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« The art of the menacing letter | Main | Look at me »
Wednesday
Nov282012

Festive season

Once a Jolly Bagman's happy remembrance of Australian politics ... James Hardie and how "separation" replaced the "corporate veil" ... A warning: be suspicious of people, like Scott Morrison, who proclaim themselves to be Christians ... Procrustes' end-of-year bleeding-heart special 

Jolly Bagman and King of Broome

'TIS the season to be jolly, and the Great and the Good, ranging from the BBC to the NSW Court of Appeal, have been in a mood of generosity that staggers your correspondent who, admittedly, is wearing his Bah Humbug Christmas bonnet 

The BBC made grovelling apology, accompanied by a bag of money, to Lord McAlpine for imputing an appalling calumny against him.

This sort of baseless accusation distracts from the utility of Lord McAlpine, and his ilk, in understanding Australian commercial, legal and political life.

McAlpine has a long association with and fondness for Australia, as revealed in his 1997 classic Once a Jolly Bagman.

While he was treasurer of the UK Conservative Party he set up in Broome as a developer, and described the arrival of some British ministers to enjoy the Australian sun.

They were greeted on arrival by the Broome representative of the WA press corps, who cornered them with:

"What questions would you like me to ask you?"

Thank Zeus for the hard-nosed Australian press, sniffing out any wrongdoing.

Lord M went on to show a keen-eyed understanding of how government and business should work hand in hand:

"Entrepreneurs today are well advised to study the characters of the politicians and the civil servants in the country where they have interests.

Today, so much of industry and finance is controlled by regulations. Politicians can enforce them or relax them, invent new ones or abolish old ones just as they please, without going anywhere near the parliaments to which they have been elected." 

The doctrine of parliamentary sovereignty was getting pretty long in the tooth, and it's good to see it being replaced with a practical focus on the welfare of the players that matter: money and power. 

The Bagman then immediately listed the three WA premiers with whom he's had dealings: Sir Charles Court, Ray O'Conor (sic) and Brian Burke.

The latter two were later imprisoned. Court, on the other hand, is the subject of a portrait (with son Richard, later also premier of WA) by Mary Moore which hangs in the National Portrait Gallery.

Sir Charles sports the largest smirk in Australian portraiture.

The Americans have feet interlocking under the table of regulation, but life is simpler in the Wide Brown Land: take the relevant minister out for a beer.

This isn't crony capitalism, just streamlining a process that works better without messy disclosure to the public through an elected forum. 

*   *   *

MEANWHILE, the NSW Court of Appeal has tempered justice with mercy for the unfortunate directors of James Hardie, reducing the period of disqualification from directing for most from the five years imposed by the primary judge, to only three years: see Gillfillan v ASIC

Sackville AJA (cuddly Ron is famous since he retired from the Federal Court for his pipe opener to his masters' class, "You may call me Judge") wrote the leading judgment. 

He balanced the impact of the notoriety and bad press that the directors had received against their fecklessness in letting through the duff announcement that liability to asbestos victims would be completely covered, when that was simply not true.

What captures your correspondent's eye is the references throughout to "subsidiary companies" and the process that the announcement was addressing, which was the creation of a fund to be administered by a new corporate entity, this being referred to as the "separation" process. 

The course of two decades of litigation by asbestos victims against what they thought was James Hardie was marked by the shape-changing character of the various corporate entities set up by Hardies with a view to hiving off liability from the core body in which shareholders had invested.

"Separation" was the very heart of the issue at the time of the crucial public statement as to covering future liability.

Neither the CA, nor the High Court, which earlier this year had surveyed the problem, referred to the issue of the law surrounding the corporate veil, the doctrine that allows a holding company to assert its separate identity from that of its subsidiaries, and consequently deny liability for subsidiaries' debts.

It was the use of the doctrine of corporate insulation (asbestos anyone?) that led to the defeating of victims' claims and the need for the setting up of a secure fund.

The NSW Court of Appeal had been very clear in earlier asbestos claims against Hardie subsidiaries (see Hall's case involving the deceased Desmond Putt in 1998, and see Gideon Haigh's Asbestos House 2007) that the corporate veil was not to be lifted, as a trial judge had done, just because the parent company had control of the subsidiary which had been responsible for the workers' interaction with asbestos.

The last time that the phrase "corporate veil" had a run in Hardie litigation was the overthrowing of the primary judge's penalties by the Court of Appeal on the first occasion in 2010.

The court there noted that it was Credit Suisse First Boston, a leading sharebroker and investment bank, which had, as adviser to Hardies, suggested a decade ago:

"Possible risks to JHlL

We see two key risks to JHIL:

1.  The Medical Research and Compensation Foundation runs out of funds before all legitimate claims can be paid. Tied into this, Australian sufferers of asbestos-related disease become more litigious; and

2. Australian plaintiffs are successful in overturning the case precedent that the corporate veil cannot be breached." 

You can all breathe easier now out in lawyer-land.

The wretched merchant bankers can go and wash their mouths out: overturning a precedent as phenomenally useful as the corporate veil in ensuring that the powerless and the victim class stay in exactly the bend over position?

Whatever were they smoking?

The important thing is that after 2010 judges sensibly dropped references to the "corporate veil", and referred only obliquely to "separation", which didn't sound half so sinisterly like "let's hive the liability for the appalling deaths our company has caused onto some dud proprietary".

The corporate veil lives, unlike the asbestos victims.  

*   *   *

WE need to conclude this barrow-load of seasonal goodwill by reflecting on the Christian conscience of Scott (Compassion) Morrison, shadow minister for boat turning. 

Scotty's maiden speech to the House spoke of the duty of Christians to stand-up for the poor and hungry, but in 2011 he attacked the government for flying survivors of the Christmas Island boat tragedy to Sydney for the funerals of their children, spouses and parents.

Fortunately, he is guided by his conscience in handling his portfolio.

When asked whether he prayed for asylum seekers he replied:

"Of course I do, I think that's part of any Christian's practice. I'm not saying I do it every day. I'm not saying I do it every month."

Sounds like being a Christmas and Easter Anglican. I hope this creepy hypocrite keeps a diary-note to jog his memory: must pray for asylum seekers. 

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