on appropriate and proper advice and did all things reasonable then they have nothing to fear. I have often had it quoted to me by many on the other side: `If you are not guilty, what have you got to worry about?'

All we are doing here is dealing with the fiction of legal professional privilege in this instance. Why? Because on good public policy grounds we are serving a higher public policy interest. This is where I agree with the honourable member for O'Connor. For me, I would not restrict it to James Hardie. I would lift the corporate veil across the spectrum. In that regard we are at one. I commend the bill to the House. I was particularly impressed by the speech by my colleague the honourable member for Parramatta because it is a particular problem in her electorate. I think she eloquently pointed out to the House why this is a bill we can all be proud of. I think the honourable member for O'Connor should go back to his party room and try and get them to, in effect, open up the corporate veil in all corporate matters. He might find that we will support him on this side.


Mr Tuckey —I've been there.