Directors of the trust fund that James Hardie established to pay compensation to victims of asbestos-related diseases have applied to the NSW Supreme Court for legal protection from claimants if the fund runs out of money or has to curtail payments.

The Medical Research and Compensation Foundation (MRCF) has arguably been insolvent since at least August 2001 when directors received actuarial advice that future claims would reach $574 million. Hardie established the trust with $293 million in February 2001.

MRCF Chairman Sir Llew Edwards, MD Dennis Cooper and directors Ian Hutchinson and Peter Jollie have no directors’ and officers’ (D&O) insurance because no insurance company will cover them.

Their D&O cover expired three months ago. While an extension has been granted until October, it provides protection only from claims for any actions they took as directors up until March.

The move to seek court protection comes within days of a special issues paper being published by the counsel assisting the NSW special commission of inquiry examining whether James Hardie under-funded the MRCF.

In the issues paper John Sheahan SC raised the question as to what extent, if any, the incoming MRCF directors were “effectively independent” of James Hardie, considering some of the original directors had prior relationships with the company.

Mr Sheahan also noted a wide range of damages actions against James Hardie which could be available to the trust, including breaches of directors' duties and misleading or deceptive conduct.

If the application is supported by Justice Robert Austin, who has set a hearing date of July 21, the trust will continue to pay current claims in full.