CSR applied to Demerger into Sucrogen and CSR, which would result in the capital of the company being reduced and available to creditors, in particular, for liability of asbestos claims.
The application was opposed by an alliance of unlikely bedfellows including; James Hardie Industries NV and James Hardie 117 Pty Limited (together “James Hardie”); the Asbestos Injuries Compensation Fund Limited (under NSW administered winding up); AMACA Pty Limited (under NSW administered winding up) and AMABA Pty Limited (under NSW administered winding up) (together “AICF”) and the Attorney-General for the State of New South Wales (NSW).
Much of the expert reports were ordered confidential given their commercial context, however, it was clear from what was disclosed, that there some dispute as to the nature and extent of the liability. Stone J noted at paragraph 24:
It is clear from the above that CSR’s provision for “known and probable asbestos claims” does not take into account claims that “cannot be reliably measured”. It would seem to follow that the “future asbestos related claims” referred to in the passage quoted above also fails to take into account such claims. Yet it is the very uncertainty raised by such claims that is at the heart of the objections to the capital reduction.
And further at paragraph 35:
In summary, the expert evidence presented by CSR, ASIC, and the other intervening parties brings into sharp relief the inherent uncertainty involved in any actuarial estimate of future asbestos-related claims and in particular the limitations and qualifications expressed in the actuarial reports relied on by CSR. In addition, specific issues raised by the experts retained by ASIC and AICF point to particular limitations in the material supplied by CSR’s experts in relation to future asbestos claims that cannot be reliably estimated at this time. The starting point in considering whether these flaws should lead to my not being satisfied that the provisions made in respect of asbestos-related claims following demerger are consistent with public policy or commercial morality must be:
(a) that New CSR will be the repository of all CSR’s liabilities in respect of asbestos-related claims both present and future; and
(b) that it will suffer a significant reduction in the capital available to meet such claims.
Stone J concluded:
38. Given the inherent uncertainties in the actuarial material that had been put before the Court, Mr Oakes submitted that the only way forward would be for the Sucrogen Company to provide a deed poll in favour of current and future asbestos claimants undertaking to satisfy asbestos-related liabilities if New CSR proved unable to do so. In a letter to CSR’s solicitors, Mallesons Stephen Jaques dated 28 January 2010, from the New South Wales Crown Solicitor’s Office a suggestion to this effect was made. I understand that CSR did not regard the suggestion as attractive. Its submissions in reply noted that the proposal “would significantly alter the commercial characteristics of the proposed demerger”. In particular it was said that the proposal would subject Sucrogen “to a contingent liability over which it had no effective control, which had no correlation to its business revenue and which offered no commercial return or benefit”. Given that rejection no such proposal is part of the Scheme which is presently before the Court and it is not appropriate that I make any comment as to whether, if the proposal were to be implemented, the amended Scheme would continue to face the difficulties that I have identified.
39. For the reasons given above I have concluded that the orders sought by the plaintiff should not be made and that the Plaintiff’s application should be dismissed.
Brisbane Barrister – David Cormack