The Australian Securities and Investments Commission (ASIC) has applied to the High Court for special leave following a NSW Supreme Court decision in December to overturn the banning of seven James Hardie directors.

This ruling will now see the directors being given the opportunity to once again serve on company boards despite being found guilty of “misconduct”.

In August last year the NSW Supreme Court ruled that the former board members of the construction materials company breached the Corporations Act by making misleading statements about the company’s ability to pay for asbestos victims’ compensation.

ASIC first initiated the case after it was revealed in 2003 that the fund faced a $1 billion shortfall. This deficit was a direct contradiction of an earlier press release issued by the James Hardie Corporation, which claimed the fund would provide certainty for asbestos victims.

The seven non-executive directors were banned from serving on a board for five years and fined $30,000 for breaching the Corporations Act.

But in December an appeal overturned the original sentence and ASIC was ordered to pay the directors’ legal costs.

Chief Justice Jim Spigelman and appeal judges Margaret Beazley and Roger Giles found that ASIC’s failure to call all relevant witnesses to the case had negated a fair trial.

“We do not think ASIC discharged its burden of truth…we are not satisfied that the non-executive director appellants voted in favour of the draft ASX announcement resolution,” the judgement said.

Australian Institute of Company Directors CEO John Colvin says the appeal highlights the importance of applying proper procedures in regulatory proceedings, including the presentation and use of evidence.

If granted special leave by the High Court, ASIC plans to argue that the NSW Court of Appeal “erred” in describing the scope and content of the commission’s obligations when bringing civil penalty proceedings and that the court’s view of these obligations affected the outcome.

James Hardie’s former CFO Phillip Morley has also applied for special leave after his appeal to overturn a five-year ban failed. He will be calling for clarification on how far duties for officers should extend.