James Hardie Former Subsidiaries (Winding up and Administration) Act 2005

The legislation directly binds three classes of entity and several categories of natural person.

Liable entities—ABN 60, Amaba and Amaca—are the primary subjects. They must maintain registered offices and member registers inside New South Wales (ss 12–13), may not transfer shares without Ministerial approval (s 15), must obey every direction issued by the SPF trustee under ss 24 or 25, segregate funds into statutory accounts (s 29), label all public documents (s 26), and conduct their affairs solely to manage and pay payable liabilities (s 23). Their directors and officers face personal liability for knowing contraventions (s 67) and may be removed by Ministerial order (s 17) or Supreme Court order (s 42).

The SPF trustee occupies the central administrative role. It manages the SPF and any discretionary fund, provides claims-management services, issues binding directions, determines when rationing directions or approved-payment-scheme applications are required, indemnifies itself out of liable-entity assets (s 36(2)(b)), and alone (subject to the Minister and Attorney General) may bring charitable-trust proceedings (s 9). After finalisation day it collects assets, admits or rejects proofs of claim, distributes according to the statutory waterfall, and applies for deregistration (Division 8).

Personal asbestos claimants (and their legal personal representatives or relatives) together with concurrent wrongdoers holding contribution claims are the intended beneficiaries. They may prove claims during the winding-up period (s 31) but are subject to the priority rules, possible instalment payments, deferral and interest-rate caps under any approved payment scheme. Claimants who have already received full compensation from another James Hardie-related party are barred from double recovery (s 32(2)). Statutory recovery claimants (principally the Dust Diseases Board under the Workers’ Compensation (Dust Diseases) Act 1942) are relegated to the lowest tier and may be rationed when funding is tight (s 32(3)–(5)).

James Hardie Industries NV (and its successors prescribed by regulation) retains residual rights: it may bring charitable-trust proceedings with leave, must consent to any cy-près scheme, and is a necessary party to variations of the SPF trust deed. Its controlled entities are relevant to the double-recovery bar in s 32(2).

The Minister holds significant oversight powers: approval of office moves, share transfers and director appointments; power to issue directions in lieu of the SPF trustee (s 40); power to fix finalisation days (s 43); power to authorise rationing and approved-payment-scheme applications; and the ability to intervene in any Supreme Court proceeding (s 58). The Minister’s concurrence is required before regulations can be made under ss 30 or 32.

Directors and officers of relevant companies and liable entities are personally exposed to penalty units for corporate contraventions they knowingly authorise (s 67), may be removed without compensation (ss 17, 42), yet are protected from insolvent-trading liability if they follow the Act (s 27).

The Supreme Court is given a supervisory rather than plenary role. It may approve or vary payment schemes (s 35), remove directors (s 42), give advice or directions (s 55), restrain contraventions (s 54), order deregistration (s 52) and act in aid of foreign winding-up courts (s 56). However, it may not entertain charitable-trust proceedings brought by strangers to the SPF (s 9).

Finally, ASIC retains residual functions; the Act expressly does not prevent liable entities from assisting ASIC (s 21(2)), but deregistration applications are frozen unless the Minister or Court consents (ss 28, 52).

Duties of liable entities are prescriptive. They must:

• exercise powers only to manage claims, pay payable liabilities and apply SPF funds on authorised terms (s 23(1));
• comply with every SPF trustee direction (ss 24(4), 25(3));
• segregate receipts into the four statutory accounts and apply money only for authorised purposes (s 29);
• lodge verified accounts and statements within one month after each financial year or as directed (s 37);
• give the SPF trustee and its agents full access to books and information (s 38);
• provide officers to attend meetings, answer questions and perform tasks (s 39);
• label all public documents (s 26); and
• refrain from applying for deregistration without consent (s 28).

Rights of liable entities are limited but include the ability to continue trading while insolvent (s 27), to compromise claims (s 23(2)), to give guarantees and security when directed (s 23(2)(d2)), and to receive advice or directions from the Court or Minister (s 55).

Duties of the SPF trustee encompass prudent management of the SPF, provision of claims-handling services, issuance of directions, determination of funding sufficiency (s 33), application for approved payment schemes when funds are or will be insufficient (s 35), indemnification rights against liable entities (s 36), and, after finalisation day, collection of property and distribution according to the statutory waterfall (ss 44–50). The trustee must act consistently with the Final Funding Agreement and may not direct discriminatory payment of proven personal asbestos claims (s 24(3)).

Rights of personal asbestos claimants are principally procedural: they may assert claims, obtain judgments or settlements, and prove in the winding up. Substantive payment rights are subordinated to the funding-availability test, the double-recovery bar, any approved payment scheme, and the priority waterfall. Small-claim holders may elect full payment if the Court so orders (s 35(8A)). Interest on deferred amounts is capped at the Court-approved rate (s 35(7)(e)).

Ministerial powers are both administrative (approval, direction, finalisation-day orders) and protective (intervention under s 58, authorisation of applicants under s 53). The Minister’s concurrence is a statutory precondition to certain regulations (ss 30(4), 32(5)).

Protections are extensive. Section 59 shields the SPF trustee, Minister and authorised applicants from most forms of judicial review or civil liability for the exercise (or non-exercise) of protected functions. Section 8(4) validates loan repayments and borrowings as proper applications of the charitable trust. Section 62 clarifies that the Act itself creates no new asbestos liabilities. Directors who lose office receive no compensation (ss 17(5), 42(4)).

The Act creates a tiered enforcement regime. Corporate contraventions of office-location, register-location, share-transfer and Ministerial-order provisions carry a maximum penalty of 1,000 penalty units (ss 12, 13, 14, 15, 16). Directors and managers who knowingly authorise or permit such contraventions are personally liable for the same offence (s 67). Proceedings may be brought summarily in the Local Court (maximum 100 penalty units) or the Supreme Court (full penalty) (s 68).

Civil enforcement is concentrated in Division 9 of Part 4. Only “authorised applicants” (the SPF trustee, the Minister, or persons authorised by the Minister) may apply to the Supreme Court to remedy or restrain contraventions (s 54). The Court may set aside rationing directions, unwind transactions, order repayment of money or return of assets, or grant any other appropriate relief. The SPF trustee or a liable entity may seek advice or directions from the Court or Minister on the performance of functions (s 55); compliance with such advice confers statutory immunity (s 55(10)).

Charitable-trust proceedings concerning the SPF are severely restricted: only the Attorney General (with or without relator), the SPF trustee or James Hardie Industries NV (with leave) may sue (s 9). This ouster is reinforced by s 59’s broad privative clause, which precludes challenges to the exercise of protected functions except in the narrow categories preserved by s 59(5).

After finalisation day, the SPF trustee’s decisions on proof of claims, priority and distribution are subject to Court supervision under ss 51 and 55 but benefit from the same immunities.

The Act is deliberately layered atop, and displaces, several Commonwealth and State statutes.

Corporations Act 2001 (Cth): Parts 3 and 4 contain explicit s 5G displacement declarations. Sections 12–19 displace Chapters 2B, 2C, 2H, 2J and Part 7.11 on offices, registers, shares and transfers. Sections 21, 27 and 60 displace Chapter 5 external administration rules so that the only permissible winding up is under this Act. Sections 28 and 52 displace Part 5A.1 deregistration requirements. Section 30 displaces s 601AG (recovery from insurers of deregistered companies). Section 26 displaces Part 2B.6 name rules. The combined effect is that the liable entities exist in a parallel legal universe for the duration of their winding-up periods.

Charitable Trusts Act 1993 (NSW) and general trust law are modified by Part 2. The SPF is declared charitable (s 8), yet standing is restricted (s 9), cy-près presumptions are narrowed, and loan receipts and repayments are deemed proper applications of the fund (s 8(4)).

Competition and Consumer Act 2010 (Cth) and NSW Competition Code are carved out for conduct required by SPF trustee directions under s 25(4)–(5), authorising single-claims-manager arrangements that would otherwise risk cartel prohibitions.

Limitation Act 1969 (NSW) is suspended for claims caught by an approved payment scheme or rationing direction (s 35(13)(c)).

Workers’ Compensation (Dust Diseases) Act 1942 statutory recovery claims are payable only when funding permits and may be rationed by regulation made with SPF trustee concurrence (s 32(3)–(5)).

Law Reform (Miscellaneous Provisions) Act 1946 s 6 (direct insurer actions) is overridden by insurance-proceeds regulations made under s 30.

The Final Funding Agreement itself is not legislation but is given contractual primacy; many provisions of the Act are expressed to operate “in accordance with” or “consistently with” that deed. Amendments to the Act have been made to keep it aligned with the Agreement (see 2006 No 108 and 2009 No 116).

The Act has been amended three times in ways that materially expand its financial architecture.

The James Hardie Former Subsidiaries (Winding up and Administration) Amendment (Trust Funds) Act 2006 inserted Part 3 of Schedule 1 (commencing on assent to the 2006 Act) and clarified that the SPF remains a valid charitable trust even if a discretionary fund is also used (s 8(3)). It also added the definition of “discretionary fund” and made minor adjustments to offence and direction provisions. These changes were required to implement the detailed mechanics of the Final Funding Agreement after it was executed.

The James Hardie Former Subsidiaries (Winding up and Administration) Amendment Act 2009 was more substantial. It inserted s 4A (indexed small-claim threshold), expanded the definition of “operating expenses” to include loan security expenses (s 4(1)), added Division 4A (authorised loan facilities) and s 30A, amended ss 23, 24, 29, 30, 32–37, 59 and 63 to accommodate borrowing, guarantees and security, and inserted ss 64A and new Schedule 1 provisions on the discretionary fund. The amendments were driven by the realisation that the original SPF capital would be exhausted faster than projected; loan facilities backed by liable-entity assets and SPF income were necessary to bridge funding gaps while preserving the charitable-trust status of the funds.

The Statute Law (Miscellaneous Provisions) Act 2023 No 7 updated s 7 to reflect modern drafting of Crown-binding provisions but effected no substantive policy change.

Each set of amendments was justified in the second-reading speeches as “ensuring the long-term sustainability of compensation for asbestos victims” and “providing flexibility to meet cash-flow shortfalls without compromising the charitable nature of the SPF”.

Because s 59 largely immunises the SPF trustee and Minister, reported litigation has been limited. The leading case is Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27, which, although not directly interpreting this Act, confirmed the power of State legislatures to alter limitation periods and procedural rights in asbestos litigation. Subsequent Supreme Court applications under s 35 for approved payment schemes have been heard in closed court or by consent, with judgments suppressed to protect commercially sensitive funding forecasts.

Controversy has centred on three issues. First, the double-recovery bar in s 32(2) has been criticised by plaintiff firms as unfairly extinguishing claims where earlier settlements were made on a “full and final” basis without knowledge of the statutory scheme. Second, the restriction on standing to challenge SPF administration (s 9) has been attacked as removing ordinary supervisory jurisdiction over charitable trusts. Third, the use of loan facilities secured over liable-entity assets has raised questions whether the SPF trustee is effectively preferring future claimants over present ones by incurring debt that must be repaid before further distributions. No appellate court has yet invalidated any of these mechanisms; the combination of s 59, the Minister’s concurrence requirements and the Act’s extraterritorial reach (s 5) has so far insulated the regime from successful collateral attack.

Most practitioners assume that once a judgment is obtained against a liable entity it can be enforced in the ordinary way; that is incorrect. Section 31(2) prohibits commencement or continuation of civil proceedings except to establish a personal asbestos claim, a payable liability or a non-monetary right. Even a judgment creditor must still wait for the SPF trustee to determine funding availability and the possible application of any approved payment scheme. The “payable liability” definition in s 4(1) expressly excludes interest and legal costs payable under a final judgment from the claims-processing-expense carve-out, yet those amounts still rank behind operating expenses and may be paid only by instalments.

Another trap is the interaction between s 30 insurance-proceeds regulations and s 35 approved payment schemes. Section 30(6) states that insurance regulations prevail in the event of inconsistency, yet many practitioners draft claims assuming insurance moneys will be available pro-rata. If regulations under s 30 have altered the destination of those proceeds, the Court-approved scheme must still respect that statutory priority.

The definition of “small claim” in s 4A is indexed by reference to Australian Statistician average weekly earnings but rounded to the nearest $500 (with $250 and $750 rounded up). A claim for $25,250 will therefore be treated as a small claim only after the Minister has published a declaration under s 4A(2); failure to check the NSW legislation website for the current declared amount is a frequent compliance error.

Section 36(2)(b) gives the SPF trustee an indemnity right against the liable entity for payments made directly to claimants, yet s 36(4) prevents double recovery from third parties. The timing of indemnity demands is at the trustee’s discretion (s 36(3A)), which can produce unexpected balance-sheet liabilities for the liable entities years after the underlying claim was paid.

Finally, the privative effect of s 59 is wider than most realise. It extends to “proposed, apprehended or threatened” exercises of function and precludes relief in the nature of certiorari, prohibition or mandamus except where s 59(5) expressly preserves rights under the Final Funding Agreement, loan agreements or specific provisions of the Act. Applications for judicial review framed as breach of natural justice or unreasonableness are almost certain to fail.

Compliance for a liable entity begins with mapping every incoming claim against the s 4(1) definition of “payable liability” and the exclusions in s 32(2)–(3). A register should record whether each claim relates to wholly Australian exposure, whether the claimant has received prior compensation from a James Hardie-related party, and whether the claim is a small claim under the latest s 4A declaration.

All receipts must be paid into the correct statutory account on the day of receipt (s 29). Transfers between accounts are permitted only to the extent authorised by the Act or an SPF trustee direction. Monthly reconciliations, quarterly management accounts and annual verified statements (s 37) must be lodged with the SPF trustee within the prescribed time; late lodgment triggers a s 67 offence for directors.

Any proposed compromise of a claim, entry into a loan facility agreement, grant of security or giving of a guarantee requires a prior written direction from the SPF trustee (ss 23(2), 24, 30A). The entity must not act on its own initiative even if the transaction appears commercially advantageous.

Directors must maintain a file demonstrating that every exercise of power falls within s 23(1) (necessary or convenient for claims management or payment of payable liabilities). Minutes should record the SPF trustee direction relied upon. If no direction exists, an urgent application for advice under s 55 should be made before proceeding.

When the SPF trustee issues a rationing direction or the entity’s own forecasts indicate insufficient funds, the board must immediately cease discretionary payments and prepare the data required for a s 35 application. Failure to do so risks personal liability under s 67 and possible removal under s 42.

Insurance proceeds must be applied strictly in accordance with any regulations made under s 30; commutation agreements require SPF trustee approval and Ministerial concurrence if regulations are to be varied.

At the back end, once a finalisation day is proclaimed, the entity must assist the SPF trustee to prove claims, realise assets and distribute according to the s 50 waterfall. No application for deregistration may be lodged until the Supreme Court so orders under s 52.

For claimants’ lawyers, compliance consists of notifying the SPF trustee of every judgment or settlement, providing evidence that the exposure was wholly Australian, and confirming that no prior full-and-final compensation has been received from a barred source. Failure to do so may result in the claim being treated as non-payable.

The SPF trustee itself must keep detailed records of every direction given under ss 24 or 25, every funding-sufficiency assessment under s 33, and the reasons for any rationing direction. When seeking an approved payment scheme, affidavit evidence must address the matters in s 35(6)–(8A), including the proposed interest rate and any small-claim carve-out. All loan drawdowns, security grants and repayments must be documented as authorised by the relevant loan facility agreement and consistent with the SPF trust deed.

In practice, the most effective compliance system is a shared online portal between the liable entities, the SPF trustee and the Minister that records every direction, every payment, every funding forecast and every s 4A indexation declaration. Annual mock “funding-stress tests” should be conducted to ensure that an s 35 application can be filed within the tight timeframes contemplated by the legislation. Only by treating the Act as a complete code that overrides every ordinary corporations-law instinct can the parties avoid the personal penalties, removal from office and civil-liability exposures the statute so carefully preserves.