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2 August, 2004  
Delving in the cancellation of the partly paid shares - Allens Final Evidence

Final flurry of evidence from Allens’ lawyers at the James Hardie inquiry. Uncertainty prevails…

Allens’ lawyer lacks total recall

Two Allens’ lawyers were sent into the witness box today at the special commission of inquiry into the James Hardie mess and pressed for a final round of details on the mysteriously cancelled partly paid shares. The shares were held out to the Supreme Court as the method by which the company’s present and future asbestos liabilities would be met.

It was a frustrating morning’s evidence. So frustrating that special commissioner David Jackson QC was compelled to inquire whether Allens’ lawyer Julian Blanchard could recall anything beyond the actual handwritten notes before him in court.

Apparently not. During nearly two hours of testimony Blanchard’s answers were sprinkled with, “I can’t recall I have no recollection I’m not certain not to my knowledge”.

Blanchard’s appearance before the inquiry began inauspiciously enough, with a polite request from the commissioner to remove his hands from his pockets while taking the oath.

The nuggetty lawyer from Bondi was then questioned at length by unions’ counsel Jack Rush QC over notes he had taken of several internal meetings at Allens between March and July 2002.

The meetings related to James Hardie Industries scheme to compensate asbestos victims.

imageBlanchard maintained that the notes he took didn’t really reflect what he’d said but what others, mainly Allens’ partner David Robb (pictured), had said. Robb had the primary responsibility of advising James Hardies’ companies, he told the inquiry.

Notes from the first meeting on March 25 between Blanchard and Robb yielded little beyond the fact that it was a briefing. Blanchard agreed that Robb’s intention was “to get rid of the partly paid shares under Australian law” and that he [Robb] was concerned about the cancellation of the partly paid shares in a “such a short period of time”.

Blanchard didn’t however recall Robb mentioning the “intentions” of the directors of James Hardie at that meeting.

He confirmed that “lifting the corporate veil under Dutch law was “one of the issues we wanted to explore” but could not take this any further.

Blanchard’s notes of a telephone conversation between Allens, James Hardie’s CFO Phillip Morley and PriceWaterhouse on April 11, 2002 were even less revealing.

In relation to the note which read, “How do you know if enough dollars there?” Blanchard was not certain what it meant. When pressed by Rush that this was about putting a dollar figure on the liabilities of JHIL, Blanchard initially wasn’t sure, then didn’t have any recollection at all.

Blanchard was similarly non-committal about his note, “Disclosure obligation. Cameron too soon.” Was Robb conveying the view of Allens’ partner Peter Cameron’s that to cancel the partly paid shares after the scheme of arrangement was “too soon?” Blanchard couldnt remember.

Asked if any person at Allens made any investigation into JHIL directors’ intentions in relation to the partly paid shares between March and July 2002, Blanchard first cavilled over the word “investigation” and then conceded that “David Robb and others asked questions”.

imageBlanchard’s notes of an internal meeting between the firm’s “top analytical mind” Michael Ball (pictured), Robb and himself on July 17, 2002 under the heading Timing proved more interesting.

Blanchard’s note saying, “Whatever misleading conduct that may be alleged has already occurred” was attributed to Ball. The note which read, “Not willing to justify to the court that creditors interests not affected” was likely to be Robb’s.

Blanchard told Rush that to the best of his knowledge “Allens wasn’t working on the issue of the directors’ intention in relation to the partly paid shares at the time of the scheme of arrangement”.

Blanchard denied that the note which read, “Nothing Santow can do. ASIC might do something,” meant that the three Allens’ lawyers were “working out the best explanation for the court of the cancellation of the partly-paid shares”.

“I totally refute that suggestion,” Blanchard told Rush.

imageThere was also a short burst of testimony from Roy Williams (pictured), one of Allens’ top litigation lawyers and the man who worked almost exclusively on James Hardie’s asbestos litigation from 1997.

Williams told the inquiry that he didn’t recall James Hardie’s liability ever being quantified.

He did however recall being asked by Robb on February 15, 2001 to speak to Blake Dawson Waldron which was advising Peter Cameron about the company’s liability. Williams told the inquiry Robb also asked him to speak to Cameron.

Asked by Rush whether the question of a conflict of interest had occurred to him, Williams replied:

“It was unusual but appeared to be done with everyone’s consent.”

That could well be the nub of the situation in which Allens now finds itself.