James Hardie Industries NV v Australian Securities and Investments Commission

The appeal concerned alleged contraventions of the *Corporations Act 2001* (Cth) by James Hardie Industries NV (JHINV) and its related entities. The Australian Securities and Investments Commission (ASIC) alleged that JHINV made false or misleading statements and engaged in misleading or deceptive conduct in contravention of sections 1041E and 1041H of the Act. ASIC also alleged that JHINV breached its continuous disclosure obligations under section 674 of the Act and ASX Listing Rule 3.1 by failing to disclose material information regarding a corporate restructure. The case was heard in the Court of Appeal of New South Wales.

The primary legal issues before the court were whether certain statements made by JHINV in a presentation to investors, and subsequently lodged with the ASX, were false or materially misleading, and likely to induce persons to buy or sell shares or affect the price of financial products. Additionally, the court had to determine whether JHINV had failed to disclose material information concerning its corporate restructure, specifically the establishment of the Asbestos Injuries Compensation Fund (AICF) and the execution of a Deed of Cross Indemnity between JHINV and its subsidiary JHIL, which ASIC argued was crucial for understanding JHINV's exposure to asbestos liabilities. The court also considered whether JHINV was entitled to relief from liability under section 1317S of the Act.

The court applied an objective, *ex ante* test to assess the continuous disclosure obligations under section 674. It found that JHINV's belief that the prospect of asbestos claims was remote did not negate the materiality of the information. Evidence from JHINV's internal documents, management communications, analyst reports, and expert testimony indicated that JHINV's connection with asbestos was negatively impacting its financial position in the market. The court reasoned that the potential financial obligation arising from the partly paid shares, which could be up to $1.96 billion, and the elimination of this liability through the transfer of JHIL, constituted material information. Furthermore, the court determined that the Deed of Cross Indemnity was an integral component of the restructure, designed to protect JHINV from asbestos liabilities and perceived connections to such claims, and its absence from earlier disclosures meant that the information was not properly disclosed until 30 June 2003.

The appeal and cross-appeal were dismissed, with JHINV ordered to pay 90 per cent of ASIC's costs.