Introduction

In 2005, the assets of the former James Hardie companies were placed into a trust to be administered by the Asbestos Injuries Compensation Fund Limited (the Trustee). The obligations of the Trustee as to administration of the Trust and the funding of the liabilities of former James Hardie entities for damages or contribution arising from asbestos-related diseases is governed by
three instruments — a Trust Deed, a Funding Agreement, and an Act of the NSW Parliament.

Although there are some inconsistencies between those instruments rendering the construction and construing of them somewhat difficult, it is uncontroversial that the scheme created by the instruments was intended to meet the obligations of former James Hardie entities for Australian liabilities arising from asbestos diseases.

An issue arose as to whether the Trustee was precluded under the Funding Agreement from paying a portion of the liability arising from diseases of indivisible character which developed as a consequence of exposure to asbestos dust and fibre in Australia in circumstances where the claimant also was exposed to medically relevant levels of asbestos dust and fibre outside Australia.

The Trustee took the view that it was not permitted to pay liabilities arising to the extent to which the overseas exposure was causally culpable in the development of the disease. Determination of the issue arose in the face of proceedings brought against Amaca [a former James Hardie entity] by Mr Talifero.

The underlying proceedings

Mr Talifero served in the British Navy and was exposed to asbestos dust and fibre. After immigrating to Australia, he was exposed to asbestos dust and fibre from Amaca’s product. On his evidence, about 10-12% of his lifelong exposure occurred in England, with the balance from Amaca’s products in Australia. He developed mesothelioma, a disease of indivisible character.

Under Australian law, mesothelioma has been found to be a form of cancer to which all asbestos exposure contributes. It is not a cumulative process and is not the result of successive deterioration. Thus each medically relevant quantity of exposure to asbestos dust and fibre gives rise to a one and indivisible loss.

Mr Talifero’s case proceeded to judgment against Amaca before the Dust Diseases Tribunal, which found he was entitled to damages of $560,482, which damages were found by the trial judge to result from Amaca’s negligence. The trial judge noted the evidence of exposure in England but held that to be irrelevant to Amaca’s liability for the full damages, bearing in mind the indivisible character of Mr Talifero’s disease.

The Trustee’s conduct

The Trustee obtained a report from an oncologist, Professor Fox, estimating the degree of causal culpability stemming from the 10%-12% of Mr Talifero’s English exposure. Professor Fox concluded that the English exposure made a 48% causal contribution to the development of the mesothelioma. Pausing there, it is evident from expert reports relied on by Mr Talifero in the Tribunal that other experts, namely Professor Henderson, a pathologist, and Professor Breslin, a respiratory specialist, did not agree with the assessment made by Professor Fox. However, as it was unnecessary for the trial judge to determine the issue, no findings or judgment was delivered on that point at trial.

Relying upon the opinion of Professor Fox, the Trustee paid 52% of Mr Talifero’s judgment. The Trustee then sought judicial advice from the Supreme Court of NSW as to its obligation to fund the balance.

The decision at first instance

The Trustee’s application for judicial advice was heard by Justice Sackar, who delivered a decision on 4 May 2018. Talifero, the State of New South Wales (the State) and Allianz Australia Insurance Ltd (being an insurer with a number of contribution cases against James Hardie entities and thus an interest in the outcome) were given leave to intervene.

Justice Sackar determined that on a harmonious reading of the three instruments giving rise to the obligations, the Trustee was justified in not paying the proportion of liability falling upon a James Hardie entity attributable to asbestos exposure occurring outside Australia.

The effect of that advice was to place a claimant such as Mr Talifero in the invidious position of first proceeding against a James Hardie entity to obtain a verdict, awaiting the Trustee’s assessment of the degree to which the exposure to asbestos outside Australia was causally culpable in the indivisible disease, assessing whether that reduction was uncontroversial (which would, in the usual course, require the claimant to obtain expert evidence and probably also legal advice), and if not acceptable, pursue proceedings directly against the Trustee in order to obtain the appropriate level of payment toward the damages. In addition, a claimant in the circumstances would be required to pursue a tortfeasor out of Australia in order to obtain full recovery of compensation for the disease.

A similar position would arise in respect of joint and severally liable tortfeasors, who would seek contribution by the James Hardie entity and would also be required to engage in further litigation with the Trustee, as well as potentially having to pursue international tortfeasors.

The appeal

Mr Talifero appealed. The State then intervened in the appeal.

The arguments on appeal centred on the character of the damages which were awarded in Australian courts in respect of diseases of indivisible character.

Mr Talifero submitted that as all of the damages constituted a loss stemming from the negligence of Amaca – thus giving rise to exposure to asbestos in Australia – and the fact that there was also a causal relationship between exposure out of Australia and the disease / loss was irrelevant to the Trustee’s obligation to fund Amaca to the full extent of its liability to pay damages to Mr Talifero.

It was also said the position was different in a case of disease of divisible character, where the exposure to asbestos dust and fibre outside Australia gave rise to different loss and damage compared to the exposure inside Australia.

As such, considering the character of the damages and the direct causal relationship of all of those damages to the Australian exposure, Mr Talifero argued that the damages awarded to him by the Tribunal constituted a ‘payable liability’ as defined by the Act, which carried through to an obligation to fund as specified in the Funding Agreement.

The Trustee maintained the argument which had been made before Justice Sackar that the ‘payable liability’ was limited to a ‘proven personal asbestos claim’ as defined by the Act, which carried a proviso that the liability was only payable to the extent that the exposure to asbestos to which the claim relates occurred wholly within the territorial limits of Australia.

The Trustee submitted that the relevant definitions were appropriately construed to limit the liability into the proportion of the causal culpability attributable to the Australian exposure to asbestos dust and fibre, regardless of the indivisible character of the disease.

The parties also made a number of ‘public policy’ style arguments. The Trustee asserted that the overall purpose of the scheme was to maintain the funds such that compensation was available to as many persons that developed an asbestos-related disease as possible, while Mr Talifero argued that the purpose of the fund was to fully compensate persons who had developed asbestos-related diseases as a consequence of the negligence of the former James Hardie entitles.

The judgment

Sackville AJA and Emmett AJA each wrote judgments. Beasley P agreed with Sackville AJA.

The majority accepted the submissions of Mr Talifero that construction of the governing instruments was appropriately undertaken by reference to the claim as made in the litigation. It was noted that Mr Talifero established he developed mesothelioma as a consequence of Amaca’s breach of duty by exposing him to asbestos dust and fibre in Australia. The effect of that exposure, independent of the overseas exposure, was the mesothelioma which sounded in damages of $560,482.

The court held that all of that liability flowed from the Australian exposure and as such was a ‘payable liability’ as contemplated by the Funding Agreement.

Emmett AJA took a different approach. He concluded that the Trustee’s approach in apportioning causal culpability for the mesothelioma between the exposure in Australia and overseas was erroneous and noting that, in his view, there was potential for the relevant fibre causative of the mesothelioma to have been inhaled by Mr Talifero either in England or in Australia such that the causal culpability for the disease either rested wholly in England or wholly in Australia. As a result, the Trustee’s liability was either to pay 100% or nil.

With respect to His Honour, his reasoning is hard to understand in light of Australian causation decisions which have found that all exposure to asbestos dust and fibre above a de minimus level is causative of mesothelioma, either by directly affecting the DNA of a cell so that it becomes malignant or promoting an environment in which that malignant cell is able to develop into a mesothelioma.

Conclusion

This decision by a majority of the Court of Appeal in providing judicial advice that the Trustee is not justified in paying only a portion of the damages for an indivisible disease is of assistance to claimants and joint and severally liable tortfeasors, because full damages / contribution will be available from the James Hardie entity to the extent of its liability. Further, those claimants will not be required to engage in further litigation against the Trustee to obtain the full share of damages / contribution nor, in the majority of cases, pursue contribution from international tortfeasors.

The issue is significant to the Trustee, given that the significant proportion of the Australian population who immigrated is such that it is likely a ‘fair number’ of claimants were exposed to asbestos dust and fibre outside Australia prior to arrival in this country. Since this issue affects litigation in all Australian states and territories, the Trustee may consider an application for special leave to appeal to the High Court.

As matters currently stand, the decision of the NSW Court of Appeal has significantly clarified the obligations of the Trustee and, in doing so, has eased the path of claimants to obtain full damages / contribution from the Trust.