Spender, Peta --- "Blue Asbestos and Golden Eggs: Evaluating Bankruptcy and Class Actions as Just Responses to Mass Tort Liability" [2003] SydLawRw 11; (2003) 25(2) Sydney Law Review 223

[*] Reader in Law, Faculty of Law, ANU. The author wishes to thank Kent Anderson, Juliet Behrens, Stephen Bottomley, the two anonymous referees and the participants in the CLTA Conference at Monash University on 12 February 2002 for their helpful and insightful comments on this article and the issues raised by it.

[1] Anthony Hughes, ‘Hardie Cleans Up Its Asbestos Act’ Sydney Morning Herald (17 February 2001) at 51.

[2] Ben Hills & Anthony Hughes, ‘Asbestos Money “Not Enough” ’ Sydney Morning Herald (17 February 2001) at 3.

[3] ‘Mass torts’ may be defined as ‘encompassing any (negligently or strictly) tortious systematic risk-taking by business that exposes some population of individuals to injury in person or property or both. All product and occupational liability, as well as all business-generated environmental hazards, are mass torts.’ David Rosenberg, ‘Mass Tort Class Actions: What Defendants Have and Plaintiffs Don’t’(2000) 37 Harv on Legis 393 at 393.

[4] A problem of terminology is already arising because we need to think about two different concepts — bankruptcy and insolvency. In this article I will use the word ‘bankruptcy’ in a general sense to describe the capacity to invoke the legal machinery of insolvency such as reorganisation procedures and in a particular sense to refer to US procedures. The distinction between bankruptcy and insolvency is important, but the terminology is slippery. ‘Insolvency’ is defined under s95A of the Corporations Act 2001 (Cth) as the inability to pay debts as and when they fall due. In Australia and the United Kingdom, the term ‘bankruptcy’ generally refers to the end point of a process undertaken under the Bankruptcy Act and specifically refers to individuals. In the USA, the term refers to both corporate and individual bankruptcies under Chapter 7 of the Bankruptcy Code and reorganisations under Chapter 11 of the same code. By comparison, in Australia ‘corporate insolvency’ is dealt with under Chapter 5 of the Corporations Act 2001 (Cth).

[5] In a long-tail tort there is a long latency period between a person’s use or exposure to a harmful product and the first manifestation of harm.

[6] Such as Agent Orange, Dalkon Shield and silicone gel breast implants.

[7] Asbestos will have the greatest number of claims and liability will come in waves for many years to come. For example, in CSR v Young (1998) Aust Torts Reports 81–468 at 64952, the New South Wales Court of Appeal found CSR liable in the first mesothelioma case involving the townspeople of Wittenoom. The plaintiff was not an employee of CSR or its subsidiaries.

[8] The judgment in Borel v Fibreboard Paper Prods Corp [1973] USCA5 840; 493 F 2d 1076 (1973) by the US Fifth Circuit that asbestos manufacturers could be held strictly liable for injuries resulting from asbestos exposure is regarded as the point at which asbestos litigation began in the USA.

[9] In 2001 Behrens and Parham quote statements by two asbestos defendants (GAF and Owens Corning) who had settled more than 740 000 claims. See Monica Parham & Mark Behrens, ‘Stewardship For The Sick: Preserving Assets For Asbestos Victims Through Inactive Docket Programs’ (2001) 33 Texas Tech Law Review 1 at 1–2. A study by the RAND Institute in August 2001 showed that although more than 500 000 claims have been filed, this may be less than half of those that ultimately come forward: Deborah Hensler, Stephen Carroll, Michelle White & Jennifer Gross, Asbestos Litigation in the US: A New Look at an Old Issue (RAND Institute, 2001).

[10] For example, Federal Court Act 1976 (Cth) s33ZA; Federal Rules of Civil Procedure (US), Rule 23(b)(1)(B).

[11] James Hardie Australia Pty Ltd, ‘James Hardie Resolves its Asbestos Liability Favourably for Claimants and Shareholders’, Press Release, 16 February 2001: <http://www.ir.jameshardie.com.au/JH_ir/news/jhilasbestosrelease.htm> (12 January 2003).

[12] Aesop tells the story of the Goose with the Golden Eggs. In that story a farmer was astonished to discover that his goose had laid an egg of solid gold. He took the golden egg to the market and sold it for a good price. Every day thereafter the farmer found an egg of the purest gold and he sold them one by one. He became a rich man. One day he thought, ‘Why must I be content with only one golden egg a day? If I kill the goose and cut her open, I can take all the treasure at once!’ Whereupon he killed the goose but there was no gold at all inside. ‘Foolish man!’ cried his wife, ‘if only you had understood that those who are greedy for too much sometimes lose all.’ Ann McGovern, Aesop’s Fables (9th ed, 1974) at 72.

[13] The company boasted in an article in Asbestos Magazine in 1970 that ‘Johns-Manville participates in almost every facet of the Asbestos Industry and is the largest producer of asbestos-based products in the United States.’ Asbestos Magazine (Sep 1970) at 14–15 quoted by Weinstein J in In Re Joint Eastern & Southern Dist. Asbestos Litig. 129 B R 710 (1991) (hereinafter In Re Joint Eastern & Southern), 742.

[14] Concerns about asbestos have some antiquity. In 1st Century AD, Pliny the Elder noted that slaves working in asbestos mines were dying at a young age of lung disease. By the 20th century the concerns were gaining momentum. For example, in 1926 the first of hundreds of successful claims for compensation for asbestos disease were settled by the Massachusetts Industrial Accidents Board and in 1930 the British Home Office reported widespread asbestos disease in UK factories and introduced regulations controlling dust particle density. For a history, see Paul Brodeur, Outrageous Misconduct: The Asbestos Industry on Trial (1985).

[15] Brodeur, id at 113–114.

[16] Barnett v Owens-Corning Fiberglas Corp et al (Ct Common Pleas, 23 August 1978).

[17] Francis McGovern, ‘Resolving Mature Mass Tort Litigation’ (1989) 69 Boston University Law Review 659. Between 1984 and 1990, the asbestos cases pending in the US District Courts increased from 7923 to 33 182 (Judicial Admin Office, Civil Cases (Asbestos Only) Commenced, Terminated and Pending During Twelve-Month Period Ending Dec. 31, 1990 Table C 1 (1991) quoted by Weinstein J in In Re Joint Eastern & Southern, above n13 at 745). In 1991 it was predicted that as many as 265 000 deaths due to asbestos would have occurred before the year 2015 (Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 2 (Federal Judicial Center 1991), quoted by Weinstein J in In Re Joint Eastern & Southern, above n13 at 746).

[18] Kevin Delaney, Strategic Bankruptcy: How Corporations and Creditors Use Chapter 11 to Their Advantage (1992) at 61. Coffee reports that in 1982 over 16 500 cases were outstanding against the company. Manville had either settled or judgment had been entered in more than 3570 claims at an average disposition cost of $20 000. John Coffee, ‘Class Wars: The Dilemma of the Mass Tort Class Action’ (1995) 95 Columbia Law Review 1343 at 1387.

[19] Coffee, ibid.

[20] Frank R Kennedy, ‘Creative Bankruptcy? Use and Abuse of the Bankruptcy Law — Reflection on Some Recent Cases’ (1985) 71 Iowa Law Review 199 at 202. One author has stated that the reorganisation made front page news throughout the US because at the time Manville was the largest company ever to file under this legislation, and, with assets of more than $2 billion, one of the richest companies ever to take such action. At the time it was 181st on Fortune’s list of the US top 500 industrial corporations. London Hazards Centre, Asbestos: The Worst Industrial Killer (1994): <http://www.lhc.org.uk/members/pubs/books/asbestos/asb09.htm#_Toc401990477> (12 Jan 2003).

[21] Delaney, above n18 at 62.

[22] Kennedy, above n20 at 202.

[23] Greg Zipes, ‘After Amchem and Ahearn: The Rise of Bankruptcy Over the Class Action Option for Resolving Mass Torts on a Nationwide Basis, and the Fall of Finality?’ (1998) Detroit College of Law at Michigan State University Law Review 7 at 50.

[24] Thomas Smith, ‘A Capital Markets Approach to Mass Tort Bankruptcy’ (1994) 104 Yale LJ 367 at 373.

[25] In Re Joint Eastern & Southern, above n13 at 752 (Weinstein J).

[26] Manville’s shareholders lost up to 80 per cent of the value of their stock in a ‘reverse split’ in which six shares were traded for a single share. Delaney, above n18 at 72.

[27] It is a fundamental premise of corporate law that shareholders’ interests are deferred to creditors. Upon winding up, shareholders should receive nothing until creditors are paid in full. In US bankruptcy law the principle is referred to as the ‘absolute priority rule’. As applied to a reorganisation it means that when a firm owes more than its assets are worth, the shareholders receive nothing unless the creditors consent. See Douglas Baird & Thomas Jackson, ‘Bargaining after the Fall and the Contours of the Absolute Priority Rule’ in Jagdeep Bhandari & Lawrence Weiss (eds), Corporate Bankruptcy: Economic and Legal Perspectives (1996) at 113.

[28] Delaney, above n18 at 71.

[29] Delaney, id at 79.

[30] In re Johns-Manville Corp 68 B R 618 (1986), 621–622. As of 31 December 1995, the trust had received over 280 000 claims. The Plan predicted the trust would receive between 83 000 and 100 000 claims during the life of the trust. Manville Personal Injury Settlement Trust — History: <http://www.mantrust.org/history.htm> (12 January 2003). A report issued by the trust in May 2001 indicated that the number of claims was still increasing. During 2000 new claims totalling 59 200 were filed with the trust which represented an 82 per cent increase in volume over the 32 500 claims filed during 1999, and was the greatest volume of claims received in any year since 1989, the first full year the trust received claims.

[31] In Re Joint Eastern & Southern, above n13 at 754 (Weinstein J).

[32] Pursuant to the Court’s decision in In re Joint Eastern and Southern, Findley v Falise 878 F Supp 473 (1995), the trust is required to undertake a re-estimation of the pro rata share at least every three years. On 19 June 2001 the trustees decided to reduce the pro rata payment percentage from 10 to 5 per cent in view of the expanding number of claims being filed. See: <http://www.mantrust.org/FTP/REDUMEM2.pdf> (18 April 2003).

[33] Richard Marcus, ‘Symposium: They Can’t Do That, Can They? Tort Reform via Rule 23’ (1995) 80 Cornell LR 858 at 859.

[34] Judicial Conference of the US Ad Hoc Comm on Asbestos Litig, Report of Ad Hoc Comm. on Asbestos Litig (1991) at 19–34.

[35] Coffee, above n18 at 1389.

[36] Coffee, id at 1392.

[37] Georgine v Amchem Prods, Inc 157 F.R.D. 246; Coffee, id at 1393.

[38] This occurs because class actions under Rule 23 FRCP are based upon an opt-out procedure. An opt-in procedure is typified by the joinder provisions which are available in most courts, eg, ACT SCR O19 r 10, NSW SCR Pt 8.13, FCR O 6 r 2. These provisions are more restrictive than class action procedures because the parties must have the same interest and the words ‘same ... series of transactions’ have involved some fatal constraints, such as where applicants participated in only one of the series of transactions. But the basic quality of these procedures is that the parties who are represented must take positive steps to be part of the proceedings and to be bound by the judgment. Contrast that with an opt-out procedure. In this procedure the represented parties are described rather than named. Therefore the class will be formed by reference to a particular description, eg, ‘people who purchased X Ltd’s peanut butter products from x date to y date and who suffered personal injury’. By virtue of the doctrine of res judicata, where an opt-out procedure is used, everyone who comes within the description is part of the class and will be bound by the judgment unless he or she takes positive steps to not be part of the class, ie, to opt-out. Section 33E of the Federal Court Act 1976 (Cth) states that no consent is required to be a group member with certain exceptions, eg, the Commonwealth, Ministers of the Crown etc. See Carnie v Esanda Finance Corporation Limited [1995] HCA 9; (1995) 182 CLR 398.

[39] Coffee, above n18 at 1393. The class was defined to include ‘all persons ... who have been exposed in the United States or its territories ..., either occupationally or through occupational exposure of a spouse or household member, to asbestos ... for which one or more of the defendants may bear legal liability and who ... have not, as of January 15, 1993, filed a lawsuit for asbestos-related personal injury or damage ... against the defendant(s)’: Georgine, 157 FRD at 319, discussed in Ortiz v Fibreboard [1999] USSC 65; 527 US 815 (1999) at 827.

[40] Preliminary Injunction, Joint Appendix 1049 & 1050, in Coffee, above n18 at 1393.

[41] 1995 US Dist LEXIS 11062 (E D Tex, 27 July 1995). Note that the Ahern v Fibreboard proceedings were named Ortiz v Fibreboard before the US Supreme Court.

[42] Coffee, above n18 at 1399–1400. A spin-off occurs when an existing corporation distributes shares in a subsidiary it previously controlled to its own shareholders. The shareholders can decide to retain the shares or to on-sell them. It is often used by companies who wish to scale down diversified corporate groups.

[43] By 1995 the number had soared to approximately 200 000 (Notice of Class Action, Global Settlement and Third-Party Claimant Class Settlement and Hearing at 17, Ahearn v Fibreboard Corp, No 6:93cv526, 1995 U S Dist LEXIS 11062 (E D Tex, 27 July 1995), cited in Coffee, above n18 at 1400).

[44] Notice of Class Action, Global Settlement and Third-Party Claimant Class Settlement and Hearing, Ahearn v Fibreboard Corp No 6:93cv526, 1995 U S Dist LEXIS 11062 (E D Tex, 27 July 1995), 27.

[45] Federal Rule of Civil Procedure (US) 23(b)(1)(B) permits a mandatory class action to be certified where ‘the prosecution of separate actions ... would create a risk of ... adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.’

[46] Coffee, above n18 at 1402.

[47] See Report of the Guardian Ad Litem, Eric D Green at 68, Ahearn (No 6:93cv526) in Coffee, id at 1402.

[48] Although, as demonstrated by the Manville example above, the bankruptcy context, at least as regards Chapter 11, is by no means unproblematic.

[49] Coffee, above n18 at 1402.

[50] Ortiz, above n39 at 845.

[51] [1997] USSC 67; 521 US 591 (1997).

[52] In particular the predominance requirements under Rule 23(b)(3) and adequate representation under Rule 23(a)(4).

[53] Ortiz, above n39 at 815.

[54] Souter J delivered the opinion of the court, in which Rehnquist CJ, and O’Connor, Scalia, Kennedy, Thomas, and Ginsburg JJ joined. Rehnquist CJ filed a concurring opinion, in which Scalia & Kennedy JJ joined. Breyer J filed a dissenting opinion, in which Stevens J joined.

[55] Ortiz, above n39 at 833 (Souter J).

[56] Ortiz, above n39 at 834 (Souter J).

[57] Newberg on Class Actions §4.09 at 4–33.

[58] Ortiz, above n39 at 838.

[59] Ortiz, above n39 at 841.

[60] Henry Monaghan, ‘Antisuit Injunctions and Preclusion Against Absent Nonresident Class Members’ (1998) 98 Columbia Law Review 1148 at 1164. Souter J also quoted Richard Marcus who had stated ‘the original concept of the limited fund class does not readily fit the situation where a large volume of claims might eventually result in judgments that in the aggregate could exceed the assets available to satisfy them’. Later in the quoted article, Marcus draws further on the bankruptcy analogy by arguing that the justification for the use of Rule 23(b)(1)(B), when the defendant’s assets were insufficient to cover all the claims, has the attractiveness of inviting something resembling a bankruptcy cram-down to cope with the expected shortfall of assets. Marcus, above n33 at 877. For an interesting discussion on bankruptcy cram-downs and future claims see Jeffrey Davis, ‘Cramming Down Future Claims in Bankruptcy: Fairness, Bankruptcy Policy, Due Process and the Lessons of the Piper Reorganisation’ (1996) 70 American Bankruptcy Law Journal 329.

[61] [1997] USSC 67; 521 US 591 (1997), 613.

[62] Ortiz, above n39 at 845–846. The Seventh Amendment provides: ‘In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved’.

[63] Ortiz, above n39 at 846.

[64] Phillips Petroleum v Shutts [1985] USSC 176; 472 US 797 (1985), 812.

[65] Anthony Hughes, ‘Hardie Cleans Up Its Asbestos Act’ Sydney Morning Herald (17 February 2001) at 51.

[66] Ben Hill, ‘Every Breath You Take’ Sydney Morning Herald (27 February 2001) at 11.

[67] Hill, ibid.

[68] CSR Ltd, Annual Report to Securities and Exchange Commission, 31 March 2001: <http://www.csr.com.au/investorcentre/Reports.asp> (12 January 2003) at 51.

[69] Anthony Hughes, ‘Healthy Hardie Profit Boosts US Roadshow’ Sydney Morning Herald (9 February 1999) at 21.

[70] Hughes, ibid.

[71] Anthony Hughes, ‘Hardie US Float In Trouble’ Sydney Morning Herald (5 March 1999) at 21.

[72] Chanticleer, Australian Financial Review (5 January 2000) at 48.

[73] James Hardie Australia Pty Ltd, above, n11.

[74] Anthony Hughes, ‘Hardie Cleans Up Its Asbestos Act’ Sydney Morning Herald (17 February 2001) at 51.

[75] Hughes, ibid. See also James Hardie Australia Pty Ltd, ‘The Medical Research And Compensation Foundation’, Press Release, 16 February 2001: <http://www.ir.jameshardie.com.au/JH_ir/news/factsheetMRCF.htm> (12 January 2003).

[76] James Hardie, Notes to Consolidated Financial Statements, 2002 Annual Report: <http://www.ir.jameshardie.com.au/jh_ir/pdf/2002/Financials/09Notes_to_Financials.pdf> (12 January 2003) at 59. See also James Hardie, Notes to the Financial Statements, 2001 Annual Report: <http://www.ir.jameshardie.com.au/JH_ir/pdf/AR2001_NOTES_TO_THE_FIN_STATEMENTS.pdf> (12 January 2003) at 55.

[77] The deposits at Wittenoom had been discovered by Lang Hancock and his companies began pick and shovel mining there in 1936.

[78] With the exception of a few shares issued to the directors of ABA.

[79] CSR v Young, above n7 at 64952 (Handley JA).

[80] Ibid. In that case, the plaintiff's family had moved to Wittenoom in May 1959. The plaintiff (Mrs Olson) was born in September 1959 and was exposed to blue asbestos from birth until the age of 27 months. Her father was employed by ABA as a draftsman and frequently returned from work with asbestos fibres on his clothing. The back yard where the children played was spread with tailings which contained asbestos fibre. Mrs Olson was diagnosed as suffering from malignant mesothelioma at the age of 34 years. She died nine months later.

[81] CSR v Young, above n7 at 64942–624947 (Handley JA).

[82] B Snell, ‘The Wittenoom Disaster’, Management of Dust Hazards and Diseases, Safety Line Institute: <http://www.safetyline.wa.gov.au/institute/level2/course21/lecture95/l95_05.asp> (12 January 2003).

[83] Snell, ibid.

[84] CSR Ltd, Annual Report to Securities and Exchange Commission, above n68 at 52.

[85] Anthony Hughes, ‘CSR Rejects Hardie-style Asbestos Fund’ Sydney Morning Herald (22 May 2001) at 9.

[86] CSR Ltd, Annual Report to Securities and Exchange Commission, above n68 at 10.

[87] CSR Ltd, id at 59.

[88] The main task of administrators is to convene a series of creditors’ meetings which decide the company’s future. These meetings must be convened within a short period. Section 439B(2) of the Corporations Act 2001 (Cth) provides that the creditors’ meetings should take place within 60–88 days from the date of appointment.

[89] Philip Crutchfield, Corporate Voluntary Administration Law (1997) at 67–68.

[90] Andrew Keay, Insolvency: Personal and Corporate Law and Practice (3rd ed, 1998) at 277.

[91] Ian F Fletcher, ‘Administration Orders Under the Insolvency Act 1986’ (1994) 2 Insolvency Law Journal 110.

[92] David Brown, Corporate Rescue (1996) at 57.

[93] Brown, id at 58.

[94] Kent Anderson, ‘Small Business Reorganizations: An Examination of Japan’s Civil Rehabilitation Act Considering US Policy Implications and Foreign Creditors’ Practical Interests’ (2001) 75 The American Bankruptcy Law Journal 355 at 403.

[95] Enterprise Act 2002 (UK) s248 para 27.

[96] Enterprise Act 2002 (UK) s248 paras 53, 54, 55.

[97] In Australia the court has power to make orders where the proceedings are being abused (Corporations Act 2001 (Cth) s447A(2)(b)), where the administrator is managing the company’s affairs in a manner prejudicial to the company’s creditors (Corporations Act 2001 (Cth) s447E(1)), or generally to protect creditors (Corporations Act 2001 (Cth) s447B). In the UK, creditors may apply to the court to challenge an administration where the administrator is acting so as to ‘unfairly harm the interests of the applicant’ Enterprise Act 2002 (UK) s248 para 74.

[98] For example, Bright v Femcare [2002] FCAFC 243 where a group of 61 women have sued the manufacturer of the Filshie clips. Another example is the action brought against a group of three tobacco manufacturers in Philip Morris (Australia) Ltd v Nixon [2000] FCA 229. The applicants claimed that they had contracted a smoking-related disease in consequence of being influenced by the respondents’ conduct to begin or continue smoking. However, the Full Federal Court found that the action could not continue as a group proceeding because Federal Court Act 1976 (Cth) Part IVA does not contemplate group proceedings against multiple defendants.

[99] See, for example, Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 56.

[100] Compare mass torts to securities class actions or consumer class actions where the number of affected people may be large but each person’s loss is too small to justify individual proceedings. In relation to securities class actions in Australia, see Peta Spender, ‘Securities Class Actions: A View from the Land of the Great White Shareholder’ (2002) 31 Common Law World Review 123.

[101] Both sections 33ZA (ie, s33ZA of the Federal Court Act 1976 (Cth) and s33ZA of the Supreme Court Act 1986 (Vic)) state as follows:

Constitution etc of fund



(1) Without limiting the operation of subsection 33Z(2), in making provision for the distribution of money to group members, the Court may provide for:

(a) the constitution and administration of a fund consisting of the money to be distributed and

(b) either:

(i) the payment by the respondent of a fixed sum of money into the fund; or

(ii) the payment by the respondent into the fund of such instalments, on such terms, as the Court directs to meet the claims of group members; and

(c) entitlements to interest earned on the money in the fund.

(2) The costs of administering a fund are to be borne by the fund, or by the respondent in the representative proceeding, as the Court directs.

(3) Where the Court orders the constitution of a fund mentioned in subsection (1), the order must:

(a) require notice to be given to group members in such manner as is specified in the order; and

(b) specify the manner in which a group member is to make a claim for payment out of the fund and establish his or her entitlement to the payment; and

(c) specify a day (which is 6 months or more after the day on which the order is made) on or before which the group members are to make a claim for payment out of the fund; and

(d) make provision in relation to the day before which the fund is to be distributed to group members who have established an entitlement to be paid out of the fund.

[102] [1999] FCA 104 (28 January 1999).

[103] The sum of $750 000 was to constitute a fund to be distributed amongst the members of the group who did not opt out of the proceeding and who could establish that they had suffered an injury as a result of consuming contaminated food products manufactured by the respondent (a hot bread bakery). The fund was to be administered by Mr Ian Hone, a solicitor employed by Slater & Gordon, the solicitors for the applicant. Each member of the group was required to submit a written claim verified by medical reports or medical certificates. The quantum of damages to which each group member was entitled would then be assessed and the fund distributed pari passu. Any decision made by Mr Hone under the settlement scheme was not subject to review by the court.

[104] [2000] FCA 1925 (22 December 2000).

[105] Carnie v Esanda Finance Corporation Limited [1995] HCA 9; (1995) 182 CLR 398, Wong v Silkfield Pty Ltd [1999] HCA 48 (9 September 1999) and Mobil Oil Australia Pty Ltd v Victoria [2002] HCA 27 (26 June 2002).

[106] Femcare Ltd v Bright [2000] FCA 512 (19 April 2000).

[107] Schutt Flying Academy (Australia) Pty Ltd v Mobil [2000] VSCA 103 (8 June 2000).

[108] Federal Mogul Corporation, ‘Federal-Mogul Corporation Files Voluntary Chapter 11 And Administration Petitions to Resolve Asbestos Claims’, Press Release (1 October 2001): <http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=105 & STORY=/www/story/10-01 – 2001/0001581778> (12 January 2003).

[109] Federal Mogul Corporation, ‘Federal-Mogul Wins Four Contracts Valued at More Than $20 Million Annually’ Press Release (12 October 2001): <http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=105 & STORY=/www/story/10 – 12 – 2001/0001590776> (12 January 2003).

[110] Formerly Turner & Newall Ltd.

[111] Between 1920 and 1976, T&N was the largest British employer in the asbestos industry. By 1950 T&N had achieved a virtual monopoly position in the UK asbestos industry; in 1955 T&N’s market share of the sales of asbestos cement products was 75 per cent and 50 per cent of friction materials. For a time T&N’s sales overtook Johns-Manville. In 1959, while Johns-Manville had sales of $304.1 million, T&N had sales of $450 million. L Kazan-Allen, ‘T&N Ltd’: <http://www.btinternet.com/~ibas/Frames/f_lka_tn_dev.htm> (12 January 2003).

[112] Kazan-Allen, ibid. See also G Tweedale, Magic Mineral to Killer Dust: Turner and Newall and the Asbestos Hazard (2000).

[113] London Hazards Centre, above n20 at Chapter 9.

[114] Paul Durman, ‘Bid report boosts T&N share price’ The Times of London (17 June 1997) at 29.

[115] Andrew Lorenz, ‘Federal Mogul gears up for T&N takeover battle’ Sunday Times — London (28 September 1997) at Business 2.

[116] George Sivell, ‘T&N silent on £1.23bn Federal bid’ The Times of London (10 March 1999) at 27.

[117] Carl Mortished, ‘Big investors unhappy over Pounds 1.5bn T&N bid’ The Times of London (17 October 1997) at 25.

[118] Carl Mortished, ‘City lets home-grown success story fall to the Americans’ The Times of London (17 October 1997) at 29.

[119] John Waples (ed), ‘T&N’ Sunday Times — London (15 February 1998) at Business 4.

[120] James Moore, ‘Federal-Mogul forced into administration’ The Times of London (2 October 2001) at 26.

[121] Patience Wheatcroft, ‘Asbestosis’ The Times of London (2 October 2001) at 25.

[122] Frances Gibb, ‘Asbestos firm freezes payouts for victims’ The Times of London (12 November 2001) at 13. However, on 10 May 2003 the English High Court ruled that claims for asbestos-related diseases were covered by T&N’s insurance policy. Robert Orr and Nikki Tait, ‘RSA and Lloyds Face Millions in Asbestos Payments’, Financial Times (10 May 2003) at 1.

[123] Early Day Motion No 423, Turner & Newall and Compensation Claims For Asbestos-Related Disease, House of Commons, 14 November 2001: <http://edm.ais.co.uk/weblink/html/motion.html/EDMI_SES=01/ref=423> (12 January 2003).

[124] Mark Roe, ‘Bankruptcy and Mass Tort’ (1984) 84 Columbia Law Review 846 at 847–848 discussing the judgment in In re UNR Indus 29 Bankr 741, 744, 746 (N D Ill 1983).

[125] Tony Honoré, Responsibility and Fault (1999) at 71.

[126] Peter Cane, Responsibility in Law and Morality (2002) at 44.

[127] Ernest Weinrib, The Idea of Private Law (1995) at 142–144.

[128] Honoré, above n125 at 73. Clearly the obligation to put matters right is complex. However, in the present context it would include the payment of individual loss by way of damages or agreed settlement. Cane argues that the process of deciding what sanction ought to attach to any particular finding of legal liability provides important opportunities for the law, by establishing ‘scales’ or ‘degrees’ of responsibility, to modify and fine-tune responsibility judgments made in adjudicating upon liability. Cane, above n126 at 44. Clearly the aggregation of claimants will undermine such responsibility judgments.

[129] Cane, above n126 at 281.

[130] With regard to corporate insolvency, some have argued that tortious liability should be regarded as something different in kind to other debts and that shareholders should be liable in particular circumstances for tort claims. See, for example, Henry Hansmann & Reinier Kraakman, ‘Towards Unlimited Shareholder Liability for Corporate Torts’ (1991) 100 Yale LJ 1879 at 1919; Robyn Carroll, ‘Corporate parents and tort liability’ in Michael Gillooly (ed), The Law Relating to Corporate Groups (1993) 91. See also the statements of Rogers AJA in Briggs v James Hardie & Co Ltd (1989) 7 ACLC 841 at 863–864.

[131] For example, as discussed above, the Manville Trust only pays 5 per cent of a claimant’s entitlement. See <http://www.mantrust.org/FILINGS/Q3_01/3RDQTR01.HTM> (12 January 2003).

[132] The example provided above was the shift by the employees of Johns-Manville from their employer to CSR, ie, from the manufacturer to the mining company.

[133] Douglas Baird, ‘The Uneasy Case for Corporate Reorganisations’ in Jagdeep Bhandari & Lawrence Weiss (eds), Corporate Bankruptcy: Economic And Legal Perspectives (1996) at 339.

[134] Douglas Baird & Thomas Jackson, ‘Corporate Reorganisations and the Treatment of Diverse Ownership Interests: A Comment on Adequate Protection of Secured Creditors in Bankruptcy’ 51 (1984) UChiLR 97 at 100.

[135] For example, Douglas Baird, Thomas Jackson, Lucien Bebchuk & Barry Adler.

[136] Baird, above n133 at 339.

[137] Veli Jukka Kilpi, The Ethics of Bankruptcy (1998) at 13. Note that in the Manville reorganisation, the moratorium placed upon claims against the corporation (as opposed to the Trust) was enforced by channelling injunctions. A channelling injunction has been described in the following way:

A channeling injunction steers claimants toward a trust or pool of assets to compensate claimants as it simultaneously steers those claimants away from the reorganized entity. ... The channeling injunction reinforces the effect of the discharge while it clearly directs claimants toward a specific fund.... Without the imposition of a channeling injunction, claimants might attempt to pursue individual suits against defendants, unwinding the benefits of collective action and equality of treatment ...

National Bankruptcy Review Commission, Bankruptcy: The Next Twenty Years, Final Report of the National Bankruptcy Review Commission (1997) at 345–346.

[138] Kilpi, id at 13.

[139] Keay, above n90 at 17.

[140] See, for example, Frederick Tung, ‘Taking Future Claims Seriously: Future Claims and Successor Liability in Bankruptcy’ (1999) 49 Case Western Reserve Law Review 435 at 482–483.

[141] Kilpi cites a range of responses to ‘going broke and breaking promises’ such as forgiveness and utilitarianism. Kilpi, above n137 at 68–72.

[142] Keay, above n90 at 499.

[143] National Bankruptcy Review Commission, above n137 at 318–319.

[144] Alan Resnick, ‘Bankruptcy as a Vehicle for Resolving Enterprise-Threatening Mass Tort Liability’ (2000) 148 University of Pennsylvania Law Review 2045 at 2050.

[145] Smith, above n24 at 370.

[146] Smith, ibid.

[147] [1999] USSC 65; 527 US 815 (1999).

[148] S Elizabeth Gibson, ‘A Response to Professor Resnick: Will this Vehicle Pass Inspection?’ (2000) 148 University of Pennsylvania Law Review 2095 at 2107.

[149] Gibson, id at 2117.

[150] Amchem Products Inc v Windsor 521 US591 (1997), 613.

[151] Roe, above n124 at 877–878.

[152] As stated by her Honour Edith Jones in ‘Rough Justice in Mass Future Claims: Should Bankruptcy Courts Deliver Tort Reform?’ (1998) 76 Tex LR 1695 at 1713:

In bankruptcy, as in future claims class actions, the claimants are absent, invisible, and passive, creating room for exploitation in several ways. The class representative ... operates without the supervision or control of real clients. Because the claims themselves are not concrete, but rather amorphous and conjectural, the representative’s bargaining position is inherently weak. The representation of future claims thus carries with it a tendency toward conflicts of interest. There is no vigorous check on a class representative’s accepting a settlement that provides generous fees for the representative but modest relief for the class. A conflict may arise if the representative undertakes to settle claims of both present and future ‘future’ claimants.

[153] Compare Gregory Bibler, ‘The Status of Unaccrued Tort Claims in Chapter 11 Bankruptcy Proceedings’ (1987) 61 American Bankruptcy Law Journal 145 at 150–161 with Ralph Mabey & Jamie Gavrin, ‘Constitutional Limitations on the Discharge of Future Claims in Bankruptcy’ (1993) 44 South Carolina Law Review 745 at 755–759.

[154] Matthew Stiegler, ‘The Uncertain Future of Limited Fund Settlement Class Actions in Mass Tort Litigation After Ortiz v. Fibreboard Corp’ (2000) 78 North Carolina Law Review 856 at 886. See also J Tidmarsh, Mass Tort Settlement Class Actions: Five Case Studies (1998) at 77–78 (discussing the failure of a $4.23 billion multi-defendant settlement of breast implant claims caused by a massive underestimation of claim volume).

[155] A judge of the US Bankruptcy Court captured the problem with the following statement:

Many commentators now assume that mass tort bankruptcy cases must follow a certain script: first estimate aggregate tort claims; then negotiate a fund to satisfy it; and finally, devise a procedure for fairly apportioning the funds. ... But there are good reasons to question the premise upon which the standard mass tort model for reorganization rests. The model rests on the shaky foundation that judges can accurately estimate the results of a series of extremely speculative problems. While one court ‘seems’ to have pulled it off (A.H. Robins), at least another has predictably failed (Johns-Manville):

Spector J, In Re Dow Corning 211 BR 545 (1997), 562.

[156] Thomas Jackson, The Logic and Limits of Bankruptcy Law (1986) at 193–194.

[157] Delaney, above n18 at 59.

[158] Smith, above n24 at 373.

[159] Smith, ibid.

[160] Jones, above n152 at 1722.

[161] Anderson, above n94 at 403.

[162] Corporations Act 2001 (Cth) s447A.

[163] See, for example, Maritime Union of Australia v Patrick Stevedores Operations No 1 Pty Ltd (1998) 153 ALR 602 (North J) and on appeal at Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 153 ALR 643. See generally Peta Spender, ‘Scenes from a Wharf: Containing the Morality of Corporate Law’ in F McMillan (ed), International Corporate Law Volume 1 (2000) 37.

[164] Lynn Lo Pucki & George Triantis, ‘A Systems Approach to Comparing US and Canadian Reorganization of Financially Distressed Companies’ 35 (1994) Harvard International Law Journal 267 at 282.

[165] Jeffrey Davis, ‘Cramming Down Future Claims in Bankruptcy: Fairness, Bankruptcy Policy, Due Process and the Lessons of the Piper Reorganisation’ (1996) 70 American Bankruptcy Law Journal 329.

[166] See generally Susan Cantlie, ‘Preferred Priority in Bankruptcy’ in Jacob Ziegel (ed), Current Developments in International and Comparative Corporate Insolvency Law (1996) at 413.

[167] In Australia s556(1)(f) of the Corporations Act 2001 (Cth) provides that priority on liquidation is accorded to ‘amounts due in respect of injury compensation’. However, ‘injury compensation’ is defined in s9 of the same Act to mean ‘compensation under any law relating to workers compensation’. The priority rules in s556 must be applied by an administrator in a deed of company arrangement, pursuant to para 4, Schedule 8A of the Corporations Regulations (Cth). In the UK, s175 of the Insolvency Act 1986 (UK) only extends priority to workers compensation and sick leave payments. This provision applies to administration by virtue of para 65, s248 of the Enterprise Act 2002 (UK). In the US, s507 of the Bankruptcy Code only allows a priority of up to $4650 for sick leave pay.

[168] Coffee, above n18 at 1402.

[169] John Farrar, Corporate Governance in Australia and New Zealand (2001) at 158.

[170] Lynn LoPucki & W Whitford, ‘Bargaining over equity’s share in the bankruptcy reorganization of large, publicly held companies’ in Jagdeep Bhandari & Lawrence Weiss (eds), Corporate Bankruptcy: Economic And Legal Perspectives (1996) 232 at 257.

[171] LoPucki & Whitford, ibid.

[172] Georgiadis v Australian and Overseas Telecommunications Corp (1994) 179 CLR 297; Cmth v Mewett (1997) 146 ALR 299. Although this decision does not apply to the States, it does recognise that future claims have juridical value.

[173] David Capper, Mareva Injunctions (1988) at 3.

[174] [1999] HCA 18 (6 May 1999)[1999] HCA 18; , (1999) 162 ALR 294.

[175] Id at para 42.

[176] In a similar vein, a settlement was finally effected between the South African victims of another major UK asbestos manufacturer, Cape plc, in March 2003. Settlement agreements totalling £10.7 million will be divided among 7500 members of a group action brought in England by people who were occupationally or environmentally exposed to asbestos in South Africa, reported in Lubbe v Cape plc [2000] UKHL 41; [2000] 4 All ER 268. Although it was conceded that once the money is divided up, it will amount to ‘next to nothing’, the plaintiffs’ solicitor Richard Meeran, agreed that a smaller settlement had to be negotiated with Cape because of the company’s precarious financial situation. See Peter Muchlinski, ‘Corporations in International Litigation: Problems of Jurisdiction and the United Kingdom Asbestos Case’ (2001) 50 ICLQ 1; Laurie Kazan-Allen, ‘Cape PLC To Compensate Foreign Plaintiffs’: <http://www.btinternet.com/~ibas/Frames/f_lka_cape_comp_forgn_pla_0303.htm> (18 April 2003).

[177] Kenneth Abraham, ‘Individual Action and Collective Responsibility: The Dilemma of Mass Tort Reform (1987) 73 VaLR 845.

[178] Jonathan Macey & Geoffrey Miller, ‘The Plaintiffs’ Attorney’s Role in Class Action and Derivative Litigation: Economic Analysis and Recommendations for Reform’ (1991) 58 UChiLR 1 at 3.

[179] John Battle MP, Member of Parliament for Leeds West, Asbestos in Armley: <http://www.johnbattle – mp.org.uk/asbestos/asbestos.html> (12 January 2003).