report on investigation into certain transactions of koompahtoo local aboriginal land council...

A P R I L 2 0 0 5

I C A C R E P O R T

Report on investigation into certain transactions of Koompahtoo Local Aboriginal Land Council

A P R I L 2 0 0 5

Report on investigation into certain transactions of certain transactions of Koompahtoo Local Aboriginal Land Council I C A C R E P O R T

2 I C A C R E P O R T : Report on investigation into certain transactions of Koompahtoo Local Aboriginal Land Council

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Independent Commission Against Corruption

ADDRESS Level 21, 133 Castlereagh StreetSydney, New South Wales, Australia 2000

POSTAL ADDRESS GPO Box 500, Sydney,New South Wales, Australia 2001

DX 557 Sydney

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The Hon. Dr Meredith Burgmann MLC The Hon. John Aquilina MPPresident SpeakerLegislative Council Legislative AssemblyParliament House Parliament HouseSydney NSW 2000 Sydney NSW 2000

Madam PresidentMr Speaker

In accordance with section 74 of the Independent Commission Against Corruption Act 1988, I am pleased to present the report of the Independent Commission Against Corruption of an investigation into certain transactions of Koompahtoo Local Aboriginal Land Council and its offi ce bearers between 1996 and 2002.

Mr John Basten QC was appointed as Assistant Commissioner for the purpose of this investigation and presided at the hearings. His fi ndings, opinions and recommendations are contained in this report.

I draw your attention to the recommendation that the report be made public forthwith pursuant to section 78(2) of the Independent Commission Against Corruption Act 1988.

Yours sincerely

The Hon Jerrold Cripps QCCommissioner

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Contents

Corrupt conduct? – Mr Bill Smith 47

Section 74A(2) statement – Mr Bill Smith 51

Other participants – Mr Stephen Griffen 51

Other participants – Sanpine representatives 52

Corrupt conduct? – Messrs Adam Perkins, Scott and Steer 57

Section 74A(2) statement – Messrs Adam Perkins, Scott and Steer 58

Transfer of land to trustee company 58

Corrupt conduct? – Mr Bill Smith 66

Section 74A(2) statement – Mr Bill Smith 66

Chapter 6: The Villa World consent 68

Background 68

The role of Villa World offi cers 73

Nature of the transaction 78

Corrupt conduct? 83

Section 74A(2) statement 84

Chapter 7: Land transfers to KLALC members 85

Corrupt conduct fi ndings 92


Chapter 8: The KLALC–CKT joint venture 94

Corrupt conduct and section 74A(2) statement 97

Chapter 9: Departures from accounting standards 98

The accounts 98

Mr South’s evidence 99

Conclusions 100

The NSW Aboriginal Land Council (NSWALC) 101

Conclusions 102

Chapter 10: Corruption prevention 104

Disposal of land: what is expected 104

Role of the Registrar 105

Structural and governance issues for Local Aboriginal Land Councils 107

Effective audit requirements 109

Authority of executive 109

Corruption prevention recommendations 110

Implementation of corruption prevention recommendations 111

Executive summary 6

Chapter 1: The investigation 10

How this investigation originated 10

Why the Commission investigated 10

Conduct of the investigation 10

Hearings 10

Section 78(2) recommendation 11

Chapter 2: Legal framework – The Aboriginal Land Rights Act 12

Operation of section 40D of the Land Rights Act 19

Chapter 3: Legal framework – corrupt conduct 21

Corrupt conduct defi ned 21

Secret commissions 27

Corrupt corporations 29

Chapter 4: The KLALC–Sanpine joint venture – part 1 30

Background 30

The land 30

The proposal 30

The parties: Koompahtoo Local Aboriginal Land Council 31

Sanpine Pty Limited 32

Robert Scott 34

Charles and Adam Perkins 35

Graham Steer 35

The joint venture 36

Financial arrangements 36

Payment to Elaine Perkins 37

Operation of the joint venture management committee 40

Corrupt conduct? – payment to Mrs Perkins 41


Chapter 5: The KLALC–Sanpine joint venture – part 2 43

Aboriginal Liaison Offi cer’s position 43

Nature of position 43

Appointment process 44

Consequences of appointment 45


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n the failure of the Chairperson to make appropriate disclosure to the members of the KLALC that he was employed as the Aboriginal Liaison Offi cer and the amounts he was receiving;

n the extent to which members of the KLALC were able to obtain information concerning the progress of the joint venture and, in particular, the expenditure of funds raised by the mortgages over KLALC’s land; and

n the circumstances surrounding the transfer of the land to be developed from KLALC to KLALC Property & Investments Pty Limited, a trustee company formed at the instigation of the Chairperson and outside the control of the majority of the membership of KLALC.

Another matter investigated by the Commission concerned the circumstances surrounding the granting of approval by KLALC to the passage of a rising sewer main across its land to service a development occurring at Wyee Point on Lake Macquarie. Villa World Limited, a property development company based in Queensland, was undertaking a residential property development at Wyee Point. To pursue the project it sought to have a sewer main constructed along an existing electricity easement which travelled through KLALC’s land. An agreement was negotiated between Sanpine and Villa World under which Villa World paid Sanpine $100,000 to obtain KLALC’s consent. Of this $100,000, $40,000 was paid to the Chairperson of the KLALC. The Chairperson and another member of the KLALC Executive signed a letter granting approval for the pipeline. It does not appear that the KLALC members voted to approve the proposed sewer main.

Whilst the KLALC–Sanpine joint venture was on foot and at the instigation of one of the Sanpine directors, KLALC entered into another joint venture with a company, CKT Developments Pty Ltd, to undertake a development of a small parcel of KLALC’s land at Ourimbah Street, Morisset. The report also examines some aspects of this joint venture.

The fi nal matter relates to the transfer of two parcels of residential land by KLALC to members of KLALC, one of whom was the Chairperson’s son. Both transfers were at a price signifi cantly below market value. Members of the KLALC Executive appear to have procured the registration of the transfers of land with full knowledge that NSWALC had only approved the transfers if the full market value was paid to KLALC.

This report is the result of an investigation by the Independent Commission Against Corruption (“the Commission”) into various land dealings engaged in by the Koompahtoo Local Aboriginal Land Council (“KLALC”) between 1996 and 2002. The primary purpose of the investigation was to determine whether members of the Executive of the KLALC or its employees, as well as those who dealt with them in organising the various land dealings, engaged in corrupt conduct within the meaning of the Independent Commission Against Corruption Act 1988 (NSW) (“the ICAC Act”).

There were four sets of transactions investigated by the Commission:

(a) a joint venture with Sanpine Pty Limited;

(b) the consent sought by Villa World Limited to the construction of a rising sewer main over KLALC land;

(c) a joint venture with CKT Developments Pty Ltd, and

(d) certain transfers of residential land to KLALC members.

In July 1997, KLALC entered into a joint venture agreement with Sanpine Pty Limited (“Sanpine Pty Ltd”) to undertake a residential development of a large parcel of land at Morisset near Lake Macquarie in New South Wales. The land was owned by KLALC. After the joint venture agreement was entered into, the land was mortgaged to fi nance the development. The Commission’s investigations revealed that as at 31 March 2003, $2.2 million had been raised by mortgages over the land, with over $1.15 million paid for services provided by related parties to the joint venture, and $500,000 paid in interest to service the mortgages.

The report examines a number of troubling aspects of the Sanpine joint venture, including:

n the acceptance of the position of Aboriginal Liaison Offi cer to the joint venture by the Chairperson of the KLALC in circumstances which suggested he had a clear confl ict of interest;

n the acceptance by the Chairperson of payment for occupying the position of Aboriginal Liaison Offi cer;

Executive summary

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The report also deals with a number of material defi ciencies identifi ed in the conduct of KLALC’s auditor in auditing its fi nancial statements.

Koompahtoo Local Aboriginal Land Council

The Aboriginal Land Rights Act 1983 (NSW) (“the Land Rights Act”) establishes three types of bodies – Local Aboriginal Land Councils, Regional Aboriginal Land Councils and the NSW Aboriginal Land Council, the State land council. The Act provides that the Minister for Aboriginal Affairs may constitute an area as a Local Aboriginal Land Council area and then a Local Aboriginal Land Council is constituted by the Act for that area. On 17 May 1985, there was gazetted an area known as the Koompahtoo Local Aboriginal Land Council area. This area is in the Lake Macquarie district on the mid-north coast.

Each Local Aboriginal Land Council is vested with functions which include the claiming of land and the implementation of the wishes of the council’s members with respect to the acquisition, management, use, control and disposal of land acquired. All Aboriginal people resident in the area or having an association with the area that is accepted by a meeting of the Local Aboriginal Land Council are eligible to become members of the Local Aboriginal Land Council for that area.

Under the Model Rules that were in force during the period of the Commission’s investigation, each Local Aboriginal Land Council had a three-member executive, comprising a chairperson, a secretary and a treasurer. They were invested with specifi c duties and functions, including a power to represent the Council and act, subject to the instructions of a council meeting, on behalf of the council in the intervals between Council meetings.

Local Aboriginal Land Councils set up under the Land Rights Act are “public authorities” by virtue of section 65A of the Land Rights Act, which provides that each Aboriginal land council is to be a public authority for the purposes of the ICAC Act. As a consequence, each offi cer of a Local Aboriginal Land Council falls within the defi nition of a public offi cial within the meaning of the ICAC Act and is thus amenable to the jurisdiction of the Commission in relation to investigation of corrupt conduct in Aboriginal land councils.

The Land Rights Act enables a “Crown Lands Minister” to grant certain Crown (State-owned) lands to Aboriginal land councils. Any dissipation of such lands for improper purposes will diminish the benefi ts that would otherwise accrue to the Aboriginal community and undermine the objects of the Land Rights Act. The property dealings examined by the Commission raised a number of important governance and accountability issues. It was apparent to the Commission that KLALC’s decision-making process was marred by a lack of transparency and by mismanagement and factionalism. A close examination of KLALC’s operations was considered necessary in order to identify aspects of the operations that were susceptible to corruption and to explore the means by which such corruption risks might be minimised.

The Commission’s investigations also raised broader issues concerning the adequacy and effi cacy of some provisions of the Land Rights Act which affect the ability of Local Aboriginal Land Councils to deal with land. There is a strong public interest in identifying appropriate safeguards to combat conduct conducive to corruption in dealings with land. In the last few years the value of the land base of Local Aboriginal Land Councils has swelled to tens of millions of dollars. These lands have become highly attractive to those with an interest in the development of such assets. If utilised properly there may be considerable advantages to the members of Local Aboriginal Land Councils; the risk of losses due to corrupt conduct needs to be minimised.

Outcomes

The Commission has made the following fi ndings of corrupt conduct in relation to eight persons.

Mr Robert Briggs, former Co-ordinator of Koompahtoo Local Aboriginal Land Council; and

Mr Stephen Griffen, former Treasurer of Koompahtoo Local Aboriginal Land Council;

each engaged in corrupt conduct in relation to his involvement in:

a) procuring the registration by the Land Titles Offi ce of the transfer of land from KLALC to Mr Malcolm Smith and Ms Debbie Barwick knowing that the transfer signed on 27 July 2001 contained a false statement, namely the amount of consideration; and


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b) procuring the registration by the Land Titles Offi ce of the transfer of land from KLALC to Mr Alan Smith and Ms Kim O’Leary knowing that the transfer signed on 27 July 2001 contained a false statement, namely the amount of consideration.

Mr Dale Holt, former Development Manager with Villa World Limited, engaged in corrupt conduct in relation to his involvement in arranging for a payment of $100,000 from Villa World Ltd to Sanpine Pty Limited in the knowledge that part of that money ($40,000) would be paid by Sanpine Pty Limited to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, the Chairperson of KLALC, in return for Mr Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

Mr Adam Perkins, a director of Sanpine Pty Limited;

Mr Robert Scott, a consultant and project manager; and

Mr Graham Steer, a chartered accountant and director of Sanpine Pty Limited;

each engaged in corrupt conduct in relation to:

a) his involvement in the unauthorised disbursement of joint venture funds of $183,314 paid to Mrs Elaine Perkins in discharge of a debt owed by Mr Robert Scott’s partner, Ms Lesley Molony, and

b) his involvement in the payment of $40,000 from Sanpine Pty Limited to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, in return for Mr Bill Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

Mr Bill Smith, former Chairperson of Koompahtoo Local Aboriginal Land Council, engaged in corrupt conduct in relation to:

a) his conduct in accepting paid employment as Aboriginal Liaison Offi cer for the Sanpine–KLALC joint venture in circumstances where there was a confl ict of interest in relation to his role as Chairperson of KLALC, and in failing to disclose the confl ict to KLALC;

b) his involvement in the transfer of KLALC land at Morisset to KLALC Property & Investments Pty Ltd which involved him in a confl ict of interest between his position as Aboriginal Liaison Offi cer for the Sanpine–KLALC joint venture and Chairperson of KLALC;

c) his involvement in the payment of $40,000 from Sanpine Pty Limited to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, in return for Mr Bill Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land;

d) procuring the registration by the Land Titles Offi ce of the transfer of land from KLALC to Mr Malcolm Smith and Ms Debbie Barwick knowing that the transfer, signed on 27 July 2001, contained a false statement, namely the amount of consideration; and

e) procuring the registration by the Land Titles Offi ce of the transfer of land from KLALC to Mr Alan Smith and Ms Kim O’Leary knowing that the transfer, signed on 27 July 2001, contained a false statement, namely the amount of consideration

Mr Kim Wilson, a native title and land rights consultant, engaged in corrupt conduct in relation to his involvement in negotiating a payment of $100,000 from Villa World Limited to Sanpine Pty Limited in the knowledge that part of that money ($40,000) would be paid by Sanpine Pty Limited to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, the Chairperson of KLALC, in return for Mr Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

Recommendations are made in Chapter 6 of the report that consideration be given to the prosecution of Mr Bill Smith for an offence under section 249B(1) of the Crimes Act 1900 (NSW) (“the Crimes Act”) and that consideration be given to the prosecution of Messrs Dale Holt, Adam Perkins, Robert Scott, and Kim Wilson for offences under section 249F of the Crimes Act.

Further recommendations are made in Chapter 7 of the report that consideration be given to the prosecution of each of Mr Bill Smith and Mr Stephen Griffen for an offence under section 178BB of the Crimes Act.

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State Government with respect to the holding of land by Aboriginal land councils in NSW.

Recommendation 1

That consideration be given to whether, and if so on what grounds, Local Aboriginal Land Councils may dispose of land held by them.

Recommendation 2

That consideration be given to the oversight function of the NSW Aboriginal Land Council in relation to Local Aboriginal Land Councils and how this function should be carried out.

Recommendation 3

That, the above policy matters having been resolved, sections 40B-40D of the Aboriginal Land Rights Act 1983 be amended to refl ect the policy so determined.

Recommendation 4

That, if Local Aboriginal Land Councils are to be encouraged or permitted to undertake commercial development of land, clear guidelines be laid down as to how such development can be pursued.

Recommendation 5

That processes by which Local Aboriginal Land Councils enter into consultancy or partnership agreements with third parties be required to be open and transparent.

Recommendation 6

That proper roles for employed staff, honorary members of the executive and the membership in general meeting be established for Local Aboriginal Land Councils.

Recommendation 7

That consideration be given to legislative change to confer an express obligation on an appropriate entity to provide assistance and advice to Local Aboriginal Land Councils to help them to comply with their statutory obligations and to run their affairs effectively.

Certain structural failings in the relevant Aboriginal land rights legislation have been recognised when considering the seriousness of the conduct which is the subject of adverse fi ndings by the Commission. That being said, the fact that opportunities for corrupt conduct can arise does not excuse the conduct itself. Furthermore, the present investigation demonstrates, as might be expected, that both Aboriginal and non-Aboriginal people have become embroiled in impropriety. The Commission is satisfi ed that this was not a case in which Aboriginal people from traditional backgrounds faced diffi culties in reconciling obligations and demands under traditional law and custom with their responsibilities under a statutory structure imposed by the general law. There is no doubt that such confl icts can arise in particular communities and there were times when it appeared that Mr Bill Smith was inclined to invoke, by way of explanation for aspects of his conduct, customary Aboriginal norms. The Commission is satisfi ed that no such cultural confl ict issue actually arose in the circumstances the subject of the present investigation.

In addition, in considering whether to recommend that steps be taken by way of prosecution for offences, the Commission has been careful not to apply different standards in relation to Aboriginal and non-Aboriginal people. It is important for the broader Aboriginal community that corrupt conduct should be recognised as such, no matter who the perpetrator may be. The victims of corrupt conduct, in such cases, may be Aboriginal people themselves: it is important that they enjoy equal protection of the law, whether the perpetrators are members of their own Aboriginal community or other people.

The Commission has a statutory corruption prevention function, outlined in section 13 of the ICAC Act. As part of its investigations the Commission seeks to determine any factors which may have contributed to or facilitated corrupt conduct, and makes recommendations where appropriate to help prevent similar conduct occurring.

In the course of its investigation the Commission identifi ed profound ambiguities in the purposes, principles and mechanisms of the Land Rights Act. While the Commission is satisfi ed that, except where otherwise noted, the conduct in question was not motivated by beliefs which were genuinely held, though mistaken, these ambiguities in the legislation and uncertainty about it are, in the Commission’s view, likely to cause the conditions in which corrupt conduct is more likely to occur.

Chapter 10 of this report deals with corruption prevention issues identifi ed in the course of this investigation and makes the following specifi c recommendations to the


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dealings, which took place between 1996 and 2002. The allegations concerning some of these dealings were serious. They could, if proven, constitute corrupt conduct within the meaning of the ICAC Act. It was in the public interest to conduct a thorough investigation.

Conduct of the investigation

This investigation was protracted and complex for several reasons. A fi re on 5 September 2001 destroyed almost all of the existing records held by KLALC. The documents available to the Commission lacked details and were disjointed. Information concerning the affairs of KLALC during the period subject of the Commission’s investigation was concentrated in the hands of a few former offi cers of the KLALC, who themselves were of interest to the Commission. Many KLALC members had little or no information as to the complex nature of the commercial ventures undertaken on their behalf by the KLALC Executive. These diffi culties were further exacerbated by the poor state of fi nancial records of expenditure maintained by KLALC and the failure of its auditors to verify the fi nancial statements in accordance with the appropriate accounting standards.

Despite these diffi culties Commission offi cers examined and reconstructed a large amount of fi nancial records and other documents spanning more than four years of operations of KLALC. The Commission used powers granted to it under section 22 of the ICAC Act to obtain fi nancial and other information and analysed the information so obtained, which materially assisted the investigation. The Commission issued 49 notices under section 22 of its Act.

Commission offi cers also interviewed a number of former KLALC offi ce-holders and employees to obtain information relevant to the investigation. Some KLALC members and persons who have had dealings with the KLALC were also interviewed to obtain relevant information.

Hearings

The ICAC Act provides that for the purposes of an investigation the Commission may hold hearings. Mr John Basten QC was appointed Assistant Commissioner for the purpose of the investigation and presided over the hearings and has prepared this report.

How this investigation originated

Between 2 July 1999 and 27 February 2002 the Independent Commission Against Corruption (“the Commission”) received three separate complaints concerning the Koompahtoo Local Aboriginal Land Corporation (“KLALC”). The fi rst two complaints alleged that there were irregularities in the development of land owned by KLALC at Morisset. The third complaint contained an additional allegation that the Chairperson of KLALC transferred a parcel of land belonging to KLALC to his son and that the proceeds of the transfer had not been received by KLALC. On 27 May 2002 NSWALC provided information indicating that certain dealings of the subject land were in breach of the Aboriginal Land Rights Act 1983 (NSW) (“the Land Rights Act”).

On 6 June 2002, the Director-General of the Department of Aboriginal Affairs provided a report under section 11 of the Independent Commission Against Corruption Act 1988 (NSW) (“the ICAC Act”) alleging that members of KLALC disposed of its land in contravention of section 40D of the Land Rights Act in that the transfer was effected without the necessary approvals from NSWALC and other relevant agencies. It was further alleged that the Morisset land was transferred to a private trust controlled by the Chairperson of KLALC.

On 7 June 2002, an investigator was appointed by the Minister to investigate matters concerning KLALC pursuant to section 56D of the Land Rights Act.1

This appointment was revoked on 26 July and the investigator was re-appointed on 1 October 2002. Based on the concerns raised by the investigator in his report, in February 2003 the Minister for Aboriginal Affairs appointed an administrator to administer the affairs of KLALC and it remained under administration to the date of this investigation. Both the investigating accountant and the administrator have provided considerable assistance to the Commission.

Why the Commission investigated

After a protracted preliminary investigation and extensive analysis of the material provided by the investigating accountant and the administrator, on 16 September 2003 the Commission publicly announced that it would investigate the conduct of certain offi cers of the KLALC in relation to certain identifi ed property

Chapter 1: The investigation

1 Major amendments to the Land Rights Act effective from late 2002 mean that many sections have changed, either in substance or numbering, or both. Generally, unless otherwise indicated references to specifi c sections of the Land Rights Act refer to the Act as it operated prior to the ammendments of late 2002.

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A number of private hearings took place between September 2003 and February 2004. Eleven persons were identifi ed as “affected persons” and the Commission considered each one of them as a person substantially and directly interested in the subject matter of the hearing. Public hearings in relation to this matter commenced on 11 February 2004 and concluded on 11 October 2004. On 2 June 2004 a public hearing was held to explore relevant corruption prevention issues. In all, 25 persons gave evidence over eight days of private hearings and 21 days of public hearings. Counsel Assisting the Commission, Mr Robert Beech-Jones, examined all witnesses called before the Commission and made submissions with respect to possible fi ndings.

Section 78(2) recommendation

Pursuant to section 78(2) of the ICAC Act, the Commission recommends that this report be made public immediately. This recommendation allows either presiding offi cer of the Houses of Parliament to make the report public, whether or not Parliament is in session.


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Chapter 2: Legal framework – The Aboriginal Land Rights ActIt is not possible to understand the activities the subject of this investigation without some basic understanding of the subject matter, scope and purpose of the Aboriginal Land Rights Act 1983. That understanding must be achieved at two levels: fi rst, at the level of policy, it is necessary to understand the role the Land Rights Act plays in recognising the dispossession of the traditional Aboriginal owners of the land of New South Wales and the mechanisms it provides for a partial restoration of land to Aboriginal ownership. Secondly, at the level of legal effect, it is necessary to understand how land was sought to be returned, to whom and by what mechanisms. For the second purpose it is important to note that signifi cant changes have been made to the Land Rights Act between the beginning of the period under investigation (1996) and the present time. These changes will be noted below, particularly as they affect recommendations which may be made for improvements in the way the Land Rights Act operates to protect Aboriginal land-holders against corrupt conduct.

The Land Rights Act contains both a preamble and a long title. The preamble reads as follows:

WHEREAS:

(1) Land in the State of New South Wales was traditionally owned and occupied by Aborigines;

(2) Land is of spiritual, social, cultural and economic importance to Aborigines;

(3) It is fi tting to acknowledge the importance which land has for Aborigines and the need of Aborigines for land;

(4) It is accepted that as a result of past Government decisions the amount of land set aside for Aborigines has been progressively reduced without compensation.

The long title may also be usefully set out in full and reads as follows:

An Act to repeal the Aborigines Act 1969 and to make provisions with respect to the land rights of Aborigines, including provisions for or with respect to the constitution of Aboriginal Land Councils, the vesting of land in those Councils, the acquisition of land by or for those Councils and the allocations of funds to and by those Councils; to amend certain other Acts; and to make provisions for certain other purposes.

The means by which “the land rights of Aborigines” were to be satisfi ed involved the vesting of lands previously held in the Aboriginal Lands Trust under the former Aborigines Act 1969 (NSW) in Local Aboriginal Land Councils. Further, lands broadly described as “claimable Crown lands”, which were lands held by the government and not reserved or dedicated for any purpose or lawfully used or occupied or likely to be needed for defi ned purposes, could be the subject of a claim lodged by a Local Aboriginal Land Council or by the New South Wales Aboriginal Land Council on behalf of a Local Aboriginal Land Council.2 To give effect to these purposes, the whole of the State was to be divided into a large number of Local Aboriginal Land Council areas, with all Aboriginal people resident in the local area or having “an association with that area” being eligible to join the Local Land Council for that area. (Those having only an association with the area needed to be accepted by a meeting of the Council.)

The mechanism by which Local Aboriginal Land Councils were created was by the constitution of an area as a Local Aboriginal Council area.3 The State was subdivided into more than 100 such areas and there are, accordingly, more than 100 Local Aboriginal Land Councils. This, as may readily be appreciated, gives rise to the possibility of signifi cant local autonomy, but also to the potential for ineffi cient allocation of scarce resources, especially with respect to organisational administration and land management.

In the years following the commencement of the Land Rights Act on 10 June 1983, signifi cant resources have been devoted by Local Aboriginal Land Councils around the State in seeking to identify what might be claimable Crown lands within their areas and making claims, which were lodged with the Registrar appointed under the Land Rights Act. Originally, the Registrar had two primary functions. The fi rst was to accept land claims and refer such claims to the “Crown Land Minister”.4

The second function was to deal with disputes, primarily between Aboriginal Land Councils or between Land Councils and individuals.5 The latter function is relevant to particular aspects of the present investigation and will be referred to below.

In relation to the fi rst function, there was no express requirement for the Registrar to do anything with a claim after referring a copy to the Minister responsible for Crown lands. Although the date on which the claim was

2 See Land Rights Act, sections 35 and 36.3 See sections 5 and 6.4 Section 36(4).5 Land Rights Act, section 59.

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lodged was of critical legal signifi cance in determining whether the lands subject to it were claimable, the Act contained no express obligation on the Registrar even to keep a register of claims. In practice, the Registrar did keep such a register and now has additional functions which have signifi cantly increased the legal importance of his or her position under the Act.

In addition to Local Aboriginal Land Councils, the Act provided for the creation of Regional Aboriginal Land Councils of which there were at the relevant time 13.6 Regional Aboriginal Land Councils constituted the middle-rung of a tripartite structure which was no doubt intended to create a level of autonomy and self-government for Aboriginal people, in relation to their land holdings. Regional Aboriginal Land Councils could, until an amendment to the Land Rights Act in 1988, hold lands, although that function came to be seen as something of an anomaly.

The highest level in the tripartite structure was the NSW Aboriginal Land Council (“NSWALC”) which had state-wide functions which also have signifi cance for present purposes. NSWALC was responsible for the administration and distribution of funds which were made available for the purposes of the Land Rights Act by an annual payment of 7.5% of land tax. Such payments were made from Consolidated Revenue from 1984 until 1998. They have now ceased. From the funds available to NSWALC payments are made annually to Local Aboriginal Land Councils. A uniform sum of $110,000 has been treated as the basic payment received by Local Aboriginal Land Councils on an annual basis, so long as NSWALC is satisfi ed that they have complied with their fi nancial obligations. The role of NSWALC in monitoring the fi nancial affairs of Local Aboriginal Land Councils will also be dealt with in more detail below.

A further important function of NSWALC is to consider, pursuant to section 40D of the Land Rights Act, and where thought appropriate approve, any proposed disposal of land vested in a Local Aboriginal Land Council. The scope and operation of this protective provision will be considered shortly. However, it may be noted that sections 40A-40D were not included in the Land Rights Act until 1990.7 Prior to that, section 40 had prohibited a Local Aboriginal Land Council selling, exchanging, mortgaging or disposing of land vested in it otherwise than by way of lease or by the grant of an easement. The Local Aboriginal

Land Council had power to lease (or change the use of) land if, at a meeting of the Council specially called for that purpose, at least 80% of members present and voting supported the proposal.8 The Regional Aboriginal Land Council for the area also had to approve the lease or the change of use. Sub-section (3) then provided:

(3) A Regional Aboriginal Land Council shall not refuse to give an approval … except on the ground that the terms or conditions of the lease are inequitable to the Local Aboriginal Land Council concerned …

Further, a Local Aboriginal Land Council was empowered to lease land to a member on such terms as it thought fi t. The Secretary of a Local Aboriginal Land Council was entitled to certify that the appropriate approvals had been given and, where the lease was to a member, that the lessee was in fact a member. Such a certifi cate was said to be conclusive evidence “in favour of a bona fi de purchaser for value without notice”.

The fi rst signifi cant amendments to the Land Rights Act were made in 1986.9 The Minister, introducing the amendment Bill, spoke positively of the early results of the Land Rights Act.

The Act has also resulted in the formation of a large network of Regional and Local Aboriginal Land Councils to carry out the functions of land purchase, land claims and the management of the communally owned land and housing stock. These Land Councils have had a positive effect and have, in many instances, become the focus of a renewed commitment at the local level to self-directed community development. 10

However, the Minister continued:

The chief concern of the Government is that the funds made available are used for the purchase of land and not for the satisfaction of other community needs which may be urgent, but for which funds should be available through different channels. We are speaking here of communities of dispossessed people with high community aspirations but without, in many cases, the managerial ability at this stage to carry out fully all the functions of a Land Council at the local or regional level. 11

6 Some Regional Aboriginal Land Councils have since amalgamated.7 Aboriginal Land Rights Amendment Act 1990 (NSW), which commenced on 16 August 1991.8 Land Rights Act, section 40(2).9 See Aboriginal Land Rights (Amendment) Act 1986 (NSW).10 NSW Legislative Assembly Hansard, 16 April 1986, p.2039 at 2040.6.11 ibid at 2041.7.


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The Minister noted that despite certain differences of opinion, there was a “solid common ground” between the Government and the NSW Aboriginal Land Council concerning “the urgent need to provide members of Land Councils with the opportunity to develop administrative and accounting skills suffi cient to cope with the demands of the legislation.”12 The Minister noted a proposal to develop a “comprehensive training program” during 1986.13 He noted that the role of government was to assist Aboriginal people in realising their aspirations.

In all of this, the role of land is crucial – for members of the Aboriginal community land is integral to their identity as Aborigines. Let us not lose sight of the fact that it was precisely when Aborigines were dispossessed of their land that the problems of Aboriginal poverty and dependency arose. 14

Three tensions which have become apparent to the Commission are refl ected in these statements of intention of the Government. First, it was hoped that the restoration of land would help to undo the ravages of earlier dispossession. There may have been some doubt as to precisely how that benefi cial intention was to be achieved: at least in part it was anticipated that the creation of a network of Land Councils would promote the re-establishment of Aboriginal communities with improved resources upon which to develop self-suffi ciency. Secondly, the concept of land held under “communal title”, which was consistent with the then absence of any power of disposal of the land, was not easily reconcilable with the concept of “community development”. If the communities were expected to develop their land, it was not clear where the resources to do so would be obtained. The Land Rights Act did not then permit the land to be mortgaged. Thirdly, there was a recognition of the diffi culties implicit in expecting Aboriginal people, who remained amongst the most disadvantaged members of the population, to have or acquire managerial abilities suffi cient to use the resources of land being placed at their disposal.

The amendments made in 1990 were directed squarely at the second problem. New section 40B dealt with the forms of disposal originally subject to the old section 40, namely leasing, change of use and granting or releasing easements. All of these functions were made easier by the removal of the special majority requirement for

a meeting of a Local Aboriginal Land Council called to approve such a decision. Further, the requirement of approval was now vested, not in the Regional Land Council, but in NSWALC, the State land council. New provisions in sections 40C and 40D provided for disposal of land by NSWALC and by a Local Aboriginal Land Council, respectively. In relation to disposal by a Local Aboriginal Land Council, the fi rst requirement was its determination that the land was “not of cultural signifi cance to Aborigines of the area”. Both that determination and the decision that it should be disposed of required a special majority of 80% of members present and voting at a meeting specially called for the purpose. In addition, the NSW Aboriginal Land Council was required to approve of “the proposed disposal” and two Ministers were to be “notifi ed” of the proposed disposal. The power of granting a certifi cate recording compliance with the statutory requirements was still vested in the Secretary of the Local Aboriginal Land Council, who merely certifi ed that the disposal “does not contravene this section”. The certifi cate was said to be conclusive evidence of that fact, in favour of any person other than a person who had notice of a contravention of the section, when the certifi cate was issued. The concept of “cultural signifi cance” was defi ned in broad terms to include land which is “signifi cant in terms of the traditions, observances, customs, beliefs or history of Aborigines”.

When the original Land Rights Bill was introduced into the Parliament on 24 March 1983, the then Minister, Mr Frank Walker, noted that the “Keane Committee” report15 “placed vital importance upon the need to return signifi cant parts of this State back to their Aboriginal inhabitants as a form of compensation and a recognition of the great spiritual attachment that Aborigines have had to this great continent of ours”. After recognising the spiritual attachment to land, the Minister noted that the Keane Report went further:

It recognised also that Aborigines had experienced severe economic deprivations in this State. … The Committee believed that land rights could also, in our times, lay the basis for improving Aboriginal self-suffi ciency and economic well-being. This could be achieved through the provision of funds for open market purchases of economically viable properties with the purpose of providing an income for the numerous deprived Aboriginal communities. In this sense land rights has a dual

12 ibid at 2042.5.13 ibid at 2042.6.14 ibid at 2041.4.15 Select Committee of the Legislative Assembly upon Aborigines, chaired by Maurice Keane.

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purpose – cultural and economic. Some lands, with traditional signifi cance to Aborigines, will retain a cultural and spiritual signifi cance. Other lands will be developed as commercial ventures designed to improve living standards. 16

The Minister also noted that a key element of land rights as a concept was that there should be “inalienable community title to land owned by Aborigines”. He continued:

In other words, once land was returned to Aborigines it should remain Aboriginal land in perpetuity. … This Bill will provide for freehold title to be held by local community groups in perpetuity. 17

Finally, in a passage which resonates in relation to the matters now before the Commission, the Minister recognised the need for further funding, including from the Commonwealth, to allow for the economic benefi ts anticipated under the Act. He continued:

Further, I have asked Mr Charles Perkins, as head of the Aboriginal Development Commission, to enter into joint ventures with the Aboriginal Land Councils to be established by the proposed Act and to maintain funds at present coming to NSW under other programs.18

The changes made in 1990, introduced by the then Premier, Mr Nick Greiner, resulted from some two years of consultations with Aboriginal people, conducted on behalf of the Government by Mr Charles Perkins. In addition to the introduction of sections 40A-40D, the amendments to the Land Rights Act provided for the reconstitution of the State land council, with some additional functions. There was no discussion in the Second Reading Speech as to the underlying philosophy of new sections 40A-40D. However, the overriding purpose of the 1990 amendments was to tighten controls on financial arrangements. There was, as the Premier noted, a concern that, despite the expenditure of over $1 billion on Aboriginal affairs in the previous decade, Aboriginal people in NSW were not significantly better off than they had been a decade earlier.19 That was, no doubt, because communal land ownership

could not, of itself, provide people with an income, as opposed to a rates bill.

The new fi nancial arrangements required that Local Aboriginal Land Councils furnish to the NSW Aboriginal Land Council and to the Minister audited fi nancial statements, and a certifi cate of the auditor within four months from the end of a fi nancial year. NSWALC was given a new power, and indeed obligation, to cease immediately the provision of funds to any Local Aboriginal Land Council which failed to obtain a “satisfactory certifi cate” from an auditor. Once funding ceased, it could not resume until a satisfactory certifi cate had been obtained, or the Local Aboriginal Land Council had otherwise complied with its accounting obligations or the Minister had obtained a report from an investigator or an administrator.20 It will be necessary to consider these provisions further below, in the light of the unsatisfactory reports from KLALC’s auditor over the period to which the matters before the Commission relate.

Against this policy background it is useful to consider specifi c mechanical provisions of the Act. Section 13 of the Land Rights Act provided for the rules of Local Aboriginal Land Councils. At all relevant times, section 13(6) has provided:

(6) Until a Local Aboriginal Land Council makes its fi rst rules in accordance with this section, its rules shall be the rules prescribed by the Regulations as Model Rules.21

The Act has also provided that a Local Aboriginal Land Council shall have a Chairperson, Secretary and Treasurer, who constitute the offi ce-holders of the LALC.22

Although the KLALC lost all of its original records in a fi re, any variation of its rules from the model rules prescribed by the Regulations would have required approval from the Registrar. There is no evidence that any such approval was sought at any time and, in relation to a complaint considered by the Registrar in 1999, it appears that both the Chairperson and Registrar dealt with the matter on the basis that the model rules regulated the affairs of the KLALC. Accordingly, reference to the model rules will be made as necessary.

Chapter 2: Legal framework – The Aboriginal Land Rights Act Chapter 2: Legal framework – The Aboriginal Land Rights Act Chapter 2: Legal framework – The Aboriginal Land Rights Act Chapter 2: Legal framework – The Aboriginal Land Rights Act

16 NSW Legislative Assembly Hansard, 24 March 1983, p.5089.2.17 ibid at 5089.8.18 ibid at 5090.9.19 NSW Legislative Assembly Hansard, 10 May 1990, p.2948.20 See section 34C.21 See now, section 84(2) of the Land Rights Act.22 Land Rights Act, section 9 and now section 61.


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Apart from the role of the Chairperson as the chair of meetings of a Local Aboriginal Land Council, the respective functions of the offi cers are not specifi ed in the Land Rights Act, but in the Regulations. The Aboriginal Land Rights Regulation 1983 was repealed on 1 September 1996 and replaced by the Aboriginal Land Rights Regulation 1996. The latter Regulation operated throughout the time relevant to the present investigation, although the rules identifi ed in Schedule 1 of each regulation are substantially the same. In the 1996 Regulation, the duties of the Chairperson, Secretary and Treasurer were set out in clauses 30, 31 and 32 of the model rules in Schedule 1. In relation to the Chairperson, clause 30 provided:

(1) The primary duty of the Chairperson is to ensure the successful functioning of the Council and achievement of its objects.

(2) Accordingly the Chairperson must:

(a) uphold the rules of the Council, and

(b) preside at Council meetings, and

(c) represent and act, subject to the instructions of a Council meeting, on behalf of the Council in the interval between meetings.

A similar obligation is placed on the Secretary23 and on the Treasurer.24 It follows that the three statutory offi cers of a Land Council act on behalf of the Land Council, in the interval between meetings and thus satisfy the defi nition of a “public offi cial” in the ICAC Act. Any persons engaged as employees of a Land Council, including a co-ordinator and offi ce staff, would, to the extent that their duties provide for them to do so, act on behalf of the Land Council and, to that extent, would also be “public offi cials”.

The matters of concern addressed in the subsequent chapters of this report relate to the conduct of various offi ce-holders of KLALC, but particularly the conduct of Mr Bill Smith, who was at all material times the Chairperson of KLALC. His obligations extended to ensuring that the Council carried out its statutory functions. Amongst the primary functions in relation to land were the following, as identifi ed in section 12 of the Land Rights Act:

12(1) The functions of a Local Aboriginal Land Council are:

(a) in accordance with any regulations, to acquire land and to hold and dispose of,

or otherwise deal with, land vested in or acquired by the Council, and

…

(d) to implement the wishes of its members (as decided at a meeting of the Council) with respect to:

(i) the acquisition, management, use, control and disposal of land and

(ii) the acquisition, establishment and operation of enterprises, and

…

(h) to protect the interests of Aborigines in its area in relation to the acquisition, management, use, control and disposal of its land …

It is apparent from these provisions that the Executive of the Local Aboriginal Land Council is not expressly vested with any powers to dispose of, or otherwise use, land vested in the Council except in accordance with the wishes of the members, formally expressed at a meeting of the Council.

The Land Rights Act imposes obligations on offi ce-holders of a Local Aboriginal Land Council, who are defi ned to include the Chairperson, Secretary and Treasurer25 in relation to pecuniary interests. Section 56B imposes an obligation on the offi ce-holder to disclose any pecuniary interest in a matter being considered by the Council, and further requires that the offi ce-holder, having disclosed such an interest, not participate in deliberations with respect to the matter unless the other offi ce-holders of the Council “otherwise determine”. The other offi ce-holders are required to consider making a different determination, but only in the absence of the person having the pecuniary interest. The relevant provisions of section 56B read as follows:

(2) An offi ce holder of an Aboriginal Land Council who has a direct or indirect pecuniary interest in a matter being considered or about to be considered by the Council is required, as soon as possible after the relevant facts have come to the offi ce holder’s knowledge, to disclose the nature of the interest at a meeting of the Council if the interest appears to raise a confl ict with the proper performance of the offi ce holder’s duties in relation to the consideration of the matter.

…

(5) After an offi ce holder has disclosed the nature of an interest in any matter or thing, the offi ce

23 Clause 31(j).24 Clause 32(g).25 Section 56B(1).

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holder may not, unless the other offi ce holders of holder may not, unless the other offi ce holders of the Council concerned otherwise determine:

(a) be present during any deliberation, or take part in any decision, of the Council with respect to that matter or thing, or

(b) exercise any function under this Act with respect to that matter or thing.

Signifi cantly for the purposes of section 9 of the ICAC Act (”Limitation on nature of corrupt conduct”), section 56C(1) of the Land Rights Act provides that a person who fails to comply with section 56B is guilty of an offence. The maximum penalty at the time was limited to “two penalty units” but conviction also carried an automatic disqualifi cation from holding offi ce under the Land Rights Act for a period of seven years, unless the court by which the person was convicted specifi ed a lesser term or ordered that no disqualifi cation should follow because of the trifl ing character of the offence.

The offence created under section 56C(1) did not distinguish between the independent obligations imposed, sequentially, by section 56B. However, a breach of any specifi c obligation would appear to constitute a failure to comply with section 56B.

Section 56B raised its own issues of construction. First, it was limited to a person who has a “direct or indirect pecuniary interest” in a matter. That language is also to be found in the Aboriginal Councils and Associations Act 1976 (Cth), section 49D. However, more recent legislation tends to adopt the terminology of a “material personal interest”, a phrase which would cover a broader range of situations which could legitimately be treated as giving rise to a conflict of interestss.26 Secondly, there are two difficulties which arise in relation to the content of the disclosure. Section 56B(2) merely required disclosure of “the nature of the interest”. How much detail was required of the nature and extent of the interest and the relationship of the interest to the affairs of the Council was not specified.27 Further, sub-section 56B(3) stated that disclosure that a person is a member, or is in the employment of, or has some other specified interest in relation to, a particular company or other body:

is suffi cient disclosure of the nature of the interest in any matter or thing relating to that company or other body … which may arise after the date of the disclosure and which is required to be disclosed under subsection (2).

This provision appeared to suggest that if the Chairperson of a Local Aboriginal Land Council discloses that he or she held a small parcel of shares in a large public company with which the Local Aboriginal Land Council was seeking to do business, no further disclosure would be necessary if the Chairperson later enters into a contract with that company for a payment if the negotiations with the Council was successful. If the provision has that effect, its underlying purpose is diffi cult to comprehend.

Next, section 56B applied indiscriminately to State, Regional and Local Aboriginal Land Councils. In 1997, there were 13 Regional Aboriginal Land Councils in New South Wales, with the result that the State land council, NSWALC, had 13 members.28 The membership of a Local Aboriginal Land Council, however, may comprise any or all of the Aboriginal persons living within or having a recognised and accepted association with its area. This could amount to several hundred members. Pursuant to section 56B(5), where there had been a disclosure “the other office-holders of the Council” might determine that the affected office-holder be permitted to take part in deliberations with respect to the matter the subject of a conflict of interest. In the case of NSWALC, all members are office-holders, and accordingly all the other members of the Council must be involved in such a determination. With a Local Aboriginal Land Council, there are only three office-holders and it is easy to envisage circumstances in which a Chairperson, for example, was readily able to persuade the Secretary and Treasurer to approve his participation in the deliberations. No formality was required in relation to such a determination. Nor was any record required to be made of it. The general members of the Local Aboriginal Land Council might be unaware of the significance of the disclosure or even the reason why the affected office-holder continued to participate in debates about the matter. They might well assume, for example, that contrary to appearances there was no real conflict of interest involved.


26 See e.g. Commonwealth Authorities and Companies Act 1997 (Cth), sections 27F and 27J.27 c.f. Commonwealth Authorities and Companies Act, section 26F(3).28 Land Rights Act, section 22(2).


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Finally, section 56B confused the nature of the Land Councils involved by providing that a reference to a “meeting of an Aboriginal Land Council” included a reference to a meeting of a “committee” of the Council and further stated that reference to an offi ce-holder included reference to a member of such a committee. In relation to the NSWALC, that provision may have made some sense: in relation to Local Aboriginal Land Councils, both its purpose and operation are far from clear. Although it cannot determine the construction of the Act, it is notable that the Aboriginal Land Rights Regulation 1996, which contains model rules for Local, Regional and State Land Councils, makes no provision for the establishment of committees, but in each case refers to “sub-committees”.

As will be noted in Chapter 9 below, there have been substantial amendments to these provisions, each of which has been repealed and replaced by Part 10, Division 4 of the Land Rights Act, dealing with the identifi cation of “pecuniary interests” and the obligations of disclosure.29 There are also entirely new provisions relating to complaints regarding failure to disclose pecuniary interests, modelled on the Local Government Act 1993.

As will be noted below, in Chapter 5, there was a complaint made in 1999 to the Registrar appointed under the Land Rights Act.30 One of his functions was to refer disputes to the Land and Environment Court for determination.31 The kinds of disputes which could be referred to the Court were widely defi ned, and included a dispute between a Local Aboriginal Land Council and an individual, or between individual members of a Local Aboriginal Land Council, but the dispute must have related to a land claim or purchase and have been referred to the relevant Regional Aboriginal Land Council for conciliation.32 More broadly, the Registrar could refer to the Court for determination:

(c) any other matter concerning the administration of particular … Local Aboriginal Land Councils.

What precisely paragraph (c) was intended to cover, given the limitations imposed on the kinds of disputes covered by paragraph (a), is unclear. Furthermore, section 59(2) imposed an additional constraint on the power of the Registrar:

(2) The Registrar shall not, under sub-section (1) refer to the Court a dispute or matter if provision is made for the determination of the dispute or matter under another section of this Act.

Although section 59(1) provided that the Registrar could act at the request of NSWALC, or on his or her own initiative, in practice it is unlikely that such a power would be engaged unless the dispute had been drawn to the Registrar’s attention by some affected individual or Land Council. In the present case, a concern with respect to proper disclosure by the KLALC Chairperson, Mr Bill Smith, under section 56B was drawn to the attention of the Registrar, who took some steps to investigate the matter. The outcome of the Registrar’s consideration was that the matter should not be referred to the Land and Environment Court. The process of inquiry and reasoning which led to that conclusion was criticised in the course of the present investigation on the basis that the Registrar construed section 56B(2) of the Land Rights Act too narrowly. However, in his submissions to the Commission, he pointed to legal advice he had obtained for the purposes of this investigation, from Mr Tony McAvoy of counsel, to the effect that he had no power, in any event, to refer the matter to the Court. That was because a contravention of section 56B constituted an offence and hence was a matter which could properly have been dealt with under another provision of the Act. There may be some force in that argument, although, equally, there may be a basis for suggesting that the “matter” raised by the complainants was not limited to a contravention of section 56B. However, that issue has no direct bearing on the Commission’s conclusions, nor to its recommendations in relation to corruption prevention, in the light of the substantial amendments made to the Act in 2002, by the insertion of a new Part 10 dealing with pecuniary interests and establishing an Aboriginal Land Councils Pecuniary Interest Tribunal.33

29 See sections 182-188, Land Rights Act.30 See old section 49, Land Rights Act.31 See section 59.32 See section 59(1)(a).33 See new section 178 ff.

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Operation of section 40D of the Land Rights Act

A matter which featured extensively in the Commission’s investigation concerned the operation of section 40D of the Land Rights Act, as in force during the period 1997–2001. Before considering the operation of that provision, it is useful to note the related terms of section 40B, which impose restraints on a Land Council leasing or changing a use of land vested in it. Thus, section 40B provided, in July 1997;

40B(2) A Local Aboriginal Land Council may, subject to the provisions of any other Act and of the approval of the New South Wales Aboriginal Land Council:

(a) lease or change the use of land vested in it …

but only if the lease, change of use … has been approved at a meeting of the Local Aboriginal Land Council specifi cally called for that purpose at which a quorum was present.

The concept of ‘change of use’ in relation to land invokes elements of planning law. Thus a planning scheme may prohibit a particular use or may change permissible uses by changing the zoning of land. Similarly, an owner may have rights depending on existing usage, whether conforming to a planning instrument or not, and may seek to change the usage of the land by having it rezoned, subdivided or by obtaining development consent for a particular purpose. Broadly speaking, it would appear that section 40B requires that a Local Aboriginal Land Council obtain NSWALC consent if it wishes to engage in any such activity.

Section 40D(1), as in force in July 1997, may conveniently be set out in full.

40D Sale etc of land by Local Aboriginal Land Council

(1) A Local Aboriginal Land Council may, subject to the provisions of any other Act, sell, exchange, mortgage or otherwise dispose of land vested in it if:

(a) at a meeting of the Council specifi cally called for the purpose (being a meeting at which a quorum was present) not less than 80 per cent of the members of the Council present and voting have determined that the land is not of cultural signifi cance to Aborigines of the area and should be disposed of, and

(b) the New South Wales Aboriginal Land Council has approved of the proposed disposal, and

(c) the Minister has been notifi ed of the proposed disposal, and

(d) in the case of the disposal of land transferred to an Aboriginal Land Council under section 36, both the Crown Lands Minister referred to in that section and the Minister have been notifi ed of the proposed disposal.

The terms of this provision give rise to a number of questions of construction, some of which were debated during the course of the present investigation. First, there was a signifi cant debate as to the effect of an approval by the NSWALC for a particular dealing in land for which its approval had been sought. Thus, would an approval to sell the land, where the particular transaction proposed did not eventuate, constitute a continuing right to sell without further approval? Similarly, would consent to mortgage the land, which may be understood in legal terms as a conveyance of the land and, for some purposes, a form of sale, cover further mortgages (with increased borrowings and for fresh periods) and even subsequent sale of subdivided blocks?

A second question concerned the requirement that 80% of the members determine:

(a) that the land is not of cultural signifi cance to the Aborigines of the area, and

(b) that the land should be disposed of.

For reasons which will be discussed later, the conjunction of these two elements seems to suggest a connection between them, which may not have been intended. Perhaps more importantly, the question of the meaning of the fi rst limb of the requirement is quite unclear: even the concept of “Aborigines of the area” is ambiguous. That term could mean Aboriginal people with a traditional connection to the area, or it could mean Aboriginal people living in the area who are members of the Local Aboriginal Land Council. Depending on which meaning is accepted, the concept of “cultural signifi cance” could take on a quite different fl avour. Presumably one underlying purpose of the provision is that land which is of cultural signifi cance should not be disposed of.

In carrying out its approval function under section 40B(3), NSWALC is required not to refuse approval of a lease or change of use except on grounds that the terms or conditions of the lease “are inequitable” to



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the Local Aboriginal Land Council or that the change of use would be detrimental to its interests. No such constraint is imposed on NSWALC carrying out its functions under section 40D(1)(b), but neither is there any specification of criteria which might be relevant. Is NSWALC, for example, expected to make its own enquiries as to cultural significance? Alternatively, is NSWALC expected to consider whether the land should, in its view, be disposed of? Or is it to give consideration to the financial merits of the proposed disposal? Other questions could be envisaged: in each case it will further be necessary to enquire whether such consideration is mandatory or merely permissible, or even impermissible.

The purpose of notification of the Minister administering the Land Rights Act and, in addition, in the case of land successfully claimed under section 36 of the Act also the Minister responsible for Crown Lands, is unclear. Their only possible role may be to make submissions, either to NSWALC or to the Local Aboriginal Land Council, seeking to persuade one or other of those bodies to take a particular course. However, no timetable is prescribed which would allow that to take place and the purpose is itself largely speculative.

It is also important to note the role of the Secretary of the Local Aboriginal Land Council in relation to the certification that relevant procedures have been followed. Again, it will be necessary to return to the purpose and effectiveness of this provision in Chapter 9.

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The ICAC Act identifi es the principal functions of the Commission, relevantly for present purposes, in the following terms:

13(1)The principal functions of the Commission are as follows:

(a) to investigate any allegation or complaint that, or any circumstances which in the Commission’s opinion imply that:

(i) corrupt conduct, or

(ii) conduct liable to allow, encourage or cause the occurrence of corrupt conduct, or

(iii) conduct connected with corrupt conduct may have occurred, may be occurring or may be about to occur,

…

(d) to examine the laws governing and the practices and procedures of, public authorities and public offi cials, in order to facilitate the discovery of corrupt conduct and to secure the revision of methods of work or procedures which, in the opinion of the Commission, may be conducive to corrupt conduct … .

…

(3) The principal functions of the Commission also include:

(a) the power to make fi ndings and form opinions on the basis of the results of its investigations, in respect of any conduct, circumstances or events with which its investigations are concerned, whether or not the fi ndings or opinions relate to corrupt conduct, and

(b) the power to formulate recommendations for the taking of action that the Commission considers should be taken in relation to its fi ndings or opinions or the results of its investigations.

It is clear from the statement of these functions that a key concept in relation to the functions and powers of the Commission is that of “corrupt conduct” which is a defi ned term. The scope of this term is discussed further below.

Corrupt conduct defi ned

A restriction is imposed on the role of the Commission in making a report, despite the broad terms of section 13(3), by section 74B.34 Pursuant to section 74, the Commission is empowered to prepare “reports in relation to any matter that has been or is the subject of an investigation”. The Commission is obliged to prepare a report in relation to a matter which has been the subject of a public hearing.35 Further, the Commission is authorised to include in its reports both its fi ndings, opinions and recommendations and its reasons for reaching such conclusions.36 Where a person has been identifi ed as an affected person, namely one against whom, in the Commission’s opinion, substantial allegations have been made,37 the ICAC Act requires:

74A(2) The report must include, in respect of each “affected” person, a statement as to whether or not in all the circumstances the Commission is of the opinion that consideration should be given to the following:

(a) the prosecution of the person for a specifi c criminal offence,

(b) the taking of action against the person for a specifi ed disciplinary offence,

(c) the taking of action against the person as a public offi cial on specifi ed grounds, with a view to dismissing, dispensing with the services of or otherwise terminating the services of the public offi cial.

(3) An “affected” person is a person … against whom, in the Commission’s opinion, substantial allegations have been made in the course of or in connection with the investigation concerned.

(4) Subsection (2) does not limit the kinds of statement that a report can contain concerning any such “affected” person and does not prevent a report from containing a statement described in that subsection in respect of any other person.

As will be noted below, conduct will not amount to corrupt conduct unless it could constitute or involve a criminal offence, a disciplinary offence, or reasonable grounds for terminating services, being the matters in relation to which recommendations must be made under section 74A(2). There is no necessary inconsistency in the Commission concluding that particular conduct is

Chapter 3: Legal framework – corrupt conduct

34 See section 13(4), ICAC Act.35 Section 74(3), ICAC Act.36 Section 74A(1), ICAC Act.37 Section 74A(3), ICAC Act.


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corrupt conduct because it could constitute a criminal offence, and yet expressing the opinion that it is not necessary or desirable to consider prosecuting a person for such an offence. That is because the defi nition of “corrupt conduct” will be satisfi ed even though such proceedings can no longer be brought,38 or because, for discretionary reasons, such consideration seems inappropriate. However, in other cases, where an allegation is thought to be justifi ed, the Commission will inevitably be required to express an opinion under section 74A(2). In that regard, it is important to note the constraints imposed by section 74B. Relevantly for present purposes, that section states:

74B(1) The Commission is not authorised to include in a report under s.74 a statement as to:

(a) a fi nding or opinion that a specifi ed persons is guilty of or has committed … a criminal offence or disciplinary offence (whether or not a specifi ed criminal offence or disciplinary offence), or

(b) a recommendation that a specifi ed person be, or an opinion that a specifi ed person should be, prosecuted for a criminal offence or disciplinary offence (whether or not a specifi ed criminal offence or disciplinary offence).

(2) A fi nding or opinion that a person has engaged …:

(a) in corrupt conduct (whether or not specifi ed corrupt conduct), or

(b) in specifi ed conduct (being conduct that constitutes or involves or could constitute or involve corrupt conduct),

is not a fi nding or opinion that the person is guilty of or has committed … a criminal offence or disciplinary offence.

Because the expression of a fi nding or opinion that a person has engaged in corrupt conduct, of a particular kind, will require the forming of an opinion as to whether the conduct could constitute or involve a criminal offence, it is important to emphasise that any such fi nding or opinion set out in this report is intended to conform to the description given in section 74B(2) and no fi nding or opinion as to guilt or commission of a criminal offence or disciplinary offence is intended or should be inferred. The nature of the Commission’s functions and powers demonstrate why that is so. Many of the substantive and procedural protections which

apply in criminal proceedings are unavailable to those appearing before the Commission. The absence of such protections is justifi ed by the need to uncover and prevent any repetition of the kinds of pernicious practice at which the ICAC Act is directed. The Commission is not responsible for the prosecution, let alone the determination, of criminal charges. Although the Act has been amended in signifi cant respects since the judgment was handed down, the underlying philosophy of the ICAC Act identifi ed by the High Court in Balog v Independent Commission Against Corruption,39 still provides a helpful guide to the role of the Commission.

Counsel appearing for one of the affected persons in the course of this investigation suggested in submissions that, as a matter of discretion, the Commission should not make a fi nding of corrupt conduct in relation to an affected person in circumstances where no recommendation in favour of prosecution was proposed. That approach was, it was submitted, supported by the remarks of Gleeson CJ in Independent Commission Against Corruption v Chaffey.40 The point in issue in that case was, however, somewhat different. Chaffey was a police offi cer who had been the subject of serious allegations by two persons themselves convicted of serious crimes. The sole issue was whether the Commission had failed to accord Mr Chaffey procedural fairness by allowing the allegations to be aired in evidence at a public hearing. The damage to Mr Chaffey’s reputation, which would inevitably arise, whether or not the allegations were found to have substance, was said to constitute the relevant unfairness. As the Chief Justice noted, it was precisely that danger which required the Commission to observe the rules of procedural fairness. It did not follow, however, “that fairness requires that proceedings be conducted in all respects in such a way as to minimise damage to reputation”. In that case, the alleged unfairness is said to derive, not from the public airing of evidence capable of demonstrating corrupt conduct, but the fact that an adverse fi nding, without a recommendation that prosecution be considered, deprives the person affected of an opportunity to clear his name of any inference that he is guilty of a crime.

There are a number of answers to this complaint. First, the statute expressly makes clear that a fi nding of corrupt conduct does not involve a fi nding that a person is guilty of a crime, or even that the person should be prosecuted. On the other hand, it may be accepted that, as a practical matter, and given the defi nition of “corrupt

38 Section 9(2), ICAC Act.39 (1990) 169 CLR 625.40 (1992) 30 NSWLR 21 at 27-28

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conduct”, members of the public may well draw an adverse inference from the existence of such a fi nding. Secondly, because the most that the Commission can do is recommend that prosecution be considered, it can never guarantee an affected person an opportunity to clear his or her name at a criminal trial. Thirdly, at least in some circumstances, it would be unrealistic to expect persons against whom an adverse fi nding has been made to invite criminal prosecution. If the evidence against them is strong, they risk conviction; if weak, most would prefer not to be prosecuted than to achieve an acquittal. Fourthly, it is clear that the ICAC Act envisages that any recommendation for prosecution should be dealt with separately from the formation of the opinion as to corrupt conduct.

The Commission is of the view that it should, in all circumstances, be cautious in reaching a fi nding of corrupt conduct. That is because no person’s reputation should be unfairly sullied. However, where the Commission is comfortably satisfi ed that corrupt conduct has occurred, it should make such a fi nding despite the consequences for the individual’s reputation. It is not a function of the Commission to protect a reputation which is undeserved. Further, it is necessary to take into account the fact that the Commission is entitled to hear evidence which could not be used in a criminal prosecution. If the only powerful evidence against a person is his or her admission to the Commission, the Commission should not be prevented from fi nding corrupt conduct in such clear circumstances, despite the fact that the evidence will be inadmissible in court and no recommendation to consider prosecution would be justifi ed.

The term “corrupt conduct” is defi ned in sections 8 and 9 of the ICAC Act. The defi nition covers any conduct which falls within the description in either or both of sub-sections 8(1) and (2), which is not excluded by section 9.41 Section 8 is in broad terms and relevantly provides:

8(1) Corrupt conduct is:

(a) any conduct of any person (whether or not a public offi cial) that adversely affects, or that could adversely affect, either directly or indirectly, the honest or impartial exercise of offi cial functions by any public offi cial, any group or body of public offi cials or any public authority, or

(b) any conduct of a public offi cial that constitutes or involves the dishonest or partial exercise of any of his or her offi cial functions, or

(c) any conduct of a public offi cial or former public offi cial that constitutes or involves a breach of public trust, or

(d) any conduct of a public offi cial or former public offi cial that involves the misuse of information or material that he or she has acquired in the course of his or her offi cial functions, whether or not for his or her benefi t or for the benefi t of any other person.

(2) Corrupt conduct is also any conduct of any person (whether or not a public offi cial) that adversely affects, or that could adversely affect, either directly or indirectly, the exercise of offi cial functions by any public offi cial, any group or body of public offi cials or any public authority and which could involves any of the following matters:

(a) offi cial misconduct (including breach of trust, fraud in offi ce, nonfeasance, misfeasance, malfeasance, oppression, extortion or imposition),

(b) bribery,

…

(d) obtaining or offering secret commissions,

(e) fraud,

(f) theft,

…

(x) matters of the same or a similar nature to any listed above,

(y) any conspiracy or attempt in relation to any of the above.

Section 9 provides, relevantly for present purposes:

9(1) Despite section 8, conduct does not amount to corrupt conduct unless it could constitute or involve:

(a) a criminal offence, or

(b) a disciplinary offence, or

(c) reasonable grounds for dismissing, dispensing with the services of or otherwise terminating the services of a public offi cial, or…

Chapter 3: Legal framework– corrupt conduct Chapter 3: Legal framework– corrupt conduct Chapter 3: Legal framework– corrupt conduct

41 Section 7(1) ICAC Act.


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(2) It does not matter that proceedings or action for such an offence can no longer be brought or continued, or that action for such dismissal, dispensing or other termination can no longer be taken.

(3) For the purposes of this section:

…

criminal offencecriminal offence means a criminal offence under law of the State or under any other law relevant to the conduct in question.

disciplinary offencedisciplinary offence includes any misconduct, irregularity, neglect of duty, breach of discipline or other matter that constitutes or any constitute grounds for disciplinary action under any law.

The conduct in question need not be the conduct of a “public offi cial” in order to satisfy the defi nition in section 8(1). However, if the conduct is that of another person, it must at least be capable of adversely affecting the proper exercise of offi cial functions by a public offi cial. The term “offi cial functions” is not defi ned, but clearly involves the functions or powers exercised by an offi cer who is a public offi cial, in his or her capacity as such. The term “public offi cial” is defi ned as follows:42

Public offi cialPublic offi cial means an individual having public offi cial functions or acting in a public offi cial capacity, and includes any of the following:

…

(h) an individual who constitutes or is a member of a public authority,

(i) a person in the service of the Crown or of a public authority,

(j) an individual entitled to be reimbursed expenses, from a fund of which an account mentioned in paragraph (d) of the defi nition of public authority is kept, of attending meetings or carrying out the business of any body constituted by the Act,

…

(m) an employee of or any person otherwise engaged by or acting for or on behalf of, or in the place of, or as deputy or delegate of, a public authority or any person or body described in any of the foregoing paragraphs.

The term “public authority” is also defi ned:

Public authorityPublic authority includes the following:

…

(d) a person or body in relation to whom or to whose functions an account is kept of administration or working expenses, where the account:

(i) is part of the accounts prepared under the

Public Finance and Audit Act 1983, or

(ii) is required by or under any Act to be audited by the Auditor-General, or

(iii) is an account with respect to which the Auditor-General has powers under any law, or

(iv) is an account with respect to which the Auditor-General may exercise powers under a law relating to the audit of accounts if requested to do so by a Minister of the Crown.

Whatever may otherwise have been the case, since 1990 all Aboriginal Land Councils established under the Land Rights Act are taken to be public authorities for the purposes of the ICAC Act.43

The primary concepts of corrupt conduct set out in section 8(1) thus involve –

n the dishonest exercise of an offi cial function;

n the partial exercise of an offi cial function, and

n a breach of public trust.

(It is not necessary for present purposes to consider misuse of information or material obtained in the course of an offi cial function.) The specifi c matters set out in sub-section 8(2) are largely, although not entirely, examples which fall within these concepts, although the term “offi cial misconduct” may perhaps be broader.

The concept of dishonesty will include many types of conduct that can readily be identifi ed in paragraphs of section 8(2), including bribery, obtaining secret commissions, fraud, theft, perverting the course of justice and other matters. These elements need not be considered further at this stage.

42 Section 3(1), ICAC Act.43 Land Rights Act, section 65A, introduced by the Aboriginal Land Rights (Amendment) Act 1990: and see now section 248.

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Partiality and breach of public trust were considered by the Court of Appeal in Greiner v Independent Commission Against Corruption,44 a case involving a former Premier and a former Minister for the Environment. The decision in that case turned largely upon the manner in which conduct might fall within paragraph (c) of section 9(1), in its then form.45 Of the three members of the Court of Appeal, only Mahoney JA (who dissented on other issues) considered questions of “partiality” and “breach of public trust”.46 In substance his Honour found that partiality occurs where –

n there are two or more persons or interests competing for a benefi t or advantage;

n there is a duty on the repository of the power to act with impartiality;

n a particular person or interest was selected for an improper purpose, and

n the extraneous purpose was deliberately so chosen.47

In relation to the concept of breach of public trust, Mahoney JA appears to have identifi ed similar elements, being primarily the use of an offi ce or the powers of an offi ce to secure an advantage for an individual for an improper reason.48 However, in circumstances where section 9(1)(c) is not available, the precise scope of these concepts is not likely to be critical: rather, and relevantly for present purposes, the scope of such improper conduct is likely to be defi ned by the limits of a relevant criminal offence. The scope of relevant conduct generally may thus be identifi ed by reference to the criminal offence having the broadest coverage and the greatest potential relevance for present purposes. The most likely contender is the common law offence of misconduct in public offi ce or, as it is sometimes called “offi cial misconduct”.49 That offence has been defi ned, conveniently for present purposes, by Sir Anthony Mason NPJ in the Court of Final Appeal of the Hong Kong Special Administrative Region in Shum Kwok Sher v Hong Kong SAR.50 In that case, the Court of Final Appeal was required to identify, as precisely as possible, the elements of the offence in order to see that it had suffi cient certainty and precision

to satisfy the concept of a “law” for the purposes of the constitutional requirements of the Hong Kong Basic Law. Sir Anthony Mason identifi ed the constituent elements in the following passage.51

In my view, the elements of the offence of misconduct in public offi ce are:

(1) a public offi cial;

(2) who in the course of or in relation to his public offi ce;

(3) wilfully and intentionally;

(4) misconducts himself.

A public offi cial culpably misconducts himself if he wilfully and intentionally neglects or fails to perform a duty to which he is subject by virtue of his offi ce or employment without reasonable excuse or justifi cation. A public offi cial also culpably misconducts himself if, with an improper motive, he wilfully and intentionally exercises a power or discretion which he has by virtue of his offi ce or employment without reasonable excuse or justifi cation.

His Honour added two qualifi cations, the fi rst of which concerned the conjunction of wilful and intentional as indicated by the emphasis provided in the passage set out above. In relation to that matter, his Honour noted that it was not suffi cient that the act be intentional, the additional quality of “wilfully” signifi ed knowledge or advertence to the consequences, as well as intent to do an act or refrain from doing an act. The second qualifi cation concerned the need for the misconduct to be serious misconduct.

Whether it is serious misconduct in this context is to be determined having regard to the responsibilities of the offi ce and the offi ce-holder, the importance of the public objects which they serve and the nature and extent of the departure from those responsibilities.

So defined, it is clear that the offence extends beyond the abuse of position for pecuniary gain, being the meaning of corruption which is often identified with bribery or extortion.52 Even neglect of a duty may


44 (1992) 28 NSWLR 125.45 Section 9(1) did not then include paragraph (d) which was added by the Independent Commission Against Corruption (Amendment) Act 1994.46 ibid at 154C-166D.47 ibid at 161C-162D; see also Gleeson CJ at 144.48 ibid at 165D-G.49 See Finn P. “Offi cial Misconduct” (1978) 2 Crim LJ 307. See also Stephens Digest of the Criminal Law (9th ed, 1950), Art 145 at p.114.50 [2002] HKCFAR 381.51 ibid at [84].52 See Finn, op. cit, at 308.


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be sufficient, so long as there is knowledge of or advertence to the consequences.

It is clear that, there being very many people in the State who may fall within the concept of a “public offi cial”, some care must be taken not to criminalise mistakes or misjudgements. That would be quite wrong. Similarly, neither ignorance nor incompetence, as such, will satisfy the relevant defi nition. No offence will be committed unless an act or omission is intentionally undertaken for what is understood to be an extraneous or improper purpose. Because all statutory powers and functions are conferred subject to limits, there must be an understanding as to the limits and a deliberate decision to act in defi ance of those limits. In short, there must be a lack of good faith in the exercise of the power. The motive, or subjective intention, of the offi cial will be of consequence.

In specifi c circumstances, other offences may become relevant, including, relevantly for matters under consideration in the course of the present investigation, the fraudulent misappropriation of property, as set out in section 527 of the Crimes Act1900 (NSW). That section provides:

Whosoever:

fraudulently appropriates, to his or her own use, or that of another, any property belonging to another person, although not originally taken with any fraudulent intent, or

fraudulently retains any such property in order to procure a reward for its restoration,

shall, on conviction by a Local Court, be liable to imprisonment for six months, or to pay a fi ne of 5 penalty units, or both.

“Property” for the purposes of this section includes money.53 The concept of “fraudulent appropriation” simply engages the concept of “dishonesty”.54 Thus, in Croton v The Queen55 the High Court held that withdrawal of money from a joint bank account by one account holder, without the authority of the other, constituted a fraudulent misappropriation of funds.56

A similar provision, section 165, deals specifi cally with misappropriation of money held by an agent. Relevantly for present purposes, that section provides:

165.Whosoever having been intrusted as an agent with any money, or security for the payment of money, with a direction in writing to apply, pay or deliver such money or security, or any part thereof, respectively, or the proceeds, or any part of the proceeds of such security for any purpose, or to any person specifi ed in such direction, misappropriates in any manner such money, security or proceeds, or any part thereof, respectively, in violation of good faith, and contrary to the terms of such direction, shall be liable to imprisonment for 10 years.

This provision is considered further in Chapter 5.

The scope of section 9, as a limitation on the kind of conduct which may be corrupt conduct, is itself qualifi ed by referring not to criminal conduct, but to conduct which “could constitute or involve” a criminal or disciplinary offence. In Greiner v Independent Commission Against Corruption, Gleeson CJ held that the Commission should fi rst make fi ndings of fact which would satisfy the elements of an offence and then ask whether, “if there were evidence of those facts before a properly instructed jury, such a jury could reasonably conclude that a criminal offence had been committed”. His Honour put to one side a matter of some practical signifi cance, namely whether it would be necessary to exclude from that approach evidence which would be inadmissible at a criminal trial.57 A similar approach appears to have been taken by Mahoney JA58 and by Priestley JA,59 although there is some difference in their Honours’ terminology. Use of the conditional “could” no doubt emphasises the fact that the Commission is neither required, nor permitted, to form its own opinion in relation to criminality. Despite the comparison noted by Priestley JA with respect to the position of a magistrate conducting committal proceedings, the analogy can, perhaps, be taken too far. Thus, there is no good reason for the Commissioner, in considering whether particular conduct is corrupt conduct or not, to exclude from consideration material which would be inadmissible in criminal proceedings. By the same logic, in conducting that exercise, the Commissioner may ignore the fact that no criminal proceedings could

53 Crimes Act, section 4 “property”.54 R v Glenister [1980] 2 NSWLR 597 at 603-605 (Court of Criminal Appeal).55 (1967) 117 CLR 326 at 331.56 The application of this provision is considered in Chapter 4 in relation to the Sanpine joint venture.57 28 NSWLR 125 at 136 C-D.58 ibid at 167.59 ibid at 186.

27

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now be brought, perhaps because they had already been brought or because a limitation period had expired.

The purpose of section 9(1) is to limit the ambit of the defi nition of corrupt conduct: it should not be treated as rendering a fi nding of corrupt conduct impossible in circumstances where criminal proceedings are not available. The admissibility of the evidence relied upon in forming such an opinion will, of course, be a factor of relevance and some importance in determining whether to express an opinion that consideration should be given to the prosecution of a person, pursuant to section 74A(2)(a). That question, as the Act clearly envisages, involves a different conclusion, based on different considerations, from one that a person has engaged in corrupt conduct.60

There is a question as to whether the second limb of section 9(1) is relevant for present purposes: in other words, is any public offi cial (being an offi cer or employee of a Land Council) capable of being subject to disciplinary proceedings. As it was not submitted to the Commission that any disciplinary offence could be created in the present circumstances, that possibility may be disregarded.

A different conclusion may be reached with respect to paragraph (c) which involves “reasonable grounds for dismissing … a public offi cial”. Clause 21 of the Model Rules provides that a Council may remove from offi ce “for any reason” an offi cer or representative of the Council. Although it is suggested in the rule itself that one reason might be that the person has been convicted of an offence relating to the property or affairs of the Council, it seems that the power of the removal extends beyond such cases to cases where the offi cer has lost the confi dence of the Council, so that 80% of members attending the meeting support the removal. Even if the matter were put to the meeting on the basis of a failure to carry out duties or responsibilities under the Land Rights Act, it does not follow that there is a dismissal on “reasonable grounds”.

This paragraph was the source of contention in Greiner v Independent Commission Against Corruption, the Commission having relied upon the power of the Governor of the State to remove the Premier or a Minister from offi ce in exercise of a power existing under the Constitution Act 1902. Further, however vague

the power of the Governor may be (and Priestley JA was prepared to describe it as “absolute, which means it is subject to no legal constraints”) in the present case there is no-one in the position of the Governor. Offi cers are subject to removal by the members who vote them in. This has a greater analogy with the position of parliamentarians and premiers as subject to removal by an adverse vote at an election. That, as the Commission and the Court accepted, would not constitute a “dismissal”. Accordingly, the Commission does not think paragraph (c) has operation in relation to offi cers of a Land Council. Nor does it think that any broader scope should be given to the Act by reference to the other terminology used in paragraph (c), namely “dispensing with services” and “terminating services”.

For completeness, it is necessary to note that an employee of the Land Council may be in a different position. Whether or not the employment is subject to an award, or other statutory controls, the general law of employment will frequently permit termination, even summary termination, in the face of misconduct. However, that issue was not canvassed during the current investigation and it is therefore not necessary to say anything further about it. It will not be the basis for a consideration of a fi nding of corrupt conduct in relation to such employees of the Land Council as might have acted in their positions as “public offi cials”.

Secret commissions

Section 8(2) of the ICAC Act expressly includes as a form of corrupt conduct, “obtaining or offering secret commissions”.61 Such conduct also constitutes a criminal offence for the purpose of section 9(1) of the ICAC Act.62 Before these matters were dealt with by amendments in 1987 to the Crimes Act, they were covered by specifi c legislation, namely the Secret Commissions Prohibition Act 1919 (NSW).63 The principal substantive offence is contained now in section 249B of the Crimes Act, which provides as follows:

249B(1) If any agent corruptly receives or solicits (or corruptly agrees to receive or solicit) from another person for the agent or for anyone else any benefi t:

(a) as an inducement or reward for or otherwise on account of:


60 Section 74B(2)(a), ICAC Act.61 Section 8(2)(d).62 Crimes Act 1900 (NSW), Part 4A.63 This Act was repealed by the Crimes (Secret Commissions) Amendment Act 1987 (NSW) which inserted Part 4A in the Crimes Act. The substantive provisions

now contained in sections 249B-249E of the Crimes Act.


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(i) doing or not doing something, or having done or not having done something; or

(ii) showing or not showing, or having shown or not having shown, favour or disfavour to any person,

in relation to the affairs or business of

the agent’s principal; or

(b) the receipt or any expectation of which would in any way tend to infl uence the agent to show, or not to show, favour or disfavour to any person in relation to the affairs or business of the agent’s principal,

the agent is liable to imprisonment for 7 years.

Giving or offering a benefi t in such circumstances is also an offence carrying the same penalty.64

The fi rst question is whether an offi ce-holder of a Land Council can constitute an “agent” for the purposes of this, and related, offences. The defi nition of agent in section 249A is broad enough to include any person acting “for or on behalf of” any other person in any capacity and includes a person purporting to be or intending to become an agent of another person. Similarly, the defi nition extends to persons serving under the Crown, police offi cers and councillors under the Local Government Act 1993. The defi nition is inclusive and does not purport to be exhaustive. It is clearly intended to cover both public sector and private sector activity. It is suffi ciently broad to include offi ce-holders, who are expressly empowered by the model rules to act on behalf of the Land Council.

It should also be noted that the concept of a “benefi t” is broadly defi ned, again by an inclusive and non-exhaustive defi nition, to include “money and any contingent benefi t”.65

The term “corruptly” in the operative provision has been the subject of consideration in relation to similar provisions in other jurisdictions. Thus, in R v Dillon and Riach66, Brooking J held in relation to equivalent Victorian legislation:

An agent does act corruptly if he receives a benefit in the belief that the giver intends that it should influence him to show favour in relation to the principal’s affairs. If he accepts a benefit which he believes is being given to him because the donor hopes for an act of favouritism in return, even though he does not intend to perform that act, he is, by the mere act of receiving the benefit with his belief as to the intention with which it is given, knowingly encouraging the donor in an act of bribery or attempted bribery, knowingly profiting form his position of agent by reason of his supposed ability and willingness, in return for some reward, to show favouritism in his principal’s affairs and knowingly putting himself in a position of temptation as regards the impartial discharge of his duties in consequence of the acceptance of a benefit.

In short, the use of the term “corruptly” is descriptive of the conduct, rather than restrictive of the scope of the provision.67

It is perhaps obvious that the receipt of the benefi t, or agreement to receive a benefi t, need not be in the capacity of an agent.68 On the other hand, the agent may be liable to the principal for the amount received69

and the principal may recover the amount in civil proceedings.

Although both the short and long titles of the Secret Commissions Prohibition Act 1919 included the term “secret commissions” the element of secrecy is not an essential part of the offence. Why that may be so is understandable: for example, in Leary v Cohan70 a payment was made to a member of a local council for distribution of sums to other members. The purpose underlying the prohibition does not require an inquiry into the state of knowledge of the principal, whether a local council, a corporation or an individual.

With these legal principles in mind, the next task is to identify the factual fi ndings which could satisfy the respective statutory tests.

64 Section 249B(2).65 Section 249A.66 [1982] VR 434 at 436.67 See Wiles J in Cooper v Slade (1858) 10 ER 1488 at 1499, approved by the Full Court of the Supreme Court of Victoria in R v Gallagher [1986] VR 219.68 R v Morgan [1970] 3 All ER 1053.69 Lunghi v Sinclair [1966] WAR 172.70 (1940) 14 LGR 142.

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Corrupt corporations

As noted above, the primary focus of the ICAC Act is on the conduct of public officials. Nevertheless, corrupt conduct may involve conduct of any “person (whether or not a public official)”.71 Generally speaking, the term “person” may include an individual or a corporation.72 However, the context or subject matter of legislation may suggest a different scope for a particular term such as “person”.73 It is at least arguable that the term “person” in section 8 of the ICAC Act does not include a corporation. On the other hand, a corporation can engage in conduct, through individual agents and a corporation can commit a criminal offence.

In the context of the present investigation, it has not been thought necessary to resolve this question. In relation to the joint venture with Sanpine Pty Limited, findings have been made in relation to several of its officers. In principle, their states of mind and actions could be treated as the actions and state of mind of Sanpine. However, it has not been thought useful to make specific findings about the company itself. In relation to a corrupt payment made by Villa World Limited, the Commission has not made the necessary factual findings to implicate the company, in any event. Accordingly, even if a corporation could be implicated in corrupt conduct, the question, in relation to Villa World Limited, does not arise.74


71 ICAC Act, sections 8(1) and (2).72 Interpretation Act 1987 (NSW), section 21(1).73 Interpretation Act, section 6.74 See generally, Chapter 6, below.


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Chapter 4: The KLALC – Sanpine joint venture – part 1

the claim, the desultory nature of the process made it diffi cult, if not impossible, for a Land Council to plan effectively for the possible use of the land.

Given the legislative constraints in the defi nition of claimable Crown lands, claims often related to relatively small parcels. In the present case, however, the Morisset Hospital site extended over 850 hectares.

The decision to grant the land was made known publicly on 8 August 1995. Given the proximity of the land to the Morisset town centre, at least some of the land clearly had potential for residential and commercial development. The Chairperson of the KLALC, Mr Bill Smith, gave evidence that the Land Council received numerous enquiries from potential developers.

The proposal

The fi rst development plan was formulated in July 1996, when Mr Charles Perkins and Mr John Leece, an accountant, attended a meeting of the membership of the KLALC, to put forward a proposal for a joint venture to create 200 residential blocks by subdivision. Messrs Perkins and Leece represented a development company, Sanpine Pty Limited, which is further described below. The proposal put to the KLALC meeting was endorsed “in principle”. Negotiations over the detail of the joint venture appear to have occurred between September and December 1996. On 20 December 1996, Sanpine wrote to the Chairperson of KLALC putting forward a proposal, set out in a four page letter, which formed the basis of the formal agreement eventually entered into on 4 July 1997. The proposal offered KLALC $100,000 on the signing of formal joint venture documents, together with an advance of a further $50,000 against KLALC’s interest in the joint venture. A further advance of $200,000 was to be payable on the rezoning of land at Fishery Point Road, on the east of the site. The agreement also provided in clause 9:

9.The foregoing is subject to [Koompahtoo] being able to dispose of the lands referred to herein or an interest therein to [sic] within the provisions of the New South Wales Aboriginal Land Rights Act (1983) as amended.

Perhaps inconsistently, the proposal also stated that, until formal agreements were executed, acceptance of

Background

The land

Under the Aboriginal Land Rights Act 1983 a Local Aboriginal Land Council may make a claim for what are described as “claimable Crown lands”.75 That description covers lands vested in the Crown which are available for sale or lease, or are reserved or dedicated for any purpose, under relevant Crown lands legislation. There are other qualifi cations which may be suffi ciently summarised as requiring that the land not be needed for relevant public purposes.

The area relevant to the present investigation, which was identifi ed as the old Morisset Hospital site, was claimed by KLALC after the State government closed the hospital. The land adjoins the town of Morisset and basically extends to the south-east of the railway station. It is bounded on its western side by the main northern railway. On its south-eastern side, it adjoins Lake Macquarie. At its south-east extremity, it is close to an area known as Wyee Point, where an unrelated residential development was taking place contemporaneously with the KLALC–Sanpine joint venture, an aspect of which is discussed below in Chapter 6.

The land claim was lodged on 20 October 198976 and, following standard enquiries to all potentially interested departments of government, as to their possible needs for the land or views about the land claim, little was done for some ten years. At this time, such delays were not uncommon. The reasons for such delays are not immediately apparent. It was established by the Court of Appeal in 1988, in a case known as Winbar [No. 3]77

that the relevant time for assessing the status of the land was at the date of lodgement of the claim. If the land was not needed for a relevant purpose at that time, or was not used or occupied at that time, subsequent events would not remove the land from the category of claimable Crown lands. However, the result of delays in processing claims and making decisions was twofold. In cases where claims were refused, an Aboriginal Land Council could appeal to the Land and Environment Court.78

The passage of many years had the potential to cause diffi culty for that Court in assessing whether the lands were claimable Crown lands at the date of lodgement of the claim. Where, as in the present case, the Minister responsible for Crown lands eventually decided to grant

75 Sections 36(1) and (3). 76 Identifi ed as ALC 3514. 77 New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act (The Winbar Claim No. 3) (1988) 14 NSWLR 685. 78 Section 36(6).

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the resolution is set out in the letter of 3 November 1999 to the Registrar. There is no suggestion in the minute that any documents were tabled: the discussion is merely recorded under the heading “Chairperson report” and the information set out in the minutes is minimal. The motion, rather vaguely formulated, was:

To enter into a joint project with Sanpine Pty.

It was carried.

The KLALC eventually entered into a joint venture agreement in July 1997 with Sanpine Pty Limited. Whether because of the nature of the land, indications from the Lake Macquarie City Council as to likely conditions of approval for residential development, or for reasons relating to orderly development and resale, the expectation was that there would be a three-stage residential subdivision comprising 1,090 lots and covering a total area of 105 hectares. The remaining 745 hectares were to be preserved for purposes of “conservation and recreation”, subject to small areas which might be used for a cultural centre and a possible conference centre designed to promote an understanding of Aboriginal culture and of the Aboriginal history of the area.

The parties: Koompahtoo Local Aboriginal Land Council

Before describing the history of the joint venture, it is helpful to identify the parties. The principal corporate entity involved in this investigation was the Koompahtoo Local Aboriginal Land Council (“KLALC”), established pursuant to section 5 of the Land Rights Act. That occurred by the Minister constituting an area as a Local Aboriginal Land Council area. The prescription of the area appears to have taken place by publication in the Gazette of a relevant notice on 17 May 1985. Thereafter, there have been two events of broad signifi cance in relation to the operation of the Land Council and relevant to the present investigation.

The fi rst is a matter of practical relevance: on 5 September 2001 there was a fi re which destroyed the offi ces of the KLALC at 2 Brougham Avenue, Fennell Bay. The destruction appears to have included all minute books, agenda papers, records of meetings and other business papers held by KLALC. As a result, what records have been obtained by the Commission are almost entirely from third parties, including NSWALC, the solicitors and accountants for KLALC and the Registrar under the Land Rights Act. By this means, much valuable information has been collected and

the points of principle constituted a grant to Sanpine of a caveatable interest in the land to be the subject of the subdivisions.

It is signifi cant that the question of the KLALC’s approval of the joint venture agreement was a matter which was raised prior to the fi re at the Land Council offi ces. Thus, on 19 January 1999, Mr Sean Docker of the Land Rights Unit at NSWALC wrote to Mr Bill Smith seeking answers to certain questions. He did so in order to prepare material to be put before NSWALC for the purpose of obtaining its approval to the mortgage which was then proposed to fund the joint venture development. (The mortgage was a “disposal” of the land, requiring NSWALC consent, under section 40D.) The fi rst question in the list asked by Mr Docker read:

1.1 What resolutions of KLALC authorise the signing of the joint venture? We request a copy or copies of the resolution(s) along with the dates of the meetings.

On 1 February 1999, following meetings with Mr Smith, Mr Docker set out in a letter his understanding of the responses to the questions. In relation to 1.1 he noted:

The JVA was approved in principle by a resolution of KLALC on 10 July 1996 with the entering into of the Agreement being authorised by a resolution on 18 December 1996.

In fact, a copy of the resolution of 10 July 1996 had been supplied on 23 November 1998 in the following terms:

Motion: Endorsement in principal [sic] by members of the proposal for the development of Morisset 200 acres by joint venture with Sanpine.

Moved: Steven Griffen. Seconded: Gloria Smith. Carried.

As noted below, a more detailed extract of “the minutes” was given to the Registrar on 3 November 1999. Interestingly, the additions involved a note of discussions at which Messrs Charles Perkins and John Leece addressed the meeting. However, one or other (or both) of the sets of minutes appears to be a reconstruction: the motion has been retyped at some stage, because the December 1998 version was in capitals and the copy sent to the Registrar was in lower case; each has spelling errors, but not the same ones.

Whether any copy of the resolution of 18 December 1998 was provided to NSWALC is unclear. A copy of


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inferences can be drawn from it. Diffi culties arise where gaps occur. The fi re was apparently investigated by police at the time it occurred and no suspicious circumstances were identifi ed. The fi re itself was not a subject of the Commission’s investigation and accordingly no inference is drawn from its occurrence.

The second signifi cant event in the history of the KLALC was the appointment of an investigator and then an administrator under the Land Rights Act. An appointment of Mr Tony Hanrahan, of Ferrier Hodgson, as investigator was made by the Minister for Aboriginal Affairs (and Deputy Premier) Andrew Refshauge MP on 7 June 2002. There was, however, some dispute as to the validity of the appointment and a further appointment was made in October 2002. On the basis of the investigator’s report, an administrator, Mr Terry Lawler, was appointed on 25 February 2003.

Sanpine Pty Limited

The other important corporate entity involved in this aspect of the investigation was a company known as Sanpine Pty Limited (“Sanpine Pty Ltd”). The identities of the participants in this company, including the history of changes in the structure of the company and the involvement of individuals, is a matter of some importance in understanding the creation, structure and operation of the joint venture.

In approximately early 1996 three companies were formed involving a solicitor, Mr John Landerer, an accountant, Mr John Leece, the late Mr Charles Perkins and his son, Mr Adam Perkins. The companies were known as Sancave Pty Ltd, Sanhope Pty Ltd and Sanpine Pty Ltd. They were created in order to exploit possible opportunities for joint development with Aboriginal organisations and communities. It was apparently anticipated that the growing number of Aboriginal organisations and communities owning land which might be available for development or which might have minerals capable of exploitation, would provide an opportunity for mutually benefi cial commercial arrangements. Thus, the intention of Sanpine Pty Ltd was to allow Aboriginal organisations with land available for development to utilise the professional and commercial experience of Messrs Leece and Landerer in relation to land development projects. Messrs Perkins would seek out, establish and maintain good relations with relevant Aboriginal interests.

In February 1996 Sanpine had two directors, Adam Perkins and John Leece, and two shareholders, Paul Robert Collins and Robert Bernard Goodwin. Sanpine was the trustee of the Sanpine Unit Trust, in which a company associated with Mr Leece, Jayare Nominees Pty Ltd held 70 units and a company associated with Mr John Landerer, Ganeden Investments Pty Ltd, held 100 units. It is not clear whether, prior to October 1997, Messrs Perkins or their associated companies held any units in the Sanpine Unit Trust. There was, however, a consultancy arrangement between Messrs Landerer and Leece on the one hand and Messrs Perkins on the other. The latter were intended to locate suitable investment opportunities and negotiate with Aboriginal communities, in particular to sell the services of Sanpine (or one of the other companies) to the community.

The KLALC–Sanpine joint venture appears to have been the fi rst signifi cant test of this business model. It appeared from Mr Leece’s evidence and from the documentation provided by Sanpine, that negotiations with KLALC commenced in late 1995 or early 1996. A form of letter setting out the basis of an in-principle agreement had been prepared by 16 January 1996. Whatever the original expectations and whatever the precise cause of their disillusionment, Messrs Leece and Landerer appear to have had second thoughts about the arrangement as early as March or April 1997, little more than a year after the arrangements were created. Mr Bob Scott told the Commission that he had had discussions with Mr Adam Perkins in March or April of that year and that Adam Perkins had told him that Leece and Landerer were then seeking to sell their interests in Sanpine. Mr Leece said that, at least by mid-1997, he and Mr Landerer were becoming frustrated with the length of time taken to set up the KLALC–Sanpine joint venture.

As noted above, Mr Bob Scott gave evidence that he had become involved in the proposed joint venture in the fi rst half of 1997. He said that he had fi rst met Mr Charles Perkins in early 1995 when he had been seeking assistance to develop land owned by the Darkinjung Local Aboriginal Land Council. He met Mr Bill Smith around the same time. Over the next two years, he maintained contact with Mr Smith, but not with Mr Perkins. His next contact, and his fi rst in relation to the present matter, resulted from a telephone call from Mr Adam Perkins in March or April 1997. He said Mr Adam Perkins offered him an 80% shareholding in the joint venture vehicle. Mr Scott then contacted Mr Graham Steer, a chartered accountant, in order to offer him half of his proposed shareholding. Mr Scott

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may not have had the funds to purchase the 80% shareholding by himself, or he may have wished to spread the risk, or both. The fi nancial arrangements in relation to this transfer are dealt with later in this chapter.

It is, however, convenient to address the nature of the relevant transactions at this point, in order to identify who had interests in the development proposal, and at what stage. The fi rst documentary evidence of the arrangement with Mr Scott is to be found in a letter of 23 June 1997 from Spencer Steer & Associates, chartered accountants, to Mr Adam Perkins. The letter concluded with the following paragraph:

As the New South Wales Aboriginal Land Council have approved the sale of the land we require copies of correspondence granting this approval.

Whether Messrs Steer and Scott obtained that information is unclear: no-one had asked the NSWALC for any approval at that stage, nor was any to be sought for a further two years. However, the need for such approval was recognised.

On 22 October 1997 an agreement was entered into between Messrs Charles and Adam Perkins and Messrs Leece and Landerer, together with their associated companies, pursuant to which Leece and Landerer agreed to obtain from the trustee shareholders, Messrs Collins and Goodwin, transfers of the two shares held by them in Sanpine to the Perkins’ company, Erolvase Pty Ltd. Leece and Landerer also agreed to transfer 170 units in the Sanpine Unit Trust, held by their respective companies, to Erolvase Pty Ltd. At the end of the transaction, the parties agreed that Jayare Pty Ltd would still hold 10% of the units in the Unit Trust, with the other 90% held by Erolvase. This arrangement preserved to Mr Leece an interest in the outcome of the joint venture, which he stated in evidence was the subject of an agreement between himself and Mr Landerer to share equally in any profi ts received by the Unit Trust.

The agreement of 22 October 1997 required repayment by the Perkins’ interests of certain consultancy fees, legal and other, being a total of $148,780. Mr Adam Perkins gave evidence that his mother had advanced the moneys, which were paid to Messrs Leece and Landerer. According to a letter of the same date as the agreement, namely 22 October 1997, under the heading “Scott Group of Companies” and addressed to Messrs Perkins, Mr Scott appears to have affi rmed the proposition that the moneys paid to Messrs Leece and Landerer were paid “on behalf of Sanpine”. However, according to Mr Leece, apart from the consultancy fees paid to Messrs

Perkins, in his view less than $10,000 related to the joint venture. Whether those fi gures are correct or not, if the purpose of the transaction was for the Perkins’ interests to acquire the shareholdings in Sanpine Pty Ltd and suffi cient units in the trust to give them 90% of the total number of units, it cannot be correct to say that the payments were made “on behalf of Sanpine”. Nevertheless, Mr Scott expressly stated that the money was to be treated as a “loan” with interest payable on settlement at the rate of 15%. In February 1999, Sanpine paid an amount of $183,314 to Mrs Perkins out of funds acquired by the joint venture.

As at October 1997, Sanpine’s only value was the interest it held in the joint venture with KLALC. The value of the interest, at that stage, must have been largely speculative. The evidence does not suggest that the Perkins family were in fact paying anything more than a nominal sum for the shareholding and units in the Sanpine Unit Trust which they obtained from Messrs Leece and Landerer. Rather, Messrs Leece and Landerer appear to have been content to put an end to the consultancy arrangements and joint venture arrangements with the Perkins family upon recoupment of the expenses incurred by them up until that time. Relevantly for present purposes, the question is whether any of the payments made to them constituted reimbursement of expenses incurred by Sanpine as part of the joint venture with KLALC.

As noted above, the discussions with respect to a proposed joint venture appear to have commenced in late 1995 and continued into 1997. Messrs Leece and Landerer were reconsidering their continued involvement in the joint venture vehicle in January 1997. Accepting Mr Leece’s explanation that the joint venture proposal was taking more time than he or Mr Landerer had available, and given the nature of the consultancy arrangements between Leece and Landerer and the Perkins, it seems highly unlikely that any significant consultancy fees were incurred “on behalf of” the joint venture, after the signing of the agreement on 4 July 1997. There is no reason to doubt Mr Leece’s evidence that less than $10,000 of the payments which he and Mr Landerer received related to expenses incurred in relation to the Sanpine joint venture. Further, it appears that the expenses he was referring to in giving that evidence were not limited to those incurred after 4 July 1997. It is at least likely that he was considering expenses incurred from the date that the in-principle agreement was reached in mid-December 1996. However, the joint venture agreement itself referred

Chapter 4: The KLALC – Sanpine joint venture – part 1 33


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to costs of the joint venture as those incurred “from the date of this agreement”, unless otherwise agreed to be included by the management committee.

The Commission is comfortably satisfi ed that, of the amount ultimately reimbursed to Mrs Perkins (which, with interest, amounted to $183,314), no more than 10% was properly attributable to “joint venture expenses”. Further, the Commission does not accept that any signifi cant amount was incurred after 4 July 1997. There is no evidence that any earlier expenditure was approved by the joint venture management committee. Accordingly, payment of at least $165,000 from the joint venture funds on account of these “expenses” involved a misappropriation of those funds. For reasons considered further below, the Commission is also satisfi ed that that fact was known to the parties responsible for that arrangement.

The Commission is satisfi ed that as of 22 October 1997 Messrs Leece and Landerer had no active on-going interest in the joint venture vehicle, Sanpine Pty Ltd. They shared a passive interest in 10% of the units under the Sanpine Unit Trust. That was presumably designed to provide some reimbursement for their own time expended on the joint venture proposal, in the event that the venture was ultimately profi table.

Thereafter, the benefi cial interests in Sanpine Unit Trust were ultimately held by a company associated with Mr Adam Perkins (Erolvase Pty Ltd) as to 35%; by a company associated with Mr Scott’s partner, Ms Lesley Molony (Bronzewing Property Holdings Pty Limited) as to 35%, and as to the remaining 30% by interests associated with Mr Graham Steer, including a company, Amabowl Pty Ltd in which Mr Steer himself had a major interest.

Robert Scott

It is appropriate to return to the position of Mr Robert Scott, who, through his dual roles as project manager and as a person associated with Bronzewing, enjoyed an indirect benefi cial interest in the profi ts of the venture. As noted above, Mr Scott (usually referred to as Mr Bob Scott) was introduced to the proposed development by Mr Adam Perkins. His involvement commenced some weeks before the signing of the joint venture agreement on 4 July 1997 and it is clear that he had questions, in mid-June 1997, about the terms of the agreement. At that stage, however, his role in relation to the development had not been settled.

Sanpine itself was appointed, pursuant to the agreement, as “the development manager for the development”. Its obligations covered virtually all aspects of the management of the development, for which it was to be paid a fee “equal to 25% of total project costs”. Those costs were to be calculated as including all costs associated with the development from the date of the agreement, other than the development management fee itself and the value of the land.

In addition, the agreement provided for the appointment of a “project manager”, who was to be nominated by Sanpine. The agreement permitted the project manager to be “an associate of either of the joint venture parties”. The project manager’s duties were not specifi ed in the agreement, nor was there any express reference to the payment of a fee or salary. If no person was appointed, the agreement envisaged that the duties and obligations of the project manager would be undertaken by the management committee. The agreement defi ned “project costs” in broad terms, but the only express provision in relation to the project manager was the inclusion in the defi nition of “project costs” of “costs and expenses paid or reimbursed to” that person. On one view, the agreement might have been read as requiring Sanpine to carry out project management, at its own expense. In fact, Mr Scott was appointed the project manager and undertook most of the obligations specifi ed as the obligations of Sanpine. Fees paid to him were to be treated as an expense of the joint venture, and not an expense of Sanpine.

On 28 August 1997, a management committee meeting was held, which appears to have been the fi rst management committee meeting of the joint venture. The fi rst two items on the agenda involved the appointment of a “liaison offi cer” and a “project offi cer”. (The appointment of the Aboriginal liaison offi cer will be discussed in some detail below, as it is central to this aspect of the investigation.) It appears that Mr Scott was not at the meeting when it commenced, but had been invited to attend at a later hour to answer questions. The minutes appear to have been written in advance of his attendance, and to have noted that he would “act as interim project offi cer”. That appears to have involved a de facto appointment: the matter was not revisited until 16 February 1999, when the agenda identifi ed the “ratifi cation of monthly payments” including those to the project manager, as an item of business. The minutes also referred to a “project management agreement” to be entered into between Sanpine and Bronzewing Property Holdings Pty Limited, although the document had apparently not then been executed

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and was not tabled at the meeting. Whether it was ever tabled is unclear: nevertheless, a “projected cashfl ow” for the development, apparently prepared on 14 September 1997 contained a project management fee of $6,500 per month, payable from the fi rst month. According to that document, which is consistent with other material before the Commission, Bronzewing was to be paid an annual fee totalling $78,000 for the services of Mr Scott as project manager. The only comparable regular outgoing was a salary payable to the Aboriginal Liaison Offi cer which was fi xed in the cashfl ow projection at $5,100 per month, totalling $61,200 per year. (The precise nature of this expense is of importance and will be addressed below.) The fi gures demonstrate that an annual amount of approximately $140,000 was to be paid to the Liaison Offi cer and the project manager. The differential between the two fi gures was signifi cantly reduced (and the overall cost increased) when allowance for the Liaison Offi cer’s vehicle was taken into account.

Over the fi rst 18 months of the joint venture, it seems likely that Mr Scott and the Aboriginal Liaison Offi cer, Mr Bill Smith, developed a close relationship. There were undoubtedly points of friction, particularly on Mr Scott’s side, resulting from the slow progress of the development and diffi culties raised by some members of KLALC, towards the end of that period. Nevertheless, it was said by one witness in relation to another matter which arose in the second half of 2000, that ‘you had to go through Bob Scott to get to Bill Smith’. The Commission accepts that as a general description of the role developed by Mr Scott through 1997-1998 and continued thereafter, at least to the end of 2000.

Charles and Adam Perkins

Of the other parties originally involved in Sanpine Pty Ltd, it is necessary to refer to the late Mr Charles Perkins and his son, Adam Perkins. The late Mr Charles Perkins was an Arrente man from the Alice Springs area. Over a long and illustrious career, his energy and abilities had ensured him a position of national recognition and stature. He was probably one of the best known Aboriginal Australians of his time. One might therefore expect that he would have been a driving force in the establishment of the joint venture. Because he had died before the commencement of the present investigation, the Commission did not hear evidence from him: nevertheless, it is apparent from the documentation and the evidence of the witnesses that his role was limited. It appears that he attended at least one meeting of the KLALC, at which the development proposal was

approved in principle. He also chaired the fi rst meeting of the management committee of the joint venture, attended the second meeting in September 1997 and the third meeting in January 1998. Thereafter, he appears to have attended only two minuted meetings, one being at his home in Newtown, the other being at the offi ces of his son, Adam Perkins.

Although he chaired the meeting at which Mr Bill Smith was appointed the Aboriginal Liaison Offi cer for the joint venture, there is no evidence that he had any role in the invitation to Mr Smith to apply for the position, or in any of the subsequent arrangements regarding payments to Mr Smith. At the meeting at his home on 16 May 1999, he is recorded as suggesting the establishment by KLALC of “an educational trust”, presumably with funds to be derived from the development. The Commission is satisfi ed that his involvement in the joint venture was limited in the manner described above and that he had no signifi cant involvement in the administration of the joint venture.

Mr Adam Perkins stands in quite a different category. Although in 1995 he was just 27 years of age, it is clear that he was actively involved in the establishment of the joint venture and its on-going administration. His commercial experience was, however, limited and the Commission is satisfi ed that the terms of the agreement were largely left to Mr Leece and a solicitor from Mr Landerer’s fi rm. Because of his central involvement in the administration of the joint venture and, in particular, the appointment of the Aboriginal Liaison Offi cer, it will be necessary to consider Mr Adam Perkins’ role in more detail below. Overall, he presented in giving evidence as a brash young man with confi dence in his own abilities, experience and judgment.

Graham Steer

The other principal participant in the joint venture on the Sanpine side was Mr Graham Steer. As already noted, he was a chartered accountant, who was introduced to the venture by Mr Scott. He was present at the fi rst management committee meeting of the joint venture and appears to have been present at all meetings thereafter. By 18 March 1999 he was chairing the meetings, many of which were held at his offi ces in Sydney.



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The joint venture

Financial arrangements

The value of the land, at the date it was acquired, may be inferred from evidence of a valuation obtained by the joint venture in June 1998 for the purposes of raising fi nance by a loan secured over the whole of the land. The valuation noted that the unimproved capital value, as determined by the Valuer-General at 1 July 1995, was $850,000. The valuer’s opinion, based on the then zoning of the area as rural 1a (with a minimum subdivision area of 40 hectares) allowed a value of $1,525 per hectare giving a total value of approximately $1.3 million. On the basis of a planned residential subdivision with a total of 1,090 allotments, and the balance of the land being used for cultural/open space purposes, the valuation was $3.75 million. The lots were valued at $3,000 per lot and the open space land at $650 per hectare.

It is of no great relevance for present purposes whether the valuation was reasonable or not: it provides some indication as to the nature of the asset which became the subject of the joint venture. In the course of providing his valuation, the valuer adopted a value for completed lot – after subdivision and the provision of essential infrastructure – of $55,000, with development costs at $30,000 per lot. Subject to elements of risk and the need to make a commercial profi t, a joint venture which permitted the development of the land to the stage of subdivision had the potential to provide a signifi cant profi t to the landowner and the developer.

Despite the apparent attractiveness of the joint venture, there is little doubt that the fi gures contained signifi cant elements of uncertainty, as the valuer himself acknowledged. In a feasibility assessment, prepared for the joint venture in December 1996, development costs were estimated at $35,000, with a selling price (after sales and marketing costs) of $61,750. After allowance for holding costs, the cost of the land and the payment of the project management fees to Sanpine, the feasibility assessment suggested a net profi t of $2.1 million. If the selling price of the lots had been $55,000, rather than the fi gure used, the calculation, undertaken on the basis of 500 lots, would have seen the profi t turn into a loss.

Whether or not the joint venture to develop the land was ultimately advantageous to the Land Council, in the sense that it provided a better return than a straight sale, it was certainly advantageous to three parties. The major potential benefi ciary was Sanpine itself. If the

assumption that the venture would be profi table came to fruition, Sanpine was to receive 50% of the net profi ts. However, the agreement also provided that Sanpine would receive a “development management fee” which had priority for payment from the proceeds of the venture after the payment of creditors (other than the venturers) and before payment of any signifi cant amount to KLALC. The development management fee was to be equal to 25% of total project costs (excluding the value of the fee itself and excluding the value of the land). The “project costs” included all costs associated with the development, and in particular “fees and expenses paid to consultants and advisors for the development”, together with “costs and expenses paid or reimbursed to the project manager”. According to the outline feasibility assessment, the fee would be $3.5 million in relation to the fi rst 500 lots. However, that fee was initially calculated on the basis of “infrastructure costs” of $17.5 million indicating a proportion of 20%. The 25% fi gure contained in the joint venture agreement, as executed, would have given Sanpine a development management fee of $4,375,000. (Again demonstrating the marginal economic value of the project, that amendment would have reduced the anticipated profi t to $1,225,000.) If one adds into the fi gure of $17.5 million for infrastructure costs, costs described as “development costs”, identifi ed at $1,575,000, the development management fee increases to over $4.75 million and the profi t to less than $1 million. Thus, even assuming the optimistic selling price contained in the outline feasibility assessment, an assessment done against the terms of the joint venture agreement would have suggested that the additional benefi t of the agreement to KLALC (beyond the value of the land) was less than 10% of the value of the land it was contributing. The total value to Sanpine, through its management development fee, was close to the value of the land. The question for KLALC should have been, would Sanpine provide value for this return?

The second major benefi ciary from the venture was the “project manager” whose salary was one of the costs of the joint venture. As noted above, Bronzewing, a company associated with Mr Robert Scott, was appointed project manager and was paid a monthly allowance of $6,250. As at 31 March 2003, some $417,059 had been paid to the company, Bronzewing.

The third major benefi ciary of the joint venture was the Chairperson of the Land Council, Mr Bill Smith. Mr Smith was also an employee of the joint venture, being appointed the “Aboriginal Liaison Offi cer”, for which he was paid an payment of approximately $5,000 per month together with a vehicle. As at 31 March 2003, a fi gure of

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$461,800 had been paid to Mr Smith, of which almost $40,000 was on account of the motor vehicle; a smaller amount was paid to members of his family.

Payment to Elaine Perkins

A fourth benefi ciary of the joint venture arrangement was Mrs Elaine Perkins, the wife of the late Charles Perkins and mother of Mr Adam Perkins. The means by which she received payment from the joint venture funds is complex. In 1997, when Messrs Leece and Landerer were relinquishing their shareholding in Sanpine and other companies in which they held interests with Messrs Perkins, a fi nancial settlement involved the payment to them of $148,780. As noted above, that amount was apparently calculated by reference to expenses and disbursements incurred by Messrs Leece and Landerer in the course of their arrangements with Messrs Perkins up until that time. The Commission was not advised of any pre-existing agreement between Leece and Landerer on the one hand and the Perkins’ interests on the other, pursuant to which that disengagement took place. That sum appears to have been paid by Mrs Perkins, either on her own behalf or, more likely, on behalf of her late husband and her son Adam and their associated companies. The result of that transaction was that the Leece and Landerer interests were transferred to entities owned by the Perkins. There was no attempt to identify the expenses incurred by Messrs Leece and Landerer as expenses incurred in relation to any particular company or joint venture arrangement. For example, the recitals to the sale agreement do not suggest that some identifi ed part of the payments had been incurred on behalf of Sanpine Pty Ltd. As already noted, the evidence of Mr Leece, which the Commission accepts, was that only a small proportion of the expenses related to Sanpine and no specifi c element was identifi ed as an expense specifi cally incurred on behalf of that company. No such item was included in any accounts prepared on behalf of Sanpine prior to October 1997, nor in any accounts prepared thereafter which might have related to that period.

Whatever the method by which the consideration for the shares was calculated, the legal nature of the transaction involved the payment by or on behalf of the Perkins’ interests of a sum, in consideration for which, Leece and Landerer transferred their interests in Sanpine to the Perkins interests. In accordance with the agreement so documented, the payment made by Mrs Perkins cannot properly have been characterised as a payment made on behalf of Sanpine. It was a

payment made on behalf of her family members who were purchasing shares in Sanpine.

The next stage in the transaction involved the acquisition from the Perkins’ interests (which then held 100% of the shares in Sanpine) of some of that shareholding. The purchase was made by interests associated with Mr Bob Scott and Mr Graham Steer, respectively. According to a letter of 23 June 1997, the original proposal was that “Bob Scott & Associates” would acquire 80% of the issued capital in Sanpine Pty Ltd for the sum of $900,000. Mr Adam Perkins stated in evidence that that transaction did not go ahead. Nevertheless, a letter containing similar terms was sent on 4 July 1997, being the date of execution of the joint venture agreement between Sanpine and KLALC. One element of the arrangement, at least, remained in place as at 18 September 1997, namely that the Scott interests would purchase the Leece and Landerer interests for the sum of $148,780. Neither Scott nor those associated with him appear to have had those funds and sought to issue a promissory note in favour of Messrs Leece and Landerer for that amount, which was said to be “exercisable one month” thereafter. A further letter addressed to Messrs Charles and Adam Perkins refers to the same sum “which you are paying on our company’s behalf to Mr John Leece and Mr John Landerer”. The payment was identifi ed as a loan provided to enable the Scott interests “to acquire the shares held in Sanpine Pty Ltd”.

A company search of Sanpine Pty Ltd, dated 24 April 2002, reveals that Sanpine had, at that date, 1,000 issued shares of which 300 were benefi cially held by Messrs Perkins’ company, Erolvase Pty Ltd, 350 by Ms Lesley Molony (in her own name) and 350 by interests which gave their address as c/- Spencer Steer & Associates. Of the last group, 250 shares were held benefi cially by Amabowl Pty Ltd, a company in which Mr Steer himself had a direct interest.

The fi nancial arrangements as between the Scott, Steer and Perkins interests remain obscure from the evidence given to the Commission. However, Mr Scott gave evidence that in return for the Molony shareholding, there was an agreement to pay the moneys outstanding to Leece and Landerer, the amount of $100,000 which was due to KLALC on execution of the joint venture agreement and a further amount of $500,000. It appears that neither Scott nor Molony had access to funds of that magnitude. It appears that the $100,000 payment to KLALC was made by interests associated with Mr Steer. However, the funds were not in fact paid to Messrs Perkins, in exchange for the shares, but appear to have



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been provided to Sanpine Pty Ltd as working capital. It was Sanpine which was responsible for making the payment to KLALC. So far as the Commission can divine, the payment made by the Steer interests became, in effect, an undocumented loan by the Perkins’ interests to Sanpine.

There remains the third payment of $500,000, which was described in the correspondence as provision for the purchase of “the remaining 13.34%” of the shares in Sanpine held by Messrs Perkins. The payment was described as to be made “from fi rst residual funds”, and apparently has not been made. Although Mr Scott acknowledged the existence of the debt in his evidence, it is startling that three business people, offering themselves and their services to a Land Council to carry out a multi-million dollar land development, appear to have had absolutely no documentary arrangements in relation to a debt which was, at least in relation to the affairs of Messrs Scott and Perkins, a signifi cant sum for each of them.79

It is clear from Mr Scott’s evidence that he and his partner, Lesley Molony, were responsible for the payments to Leece and Landerer. That element of the transactions, at least, is confi rmed in the correspondence, as is the payment of those moneys by the Perkins’ interests on their behalf. What is extraordinary is that the repayment of that amount was never made by Scott or Molony from their own resources, but was made, with interest, on 18 February 2000, from funds raised by mortgaging KLALC’s land. The sum required to expunge the Molony debt, as at 18 February 2000, was $183,314.

Two questions then arise: fi rst, whether that use of the joint venture funds was properly authorised and, secondly, what were the terms on which those funds were, in effect, lent to Lesley Molony to assist her in purchasing her shareholding in the company?

In the second half of 1998, arrangements had been made to acquire funds by way of loan against the security of the land. The land was then, and at all relevant times, owned by KLALC. It will be necessary to consider further the mechanism, pursuant to section 40D of the Land Rights Act, whereby the NSWALC was required to approve a disposal of the land. This provision was triggered by the need to mortgage the land by way of security for the loan. It is suffi cient for present purposes to note that a mortgage was executed in favour of Inteq Pty Ltd, a source of funds associated with a north coast

solicitor. On 16 February 1999 an amount of $670,000 was drawn down under the mortgage. Pursuant to the joint venture agreement, funds obtained for the purposes of the joint venture were to be deposited in an account opened for the purposes of the joint venture and having signatories including representatives of both Sanpine Pty Ltd and KLALC.

The joint venture agreement made provision for funds to be obtained from a “project fi nancier”, as determined by the management committee.80 Clause 11.2 provided:

All funds advanced by project fi nanciers for the purposes of the Development shall be immediately deposited in the Joint Venture Account to be used solely for the purposes of the Development, subject to any special arrangements for the advance of the funds provided by project fi nanciers and approved by the management committee.

The establishment of a joint venture bank account, with signatories to be representatives of Sanpine and KLALC, and with each party to receive a copy of “all periodic bank statements” was provided for by clause 16 of the Agreement. Clause 16.3 read:

16.3 Deposit of funds

Except as provided in clause 15.1,81 the Venturers agree that all cash and other funds received from time to time by the Venturers concerning the Development, the Development assets or the Joint Venture will be promptly deposited in the Joint Venture Account before any disbursement or use of those funds is made for any purpose. Unless fi nancing arrangements require an alternative treatment or the management committee approves otherwise, the funds to be deposited in the Joint Venture Account will include all funds advanced by third parties to the Joint Venture as contemplated by the clause 11.

When Mr Steer was asked in evidence why the funds obtained under the mortgage were not paid into the joint venture account, he pointed to the provision for the management committee to approve “otherwise”.

Mr Steer was taken to the minutes of the joint venture management committee of 16 February 1999, which recorded Mr Steer advising the meeting that a joint venture bank account had been opened. It was then put to him:

79 The Commission had no evidence from which it could draw any inference as to the magnitude of the business interests of Mr Graham Steer.80 Agreement, clause 11.1.81 Which dealt with the initial payment of $100,000 to KLALC.

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[Counsel Assisting] Q: Of course, you know that, don’t you, that the loan proceeds were not paid into that account but were paid into an account in the name of Sanpine?

[Mr Steer] A: There was a resolution at this meeting which is – I’ve subsequently read these minutes and it’s not recorded here, I think it was recorded later – there was a resolution that the funds would be deposited into the other bank account, yes.

…

Q: So do you say that the motion was at this meeting?

A: Well, it’s not recorded here. I’ve read these minutes in detail and it’s not recorded here but it was certainly discussed at that meeting.

Q: Was it resolved at that meeting?

A: Well —

Q: Sorry, that they be paid into Sanpine’s account?

A: What was resolved was that the loan was being taken by Sanpine, using the security of the land and that the loan — and the moneys were going to be deposited into Sanpine’s account and that those moneys, when expended, would then be reported via the project manager and myself to the subsequent committee meetings as they were expended, yes. It’s not recorded in these minutes.

Q: That was decided at the meeting?

A: It was certainly discussed and decided at that meeting, yes.

When asked why that step was being taken, he indicated that the purpose was to “minimise as many costs as possible”. Counsel Assisting continued:

Q: Why would putting the money into the joint venture account add to that expense?

A: Because it required an audit every year.

On the day of the draw-down, namely 16 February 1999, there was a joint venture management committee meeting. The minutes record that Mr Graham Steer advised the meeting that a bank account had been established with the National Australia Bank and appropriate signatories had been organised. The meeting was further advised that two signatories were required for the account, one being a Sanpine representative and

one being a KLALC representative. The minutes do not record any reference to the draw-down on the mortgage, but they do record that the salary for the Aboriginal Liaison Offi cer “would now be paid by direct bank transfer”. A reader of the minutes would infer that the payment would be made from funds now available in the joint venture account.

In fact, the funds were never placed in the joint venture account. Rather, in contravention of the obligations under the joint venture agreement, and without either notice or authority from the management meeting, the funds were deposited in a private account of Sanpine Pty Ltd. Within 48 hours, over $430,000, approximately two-thirds of the available funds, had been disbursed by Sanpine. Some of those disbursements repaid expenses which had undoubtedly been incurred by various parties, including Mr Steer and his company Amabowl Pty Ltd, on behalf of the joint venture. Nevertheless, even those expenditures were not expressly authorised by the management committee, nor are their purposes documented in the records of the joint venture, nor has the joint venture expenditure ever been audited. (It will be necessary to return to the last point.) The payment of $183,314 to Mrs Perkins was in discharge of a debt owed to Mrs Perkins by Ms Molony. The Commission is satisfi ed that the repayment was organised by Mr Scott who invariably attended joint venture management committee meetings “as proxy for Ms Molony”. What knowledge, if any, Ms Molony or Mrs Perkins had of any of these arrangements, the Commission is unable to say. However, it is satisfi ed that all of the arrangements which involved Ms Molony were made by Mr Scott.

The expenditure of this specifi c amount from the Sanpine account was made in contravention of the contractual arrangements between Sanpine and KLALC. Each of the joint venture partners and their representatives stood in a fi duciary relationship with each other. The unauthorised expenditure of funds of the joint venture in this manner undoubtedly constituted a breach of those fi duciary obligations. The manner in which the expenditure was effected, through failing to deposit the funds in the joint venture account, suggest that the transactions were known by those party to them, including Messrs Steer, Scott and Adam Perkins, as, at best, devious. They involved a misuse of funds which were in part the funds of a public authority. The question for the Commission, however, is whether that action involved corrupt conduct because it could have involved a criminal offence. That question requires further consideration of the manner in which Messrs Perkins, Scott and Steer operated for the purposes of



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the joint venture. It also requires consideration of the role played by the KLALC representatives on the joint venture management committee.

Operation of the joint venture management committee

It is convenient to consider fi rst the role of the KLALC representatives on the management committee. Clause 10 of the joint venture agreement provided that the venturers would form a management committee “to manage the affairs of the Joint Venture” and to consider and make decisions in relation to all aspects of the development including, without limitation, fi nancial issues … ”. The management committee was also responsible for approval of fi nancing and the appointment of auditors. The agreement required that the management committee comprise four representatives of each venturer and specifi cally named the initial representatives. For Sanpine, they were Messrs Charles and Adam Perkins and Messrs Leece and Landerer. For KLALC they were the Chairperson, Mr Bill Smith, two of his sons, Messrs Malcolm and Edward Smith, and Mr Ray Roberts. Mr Roberts appears not to have attended any meetings and was replaced by the KLALC Treasurer, Mr Steve Griffen. In substance, the agreement provided that responsibility was to be equally shared, so that no approval could be obtained without the support of both joint venturers, if their representatives took common positions amongst themselves.

As already noted, because most of the minutes of KLALC meetings have not survived, it is diffi cult to know what steps were taken by KLALC at properly constituted meetings, in relation to the joint venture. However, evidence was given, by Mr Malcolm Smith amongst others, that there was an election for the KLALC representatives on the joint venture management committee. The Commission accepts that that was so. Further, the KLALC representatives were paid $100 to attend a meeting. Whether that arrangement was disclosed to KLALC members is unclear, but no doubt the payment provided some incentive to those elected, other than Mr Bill Smith, who was personally committed to the project, to attend management committee meetings of the joint venture. Non-attendance appears to have been an issue, because the management committee passed a resolution at what appears to have been its fourth meeting, on 16 February 1999, stating that “future meeting payments would only be paid on attendance”. The payments apparently did not apply to Mr Bill Smith who had, by that stage, been

appointed Aboriginal Liaison Offi cer. Until February 2000, Mr Edward Smith was not a regular attender and his brother Malcolm Smith also missed a number of meetings, according to the management committee minutes. Again, in 2002, Mr Edward Smith was absent on a signifi cant number of occasions. It is also fair to say, from a reading of the minutes, that neither Malcolm nor Edward Smith appear to have made any signifi cant contribution to the matters under consideration.

The Commission heard evidence from Mr Malcolm Smith, who did not give the impression that he had any signifi cant knowledge of the merits of, or management issues involved in, the joint venture. He did, however, confi rm the evidence given by his father, Mr Bill Smith, and Mr Steve Griffen, to the effect that none of them were aware of the diversion of funds from the fi rst mortgage to Mrs Perkins, to pay for the acquisition of shares in Sanpine by Ms Molony. Their evidence, combined with the absence of any suggestion in the minutes that approval was sought for the payment, combined with inferences to be drawn from the fact that the mortgage funds were paid into the Sanpine account and not the joint venture account, satisfy the Commission that the management committee was not asked to approve the expenditure of joint venture funds in that manner and did not in fact do so.

The structure of the joint venture agreement was such that any addition to the costs of the joint venture increased the fee payable to Sanpine and diminished the overall profi ts available to be shared by Sanpine and KLALC. It required no great sophistication to appreciate that it was in the interests of KLALC to ensure that joint venture expenditure was kept under tight control. It is doubtful that the KLALC representatives, with the possible exception of Mr Bill Smith, had any appreciation of that responsibility. Had the KLALC representatives considered the matter from that perspective, it is unlikely that they would have accepted the limitations which were imposed on the fi nancial information provided to them, the failure to account through the only banking arrangements permitted under the joint venture agreement and the non-appointment of auditors. For reasons discussed further below, Mr Bill Smith had his own interest in accepting these arrangements, which were not only of dubious legality under the agreement but were against the interests of the KLALC.

It is possible that Mr Steve Griffen might have exerted some independent infl uence had he wished to do so. He was, for some years, Treasurer of KLALC and, with the

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assistance of KLALC’s accountant Mr South, appears to have been quite capable of applying proper accounting principles. However, at least in the fi rst two years of the joint venture, he appears to have exercised no independent judgment of any kind that was recorded in the minutes, nor was any apparent from his evidence.

This suggests, and the Commission accepts, that none of the KLALC representatives were actively complicit in the misappropriation of the joint venture funds for the benefi t of Ms Molony. Further and separately, the Commission accepts Mr Bill Smith’s evidence that he had no knowledge of the arrangement with respect to the purchase by an associate of Mr Scott of the shares in Sanpine. However, the relationship between Mr Scott and Mr Bill Smith, at least until 2001, if not 2002, appears to have been amicable and cooperative. It is quite likely that, if Mr Bill Smith had demanded a full explanation of the expenditure of funds by the joint venture, Mr Scott and Mr Steer would have provided the information, albeit on a confi dential basis. However, as will be noted below, Mr Bill Smith had his own reasons for not wanting the fi nancial arrangements to be made publicly available and the Commission is satisfi ed that he never made enquiries which might have resulted in the disclosure of the full fi nancial arrangements with an adequate explanation of expenditure incurred.

Turning to the Sanpine representatives, the Commission is satisfi ed that Mr Adam Perkins, Mr Robert Scott and Mr Graham Steer each understood the purpose for which the funds were being used in making the transfer of $183,314 to Mrs Perkins. The correspondence between Mr Perkins and Mr Scott reveals a clear understanding on each part that Mr Scott owed money to the Perkins family for the purchase of shares in Sanpine. It is clear that he did not have the money and that the repayment to Mrs Perkins was in fact made out of the proceeds of the joint venture mortgage moneys. The Commission is also satisfi ed that Mr Steer was fully aware of the purpose and nature of the payment. Mr Steer acted as Mr Scott’s agent in seeking to set out in written terms the arrangement between the Perkins interests and the Scott interests. Mr Steer sent at least two letters to Mr Adam Perkins on behalf of Mr Scott. Mr Steer was also the Chair of the management committee at the time when the mortgage was drawn down and it was Mr Steer who made the relevant banking arrangements. Although it does not appear that he obtained any personal benefi t from the appropriation of the moneys to Mrs Perkins, he had primary responsibility for depositing the mortgage funds in the relevant account, namely that of Sanpine.

It also appears from the minutes that it was he who proposed that no audits be undertaken, and provided to the management committee a supposed justifi cation for that position, said to be in accordance with the joint venture agreement.

Even if one accepted the fallacious view that the joint venture funds could be treated by Sanpine as its own funds, a separate question arises as to the propriety of Sanpine using those funds to allow a third party, with no interest in the company, to purchase shares in the company from an existing shareholder and director. The purchaser, Ms Molony, was at all times prior to the acquisition of the shares, a stranger to Sanpine.

Corrupt conduct? – payment to Mrs Perkins

In substance, Messrs Adam Perkins, Scott and Steer treated the joint venture funds either as the private funds of Sanpine, or even as their own funds, to be used without regard to the legal niceties of ownership and authority. If the evidence presented to the Commission were available to a relevant tribunal, the Commission is of the view that each of those persons could be found to have committed an offence under section 527 of the Crimes Act, which would satisfy the test of an offence of dishonesty.

The next question is whether, as well as involving a potential criminal offence, the conduct falls within the defi nition of “corrupt conduct” in section 8 of the ICAC Act. The misappropriation of the funds was not carried out by any public offi cial: accordingly, to satisfy the terms of section 8, it must constitute conduct of a person (who need not be a public offi cial) that adversely affects, or could adversely affect the exercise of offi cial functions by any public offi cial.82

There are two ways in which the funding arrangements could affect official functions: the first involves the potential misrepresentation to officers of NSWALC of the intended use of the funds to be obtained by mortgage of KLALC land, in circumstances where the approval of NSWALC was required for the purposes of section 40D of the Land Rights Act. The second possibility is that the misuse of the funds could have affected adversely the exercise by the KLALC representatives, including the two office-holders, namely Mr Bill Smith and Mr Stephen Griffen, of their obligations

82 See section 8(2).



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as office-holders to ensure that KLALC property was properly used for the purposes of the joint venture, as approved by the KLALC members at a general meeting.

The Commission considers that each of the members of KLALC appointed to the joint venture management committee satisfi ed the defi nition of “public offi cial” in section 3(1) if the ICAC Act.83 Whether Messrs Malcolm and Edward Smith, who held no offi ce with the Land Council, were exercising “offi cial functions” may be open to argument: there is, however, no doubt that the Chairperson and Treasurer of the Land Council were exercising their statutory functions of protecting the interests of KLALC in carrying out their role as KLALC representatives on the joint venture management committee.

The conduct of Messrs Perkins, Scott and Steer which adversely affected the exercise of those functions was the failure of each of them to ensure that the KLALC representatives understood the purpose of the payment, and approved it or disapproved, before it was made. The Commission is satisfi ed that no such disclosure was made. The failure of disclosure was part of the conduct involved in the misappropriation of the funds.

Accordingly, the Commission is satisfi ed that:

Mr Adam Perkins, a director of Sanpine Pty Ltd;

Mr Robert Scott, a consultant and project manager; and

Mr Graham Steer, a chartered accountant and director of Sanpine Pty Ltd;

each engaged in corrupt conduct in relation to his involvement in the unauthorised disbursement of joint venture funds of $183,314 paid to Mrs Elaine Perkins in discharge of a debt owed by Mr Robert Scott’s partner, Ms Lesley Molony.

Section 74A(2) statement

Section 74A(2) of the ICAC Act provides that, in respect of each “affected person” a report must include a statement as to whether or not in all the circumstances the Commission is of the opinion that consideration should be given to the following:

a) the prosecution of the person for a specifi ed criminal offence,

b) the taking of action against the person for a specifi ed disciplinary offence,

c) the taking of action against the person as a public offi cial on specifi ed grounds, with a view to dismissing, dispensing with the services of or otherwise terminating the services of the public offi cial.

The term “affected person” is defi ned as including a person against whom, in the Commission’s opinion, substantial allegations have been made in the course of or in connection with the investigation.

For the reasons set out in Chapter 3 of this report, the Commission is of the view that no question of disciplinary action or dismissal arises in relation to any person involved in conduct that was the subject of this investigation.

Given the lapse of time since the transaction that is the subject of the fi ndings of corrupt conduct took place and the circumstances surrounding it, including the documentation, the Commission does not recommend that consideration be given to prosecution of any of the participants for an offence in relation to the corrupt conduct fi ndings stated above in this chapter.

83 See paragraph (h) defi nition of “public offi cial” set out in Chapter 3.

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Aboriginal Liaison Offi cer’s position

Nature of position

Where there is a proposal for some infrastructure development (such as the laying of a pipeline) or the establishment of a mine, that is to occur on Aboriginal land, arrangements made on behalf of the Aboriginal land-holders and the commercial or government enterprise carrying out the development may well include provision for the appointment by the developer of an offi cer to liaise with the land-holders. It is common practice for such an offi cer to be an Aboriginal person, although not necessarily a member of the land-holding group. The joint venture agreement made express provision for the appointment of an Aboriginal “liaison offi cer”.

The evidence before the Commission, including that of Mr Leece, supported by Mr Adam Perkins, was that the inclusion of a full-time liaison offi cer was fi rst proposed by Mr Charles Perkins. Given his signifi cant experience with developments of the kind referred to above, that is entirely plausible. However, little consideration appears to have been given to the appropriateness of the concept in the context of a joint venture. This was not a situation where a commercial entity, such as a mining company, was proposing to conduct activities on Aboriginal land over a signifi cant period, which might well give rise to on-going disruption of Aboriginal life. This was a case in which the Aboriginal land-holders were themselves embarking on a development, albeit in partnership with commercial interests, of unused land which they were seeking to dispose of. The KLALC had 50% representation on the board of the management committee, which provided a level of on-going control and which rendered the concept of “liaison” virtually irrelevant. Pursuant to a process which will be considered further below, the management committee, at its fi rst meeting on 28 August 1997, appointed Mr Bill Smith as the liaison offi cer. Mr Bill Smith was, at that time and thereafter, the Chairperson of KLALC and a member of the management committee.

In seeking to understand the consequences of his appointment, three matters need to be addressed. These are, fi rstly, the nature of the position; secondly, the circumstances of his appointment and, thirdly, the fi nancial arrangements between the joint venture and Mr Bill Smith.

The fi rst point may be conveniently addressed by setting out the terms of clause 8 of the joint venture agreement, which were as follows:

8 Liaison Offi cer

8.1 Upon the date of this Agreement the Joint Venturers shall call for expressions of interest from within the membership of Koompahtoo for the appointment of an aboriginal liaison offi cer for the Joint Venture whose role shall be to liaise between members of the Koompahtoo Local Aboriginal Land Council and the Venturers in connection with the Development. More particularly the aboriginal liaison offi cer will have the responsibility of:

(a) outlining the nature and scope of the Development to the members of the Koompahtoo Local Aboriginal Land Council;

(b) explaining and demonstrating the benefi ts which will accrue to the Koompahtoo Local Aboriginal Land Council as a result of the Development;

(c) receiving questions, queries, suggestions and concerns of members of the Koompahtoo Local Aboriginal Land Council and relaying those to the Management Committee for further instructions from the Management Committee concerning responses to such questions, queries, suggestions and concerns;

(d) negotiating on behalf of the Joint Venture with the Koompahtoo Local Aboriginal Land Council on matters of aboriginal cultural signifi cance in accordance with the directions of the Management Committee;

(e) reporting any concerns of the Koompahtoo Local Aboriginal Land Council as to the Development to the Management Committee;

(f) arranging, at Koompahtoo’s discretion, the removal of any item of aboriginal cultural signifi cance from the Joint Venture Site to another area of land owned by Koompahtoo;

(g) attending to such other matters which the Management Committee may delegate to the aboriginal liaison offi cer.

8.2 The aboriginal liaison offi cer:

(a) must be an ordinary member of Koompahtoo;

(b) will be selected by Sanpine from the shortlist provided by Koompahtoo from the applications received in response

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to the advertisements placed by the Management Committee;

(c) will be an employee of the Joint Venture;

(d) shall report to the Management Committee and be subject to the instructions and directions of the Management Committee; and

(e) may be a member of the Management Committee.

8.3 The employment of the aboriginal liaison offi cer by the Joint Venture will be in part satisfaction of the obligations of Sanpine pursuant to clause 9.84

Appointment process

The second issue concerns the method by which Mr Smith was appointed. As appears from clause 8.1 of the joint venture agreement, the joint venturers were required to call for “expressions of interest” from KLALC members for appointment as Aboriginal Liaison Offi cer. It was apparently envisaged that KLALC would provide a “short list”85 from which the Sanpine representatives would select the successful applicant.

The evidence before the Commission included a two page notice, on KLALC letterhead, setting out the terms of clause 8 of the Agreement and seeking expressions of interests from the KLALC membership, although clause 8.3 was replaced by a list of criteria, namely:

8.3 The applicant will have to demonstrate

(a) A proven record of reliability

(b) Hold excellent negotiation skills

(c) Hold a current drivers’ licence

(d) Hold a position of respect amongst the wider community

(e) Have a broad knowledge of Aboriginal Culture, customs and practice of the eastern sea board of N.S.W.

It required “applications and resumes” to be lodged by 5pm on Tuesday, 26 August 1997 and advised that interviews would be held on Thursday, August 28. The evidence also disclosed that there was an extraordinary general meeting of KLALC held on 20 August 1997, the remaining fragment of the minutes of which records “lengthy discussion” of the joint venture and

the Aboriginal Liaison Offi cer position. The result was apparently a motion, moved by Mr Malcolm Smith, in the following terms:

Members agree that the joint venture management committee appoint liaison offi cer from KLALC membership.

The motion was carried. That such a discussion did take place may be accepted: its purpose is less clear, given that the motion which resulted did no more than affi rm (though not entirely accurately) the requirements which had already been incorporated into the joint venture agreement. Whether the notice was ever circulated is doubtful. Whether the discussion at the meeting extended to nominations for the position is also doubtful.

On 26 August 1997 Mr Bill Smith wrote, as Chairperson of KLALC, to Mr Adam Perkins seeking to nominate Mrs Carol Briggs (his daughter) and Ms Louise Charles, who was employed part-time as KLALC bookkeeper. Bill Smith’s letter also referred to “Robbie and Louise” being available for interview on Thursday, 28 August. Mr Robbie Briggs was Carol Briggs’ husband and the KLALC Co-ordinator. The KLALC Secretary at the time, Ms Julianne Rose, thought the reference to “Robbie” was a mistake: that inference is probably correct. However, Mr Bill Smith gave evidence that he had spoken to each of Louise Charles, Robert Briggs and Carol Briggs about the position and they had all indicated interest. However, 48 hours later, all of them had apparently changed their minds and no-one attended for an interview. In the meantime, Mr Adam Perkins had written to Bill Smith on 27 August 1997 inviting him to apply for the position of liaison offi cer.

Although the interviews were to be held at the KLALC offi ce, only Bill Smith attended. Mr Robert Briggs and Ms Louise Charles denied having expressed any interest in the position. Ms Carol Briggs, who was Ms Carol Smith again by the time she gave evidence to the Commission, said she had indicated some interest by putting up her hand during the course of the Land Council meeting on 20 August 1997. She said she simply did not follow through by going to the interview, for reasons which involved her personal domestic circumstances and were somewhat vague.

As noted above, the joint venture management committee agreed to employ Mr Bill Smith as the Aboriginal Liaison Offi cer and agreed to provide a package including a salary

84 Which obliged Sanpine to use reasonable endeavours to give preference in employment to Aborigines.85 Clause 8.2(b).

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in excess of $60,000 per year together with a car, which would become the property of Mr Smith after three years. The vehicle provided was a Toyota Land Cruiser.

The selection process on the KLALC side appears to have been a sham. It is possible that Carol Smith expressed interest in the position, but the Commission is satisfi ed that, if she did, it was because her father had encouraged her to do so, rather than because she wanted the position. There is no evidence that KLALC proposed Mr Bill Smith as a candidate, but the Commission is satisfi ed that, had he indicated his interest, it would have been most unlikely that any of his supporters or relatives on the Land Council would have sought to oppose him or compete with him. Not only is he a person of forceful personality, and clearly the driving force behind the Land Council, but he was also a man with the age and experience which would have been hard to overlook had there been a genuine competitive selection process. He alone would appear to have satisfi ed the qualifi cations set out in the notice.

The Commission is satisfi ed that there was no real selection process: the Sanpine representatives, who were responsible under the Agreement for the appointment, had clearly decided amongst themselves that Mr Bill Smith was the appropriate appointee prior to any possible interviews. How long before the date of the appointment they had reached that view is not a matter on which any fi rm conclusion can be reached. It is possible that some of those involved with Sanpine had expected Mr Bill Smith to take the position from the time the agreement was being negotiated. It is possible that the position, which otherwise had no clear purpose in the context of the joint venture, was included in the agreement as a means of providing for the on-going involvement of Mr Smith in a paid capacity. For present purposes it is neither necessary nor possible to resolve such matters. It is suffi cient to determine (and the Commission is so satisfi ed) that at the time of his selection by the Sanpine representatives, Mr Adam Perkins and Mr Graham Steer each intended that Mr Smith be employed by the joint venture and be provided with substantial remuneration for that employment. Whether similar views were held by Mr Charles Perkins and Mr Leece is unclear. The late Mr Charles Perkins did not give evidence to the Commission and it is unnecessary to make fi ndings in respect of his role. Mr Leece, on the other hand, was conscious of the availability of the position and gave evidence that he had discussed the position with Mr Smith prior to the execution of the Agreement, though

not necessarily by reference to the appointment of any particular person. However, he did give evidence that Sanpine representatives had considered the appointment of Bill Smith as Aboriginal Liaison Offi cer prior to the execution of the Agreement. Mr Adam Perkins went further, agreeing that he had directly raised with Mr Smith the possibility of his appointment, prior to signing the Agreement, on the understanding that it would be open to other members of KLALC to apply for the position. Mr Smith himself denied that anyone had raised the possibility of his appointment prior to the Agreement being executed.

Consequences of appointment

In his letter inviting Mr Bill Smith to apply for the position, Mr Adam Perkins stated:

I feel it would not create any diffi culties in regard to your position as chairman of Koompahtoo and that your skills in this area would be invaluable.

The correctness of the assessment concerning the “diffi culties” requires a comparison of the duties of the Liaison Offi cer, as set out in clause 8 of the joint venture agreement, and the role of the Chairperson of a Local Aboriginal Land Council, as defi ned in clause 30 of the Model Rules set out in the Land Rights Regulation.86

In broad terms, the potential for confl ict of interest which arose from this arrangement were, fi rst, the obligation incurred as Aboriginal Liaison Offi cer to promote the joint venture, whether or not it was in the interests of KLALC and, secondly, the receipt of moneys from the joint venture in diminution of the potential payments to KLALC. An important consideration in assessing the nature and existence of any confl ict is the extent of disclosure to the interested parties. No issue of disclosure to Sanpine arose: the Sanpine interests were clearly aware of Mr Smith’s position as Chairperson of KLALC and were also aware of both his employment as Aboriginal Liaison Offi cer and the payments agreed to be made to him. Rather, the relevant issue concerns disclosure to KLALC members of Mr Smith’s appointment and the benefi ts and disadvantages fl owing from that appointment.

On 19 August 1999 the Registrar appointed under the Land Rights Act received a letter from a fi rm of solicitors acting for a number of members of KLALC, raising questions about the manner in which the joint venture

86 Aboriginal Land Rights Regulation 1996, Schedule 1, clause 30.

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had been entered into and was being administered. One question raised was whether the Chairperson had a pecuniary interest in the joint venture, which required disclosure at a meeting of the Land Council in accordance with section 56B(2) of the Land Rights Act. For the purposes of dealing with this matter, the Registrar sought from KLALC, amongst other things, “copies of minutes of Local Aboriginal Land Council meetings convened since the date upon which the agreement with Sanpine Pty Ltd was entered into”.87

That request was made before the fi re which destroyed KLALC records. In response a letter dated 3 November 1999 provided “extracts of minutes regarding the joint venture agreement”. The letter refers to meetings on 10 July 1996 and 18 December 1996, each of which predated the formal agreement. There was a third meeting on 14 July 1997, being the date on which the agreement was executed. As noted above, a meeting on 20 August 1997 considered an item identifi ed as “job application, liaison offi cer” and passed a resolution supporting the appointment of a liaison offi cer, the meeting being eight days before the appointment was made. A fi fth meeting, being the annual general meeting held on 15 December 1997, noted the signing of the joint venture and the receipt of $100,000 on signing. Those matters were apparently dealt with in the Chairperson’s report. No further meeting discussed the joint venture, apparently, until 8 December 1998. That meeting was apparently called to discuss a proposed mortgage and rezoning of the land. It appears that Adam Perkins, Charles Perkins and Bob Scott attended the meeting, as did Mr Sean Docker, an offi cer from NSWALC and Mr Nicholas Dan, KLALC’s solicitor. A section of those minutes was provided to the Registrar, presumably because it related to the joint venture agreement. Mr Bill Smith is recorded as having participated in the discussion. One may infer that the minutes provided to the Registrar were all of those dealing with the joint venture. There is no reference to any disclosure up to that time relating to Mr Smith’s position as Aboriginal Liaison Offi cer.

There is a reference to the joint venture taken from the minutes of the annual general meeting held on 21 December 1998 which reads as follows:

Glen Green – questioned the development.

Steve Griffen – expressed he had some concerns but after looking into with further discussions he now supports it.

Open discussion took place regarding the Joint Venture to clarify concerns and misunderstanding by members.

Two further meetings are identifi ed in the letter to the Registrar, occurring on 29 March and 10 May 1999 respectively. In relation to the meeting of 29 March 1999, there is extensive information provided concerning the joint venture, including a disclosure of “consultant wage $65,000 per year”, which presumably refers to the payment being made to Mr Bob Scott. The minutes also note:

$780,000.00 in bank a/c to pay for studies etc.

No reference was made to the fact that that money was not in the joint venture bank account, nor to the fact that more than half had been expended almost immediately upon receipt, though not on “studies”. All of the details set out in the minutes appear to have been supplied to the meeting by the Chairperson delivering his report. The short note from the minutes of 10 May 1999 contains little information but states, in the Chairperson’s report:

Joint Venture full steam ahead endorsed by all appropriate bodies. All Studies etc being carried out as required by lake Macquarie city Council. Joint Venture major initiative of our members with 3 years of negotiation.

In responding to the Registrar, Mr Bill Smith was well aware that:

(a) he was being asked whether he (or any other offi ce-holder) had a direct or indirect pecuniary interest in the joint venture agreement;

(b) such an interest was required to be disclosed to NSWALC under section 56B of the Land Rights Act, and

(c) copies of the minutes of KLALC meetings were sought, as being relevant to the determination of the issues under consideration.

According to his response, Mr Bill Smith believed there was “a very small group of dissident members of our Land Council” who had been causing difficulties over a period of six months, apparently dating back to March 1999, immediately after the dealings in relation to the mortgage had been completed. In relation to the Registrar’s inquiry as to whether any

87 Letter from Registrar to Mr Bill Smith, Chairperson, KLALC, 18 October 1999, p.2 at paragraph 5.

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office-holder had a pecuniary interest in the joint venture, Mr Smith replied:

No. An indirect pecuniary interest may arise in the future when blocks of land are to be allocated to members of KLALC as per the joint venture agreement. At this point in time transparent application and allocation procedures will be implemented.

Between 24 September and 18 October 1999, a meeting apparently took place between the Registrar and the KLALC Treasurer (Mr Steve Griffen) and its Co-ordinator (Mr Robbie Briggs). The Registrar’s letter of 18 October, 1999 noted that in addition to the Treasurer and the Co-ordinator, Mr Smith had been at the meeting accompanied by two other KLALC representatives and “three representatives of Sanpine Pty Ltd.” Apparently it was disclosed at that meeting that Mr Bill Smith was the Aboriginal Liaison Offi cer for the joint venture. By letter dated 3 November 1999 Mr Smith responded to the Registrar, stating in part:

As you are aware I am the Aboriginal Liaison Offi cer for the KLALC/Sanpine Joint Venture. I have enclosed a copy of that section of the Joint Venture Agreement which deals with that position.

I am fi rmly of the belief that when this section of the Joint Venture Agreement is Read in conjunction with Schedule 1 – Model Rules for Local Aboriginal Land Councils, Clause 5, Objects (a)-(i) inclusive no pecuniary interest either of a direct or indirect nature exists in relation to this matter.

It was, accordingly, not Mr Smith’s position, at least in 1999, that there was anything which required disclosure to, or non-participation in, meetings of the KLALC. There is no reference in the correspondence to any salary, nor does the Registrar refer to any salary payable to Mr Smith as Aboriginal Liaison Offi cer in the reasons he provided for his decision not to refer any issue to the Land and Environment Court. However, the Registrar did note in his reasons that he had been supplied with a transcript of a Local Court hearing which apparently contained evidence that Mr Bill Smith received “approximately $400.00 per week from the KLALC”. The Registrar noted that there was no evidence linking that statement to the joint venture agreement. The Commission infers that the Registrar was not told of the remuneration payable to Mr Bill Smith.

The Commission is satisfi ed as to the following matters:

(a) on and from the date of his appointment on 28 August 1997 as Aboriginal Liaison Offi cer for the joint venture, Mr Bill Smith had a direct fi nancial interest in the joint venture agreement, as an employee of the joint venture;

(b) although the details of the arrangement were not settled until some weeks later, the interest involved payment of a monthly stipend of $5,094, together with the provision of a four-wheel drive vehicle and payment of on-road costs;

(c) the accounts of the Sanpine parties reveal that payments to Mr Bill Smith’s consultancy fi rm, Smith & Sons, exceeded $400,000 during the period 28 August 1997–31 March 2003;

(d) in accordance with the terms of the joint venture agreement, payments to the Aboriginal Liaison Offi cer constituted costs of the joint venture to be accounted for prior to the ascertainment of any profi t; and

(e) KLALC’s share of the profi t would, accordingly, be proportionately reduced by the amount of the remuneration paid to Mr Bill Smith as Aboriginal Liaison Offi cer.

Corrupt conduct? – Mr Bill Smith

In the course of the hearings held as part of this investigation, some attention was paid to the question whether Mr Smith, as Chairperson of the KLALC, had placed himself in a position of confl ict in accepting the position of Aboriginal Liaison Offi cer under the joint venture agreement. Before turning to that question, however, it is appropriate to return to the question of “corrupt conduct” for the purposes of the ICAC Act. In substance, corrupt conduct includes any conduct that could adversely affect, either directly or indirectly, the honest or impartial exercise of offi cial functions by a public offi cial. Some circumstances examined here clearly fall within the scope of that concept: others may be less clear. For example, if the Sanpine representatives had offered the Chairperson of the KLALC an attractive fi nancial package on condition that the KLALC entered into an agreement with the Sanpine interests, corrupt conduct would be readily established. However, on the fi ndings made above, that is not this case. A different inference might be drawn if the KLALC, in full understanding of the nature of the agreement, had approved the joint venture and, by resolution, had



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authorised its Chairperson to apply for appointment as the Aboriginal Liaison Offi cer, at least in circumstances where the obligations and remuneration were known at the time of the approval. But that is not the case here either. The differences need to be noted.

First, although there was evidence that the concept of an Aboriginal liaison offi cer was discussed during 1996, the Heads of Agreement considered in late 1996 and apparently executed in January 1997, do not refer to that position. Nor is there any reference to it in the somewhat brief minute of the discussion at the Land Council meetings on 10 July and 18 December 1996. In the minutes of the latter meeting there is a somewhat cryptic reference to the Chairperson’s explanation “that all times Aboriginal will be employed”. However, that is most probably a reference to the obligation on the part of Sanpine, which is noted in the short form of the agreement, that Sanpine shall use reasonable endeavours “to ensure that throughout the term of the joint venture all contractors and subcontractors offer employment to local Aboriginal people where they have appropriate skills”. The Commission is satisfi ed that there was no appropriate disclosure to the KLALC membership of the proposed employment of an Aboriginal Liaison Offi cer prior to the execution of the formal agreement on 14 July 1997.

Secondly, although there was undoubtedly discussion of such an appointment at a KLALC meeting on 20 August 1997, the Commission is satisfi ed that there was no discussion or approval of the Chairperson as an applicant, nor was there any discussion or approval of a remuneration package. Thirdly, the Commission is satisfi ed that before the matter was considered by the KLALC, the Sanpine representatives had already decided that Mr Bill Smith would be the Aboriginal Liaison Offi cer and had communicated that intention to him, however informally. Attempts to convey an open and transparent process were a sham, designed to hide the fact that decisions had already been taken. Apart from the arrangements for interviews discussed above, there is a memorandum from Mr Adam Perkins of 29 August 1997, addressed to the KLALC Executive Committee, care of the Secretary, Ms Jill Jessop, reporting on Mr Smith’s appointment. Paragraph 4 of that memorandum stated:

As the executive of Koompahtoo you are requested to indicate if you have any diffi culties with Sanpine appointing Bill Smith to the position of liaison offi cer. This is, however, a matter of courtesy and co-operation as Sanpine has an obligation to appoint the liaison offi cer … . Thus said [sic], we

would welcome your consideration of this matter, any recommendations you may have and your Committee’s endorsement of this appointment.

Who received this memorandum, sent by facsimile to the KLALC offi ce, is not known. Two short statements, on KLALC letterhead, bearing the date 4 September 1997 and apparently signed by the Treasurer and Secretary of KLALC respectively, still exist. The then Treasurer, however, in a written statement provided to the Commission, denied that the signature over her name was in fact her signature. In relation to the other statement, Ms Jill Jessop accepted that her signature appeared on the letter, but could not recall signing it. She believed that Mr Bill Smith had asked her to do so. Although the facsimile cover sheets, like the letters, are dated 4 September 1997, the printed transmission details at the top of the sheets indicate that both were sent within a 15 minute period on 2 January 1998. Why that should have happened is not known. However, the Commission is satisfi ed that the statements were prepared, in response to the request from Mr Adam Perkins, to give the appearance that the appointment of Mr Bill Smith was made pursuant to appropriate procedures.

The day after the dates on the two formal letters of approval from the Treasurer and Secretary, the KLALC accountant and auditor, Mr Richard South, acting on behalf of Mr Bill Smith’s company, Smith & Sons Consultancy Pty Ltd, presented a proposal to Sanpine, on behalf of Mr Smith, for an annual salary package of $100,000. At about the same time, Mr Steer provided a draft agreement. Although no formal agreement appears to have been entered into by the parties, the Commission is satisfi ed that:

(a) Mr Bill Smith was employed by the joint venture as Aboriginal Liaison Offi cer;

(b) his remuneration included a monthly salary of $5,094, together with lease payments on a 1996 Toyota Landcruiser, which was transferred to Mr Smith after approximately three years; and

(c) the details of the remuneration were not made known in any appropriate manner to the members of the KLALC.

The joint venture management committee minutes of 18 September 1997 (undated) refer to an employment contract with Mr Smith to commence on 1 September 1997, with an agreed salary of $4,717 per month “plus a car to the value of $30,000”. There is no suggestion in

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the minutes that Mr Bill Smith absented himself from the discussion, which suggests that the arrangement was presented largely as a fait accompli. Of the two KLALC representatives at the meeting, other than Mr Bill Smith, Mr Ray Roberts was wrongly identifi ed in the minutes as “Ray Smith”: whether he was in attendance is not entirely clear, but if he was, it was the only meeting he attended. The other KLALC representative was Mr Malcolm Smith, who was one of Mr Bill Smith’s sons. Mr Malcolm Smith gave evidence that he had learned the amount of his father’s remuneration package at a management committee meeting. He also asserted that the amount was discussed at a meeting of KLALC members. That meeting he said occurred about three months after the appointment, and the announcement was made by Mr Charles Perkins, who attended the KLALC meeting. If such a meeting did occur, and the remuneration package was clearly identifi ed for KLALC members, it is startling that no other witness before the Commission was able to recall that fact. It is also surprising that the Registrar was not given that information, when the question of disclosure was raised in late 1999. Further, if that information was publicly available in the manner suggested, the extraordinary arrangements adopted by the joint venture management committee to prevent the dissemination of fi nancial material would have been fruitless.

These considerations suggest that Mr Malcolm Smith’s evidence in this regard was incorrect. The manner in which he gave his evidence strongly supports that view. Despite his apparent attendance at numerous joint venture management committee meetings, there is no suggestion in the minutes that he contributed anything to the discussion. His own evidence in relation to the activities of the joint venture did not suggest that he was actively involved. He clearly drove his father to a number of meetings but was otherwise vague as to the arrangements. At numerous points, his evidence gave the appearance of a reconstruction of events, rather than a true recollection. However, in the case of Mr Malcolm Smith, the Commission is satisfi ed that he had very little knowledge about the matters on which he spoke. Often he asked for questions to be repeated in circumstances where they were not complicated or unclear. Many of his answers appeared to be constructed according to his understanding of what might be the best thing to say, in the interests of his family. It is quite possible that he knew in broad terms the nature of the remuneration that his father was receiving from the joint venture as Aboriginal Liaison Offi cer. The Commission is unable to determine the source of that information, but it does not matter for present purposes. The Commission is satisfi ed that that information was not conveyed to any general

meeting of the KLALC. It was information which Mr Bill Smith was anxious should not be disclosed and the Commission is satisfi ed that Mr Malcolm Smith would have understood that at all relevant times and would not have revealed what he did know to people who did not share his father’s interests.

More importantly, for present purposes, the Commission is satisfi ed that Mr Bill Smith himself did not disclose to the KLALC, at a formal meeting, the details of his remuneration package. It will be necessary to consider shortly whether that constitutes a contravention of section 56B of the Land Rights Act. However, the fi rst question is whether his failure to reveal his own fi nancial interest in the joint venture affected, directly or indirectly, the honest and impartial exercise of his functions as Chairperson or, indeed, the exercise of their functions by other members of the KLALC Executive.

The point made by Mr Bill Smith in his evidence was, in substance, that he did not see any necessary confl ict between the interests of the Land Council and the interests of the joint venture. That was because KLALC had properly approved the joint venture and was, accordingly, bound to participate in it in good faith. Other things being equal, there might be merit in that response, subject to the general diffi culties arising from having such a broad-based community organisation, with disparate interests and personalities, contractually bound to a major commercial enterprise. (These considerations will be addressed later in this report.) However, two factors did not permit the assumption of congruence of interests between KLALC and Sanpine Pty Ltd as its fellow venturer. The fi rst was the fact that, to the extent that KLALC had approved the joint venture, the Commission is satisfi ed that it did so only in the broadest, in-principle manner and without any detailed understanding of the fi nancial feasibility of the venture or the relevant respective obligations and rights. Accordingly, when dissent arose in early 1999, the Chairperson of the Land Council should have been in a position to provide a dispassionate and detailed statement of such matters, for the further evaluation of KLALC members. His obligations as Aboriginal Liaison Offi cer, required him, on the other hand, to promote the merits of the venture, merits which happened to coincide with his own fi nancial interests.

The second matter of concern is that referred to above, namely that the Land Council, in receiving, from time to time, reports from its Chairperson in relation to the joint venture, had, on the factual fi ndings already made, no knowledge of the fi nancial interest its Chairperson had



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in maintaining and promoting the joint venture. The impropriety of this should have been fully apparent to a Chairperson acting reasonably and in the interests of the Land Council. Further, Mr Bill Smith had more than one occasion to consider his position. That was not merely the time at which he accepted the position as Aboriginal Liaison Offi cer and negotiated a very favourable package for himself, but the occasions in December 1997, 1998, 1999, 2000 and 2001 on which he resubmitted himself to the members for election as Chairperson for a further year. Mr Bill Smith was not, in the Commission’s view, in a position to exercise his functions as Chairperson honestly and impartially, due to his own failure to make proper disclosure of his interests and his own failure to ensure that KLALC members were fully informed as to the terms of the joint venture.

The next question is whether the conduct may also involve a criminal offence. The provision of most immediate relevance is section 56B of the Land Rights Act, the terms of which have been set out above.88 The opinions already expressed would, if adopted by a relevant tribunal of fact, permit the tribunal to be satisfi ed that Mr Bill Smith had a direct pecuniary interest in the joint venture during the period over which the Land Council was considering its involvement in it. Similarly, for the reasons set out above, it would be open to the tribunal of fact to be satisfi ed that the interest appeared to raise a confl ict with the proper performance of the offi ce-holder’s duties in relation to the consideration of the matter. The third issue concerns disclosure of the nature of the interest at a meeting of the KLALC. For this purpose, the disclosure required is relatively limited. It would have been suffi cient for the Chairperson to disclose that he was employed by the joint venture as Aboriginal Liaison Offi cer. The absence of any reference in the minutes presented to the Registrar (being the only extant minutes) of an express disclosure in those terms, would permit the tribunal of fact to be satisfi ed of that limb.

Section 56B further requires that particulars of any disclosure be recorded in a book kept for the purpose, which is to be open for inspection. On the basis of the material supplied to the Registrar (which included no such record) the Commission is satisfi ed that that provision was not complied with. Whilst a failure to comply with “section 56B” constitutes an offence,89 no obligation to keep such a record is imposed by section 56B(4) on any particular individual. Accordingly, it may be argued that the omission to keep the record does not

itself constitute an offence. For present purposes the need to keep a record indicates the degree of formality which should attend a proper disclosure; the absence of such a record is at least consistent with the absence of any proper disclosure being made by the Chairperson.

The extant minutes of KLALC meetings show that the Chairperson was heavily involved in discussions at those meetings in relation to on-going decisions with respect to the joint venture. Importantly for present purposes, those deliberations included the mortgaging of the whole of the Morisset land to cover expenses of the joint venture. Those expenses, in turn, included payments to the Chairperson. Such participation by the Chairperson was a breach of section 56B(5), unless the offi ce-holders of the Council had otherwise determined. There is no evidence of any such decision by offi ce-holders in any of the material supplied to the Registrar, or to the Commission. The perception of a need for any such determination would have been inconsistent with Mr Smith’s expressed views in 1999, namely that he had no pecuniary interest, direct or indirect.

Brief reference has been made to Mr Bill Smith’s background and experience. There were lengthy and sometimes heated exchanges which took place between KLALC offi cers (and particularly Mr Bill Smith) and offi cers of NSWALC over the proposed mortgage of the land in late 1998. During those exchanges, Mr Bill Smith adopted a position of righteous indignation that anyone, and perhaps particularly employed staff of NSWALC, could question the value or propriety of the joint venture to which the Land Council was committed, largely at his instigation. He appears to have adopted a similar position, at least in written communications, with the Registrar. It was put to the Commission on Mr Smith’s behalf that he was “a man of lofty ideals but poor in his skills to realise them”. It was further put that, whilst perhaps naïve, his primary aim was to improve the position of “his people”, being an aim consistent with his position as “an Aboriginal elder steeped in his cultural heritage”. To an extent, the Commission can accept these submissions. Mr Smith is clearly a man with a deep commitment to the improvement of the social and economic conditions of Aboriginal people generally. That does not mean, however, that he was oblivious to opportunities to improve his own fi nancial position, and that of his immediate family. Public service can provide personal rewards, in both fi nancial terms and in terms of power and social status. The jurisdiction of the Commission is engaged, at a point where, according

88 See Chapter 2.89 See Land Rights Act, section 56C(1.

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to the law, the pursuit of private interest has negatively affected the public offi cial’s public offi cial duties and his or her obligation to serve the public interest.

The Commission is satisfi ed that Mr Bill Smith was conscious of the need to exercise his position as Chairperson of the Land Council with propriety and according to the law. As his negotiation with the Sanpine representatives indicated on more than one occasion, he sought legal and accounting assistance where necessary, to protect not only the interests of the Land Council, but also his own private interests. When challenged by the Registrar in 1999, he was prompt in his responses and called in aid various provisions of the Land Rights Act and Regulation. After some years as Chairperson of the Land Council, the Commission is satisfi ed that in mid-1997 (and subsequently) Mr Smith was aware of the structure and terms of the Land Rights Act and the Model Rules under which he operated as Chairperson of the Land Council. At no stage did he plead ignorance of its requirements in his dealings with NSWALC, with the Registrar, or with the Commission. As will be seen below in relation to the establishment of a trust, he was happy to adopt legal devices of some sophistication, which suited his purposes. He was also content to ignore advice which did not. Such selectivity was not a function of naivety or cultural heritage: it was motivated by self-interest.

Through a strong and engaging personality, it is clear that Mr Bill Smith was a dominant force in KLALC. However, he was not necessarily the dominant force in the transactions the subject of consideration by the Commission. Rather, he was one of a group of players, all of whom were acting within a system which was ripe for personal exploitation and some at least of whom failed to curb appropriately their pursuits of personal gain.

There was ample evidence to establish that Mr Bill Smith had a direct pecuniary interest in the joint venture, which was a matter being considered from time to time by the KLALC, of which he was Chairperson. There was also suffi cient evidence that he had not disclosed the nature of his interest, so that a tribunal of fact could have found that he was guilty of an offence under section 56B of the Land Rights Act. Accordingly, the Commission is satisfi ed that Mr Bill Smith, former Chairperson of KLALC, engaged in corrupt conduct in relation to his conduct in accepting paid employment as Aboriginal Liaison Offi cer for the KLALC–Sanpine joint venture in circumstances where there was a confl ict of interest in relation to his role as Chairperson of KLALC, and failing to disclose the confl ict to KLALC.

Section 74A(2) statement – Mr Bill Smith

Although Mr Smith’s conduct continued over a period of years, it ceased more than two years ago. Indeed, the serious aspects of the conduct occurred in the early days of the joint venture, prior to the inquiry by the Registrar of the Aboriginal Land Rights Act. Those events took place more than fi ve years ago. Accordingly, it is now too late to consider laying charges against Mr Smith for a criminal offence. This is because such offences under the Land Rights Act are summary offences and prosecution action must therefore commence within six months of the commission of the offence. The Commission does not recommend that consideration be given to such charges in respect of this conduct.

Other participants – Mr Stephen Griffen

Of the members of KLALC, Mr Stephen (Steve) Griffen, the Treasurer and a member of the joint venture management committee was the person most likely to have known about the arrangements between the joint venture and Mr Bill Smith. However, so far as his role on the management committee was concerned, the minutes suggest that the fi rst committee meeting he attended was that of 16 February 1999. Although arrangements with respect to the Aboriginal Liaison Offi cer’s remuneration and vehicle were discussed at that meeting, the discussion, as recorded in the minutes, concerned administrative matters in relation to the employment, which had commenced almost 18 months earlier in September 1997. Mr Griffen said in evidence that he had asked Mr Graham Steer for details of the funds that were drawn down on the mortgage and was told, in effect, that until they were expended, details would not be supplied. Since there was signifi cant expenditure immediately following draw-down, and because Mr Griffen was vague as to the timing of any request he may have made, this evidence, taken in isolation, might appear unconvincing. However, the relevant context is provided by the common position of the Sanpine representatives on the joint venture, namely that no details of expenditure would be released beyond management committee meetings because the expenditure had been incurred by Sanpine Pty Ltd and was “confi dential information”. An audit of the expenses was to be deferred until the rezoning of the land had occurred. This evidence, which is dealt with in more detail below, suggests that even if Mr Griffen had asked, it is unlikely that he would be have been supplied with detailed information. If it had been supplied, it would have been on conditions as to confi dentiality.



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This conclusion does not entirely exonerate Mr Griffen from responsibility for the failure of the joint venture to provide KLALC with appropriate details of expenditure, including its expenditure on the Chairperson of KLALC in his role as Aboriginal Liaison Offi cer. Mr Griffen appeared before the Commission to be a shrewd and articulate man, although he was capable of giving evasive answers if he foresaw trouble in a line of questions. However, he gave the following evidence in response to questions from Mr Bill Smith’s counsel about his knowledge of Mr Smith’s remuneration as liaison offi cer.

[Mr Davies] Q: Did you subsequently fi nd out about the salary and the car?

[Mr Griffen] A: I did.

Q: When did you fi nd that out?

A: It was, I guess, when Bill had the car and he up and working and I went to one of the management team meetings after I’d come back and he was handed his wage — sorry, a cheque for his wage.

Q: Did you see how much that was?

A: It was 5,000 and something dollars for a month.

…

Q: Do you know, to your knowledge, did you know if it became known amongst the members of the Koompahtoo community that he was earning $5,000 a month?

A: At that — well, it did get out there eventually, but certainly I didn’t query it. I knew of it. When I went to that management team meeting, but I mean to say, wages are certainly something that I would have seen as ethical and it was confi dential, and it —

Q: Sorry, you were going to go on?

A: No, that’s all, yeah.

Q: Was it included in the expenditures as detailed by Mr Scott at the joint venture meetings?

A: No.

Mr Griffen was also asked about whether, as a member of the joint venture management committee, he had reported back to KLALC as to what he had been told at management committee meetings. His answer was that he did not because he saw it as the Aboriginal Liaison

Offi cer’s job to report back to the KLALC, which was something he said that Mr Bill Smith did.

Mr Griffen was Treasurer of the Land Council for approximately 11 of the 12 years preceding the appointment of the KLALC administrator. Mr Bill Smith was his uncle. The Commission is satisfi ed that Mr Griffen was, at all times between 1996 and 2002, a loyal lieutenant of Mr Smith. There was no aspect of the arrangements which were the subject of evidence before the Commission in relation to which Mr Griffen exercised any independent judgment. He was capable of doing so: he just did not see that as his role. However, in relation to the arrangements with Mr Bill Smith in the position of Aboriginal Liaison Offi cer, Mr Griffen was not on the management committee at the time those arrangements were put in place and there was no evidence that he was party to them. Rather, his sins were those of omission by playing a passive role in relation to the possibility of subsequent disclosures to the KLALC membership. His position in that regard is assessed below in the context of the evidence of Mr Robbie Briggs, who was employed by the KLALC as its Co-ordinator and Mr Richard South, an independent accountant who was responsible for the preparation and audit of the KLALC’s annual accounts. The Commission is not satisfi ed that Mr Griffen’s participation in these events satisfi ed the statutory concept of corrupt conduct. There is little doubt, however, that he failed to carry out his obligations as an offi ce-holder of the KLALC in relation to the issues discussed above. To that extent, he betrayed the trust which the members had, over more than a decade, placed in him.

Other participants – Sanpine representatives

The involvement of the Sanpine representatives carries quite a different complexion. Mr Steer, Mr Scott and Mr Adam Perkins were each fully aware of the details of Mr Bill Smith’s appointment and remuneration package. They were also aware of how this package was provided. In the Commission’s view, each was involved in devising, or consenting to, a scheme which would prevent the disclosure of such information until at least the rezoning of the land was effected. Between 16 February and 18 February 1999, the joint venture disbursed more than $430,000 of the moneys drawn down under the mortgage. As already noted, the mortgage draw-down was deliberately diverted from the joint venture bank account into Sanpine’s bank account. As a result, KLALC representatives, who were required to be joint signatories of the joint venture bank account, were not

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required to sign cheques for those disbursements. The minutes of the joint venture management committee for meetings held on 16 February 1999, 19 March 1999, 14 April 1999 and 16 May 1999 contain no record of that expenditure. The minutes of the 14 April 1999 meeting contain reference to receipts not being received for a donation to a KLALC barbeque in an amount of $500 and contain details of proposed expenditure on consultants preparing reports to go to the Shire Council, in support of the rezoning application. That which is included, totalling $65,000 of expenditure, merely tends to highlight that which was omitted. The willingness of the joint venture (meaning presumably Sanpine) to cover the costs of a barbeque only on presentation of receipts, in an amount totalling $500 is dutifully minuted at a time when members of the KLALC Land Council, described in the minutes of 16 May 1999 as “KLALC troublemakers”, were asking questions about the joint venture expenditure. The project manager’s report of 12 May 1999 referred to the need to give consideration to “taking legal action against the offending parties”, being the “troublemakers”.

During the same month, May 1999, an extraordinary general meeting of members of KLALC was sought by the “dissidents” who posed a series of 13 questions in relation to the joint venture including a request for up-to-date information as to the expenditure of the $780,000 drawn down under the mortgage. A further question asked why the project was to be “wholly fi nanced on borrowed money and why, whilst the Land Council was providing the land, Sanpine was providing no cash or equity”. For the purposes of the extraordinary general meeting, a set of answers was prepared by Messrs Scott, Steer and Adam Perkins. The answers, as typed by Mr Scott were, according to the evidence, faithfully provided to members at the meeting, held on 27 May 1999. They included the following propositions:

It is not correct to say that Sanpine has put in ‘no cash or equity’. Sanpine has funded and/or underwritten the project from the start.

The ‘expenditure to date’ is at the cost of Sanpine. The only relationship to the KLALC is the fact of the security of the land for the borrowings. The expenditure is confi dential to Sanpine.

These statements were at least grossly misleading. Their truth depended upon the fact that the funds drawn down under the mortgage, had been appropriated, in contravention of the joint venture agreement, into the bank account of Sanpine Pty Ltd. The answers set out above fi nd their origin, in almost identical terms, in a

facsimile sent by Mr Steer to Mr Scott on 25 May 1999, two days before the extraordinary general meeting took place. These facts were well known to Messrs Scott and Steer, and by inference to Mr Perkins. On 20 November 1998 Sanpine, Messrs Adam Perkins, Charles Perkins, Lesley Molony and Graham Steer had executed a deed which commenced with the following recital:

Sanpine and Koompahtoo have on or about the 14th July 1997 entered into a joint venture agreement and whereas they now wish to obtain fi nance to assist with the joint venture and whereas Koompahtoo are required to mortgage the land …

Neither the Sanpine directors nor the company itself could properly deny any aspect of these recitals. Accordingly, it is clear that the fi nance was obtained for the sole purpose of the joint venture.

The question of the need for an audit was in fact dealt with in the minutes of the joint venture management committee of 9 June 1999. By this stage, it will be recalled, the extraordinary general meeting of KLALC had been requisitioned and held, on 27 May 1999. At Mr Scott’s instructions, a draft letter had been prepared by solicitors. In his management report for the period 8 June 1999 Mr Scott had reported:

A considerable amount of my time has been taken up with the problems brought about by the internal disruption of Koompahtoo. I drafted and arranged letters to be sent via Garrett, Walmsley, Madgewick [sic] – solcitors [sic] (consultant Philip Penman) on behalf of Sanpine to the 13 members who petitioned for the extraordinary meeting of the KLALC.

The draft letter contained the following statements:

We act for Sanpine Pty Ltd who is the Joint Venturer of Koompahtoo Local Aboriginal Land Council (“the Local Council”) in the development of land at Morisset.

We understand that you, together with others, have requisitioned an extraordinary general meeting of the Local Council in relation to criticisms of the elected executive on grounds of:

n ‘mismanagement’

n ‘failure of duty of care’

n ‘failure to work in the interests of members of the Local Council’



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n ‘failure to inform membership of matters of critical importance’

n ‘failure to keep accurate records etc’.

…

The necessary implication of the material contained within the requisition is defamatory of our client. We have been instructed to obtain Senior Counsel’s urgent advice as to what action should be taken against yourself and any of the following … .

The damages that are likely to be suffered by the Joint Venture, the local Council and our client are substantial and could well exceed $1 million.

Whether the letter was sent or not was a matter of dispute. However, the Commission is satisfi ed that a draft in similar terms was prepared by Mr Scott, who intended it to be sent.

By the time the joint venture management committee met on 9 June 1999, it appears, as recorded in general business, that a reporter from the 60 Minutes program had been investigating the joint venture arrangements and had met with Messrs Charles Perkins, Adam Perkins and Graham Steer. The next paragraph of the minutes, which were signed by Mr Steer as chairman of the management committee, reads as follows:

Billy and Bob then raised the issue of the upcoming Audit and in particular the cost to the Joint Venture. The chairman [Steer] advised that whilst there is a requirement under the Joint Venture for an audit, he believed that if the expenses were not incurred until the rezoning then the audit of the Joint Venture could be deferred. He confi rmed that Sanpine has no requirement for an audit. After much discussion it was agreed by all members of the committee that because of the expense of the audit and the fact that at present the expenses of the JV are being incurred by Sanpine Pty Limited on behalf of the Joint Venture, that the audit of these expenses could be deferred until the rezoning. The meeting resolved to defer the appointment of an auditor of the Joint Venture until the rezoning.

In his evidence, Mr Steer sought to say, perhaps faintly, that what occurred at the meeting on 9 June 1999 was confi rmation of a position which had been reached earlier. The Commission is satisfi ed that that is not the case. There is no recorded resolution of the joint venture management committee approving the payment of the

moneys into the Sanpine account, at any time. It may have been done to prevent information concerning the expenditure becoming available, except to the extent permitted by the Sanpine representatives. It is clear that by 9 June 1999 the management committee was committed to not revealing details of the expenditure. An attempt by KLALC members to have that information made available was fi rmly rejected at the extraordinary general meeting of the Land Council held less than two weeks earlier. The persons who apparently raised the question of the audit at the meeting of the management committee on 9 June 1999 were Mr Bill Smith and Mr Bob Scott. It is likely that an audit of the joint venture expenditure as at 30 June 1999 would have revealed payments to Mr Bill Smith’s company of approximately $116,000, payment to Bronzewing Property Holdings Pty Ltd on behalf of Mr Scott’s salary in an amount of $105,000 and the repayment of the loan to Mrs Elaine Perkins in the amount of $183,314 which, as noted above, was the repayment of a loan obtained by Mr Scott’s partner for the purchase of shares in Sanpine. In addition, an audit might have revealed the amounts paid on account of Mr Smith’s motor vehicle lease. In short, had the mortgage amounts been paid into the joint venture account, and had the account been audited, Mr Scott and Mr Bill Smith would undoubtedly have been asked by the “dissidents” to explain payments to them or their associates totalling in excess of $400,000.

The Commission is satisfi ed that Mr Perkins and Mr Steer shared that concern and that the other KLALC representatives, namely Mr Stephen Griffen and Mr Malcolm Smith, would have taken whatever position Mr Bill Smith took. These concerns were so strongly held that, as will be noted below, they resulted in the executive of KLALC taking the extraordinary step of transferring the Morisset land from the Land Council to a trust company, which was out of the reach of those members of the Land Council who were asking questions.

Before leaving the joint venture management committee meeting of 9 June 1999, it is convenient to note the statement recorded in the minutes concerning the meeting with the reporter from the 60 Minutes program:

Adam Perkins then advised the meeting that Charles, Graham and himself had met with the reporter and the reporter confi rmed that based on his research that there were only a handful of troublemakers that were not representative of the aboriginal community and the Land Council.90

90 Minutes, 9 June 1999, pages 1-2: emphasis added.

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The solicitor’s letter arranged by Mr Scott was addressed to 13 members. How many supporters those requisitioning the meeting could have relied on if the continuance of the joint venture had been put in issue, is an unknown fact. In the evidence before the Commission, those who called the meeting were consistently described as a “small group” and as “disruptive”. There is no evidence before the Commission that, at any stage, they ever commanded a majority of KLALC members. The inference which the Commission draws is that the concern of the joint venturers was not that the dissidents were suffi cient in number to gain control, but that the fi nancial arrangements should not become public because they might be thought to reveal impropriety. It will be necessary to return to this inference in relation to the next topic, namely the transfer of the land to a trust.

The further inference which should be drawn for present purposes is that Mr Adam Perkins, Mr Graham Steer and Mr Bob Scott, during the period from February to June 1999, each sought to avoid the revelation, beyond the members of the joint venture management committee, of the remuneration package enjoyed by Mr Bill Smith. Nor did they leave that exercise to Mr Smith and his son and nephew. As already noted, the claim of confi dentiality in relation to fi nancial details was, in its essence, drafted by Mr Steer and presented at the extraordinary general meeting by Mr Scott and Mr Adam Perkins. Each of them was an active party in the process by which all details of Mr Smith’s fi nancial interest in the joint venture were concealed from the membership of KLALC. That process continued up to, and included, the inquiry undertaken by the Registrar appointed under the Land Rights Act. When Mr Bill Smith met the Registrar on 14 October 1999 he was accompanied by four members of KLALC, including the Treasurer and Co-ordinator and three representatives of Sanpine, who appear to have been Messrs Scott, Adam Perkins and Steer. As already noted, Mr Bill Smith’s representations to the Registrar were that he enjoyed no pecuniary interest in the joint venture and that the expenditure of the joint venture was confi dential. The Commission infers that he was supported in that position by the Sanpine representatives.

On 13 December 1999 Mr Graham Steer sent Mr Richard South, as accountant for KLALC, a document entitled “Financial Accounts for the Year Ended 30 June 1999” in relation to the joint venture. That document is sparse, to say the least. It records an operating loss of $36,875.89, liability for which is said to be shared equally between Sanpine and KLALC. Of the items over $500, the meeting expenses paid to KLALC

representatives for attending joint venture management committee meetings total $3,200 and a fee paid to the City Council, $7,500. A fi gure of $25,478 is recorded for “Aboriginal liaison”. The basis of these calculations is not known. The accounts suggest that Malcolm Smith and Stephen Griffen, each of whom was paid $1,300, must have attended 13 meetings at the approved rate of $100 per meeting. In fact the minutes produced by Sanpine indicate that only fi ve meetings were held in that fi nancial year. Mr Griffen did not attend any meetings in the previous fi nancial years. The “Aboriginal liaison” fi gure appears to cover fi ve months of Mr Bill Smith’s salary, but not the vehicle lease expenses or the remaining seven month’s salary. This account is not consistent with the proposition that the expenses of the joint venture were all being paid by Sanpine, nor is it a full record of all joint venture expenses.

Whether anybody cared about, or even read, this document is unclear. The KLALC balance sheet prepared by Mr Richard South, as at 30 September 1999, contained no reference to the liability recorded in the joint venture accounts. Indeed, the only reference to the joint venture (if it is in fact the Morisset land joint venture) is an item of receivables “by auditor of the Land Council” being $2,800 with respect to the joint venture.

A year later, both Mr South and the Co-ordinator, Mr Robbie Briggs, were becoming impatient with the lack of information. On 4 October 2000 Mr Briggs wrote to Mr Steer and to Mr Scott stating:

Koompahtoo members moved a Motion unanimous that Sanpine be asked to present to Koompahtoo LALC a written updated fully fi nancial and progress report ($780,000 loan) by the end of October 2000 and that they table the such report at a meeting immediately after the 13 September 2000.

A joint venture management committee meeting held on 16 October 2000 made no reference to this request. Mr Bill Smith’s report, as Aboriginal Liaison Offi cer, referred to “issues associated with” the dissident group and the discussions about the possibility of transferring the joint venture land into a trust. He also referred to “the current excellent working relationship” between Sanpine and KLALC.

By late October 1999, it appears that Mr Briggs was seeking on behalf of KLALC an advance of $50,000 from Sanpine, which Mr Steer refused. Mr Briggs’ response of 24 November 2000 exhibited some bitterness. It stated:



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We thank you very much for not helping us out of our short term fi nancial diffi culties. We can be assured of what our future holds especially with doing business with people like yourself and Bob Scott.

As mentioned on numerous occasions, Sanpine treat the Members of Koompahtoo LALC like mushrooms ‘feed them shit and keep them in the dark’.

Since Sanpine are unable to advance us any moneys from our agreement because of legal reasons, could you please also ask your legal counsel if it would create a confl ict by Koompahtoo LALC seeking and requesting a detailed fi nancial report on the $780,000-00 loan which is required NOW for our audit report.

On 4 December 2000 Mr Richard South wrote to Mr Steer:

As per AASB 1006 para 5.1 Koompahtoo LALC are required to disclose in their fi nancial statements any liabilities relating to their interests in joint ventures. For this reason we request a summary of the current mortgage arrangements as they apply to Koompahtoo lands in relation to the joint venture, including details of any guarantees made upon the liabilities of the joint venture by the directors or other venturers in your organization.

As per AASB 1006 para 9.3, 9.4 and 10.1, Koompahtoo LALC are also required to disclose details of any revenue, expenses, assets or liabilities that relate to their interest in joint ventures, including comparatives.

Whether Mr Steer replied to Mr Briggs is unclear: on 19 December 2000 he replied to Mr South repeating the mantra that “the expenses incurred to date have all been to the account of Sanpine”. He further stated, “These expenses will be to the account of the joint venture only when the development application has been fi nalised”.

A statement that a payment is “to the account of” one entity rather than another involves one or both of two propositions. The fi rst proposition is that the payment was in fact made by entity A and not by entity B. The second is that the payment was made by entity A in discharge of an obligation which it had incurred as principal. Mr Steer’s justifi cation for the fi rst proposition appears to arise from the fact that the “borrower” identifi ed under the mortgage was Sanpine Pty Ltd. The legal basis for the second proposition is unclear: for example, both Messrs Scott and Smith were employed by the joint venture – there was no

written agreement or resolution of the joint venture management committee which imposed any obligation on Sanpine to meet their expenses.

Indeed, the legal assertion underlying the fi rst proposition is also doubtful. The Commission was supplied by Sanpine with a copy of a “loan agreement” purportedly dated “November 1998” and signed by Mr Smith on behalf of KLALC. That agreement bears a facsimile transmission record with the date 28 October 1999. The agreement identifi es Sanpine as the “borrower”. Clause 3 records that the principal under the loan was lent to the borrower, in consideration of which agreement on the part of the lender, the mortgagor (KLALC) agreed to provide the security, namely a fi rst registered mortgage over the Morisset land. Clause 5 records that the borrower is obliged to repay the principal, but clause 6 states that “the borrower and the mortgagor” will pay interest. The registered mortgage was apparently signed by the mortgagor and the mortgagee and was dated 15 February 1999. It bears a stamp duty receipt of 18 February 1999. The mortgagor and mortgagee are identifi ed as KLALC and Inteq Custodians Ltd. Inteq was the lender under the loan agreement. The mortgage states, in clause 1 of the covenants:

The mortgagor will pay to the mortgagee $780,000 (‘principal sum’) lent pursuant to loan agreement between the mortgagee, the mortgagor and Sanpine Pty Ltd by the mortgagee to the mortgagor or so much thereof as shall remain unpaid twelve (12) months from the date of this mortgage.

Clause 4 of the covenants further states:

This mortgage has been granted in consideration of the mortgagee at the request of the mortgagor advancing to the mortgagor and Sanpine Pty Ltd (‘debtors’) jointly and severally the principal sum and the debtors hereby covenant and agree with the mortgage to repay the principal sum and all interest thereon …

Given the composite effect of these provisions, it is at least diffi cult to argue that Sanpine was solely entitled to the money received from Inteq, and had no obligation to account to KLALC for its expenditure of those funds. Even if the mortgage had not created a joint and several debt, it is beyond doubt that the mortgage was given by KLALC in fulfi lment of its contractual obligations under the joint venture agreement and for the purpose of obtaining fi nance for the joint venture, as envisaged in clause 11 of the joint venture agreement.

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It follows that each of the propositions underlying Mr Steer’s assertions was false. Sanpine was not authorised to appropriate the moneys received pursuant to the mortgage secured over KLALC land to its own purposes. To the extent that Sanpine paid the moneys into its own bank account, it was a constructive trustee of those moneys for the purposes of the joint venture. It was at all stages obliged to account to KLALC, as its joint venture partner, for the expenditure of those moneys. The Commission is satisfi ed that Sanpine’s refusal to do so from February 1999 until the end of 2000 was designed to prevent the public disclosure of the benefi ciaries of the payments. The claim that the costs were those of Sanpine and that it had no legal obligation to account was simply a device to justify non-disclosure. Even pursuant to the loan agreement with Inteq, KLALC was liable to pay interest on the loan. The interest payments and loan establishment fees incurred between January 1999 and 31 March 2003 totalled approximately $450,000. It may further be noted that the advances made by LKM Capital Ltd in April and November 2000 each included terms rendering Sanpine and KLALC joint and several debtors in terms substantially the same as those set out above.

Corrupt conduct? – Messrs Adam Perkins, Scott and Steer

It is the view of the Commission that Messrs Adam Perkins, Scott and Steer had a role in the appointment of Mr Bill Smith as Aboriginal Liaison Offi cer in circumstances where there was a clear confl ict of interest in relation to his role as Chairperson of the KLALC. Indeed, it is more likely than not that they were the instigators of that appointment. However, for the purposes of section 9 of the ICAC Act, it is necessary to fi nd that they were parties to a criminal offence other than that identifi ed in section 56B of the Land Rights Act, with which they had no immediate connection.

As none of the Sanpine representatives is a public offi cial, none can be the primary person responsible for the offence of misconduct in public offi ce. At most, they could be complicit in an offence committed by Mr Smith.

In the circumstances of this investigation, the Commission does not consider it appropriate or desirable to enter upon this question. Neither Counsel Assisting nor any other party sought to argue that the facts gave rise to such an issue. Even in relation to Mr Bill Smith, it was not suggested that any recommendation or referral

be made in relation to criminal prosecution. At the heart of the matter presently being considered is the failure of Mr Smith to disclose his circumstances at a meeting of the KLALC. For that he must wear the primary responsibility. The Sanpine representatives did no more than facilitate a scheme which allowed Mr Smith to conceal the full circumstances relating to his employment. The underlying issue is whether there was corrupt conduct in relation to the transfer of the proceeds of the mortgage of KLALC land into the private bank account of Sanpine Pty Ltd. That bears some similarity to the question to be dealt with next, namely the transfer of the land itself from KLALC to a trust company.

The primary question in this context is whether the conduct of the Sanpine representatives in relation to the loan moneys constituted a criminal offence for the purposes of section 9 of the ICAC Act. The argument in that respect is that the proceeds of the mortgage were received by Sanpine subject to a requirement that they be dealt with in accordance with the joint venture agreement. It is arguable that the diversion of those funds into Sanpine’s own account constituted misappropriation of the proceeds by the Sanpine offi cers, as agents of the joint venture, and thus might constitute a contravention of section 165 of the Crimes Act 1900, the terms of which are set out in Chapter 3 above. For this purpose, the terms of the joint venture agreement, entered into by KLALC and by Sanpine, are suffi cient to constitute a written direction as to the destination of the proceeds of the security, being the money obtained by draw-down of the mortgage by KLALC of its land. The deposit in the Sanpine account was not entered into in good faith, but for the purpose of concealing from the members of KLALC the amounts of the payments made on behalf of the joint venture, and to whom they were made. To similar effect, it would be open to the trier of any criminal charge, to fi nd that the payments made to Mr Bill Smith were intended, and were known by him to be so intended, to induce him to encourage KLALC members to look favourably on the joint venture agreement and its administration, which included the personal pecuniary benefi ts obtained by him under the agreement.

By way of defence, each of the Sanpine representatives and Mr Smith might argue that KLALC had authorised not only the appointment of an Aboriginal Liaison Offi cer for the joint venture, but the appointment of Mr Smith himself to that position. So much may be accepted: KLALC did not, however, authorise the fi nancial package entered into between Sanpine (or the joint venture) and Smith & Sons Consultancy Pty



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Ltd. It is doubtful whether the terms of that agreement were known to or understood by members of KLALC, with the possible exception of Mr Stephen Griffen and Mr Malcolm Smith, who were on the joint venture management committee, or that, if members did know some of the facts, they understood that the signifi cant sums being paid to Mr Smith would constitute costs of the joint venture, thereby reducing the benefi ts fl owing to KLALC. However, in all the circumstances, the Commission is not comfortably satisfi ed that the relevant conduct could constitute a criminal offence for the purposes of section 9 of the ICAC Act. Accordingly, no fi ndings are made that Messrs Adam Perkins, Scott and Steer engaged in corrupt conduct in relation to the payments made to Smith & Sons Consultancy Pty Ltd, on account of Mr Bill Smith’s role as Aboriginal Liaison Offi cer.

Section 74A(2) statement – Messrs Adam Perkins, Scott and Steer

No recommendations are made that consideration be given to the prosecution of Messrs Adam Perkins, Scott or Steer for any criminal offence arising out of their conduct described above.

Transfer of land to trustee company

On 30 March 2001 Mr Bill Smith (KLALC Chairperson) and Mr Stephen Griffen (KLALC Treasurer) executed two documents under seal on behalf of KLALC. One was a transfer of the Morisset land from KLALC to a company known as KLALC Property & Investments Pty Ltd; the second was a trust deed creating the KLALC Property & Investment Trust. The Trust included three classes of unitholders. Class A unitholders were entitled to vote on the appointment and removal of the trustee. Class B unitholders held sole rights to the distribution of trust income or property (other than capital). Class C unitholders were entitled to the distribution of trust capital. Class B and class C units were issued to KLALC; class A units were issued to 30 members of KLALC, being the three members of the executive and 27 other persons who were either relatives or supporters of Mr Bill Smith.

Whether KLALC members voted on the disposal of the land to the trustee company prior to the transfer occurring was a matter raised in evidence with a number of witnesses before the Commission. The KLALC minute book for this period was lost in the fi re at the KLALC offi ces and no secondary documentary evidence

is available. Mr Robert Briggs, the then Co-ordinator of KLALC, positively asserted that there was no motion put to a meeting to transfer land to a trust. He further stated that, after fi nding out that the transfer had taken place, he took the minute book, then in existence, to NSWALC and pointed to the absence of any minute authorising the transfer. Mr Briggs had, by this stage, fallen out with the Smith faction, but the Commission is satisfi ed that his evidence in this regard is truthful and accurate. That a meeting of KLALC was called and a proposal to establish a trust was put forward seems beyond doubt. A number of witnesses refer to there being some discussion in relation to a proposed trust and members being asked to put up their hands if they were willing to be involved in some way with the trust. Precisely what role was expected of them was unclear. However, the expectations of those who gave evidence were that they were nominating themselves to become unitholders of the Trust, and possibly directors of the trustee company. As the holders of class A units had the power to elect directors of the trustee company, this confusion is of little consequence. Nevertheless, even those members of KLALC who had some recollection of the meeting were either doubtful, or could not recollect, any motion being put to authorise the disposal of the land by way of transfer to the trust. The Secretary of KLALC, Ms Veronika Bailey, signed a certifi cate stating that the disposal of the land “does not contravene section 40D of the Land Rights Act in that the land is not of cultural signifi cance to Aboriginal people of the area”. A certifi cate in that limited form could have been justifi ed on the basis that a resolution to that effect was passed by KLALC members prior to the fi rst mortgage for the purposes of the joint venture, a position asserted by Mr Smith and others at various times. The certifi cate is silent as to whether there had been any separate approval for disposal to the trustee company.

Evidence and submissions before the Commission concerned three main issues arising from this transaction, namely:

(1) whether KLALC membership approved the transfer of the land to the trustee company;

(2) whether NSWALC approval was required for the transfer, and

(3) whether the transfer was carried out for an improper purpose.

It is convenient fi rst to consider the purpose underlying the transfer.

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Four possible purposes were identifi ed by witnesses before the Commission. These may be categorised as follows:

(1) to comply with requirements of the mortgagee;

(2) to protect the joint venture with Sanpine Pty Ltd from being subverted by a change in control of KLALC;

(3) to protect the joint venture against subversion by the appointment of an administrator to KLALC, and

(4) protection against government action to recover lands from Aboriginal land councils.

To these may be added a fi fth possibility, namely to protect individuals against embarrassing questioning by NSWALC, should the need for or expenditure of mortgage funds be questioned in relation to further NSWALC approvals, the need for such approvals being obviated by alienation to a trustee company.

In a general sense, all the possible purposes of the transfer, with the exception of (4), involve considerations specifi c to the joint venture land. Furthermore, they are, to a signifi cant extent, interrelated.

The fi rst record of the consideration of a transfer to a trust of the Morisset land appears in the minutes of a management committee meeting of the joint venture dated 16 October 2000. Those minutes noted a report by the Aboriginal Liaison Offi cer (Mr Bill Smith) in the following terms:

The issues associated with George Parry, Dargin etc continue to frustrate our sensible operation of the Land Council. Bill Smith confi rmed to the meeting that the KLALC members at various meetings have discussed the possibility of transferring the joint venture land to a separate Koompahtoo trust. We confi rm that they are currently seeking independent legal advice.

There was no clear evidence before the Commission to support any earlier discussion at meetings of KLALC, nor any evidence of KLALC seeking independent advice in late 2000. The fi rst legal advice which appears in the records is that sought by Sanpine Pty Ltd in March 2001. On 8 March 2001 a solicitor from Baldwin Oates & Tidbury wrote to her client Sanpine confi rming that she had been instructed that the joint venture sought to raise additional funds from the existing mortgagee, and that the mortgagee had requested that the property be transferred to a corporate trustee. The letter also noted:

The purpose of this alienation of property from the Land Council is to prevent any administrator who might be appointed in the future from upsetting the joint venture and ensuring continued stable management of the development.

Ms Jo Gamble, a member of KLALC, gave evidence that Mr Bill Smith addressed a meeting of members at which he had stated that “all our lands” needed to be protected and that this could be done by a transfer to a trust. The effect would be to protect the lands “from the government, local council and other parties including a breakaway group”. She added:

Bill explained that although the KLALC members were the benefi ciaries of the trust, the trust would be controlled by a board of directors. Therefore, even if the breakaway group controlled the KLALC executive committee, it could not control the trust and therefore, the land.

The concerns of the fi nancier are understandable: indeed, there was evidence that a number of more substantial sources of fi nance had been approached during the early stages of the joint venture, but had declined to become involved. The structure of the joint venture as a partnership, pursuant to which the management was vested in one partner and the land in the other, might well have seemed less than ideal from the point of view of a fi nancier. It was an arrangement which the mortgagee had initially accepted, but had apparently questioned when asked to provide further funds. Three factors could have given rise to this belated concern. First, the original mortgage was proposed for a period of one year, which was presumably anticipated to be a reasonable period within which the development could have proceeded towards a stage at which external funding would not be required. That forecast had not been fulfi lled. Secondly, a substantial increase in the borrowings was proposed, which no doubt increased the risk to the lender. Thirdly, it is possible that the lender had obtained some indication that there was dissatisfaction or potential instability in KLALC.

Why the possibility of the appointment of an administrator was identifi ed as an issue at that stage is unclear. However, it appears that members of the so-called “dissident group” had been raising questions about the expenditure of the mortgage moneys since the fi rst half of 1999. Because the joint venture management committee adopted a fi rm policy of non-disclosure in relation to the expenditure of the funds, fi nancial information was scarce and rumours rife. Further, on 15 March 2000 the acting Executive Director of



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NSWALC, Ms Kerri Wilkinson, had written to Mr Bill Smith enquiring as to the position with the mortgage, noting that the twelve month term was due to expire. Mr Smith responded indignantly, suggesting that the resolution of 4 February 1999 absolved KLALC of any further obligation to account to NSWALC. In short, the possibility that the NSWALC might become concerned about fi nancial irregularities could well have raised the possibility in the minds of the joint venture management committee members of a threat of appointment of an administrator.

These considerations suggest that the fi rst three possible purposes for the transfer to a trust are closely interrelated and were probably all factors that motivated Mr Bill Smith to promote that transaction to the KLALC members. Support for that view was also to be found in the evidence of a former Newcastle barrister, Mr Timothy Thomas, who advised the joint venture parties in relation to the transfer when the matter became known to the NSWALC in 2001. Finally, Mr Bob Scott agreed that the proposal for the transfer of the land to the trust was at least partly motivated by concern that the dissident group might gain control of the KLALC executive.

In his evidence before the Commission, Mr Bill Smith stated that his sole objective in pursuing the transfer to the trust was to protect the Morisset property from any possible “government action” to reclaim Aboriginal land. He denied that any part of his motivation was to avoid the possibility that a dissident group might gain control. The Commission does not accept that evidence as either accurate or truthful. It is implausible, because there was no identifi able threat of government action to reclaim Aboriginal land at that time, but there was ample evidence to indicate that those involved with the joint venture were concerned about the threat posed by the dissident group within KLALC. Mr Smith was unable to give any plausible reason for the difference between his evidence to the Commission and the report in the joint venture management committee minutes noted above.. The Commission is satisfi ed that the evidence Mr Bill Smith gave to the Commission was untruthful. Although Mr Smith denied that the transfer of the trust took place, he accepted in his evidence that the reasons for the transfer which were noted in the joint venture management committee minutes were improper reasons in the context of the Land Rights Act.

If the transfer of land to a trust company were to be effective, in the manner proposed, it would have stripped KLALC of assets, so that any democratic change in the executive would have been unable to regain control of

the joint venture assets, although KLALC would have remained a partner in the joint venture.

As already noted, at least part of the timing and motivation of the transfer was the need to obtain further fi nance for the joint venture. That need appears to have been urgent. Following the execution of the trust deed and transfer on 30 March 2001, the original mortgage was transferred to LKM Capital Ltd, a different fi nancier associated with the same solicitors as the original mortgagee. The Inteq mortgage was then discharged and a new mortgage entered into, dated 10 April 2001, which provided for a loan of $1.65 million. Of that sum, $780,000 appears to have been used to discharge the earlier mortgage. The new mortgage was signed on behalf of KLALC Investments by Mr Bill Smith and Mr Stephen Griffen. On the basis that the land was no longer vested in KLALC, and that there was no disposal by that entity, no approval was sought either from the members or from the NSWALC for the new mortgage and increased borrowings.

Approximately one week before the execution of the trust deed and the transfer, advice was sought by Baldwin Oates & Tidbury, on behalf of Sanpine, from a Sydney barrister, Mr John Waters. According to the letter written by Mr Stern of Baldwin Oates & Tidbury, to the Secretary of Sanpine, Mr Waters’ advice was not entirely supportive of the proposal and its effectiveness. The letter records that Mr Waters:

… expressed doubts as to whether the transfer of the land to a trust would achieve your stated result, ie protect the land if an administrator were appointed.

The proposed appointment by the trustee of a manager with an irrevocable power of attorney to act on behalf of the trustee was questioned as being an apparently sham transaction.

[Mr Waters] advised that the certifi cate previously issued by the Land Council consenting to the mortgage of the land to Inteq Custodians Pty Ltd, was not wide enough to certify disposal of the land by sale in compliance with s.40D of the Aboriginal Land Rights Act 1983.

The letter concluded by noting that, despite Mr Waters’ advice, “you” (referring somewhat inaccurately to Sanpine) “are proceeding with the transfer”. The letter also noted Mr Waters’ advice that should the transfer proceed, the joint venture agreement would need to be amended. That followed from the fact that KLALC would no longer be able to carry out its obligations

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in relation to land which it no longer owned, for the purposes of the joint venture.

Whether KLALC obtained separate legal advice in relation to its obligations under section 40D prior to the transfer is a matter of some doubt.

What is not in doubt is that no attempt was made to obtain NSWALC approval for the transfer to the trustee company. On 5 June 2001, the transfer and the mortgage to LKM were registered on the certifi cate of title. On 27 June 2001, the Chief Executive Offi cer of NSWALC, Mr Jeffrey Bradford, wrote to Mr Bill Smith noting that this transaction had been drawn to his attention. When the letter reached Mr Smith is unclear, but it was certainly faxed to Mr Briggs, at the KLALC offi ce, on 3 July 2001. The concern expressed by Mr Bradford undoubtedly came to the attention of Mr Bill Smith in early July 2001, as there was a meeting between, amongst others, Mr Bradford and Ms Veronica Graf of NSWALC on the one hand and, on the other hand, Mr Bill Smith and Mr Timothy Thomas, on behalf of KLALC. One outcome of these discussions was agreement that the directors of the trustee company would sign an undertaking not to deal with the Morisset property, nor to disburse the proceeds of the mortgage, before a meeting of the NSWALC on 20 August 2001. An undertaking in those terms was given by, amongst others, Mr Bill Smith and Mr Stephen Griffen. However, on 16 August 2001, Mr Thomas wrote a letter to Mr Bradford refusing to reveal any details of the expenditure of loan moneys by the joint venture.

About this time, the KLALC executive appears to have accepted that KLALC’s own processes had been defi cient. As a result, a further meeting of the KLALC membership was convened for 9 October 2001, properly advertised, with the express intention of seeking approval from the membership for the transfer of the land to the trustee company. On 9 October 2001 Mr Smith wrote to Mr Bradford enclosing copies of the advertisement and the motions passed at the extraordinary general meeting of KLALC. Whether those processes would have satisfi ed the NSWALC that appropriate steps had been taken to approve the disposal of the land to the trustee company and whether the NSWALC itself would have sought to give retrospective approval to the transaction is not known. Mr Bradford agreed, in his evidence to the Commission, that he may well have told Mr Smith at a meeting in October 2001 that the steps taken by KLALC constituted an end of the matter “as far as [he was] concerned”. Although Mr Bill Smith said in his evidence that he was satisfi ed at that stage that all necessary approvals had been obtained from NSWALC,

the Commission is satisfi ed that Mr Bradford did not say that, did not intend to convey that message and was not perceived by Mr Smith as having conveyed that message. The important issue in dispute between KLALC and the CEO of NSWALC concerned the failure of KLALC to obtain NSWALC approval for the transfer. KLALC representatives said that such approval was not necessary, but if it was necessary, no-one thought that Mr Bradford could give it. All the individuals involved were well aware that approval, if required, must be forthcoming from NSWALC itself. Indeed, the Commission has no doubt that Mr Smith understood that to be the position on 9 October 2001. On that date, he wrote to Mr Bradford enclosing material demonstrating that the relevant resolutions had been passed by KLALC. He did not suggest that this material satisfactorily resolved outstanding questions of authority – rather, he concluded the letter as follows:

I would very much appreciate it if you would kindly have these motions ratifi ed by the State Land Council [NSWALC] at its meeting this week.

On 16 November 2001 a variation of mortgage was executed by Mr Bill Smith and Mr Griffen increasing the amount secured over the land to $1.95 million. By that time, Mr Smith and Mr Griffen were acting on the basis that they had a free hand to deal with the land as they thought fi t. There was no evidence before the Commission suggesting that any meeting of KLALC had been properly convened to consider and pass a resolution with respect to this variation of the mortgage. Nor was any approval sought from NSWALC for the new transaction with the land. That was no doubt because Messrs Smith and Griffen were happy to take the approach that neither step was legally necessary. The Commission is satisfi ed that this was precisely the intended result of the transfer to the trust company. It permitted subsequent dealings in the land to be made without any necessary involvement of KLALC or NSWALC.

This action by Messrs Smith and Griffen should be seen in the light of the fi nancial circumstances of the KLALC–Sanpine joint venture. As noted above, the initial mortgage, less interest, was drawn down on 16 February 1999, when a fraction over $670,000 was paid into the Sanpine account with the National Australia Bank. However, by 31 December 1999, the balance in the account was less than $3,000. Throughout the following year, the account appears to have been kept in credit by sundry payments from companies associated with Mr Steer or Mr Adam Perkins. The payments to companies associated with Mr Bill Smith and Mr Bob



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Scott were running at approximately $11,000 per month. From 1 September 2000 the account was virtually static, with the exception of certain deposits and payments relating to the Villa World transaction in December 2000, which are dealt with in the following chapter of this report. The absence of activity on the account continued until 23 May 2001, when a further $300,000 was deposited from the draw-down on the increase in the loan from LKM Capital. Of that amount, $233,000 was disbursed in two days, largely on account of the outstanding amounts owing to the companies associated with Mr Smith and Mr Scott. As a result, a further draw-down of $278,000 was made on 18 June 2001. However, by 26 September 2001 the balance had again fallen under $3,000. On 22 October 2001 the account was overdrawn. It is clear that there was signifi cant fi nancial pressure on the joint venture parties to arrange further fi nance. That occurred with the further draw-down of a little more than $280,000 on 16 November 2001.

In addition, the general ledger for the Sanpine Unit Trust indicates that a series of signifi cant payments were made to a fi rm known as Welsh Property Consulting Pty Ltd which supplied fi nancial advice to Sanpine in relation to the joint venture. In particular, a report dated 24 October 2001 was provided to Mr Bob Scott. The document indicates that a copy was sent to Mr Graham Steer. Whether it was ever provided to the KLALC representatives on the joint venture management committee is not known. A number of inferences may be drawn from the document. First, Sanpine was attempting to sell its interest in the joint venture, and had been seeking to do so for some time. Mr Welsh noted:

The asking amount for the sale of the Sanpine interest and the terms which you may be prepared to accept are your decision and I will not attempt to infl uence you in that decision except to say that I am aware that quite a number of parties have looked at the proposal and to date no one has even come back with a counter-proposal (or have they) and that maybe that is telling us something.

Secondly, the cash fl ow calculations, which were the purpose of seeking the advice, included a price of the Sanpine interest at $16 million. Thirdly, Mr Welsh advised that the cash fl ow calculations would only be provided on the basis of a payment of $50,000. He continued:

As stated to you on a number of occasions, I have spent hundreds of hours on this matter and no fees have been forthcoming as yet.

The dire fi nancial state of the joint venture was clearly a matter of immediate personal fi nancial concern to Messrs Scott and Smith: their monthly payments could not continue unless fi nance became available. The only asset the joint venture owned which could be used to secure the necessary funds was the KLALC land. At that stage it was owned, either legally, or benefi cially, or both, by KLALC. Those with a relevant fi nancial interest were in the happy position that they had a fi nancier who was prepared to advance capital to a fi gure substantially in excess of the market value of the property, according to the valuation obtained three years earlier. In effect, the fi nancier was taking the risk of the land not being rezoned for residential subdivision. Further, the owner of the land, namely KLALC, was apparently willing to provide the necessary security without the need for any accounting as to the expenditure of funds in the past, or the proposed future expenditure. This result was achieved by Mr Bill Smith, in part to protect his own fi nancial interest in the joint venture proceeding. The steps taken to that end included two variations of the mortgage and the transfer to the trustee company.

The circumstances in which Mr Smith and Mr Griffen signed the second variation of mortgage in November 2001 are extraordinary for two reasons. First, the Chief Executive Offi cer of NSWALC, Mr Bradford, had expressly told Mr Smith that the transfer to the trustee company was not, in his view, valid and effective. Before the Commission, Mr Smith sought to assert that he did not believe that anything further needed to be done once KLALC had passed the necessary resolutions. For reasons given above, the Commission does not accept that Mr Smith had a genuine belief in that state of affairs at the time he executed the mortgage in November 2001. At the very least, he was reckless as to whether he and Mr Griffen had the legal authority to execute the mortgage. Secondly, at the request of NSWALC, he had, on 5 July 2001, executed an undertaking, as a director of the trustee company, that it would not in any way deal with the land, nor disburse any funds held by it “and used by way of mortgage” on the said land, pending the meeting of the NSWALC on 20 August 2001. The drafting of the undertaking left something to be desired and appears to have been prepared by the offi cers of KLALC Property & Investment Pty Ltd, possibly without legal advice. The undertaking came about as a result of discussions between Mr Bradford and Ms Veronica Graf (a Councillor for the Sydney/Newcastle region), Mr Bill Smith and other offi cers of NSWALC and certain members of KLALC. A letter prepared for Mr Bradford and sent to Mr Timothy Thomas, the barrister then

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representing KLALC, apparently on 13 August 2001, makes the following statement:

At the meeting it was agreed that Bill Smith would arrange for written undertakings, containing the terms listed below, to be urgently obtained from each of the Directors of KLALC Property Investments Pty Ltd [sic] and forwarded to NSWLAC [sic] which would have the effect of freezing all dealings with the subject land and the mortgage until the appropriate NSWALC approvals are granted. It was agreed that the undertaking would refrain [sic] the signatories from carrying out the following acts:

n from anyway dealing with, or promising to deal from anyway dealing with, or promising to deal with [the land], and

n from disbursing or committing to disburse in the from disbursing or committing to disburse in the future or agreeing to disburse any of the moneys obtained through he mortgage of [the land], valued at $1,650,000 loaned by LKM Capital Ltd.

The undertaking itself was said to operate “pending the meeting of the State Aboriginal Land Council on the 20th of August 2001”. Whether that was intended to be a specifi c time limitation, or merely an indication that it was, as proposed in Mr Bradford’s letter, to have effect until the relevant approval was obtained from NSWALC, is unclear. Further, it is apparent that, at least at that stage, it had not occurred to the NSWALC representatives that the trustee company might actually have little or no control over the expenditure of the funds: KLALC Property & Investments Pty Ltd was not party to the joint venture. On 16 August 2001, Mr Timothy Thomas, responding to Mr Bradford’s letter, merely noted that the undertaking was supplied “on or about 9 July 2001”. In answer to a request that “the names of the signatories required to access the mortgage for each disbursement” be supplied to NSWALC, Mr Thomas replied:

The names of the signatories would not seem to be relevant.

Accepting that the statement was made on instructions, it would not be open to Mr Smith to assert that the undertaking he gave was only as a director of the trustee company and could not bind him as a member of the joint venture management committee. However, even that point is by the way, as the proceeds of the loan were not passed into the joint venture account, but into the account of Sanpine. The signatories to that account were offi cers of Sanpine, none of whom included the KLALC members.

In his evidence before the Commission, Mr Smith sought to say at one point that he had legal advice from Mr Timothy Thomas to the effect that the trustee company was entitled to execute a further mortgage of the land. If he ever did get such advice in those terms, it was never obtained in writing and would have depended upon an assessment of the validity of the transfer to the trustee company. Yet, it was precisely because that transfer was in dispute that NSWALC sought undertakings from the directors of the trustee company not to deal with the land or the proceeds of the loan. Ultimately, Mr Smith was not able to explain how he could execute the variation of the mortgage consistently with his undertaking. Mr Griffen, on the other hand, said that he had forgotten about the undertaking by the time he came to execute the variation of the mortgage. The Commission is satisfi ed that, in the case of Mr Griffen, he gave very little attention to the documents he signed: he was, as already noted, a willing lieutenant who did the bidding of Mr Bill Smith. In so doing, he betrayed the trust placed in him by the membership of KLALC, as their Treasurer. The position of Mr Smith, however, is different.

Although when the joint venture mortgage funds ran out Mr Scott ceased being paid, the Sanpine parties apparently ensured that Mr Smith continued to receive his monthly payments. However, after the money was drawn down from the mortgage variation on 18 June 2001, it would appear that he received a cheque for $5,094 on 13 July 2001, being the day after the undertaking was sent by facsimile to NSWALC. He received a further payment of $5,094 on 9 August 2001. In total, an amount of approximately $138,000 was debited to the Sanpine account in the month of July 2001 and a further $132,000 in the month of August 2001. Whether he knew the precise fi gures or not, Mr Smith must have been aware of signifi cant disbursements to himself, which, if he did not know but enquired, he would have known came from the proceeds of the mortgage. He must have known, no later than the end of October 2001, that further funds were needed. Whether or not he could have discovered the extent of the disbursements at the time that he gave the undertaking on 5 July 2001, it is apparent that he made no attempt to see that the loan moneys were preserved in a bank account. At least in terms of probabilities, the Commission is satisfi ed that Mr Smith did in fact have a general knowledge of the state of the account. Mr Scott had such knowledge and, because of their close relationship, would have told Mr Smith what was necessary for him to know in order to achieve the further mortgage arrangements, which were to their mutual benefi t.



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Mr Smith’s conduct in signing the undertaking was iniquitous. The Commission is satisfi ed that he signed it because it cost him nothing to do so and because it might assist in appeasing NSWALC. After signing it he allowed a letter from Mr Thomas to go to NSWALC which continued to conceal the true position as to the recipient of the loan funds and the manner of their disbursement. This he did to conceal the fact that he was personally benefi ting from loans obtained against the security of the land. The detriment to KLALC was not merely the payment going to Mr Smith on a monthly basis, but the interest which accrued on that payment for as many years as it took to subdivide and sell the property. Putting to one side any question of the validity of the transactions, the Commission is satisfi ed that at all stages during the period from March to November 2001, Mr Smith’s actions were primarily concerned to promote his own interests and were at the expense of the interests of KLALC.

Before leaving this issue, it is necessary to give some attention to the role played by Mr Bob Scott in the transfer of the land to the trustee company and in the further mortgaging of the land. Sanpine had an immediate interest in any proposal to transfer the land to a third party, because that would place it beyond the power of KLALC to carry out its obligations under the joint venture agreement as owner of the land subject to the development. Apart from anything else, KLALC was obliged to make the land available in two stages for the purposes of the joint venture. A disposal to a third party would have the potential to put it beyond the power of KLALC to comply with its contractual obligations. Nevertheless, Sanpine, through Mr Bob Scott, appears to have promoted the proposal to place the land in a trustee company. The possibility was apparently discussed at a joint venture management committee meeting on 16 October 2000, as noted above. In March 2001, Sanpine sought legal advice, through its solicitors from counsel, concerning the effectiveness of the proposed transfer of the land to a trust, viewed from the perspective of the KLALC interests in the joint venture. Mr Waters of counsel also apparently advised in relation to the adequacy of the certifi cate obtained under section 40D of the Land Rights Act consenting to the mortgage of the land to Inteq Custodians Pty Ltd. He advised that the certifi cate was not suffi ciently wide to constitute an approval of the transfer of the land to a trust.

Support for the view that Sanpine was intimately involved in the proposed transfer is the content of the letter from Sanpine’s solicitors to Sanpine itself, dated 8 March 2001, noting:

We are instructed to prepare a unit trust where the directors of the corporate trustee shall be the executive committee of the members of the community and that the members of the community shall be the unitholders who shall have voting rights.

The only unitholder, however, to have distribution rights shall be the corporate entity of the Land Council itself which shall have no voting rights.

The letter was prepared by a consultant of the fi rm: the partner having the conduct of the matter, who was away when the letter was sent, told the Commission that the fi rm did not in fact prepare the unit trust, because it was a matter which he considered beyond the areas of his competence. Nevertheless, a conference with counsel went ahead and the partner, Mr Peter Stern, attended the conference. In a letter dated 9 June 2001, Mr Stern wrote to both Sanpine and KLALC Property & Investment Pty Ltd jointly, sending a copy of the letter to Mr Bill Smith. Amongst other points referred to in the letter, he noted Mr Waters’ advice that:

There is no certainty that alienation of the land to the trust would be immune from attack from an administrator, although transfer to the trust would appear to be the best possible protection.

Transfer of the land would require compliance with Section 40D of the Aboriginal Land Rights Act 1983.

…

4. The joint venture agreement will have to be amended.

Each element of the advice, set out above, was substantially ignored.

In relation to the need for a further approval from the NSWALC under section 40D of the Land Rights Act, both Mr Smith and Mr Scott asserted they believed this was not necessary. In support of his view, Mr Scott said that he relied upon statements made in two letters written in May 1999, one by the then Chief Executive Offi cer of NSWALC, Ms Norma Ingram, and the other written by the then Chairman, Mr Ossie Cruse. Each, read in its historical context, was intended to give some reassurance and comfort to the KLALC after what Mr Bill Smith (and possibly others) had clearly regarded as an intrusive and unnecessary examination of the terms of the joint venture. Although the letter signed by the Chairman of the NSWALC referred to “the signing off on NSWALC responsibility under the provisions of the NSW Aboriginal Land Rights Act”, it was not a legal

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document and did not purport in its terms to express a view about the scope of the “signing off” which had occurred. The letter from the Chief Executive Offi cer was hardly supportive of the construction sought to be placed upon it after the event: it expressly identifi ed the possibility that NSWALC might have further responsibilities as “required by the law”.

The fi rst apparent reliance placed upon this correspondence, at least in the written record, appears in a letter written by Mr Bob Scott to the Premier on 3 December 2002. In the context of public criticism of the joint venture, Mr Scott noted that KLALC had formed a trust and resolved to transfer the land to a trust to meet the needs of its fi nancier.

In transferring the land to the trust, … the KLALC made an error. Relying on assurances from the NSWALC (which can be clearly established), it failed to comply with some requirements of Section 40D of the Land Rights Act. Section 40D sets out the procedure, which a Local Aboriginal Land Council must follow before land can be disposed of. The error of KLALC was inadvertent. KLALC was led into error by the misleading conduct of the CEO of the NSWALC.

Aspects of that statement are startling. First, if “KLALC” made an error, it must have been an error made by the executive who were responsible for obtaining appropriate legal advice in relation to the establishment of the trust and the disposal of the land. The moving party at KLALC was undoubtedly Mr Bill Smith. If he had been misled by the misleading conduct of the CEO of NSWALC at the time, Ms Norma Ingram, he surely had the opportunity to provide a copy of the correspondence he received from her to Mr Waters, who had advised on the very matter. As noted above, he received from Mr Stern a copy of a letter setting out Mr Waters’ advice. Neither he nor Mr Scott put Ms Ingram’s letter in front of Mr Waters as support for a contrary position. Mr Smith, however, asserted that he had obtained contrary advice from Mr Timothy Thomas, barrister. Although he thought that he had had such advice in writing, there is no evidence before the Commission to suggest that he had obtained a written advice. Although Mr Thomas wrote letters to NSWALC on behalf of KLALC or the trust company, he did not mention any such advice being relied upon in relation to the transfer. His letter to Mr Bradford of 16 August 2001 referred to Mr Bradford’s letter of 13 August 2001 and noted that his “clients do not concede that a fresh section 40D approval is

required” but continued “I have been instructed to reply as set out below”.

Whilst the reply set out by Mr Thomas in the letter sought to persuade Mr Bradford that no further approval was required, in his evidence before the Commission Mr Thomas denied that he had advised Mr Smith that no further approval was required.

In his summary of events relating to the joint venture, prepared for submission to the Premier in December 2002, after the administrator had been appointed to KLALC, Mr Scott set out in some detail the explanations given to the KLALC executive and to a general meeting of KLALC, in January to March 2001, when the trust was approved. There is no suggestion that independent legal advice was obtained at that stage in relation to section 40D. Although the précis stated that “all the signed documents” were “hand delivered to the legal department of NSWALC” the précis failed to say that that only occurred after the trust had been established, the land transferred to it and the questions raised by NSWALC. Further, in his letter to the Premier, Mr Scott signifi cantly did not suggest that KLALC relied upon its own legal advice: rather it was the misleading conduct of the CEO of NSWALC which, it was said, led to it not seeking approval for the transfer.

Whatever Mr Thomas might have said, Mr Scott well knew that the legal advice obtained on his instructions from Mr Waters, was to the effect that a further approval was required. He did not tell the Premier that.

In his evidence to the Commission, Mr Scott stated, consistently with the evidence of Mr Smith, that Mr Thomas had confirmed his own opinion that “the section 40D approval obtained in 1999 [for the first mortgage] was the end of the section”. Although in evidence Mr Scott did rely upon the letter from the CEO of NSWALC, Ms Ingram, of May 1999, he stated that the misleading conduct of the CEO to which he referred in his letter to the Premier was conduct engaged in by Mr Geoff Bradford. If so, that provided another element of the letter which was misleading: that conduct only occurred after the transfer had been effected. That being established, he was asked whether there was anything else, other than the two letters of May 1999, which led him to the view that the NSWALC approval covered the whole of the joint venture, including the transfer now proposed to the trust. He had agreed there was nothing else. However, when he later returned to the witness box he “corrected” his evidence and stated



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that other assurances had been given by people “who were members of the Council at the time”.

Whether any such additional “assurances” were given is impossible to establish on the evidence. They were only referred to when it became apparent that the letter to the Premier may have been defi cient and misleading. They were at fi rst denied and then recalled. In what way they were relied upon was never made clear. The Commission is satisfi ed that they constituted a concocted embellishment by Mr Scott. More importantly, the Commission is satisfi ed that both Mr Scott and Mr Smith had persuaded themselves that a transfer to a trust company could be effected without the need to return to the NSWALC and risk further exposure of their own fi nancial interests in the proceeds of the loans which had been and were being obtained.

Ostensibly, Mr Scott had no role to play in the decision-making processes of KLALC. On the other hand, it is clear that he was intimately involved in everything Mr Smith did in relation to the Sanpine joint venture and the CKT joint venture discussed in Chapter 8. He had attended the meeting with the Registrar of the Aboriginal Land Rights Act in 1999 when questions about Mr Smith’s conduct were raised; he had been responsible for obtaining legal advice in relation to the proposed trust arrangement and he established the CKT joint venture with KLALC, through Mr Smith. In relation to the Villa World transaction discussed in Chapter 6, Mr Kim Wilson said, in evidence which the Commission accepts as being a substantial refl ection of reality, “to get to Bill Smith you have to go through Bob Scott”. How much infl uence Mr Scott exercised over Mr Smith is unclear: what is clear is that he encouraged and supported Mr Smith to take the necessary steps to achieve the transfer to the trust and to effect the variations of mortgage without the further approval of NSWALC. Although Mr Bill Smith is undoubtedly a forceful character in his own right, the Commission is satisfi ed that in relation to the business dealings of KLALC, he was infl uenced to a signifi cant extent by advice given by Mr Bob Scott.

Corrupt conduct? – Mr Bill Smith

The Commission was invited to consider whether, in the light of the involvement of Mr Bill Smith in the transfer of the Morisset property to the trustee company, given his motives, as set out above, it may be argued that his conduct in seeking to have the KLALC membership approve a transfer of the Morisset land to the trustee

company and his own action in signing the transfer (with Mr Griffen) on behalf of the KLALC constituted the dishonest or partial exercise of his offi cial functions, as Chairperson, for the purposes of section 8(1) of the ICAC Act. The fact that the transfer was approved by the KLALC membership at a properly convened meeting does not excuse Mr Smith’s conduct, which included the failure to disclose to the meeting at which the vote was taken his own personal interest in seeking to have the transfer effected. The Commission is satisfi ed that the conduct in question falls within section 8(1) of the ICAC Act. It was in substance, a continuation of the improper conduct arising from Mr Smith’s position as Aboriginal Liaison Offi cer, his receipt of signifi cant remuneration in that position and his failure to disclose to the KLALC his interests in that regard.

For the reasons set out above in relation to the fi ndings of the Commission with respect to his position as Aboriginal Liaison Offi cer, the Commission is also satisfi ed that a relevant tribunal of fact could fi nd that such conduct constituted a criminal offence, namely the common law offence of offi cial misconduct, if proceedings for that offence were instituted. The Commission is also satisfi ed that, being a continuation of the conduct addressed in relation to his role as Aboriginal Liaison Offi cer, it constituted an instance of the continuing conduct in contravention of section 56B of the Land Rights Act and was, for that purpose also, an offence.

In these circumstances the Commission is satisfi ed that Mr Bill Smith, former Chairperson of KLALC, engaged in corrupt conduct in relation to his involvement in the transfer of KLALC land at Morisset to KLALC Property & Investments Pty Ltd which involved him in a confl ict of interest between his position as Aboriginal Liaison Offi cer for the joint venture and Chairperson of KLALC.

Section 74A(2) statement – Mr Bill Smith

Because of the passage of some three years since the conduct relating to the transfer to the trustee company, no charge could properly be laid for a contravention of the Land Rights Act provisions. This is because such offences are summary offences and prosecution action must therefore commence within six months of the commission of the offence. Accordingly, the Commission does not recommend that consideration be given to prosecution for such an offence. Further, given the period of time which has elapsed and the absence of records in relation to what occurred at various meetings

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of the KLALC, the Commission does not recommend that any prosecution be considered in relation to the common law offence.

Before leaving this issue, it should be noted that the Commission’s conclusions do not depend on any view as to the legality of the transfer by a Local Aboriginal Land Council of land owned by it to a trustee company. Whether a Local Aboriginal Land Council has such power is a matter which may be open to genuine differences of opinion. The focus of concern for present purposes is that Mr Smith’s role in the process adopted in the present case was motivated by the improper purposes identifi ed above. Further, because the conclusions of the Commission in that regard relate specifi cally to Mr Bill Smith, it is not satisfi ed that any other person was implicated in the corrupt conduct identifi ed.

The Commission does not consider that there is suffi cient admissible evidence to warrant consideration being given to any prosecution of Mr Smith for any offence of giving false or misleading evidence contrary to section 87 of the ICAC Act.



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At the south-eastern tip of the Morisset Hospital site, part of which was the subject of the Sanpine joint venture, the land owned by KLALC adjoined an entirely independent development being undertaken at Wyee Point. The Wyee Point development was not, in 2000, connected to the Hunter Water Board sewage system. Establishing that connection was an essential part of the Wyee Point development. The most effi cient means to achieve that goal was to construct a rising sewer main from south to north, across KLALC’s land.

At some stage before November 1999, the owner of the Wyee Point development sought the consent of KLALC to the construction of a rising sewer main. However, a general meeting of KLALC held on 8 November 1999 voted to oppose the passage of the pipeline through the KLALC land. This opposition appears to have been based, at least in part, on the concern that the Wyee Point development would provide competition for KLALC’s own joint venture with Sanpine.

By the second half of 2000, the Wyee Point development was owned by Villa World Limited (“Villa World Ltd”), a property development company based in Queensland. By letter dated 13 December 2000 Mr Bill Smith, as Chairperson of KLALC, and Mr Stephen Griffen, as Treasurer of KLALC, advised Hunter Water Corporation that KLALC had approved the construction, operation and maintenance of the proposed sewer line. The sewer line was built in 2001.

One question which arises from these circumstances is whether Mr Smith and Mr Griffen had authority to give the consent provided on behalf of KLALC on 13 December 2000. That, however, is not the issue of central relevance for the Commission. Rather, the concern of the Commission arises from the circumstances in which the consent was given. This included the payment of $100,000 by Villa World to Sanpine, $40,000 of which was paid by Sanpine to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith and $40,000 to Bronzewing Property Holdings Pty Ltd, a company associated with Mr Scott, through his partner, Ms Lesley Molony. The other $20,000 received by Sanpine was paid to KLALC. The question to be considered by the Commission is whether those payments constituted corrupt conduct and, if they did, who was implicated in that conduct. The Commission is satisfi ed that the amounts of $40,000 were each in the nature of bribes and were understood by the parties involved at the time to have been improper. However, various explanations were given as to the purpose and intended effects of the payments which need to be

addressed, in their context. Similarly, it is necessary to consider the circumstances of the transactions in order to identify which parties were involved.

Background

Prior to the year 2000, the land at Wyee Point appears to have been owned by Goldris Pty Ltd, a company associated with a Mr Spencer Simmons. Goldris sold its interest in the land to Villa World Ltd, subject to various conditions, including an obligation to obtain approval for the rising sewer main. At about the time that KLALC declined to approve the construction of the rising sewer main, Mr Simmons approached Mr Kim Wilson, who operated a native title consultancy business, to obtain assistance in dealing with KLALC. On 11 July 2000, Mr Blackley of Pulver Coper & Blackley Pty Ltd, consultants to the Wyee Point development, wrote to Lake Macquarie City Council noting that construction had not been able to commence because of the delays in providing the sewer main. Mr Blackley anticipated that the developer would need an extension of the subdivision approval. By September 2000, little progress had been made in obtaining the necessary consent from KLALC, but it is clear that Mr Wilson had established contact with Mr Adam Perkins, Mr Bob Scott and Mr Bill Smith. Whilst he was aware of the KLALC–Sanpine joint venture, it was unclear whether he believed that Sanpine Pty Ltd had any legal involvement in relation to the consent being sought from KLALC. However, at a practical level, Mr Wilson recalled Adam Perkins giving him “very strong advice” that in relation to the day-to-day activities of KLALC and particularly things to do with developments, “you had to talk to Bob Scott to get through to Bill Smith”. The Commission is satisfi ed that that description accurately described the relationship of those parties at that time and accepts that Mr Perkins conveyed that message to Mr Wilson.

Between May and September 2000, Mr Wilson had discussions, both in person and on the telephone with each of Adam Perkins, Bob Scott and Bill Smith. These contacts were discussed at a management committee meeting of the joint venture on 11 September 2000. Signifi cantly, the minutes of that meeting record:

The meeting agreed that Bronzewing Property Holdings Pty Ltd and Smith & Sons Pty Ltd undertake the necessary detailed studies to assess the benefi ts/disadvantages of the proposal and Adam be charged with the responsibility to negotiate a suitable compensation package to meet the costs of this investigation. Any excess of this funding will be remitted to the KLALC.

Chapter 6: The Villa World consent

69

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The Commission is satisfi ed that, at least by September 2000, those involved in the joint venture management committee, including Mr Scott and Mr Smith, had decided that money should be obtained from Villa World for the purpose of giving proper consideration to its request. Whether any view had been formed about the likely outcome of the request is less clear. Whilst little progress was made on the matter until early November, on 6 November 2000 Mr Scott sent a memorandum to Mr Perkins stating:

I trust that you have made it clear to the Villa World people during your conversations that the consultancy comes with no guarantees whatsoever.

The rising main proposal must be of benefi t to the KLALC and the JV – obviously before it can be recommended.

Messrs Scott, Perkins and Wilson held further discussions in early November. On 9 November 2000 the minutes of a further meeting of the joint venture management committee record:

In relation to the Villa World matter a lot of work had commenced but to date no agreement has been reached with Villa World. It was agreed that Adam as a matter of urgency complete the negotiation and agree a settlement with Billy or Bob. Any payments from the amount negotiated should be paid by agreement. Before any payments are made all members of the committee are to be informed.

The Commission is satisfi ed that the “committee” referred to in the last sentence was the joint venture management committee. As will be noted below, when agreement was reached Mr Perkins was adamant that it must not be disclosed to anyone outside Villa World without Sanpine approval. However, what is also clear from this minute is that, by 9 November 2000, members of the joint venture management committee had agreed amongst themselves that any approval would be made conditional on payments to Bill Smith and Bob Scott. There is no suggestion in the minutes that Sanpine was then opposed in principle to the construction of the rising sewer main across the KLALC land.

On 16 November 2000, Mr Wilson sent to Villa World an email with an attachment setting out a proposed agreement. The email stated that the proposal had been formulated by him following a meeting with Adam Perkins and during discussions with Mr Scott. Mr Wilson asked:

Can you authorise me in principle to forward this on the basis that Scott/Smith indicate that this is the way they wish to proceed.

Once the basic terms are settled it would be proposed to draw up and exchange letters of agreement.

The substance of the proposal was that Villa World would appoint both Smith and Scott personally as consultants for a period of three months –

… for the purpose of achieving the completion of the necessary documentation by Hunter Water from the Koompahtoo Aboriginal Land Council which will satisfy Hunter Water that it can commence construction of the sewerage transfer line through land owned by Koompahtoo Land Council.

The key part of the proposal is of importance and reads as follows:

The consultancy will provide for the payment to each of Bob Scott and Bill Smith the sum of $10,000.00 per month plus GST.

There will be an incentive provision that if the required approvals are provided within the fi rst month of the consultancy there will be a bonus payment to each of $20,000.00. If the necessary approvals are obtained in the second month of the consultancy the bonus payment will be $10,000.00 to each and if the approval is obtained in the third month of the consultancy there will be no bonus payment.

The method of payment of the basic consultancy fee will be that each month 50% of this amount, that is $5,000.00 per month plus relevant GST will be paid to each consultant.

Once the relevant approvals have been provided the company will also make a payment of $25,000 to the Charles Perkins Children’s Trust.

In the event that the necessary approvals are not gained within the three month period the consultants will only be entitled to the amount of money already paid, that is one half of the $10,000.00 per month as indicated above.

It will be a condition of entering into the agreement and for the fulfi lment of the agreement by Villaworld that Koompahtoo Land Council undertake that there will be no disruption to the construction of the sewerage line so long as Hunter Water and its servants and agents fulfi l the requirements of those matters agreed between them and Koompahtoo Land Council for the construction of the pipeline.


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However, that conclusion does not mean that he received the email of 16 November 2000 from Mr Wilson, nor that he was aware of the content of that proposal prior to the agreement being entered into. In addition, his personal knowledge would probably not constitute knowledge of the company at that time.

Although he did not provide Villa World’s lawyers with a statement for the purposes of the Commission’s investigation, Mr Holt came to Sydney with the Villa World team and gave evidence to the Commission on 2 July 2004. Whilst he did not deny his own knowledge of the contents of the proposal of 16 November 2000, he was otherwise vague about the circumstances of the transaction. It was true that the transaction had taken place almost four years earlier, and that Mr Holt had recently left the company for personal reasons and had been under some personal stress a number of months prior to giving evidence. However, the Commission was satisfi ed at that time that numerous answers in which he denied knowledge or recall of particular matters were either untruthful or suggested he was being uncooperative in the sense that he was not applying his mind to the questions put to him. Either way, Mr Holt appeared to be a reluctant witness, although he had attended voluntarily at the request of Villa World management, and his answers were unconvincing. Although he was not a member of the Villa World senior management team, Mr Holt was the manager responsible for the Wyee Point development in 2000 and was clearly the principal point of contact between Mr Wilson and Villa World.

Following the evidence provided to the Commission in February–April 2004, Villa World submitted that knowledge of the 16 November 2000 proposal was limited to Mr Holt, had never been conveyed to senior management and that therefore neither the company nor other individual senior offi cers had knowledge of the facts which might lead to an inference that the proposed payments were corrupt.

On learning of the approach being taken by Villa World to exonerate itself, Mr Holt formed the view that there was a confl ict of interest in relation to his circumstances and those of Villa World and its senior management. Accordingly, he sought independent legal advice and, having obtained separate representation, on 1 September 2004 made a new and detailed statement to the Commission. The tenor of that statement was that:

(a) members of the senior management team of Villa World were aware at all stages of the proposed transaction in relation to KLALC and were aware, in particular, of the content of the proposal of 16 November 2000;

(b) he, Holt, had neither the authority nor the responsibility for entering into such an agreement; and

In giving evidence to the Commission, Messrs Perkins, Scott and Wilson distanced himself from responsibility for the content of the proposal of 16 November 2000, except that Mr Wilson appeared to accept responsibility for the suggestion that $25,000 be paid to the “Charles Perkins Children’s Trust”, a charity which appears not to have existed at that time. (That largely innocuous element was removed by the time the next draft was prepared.) But responsibility for aspects of the proposal is not of present relevance: the Commission is satisfi ed that Messrs Perkins, Scott, Smith and Wilson were each aware of the terms of the proposal at the time it was formulated.

As will be seen below, the next version of the proposed agreement omitted reference to Scott and Smith and provided for an agreement between Villa World and Sanpine, with the payment of up to $100,000 being made by Villa World to Sanpine. In giving evidence to the Commission, Villa World senior management was adamant that none of the responsible offi cers knew anything about the proposal to make payments to Smith and Scott or their companies. That evidence asserted ignorance of the ultimate intended recipients of the funds and hence constituted a denial of direct knowledge of the facts which might have rendered the payments corrupt. In order to assess the credibility of those denials, it is necessary to consider to whom the proposal of 16 November 2000 went, within the Villa World administration.

The email from Mr Wilson was addressed to Mr Dale Holt and copied to Mr Doug Merritt. There is no doubt that it reached Mr Holt: whether it reached Mr Merritt is less clear. Mr Merritt denied that he had seen the document and pointed out that the email address would not have been suffi cient for it to reach him, because it contained the name “primus” instead of “iprimus”. Mr Merritt also stated that he was no longer involved in the management of Villa World in November 2000 and took no part in the transaction under consideration. For reasons noted below, the Commission is satisfi ed that Mr Doug Merritt, although he ceased to be the Chief Executive Offi cer of Villa World on 1 September 2000, continued to be involved in this particular project in November.

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(c) the changes to the agreement from the proposal of 16 November 2000 were made at the behest of senior management by the company’s in-house legal counsel, Mr Barry Cronin.

This change in position led to the company requesting that Mr Holt return to the witness box and be made available for cross-examination. This was done on 11 October 2004. Various matters going to the credibility of Mr Holt’s latter statement were put to him, both by Counsel Assisting and by independent counsel for the company, who had not appeared at the earlier hearing.

There is no doubt that several of the criticisms made by the company of Mr Holt’s change in evidence have substance to them. In particular, Mr Holt’s later statement was clearly the product of a belief that he had been “set up” by senior management to take responsibility for any adverse inferences that could be drawn about the company’s apparent conduct. Indeed, a number of passages in his evidence were argumentative, rather than factual, and related to matters of which Mr Holt had no direct knowledge. Other passages gave the appearance of being a reconstruction of events, rather than a record of his recollections. In a sense, Mr Holt moved from being uncooperative to being over-assertive. Accordingly, the Commission has approached his evidence with a degree of caution. The company also submitted that his intention to be vindictive meant that his earlier evidence, which asserted a lack of recollection on many matters, should be preferred. However, because the Commission is of the view that his earlier evidence was itself unsatisfactory, it is not prepared to approach his evidence generally on that basis.

Against that background, it is necessary to note the changes made to the proposal of 16 November 2000, before the fi nal agreement was reached. On 17 November 2000, Mr Scott sent Mr Wilson a further proposal on Bronzewing letterhead. Instead of a consultancy agreement between Villa World and Messrs Scott and Smith, the new proposal involved a consultancy agreement between Villa World and Sanpine. The proposal specifi ed that the following points were to be incorporated into the consultancy contract:

n The contract is to be between Villa World Pty Limited (or which ever of their companies owns the land at Wyee Point) and Sanpine Pty Limited of level 4, 65 York Street, Sydney (for you [sic] information Sanpine is the Joint Venture partner of the Koompahtoo Local Aboriginal Land Council in relation to the land described above and

Bronzewing Property Holdings are the Project Managers of the venture.

n The Agreement will be from the period of signing to 28 February 2001.

n Sanpine will meet with the Mayor of Lake Macquarie City Council and ask him to arrange a meeting with a delegation representing the Koompahtoo Local Aboriginal Land Council. It is envisaged that at this meeting the Mayor will explain to the delegation the benefi ts that will fl ow to the City Council, existing residences and the proposed development within the Wyee Point area once Koompahtoo grant approval for the sewer line to traverse their land.

n A delegation of Koompahtoo members will meet with yourself and Spencer Simmons at Wyee Point to see fi rst hand the land that is the subject of the current discussions.

n The Chairman of Koompahtoo must seek agreement from the members of the Land Council at a correctly convened meeting. The approval is to be forthcoming no later than the Land Council meeting of February 2001.

n The Land Council must acknowledge in their letter of consent that they will sign under seal any necessary documents and give consent required by any Statutory or Government authorities to allow the easement to be granted and the sewer line to proceed.

n Compensation will be paid to the Koompahtoo Local Aboriginal Land Council by the relevant authorities at fair and reasonable valuation for them granting the easement over their land.

n Your clients [sic] company must make representations to the relevant authority viz. Hunter Water Corporation or Public Works Department to the effect that during the construction phase of the easement two (2) members of the Koompahtoo Land Council are to be engaged on a work experience basis for a nominal salary whilst the surveying of the easement takes place and three (3) members of the Koompahtoo Land Council are to be present when the excavation work is being carried out on the basis of Heritage Consultants, again at a nominal salary.



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n The consultancy fee is to be $80,000 + GST ($88,000) which is to be paid as follows:

i) $40,000 + GST ($44,000) to be paid at commencement of consultancy. The consultancy shall commence immediately upon signing of the agreement.

ii) $40,000 + GST ($44,000) to be paid upon receipt of a letter from Koompahtoo Local Aboriginal Land Council (signed by it’s executive) granting permission for the sewer easement to traverse the Koompahtoo land as shown on the Hunter Water Corporation plan.

iii) In addition to its (i) and (ii) an additional consultancy bonus fee of $20,000 + GST ($22,000) shall be paid if Koompahtoo Local Aboriginal Land Council grants approval in writing under seal for the easement to be created prior to 31 December 2000.

One effect of the changes was to make the proposal relatively anodyne, from which it might be inferred that the earlier proposal had been identifi ed as at least potentially improper. Perhaps for that reason, and because he could not deny knowledge of and involvement with the earlier proposal, Mr Scott, in his evidence to the Commission, repeatedly distanced himself from the negotiation of the arrangements and in particular the facsimile of 17 November 2000. The contents of that document were, he stated, effectively dictated by Mr Kim Wilson leaving him, Mr Scott, playing a “secretarial” role. Having regard to the terms of the document and having heard both Mr Scott and Mr Wilson give evidence, the Commission fi nds Mr Scott’s evidence in this respect implausible and unacceptable. The Commission has no doubt that the changes were discussed by Mr Wilson and Mr Scott, and accepts that Mr Wilson may have had a signifi cant contribution in relation to the content of the November 17 proposal. Broadly speaking, Mr Wilson’s client, Villa World, wanted a consent from KLALC; Mr Scott was in effect dictating the terms on which that consent might be forthcoming. It is at least likely that Mr Wilson told Mr Scott that, if he wished to make changes to the proposal, it would be appropriate for him to put forward a further proposal. Each of them was aware of the terms of the previous proposal and each may have contributed to the new proposal. It is unlikely that there was a single author with sole responsibility.

The one reason why Mr Scott’s claims as to Mr Wilson’s dominant role might be signifi cant relates to the role of Villa World. If Mr Wilson dictated the changes, it

may have been because Villa World offi cers had taken exception to the terms of the 16 November 2000 proposal. However, the only objective documentary evidence, being Mr Wilson’s fee memorandum to Villa World, records no contact between Mr Wilson and Villa World offi cers from 16 to 19 November 2000 inclusive.

The next step in the process was the creation, on 20 November 2000, of a draft agreement proposed by Villa World Limited and addressed to Sanpine Pty Ltd. The substance of that proposal refl ected the points identifi ed by Mr Scott in his facsimile of 17 November 2000. The draft agreement read as follows:

The parties agree that for the consideration set out in this letter, Sanpine Pty Ltd will facilitate the necessary consents and documentation to grant permission to Hunter Water Corporation to approve the construction of the sewerage transfer line through the land owned by Koompahtoo Land Council at Morrisset for the purpose of construction of a rising sewer main.

As well as obtaining the necessary consents and authorising Hunter Water Corporation to proceed with the necessary works Sanpine Pty Ltd will also ensure that the Agreement entered into by Koompahtoo Land Council with Hunter Water Corporation for such works will not be subject to any disruption in the construction phase so long as Hunter Water Corporation and its servants and agents fulfi l the requirements of those matters agreed between it and Koompahtoo Land Council for the construction of the pipeline.

…

Villaworld Limited will arrange for Mr Spencer Simmons and Mr Kim Wilson to attend at a meeting to be nominated by Sanpine Pty Limited with members of the Koompahtoo Land Council to view the land owned by Villaworld Limited at Wyee Point.

Villaworld Limited will provide any reasonable assistance requested by Sanpine Pty Limited in its negotiations with Hunter Water Corporation and the Public Works Department but Sanpine Pty Limited will take primary responsibility for the negotiation of the Agreement with Hunter Water corporation for the permission to construct the pipeline.

…

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The consideration that will be provided by Villaworld Limited will be as follows:

1. $40,000.00 plus GST will be paid at the commencement of the consultancy and the consultancy will begin once Villaworld Limited receives a signed copy of this letter by Sanpine Pty Limited.

2. A further $40,000.00 plus GST will be paid to Sanpine Pty Limited on receipt of a letter duly signed and authorised by the Koompahtoo Local Aboriginal Land Council addressed to Hunter Water Corporation granting permission for the sewer rising main to traverse the Koompahtoo land as shown on the Hunter Water Corporation plan. Such letter will be in terms that will satisfy Hunter Water Corporation that it can commence construction of the sewerage transfer line through the land owned by Koompahtoo Land Council.

3. Should the terms of 2 above be completed prior to 31 December 2000 a further payment of $20,000.00 plus GST will be paid by Villaworld Limited to Sanpine Pty Limited.

4. In the event that the necessary approvals are not gained within the period of this agreement Sanpine Pty Limited will only be entitled to the amount of money paid at the commencement of the agreement, i.e. $40,000.00 plus GST.

For the avoidance of any doubt the term of this contract is from its commencement at the date of signing and return to Villaworld Limited by Sanpine Pty Limited and the Agreement will terminate on 28 February 2001.

This document was sent to Mr Holt at Villa World Limited at 2pm on 20 November 2000 electronically, a copy being sent to Mr Doug Merritt, at his correct email address. An annotation on the covering email records Mr Holt’s instructions that the document should be forwarded to Mr Whitewood and others for their comments. The Commission accepts that senior management at Villa World became aware of the contents of the attached draft agreement.

The covering email was addressed and commenced as follows:

Gentlemen

Attached is a draft of a letter setting out an agreement in respect of this matter which I believe would be accepted by Sanpine P/L. I have spoken with Scott today and he said that Koompahtoo Aboriginal Land Council does not meet in January so if the approval does not happen in December the next date is February, that is why I have left the agreement in place to cover that eventuality. Scott was however very bullish about the likelihood of completion before the end of December, describing it as ‘99% certain’.

Once you are prepared to accept this then I would fax a draft to Scott and subject to any suggestions or amendments he has asked you to fax a signed copy to him … and have him return a signed copy.

I await your advice. I indicated that I would hope to send it today or early Tuesday.

Kim Wilson

The invoice later rendered by Mr Wilson to Villa World, under an entry for 20 November 2000, notes three hours with the explanation “Merritt, Simmons and Scott and draft proposal”. That document suggests that Mr Kim Wilson spoke (either in person or on the telephone) to the three individuals identifi ed on that day.

The role of Villa World offi cers

The fi nal stage in the settling of the agreement between Villa World and Sanpine was undoubtedly undertaken by Villa World. It resulted in a letter setting out the terms of an agreement between Sanpine Pty Ltd and Villa World Limited, provided by Villa World and signed by Mr Cronin and Mr Lambert on behalf of Villa World. The letter was dated 24 November 2000 and appears to have been signed by both parties on that date. The substance of the agreement read as follows:

… In consideration of the terms of this Agreement and for the monetary consideration referred to later, your company undertakes to facilitate the obtaining of the appropriate consents and execution of documentation to enable the Hunter Water corporation to enter upon freehold land owned/controlled by the Koompahtoo Local Aboriginal Land Council (“Land Council”) for the purpose of construction and thereafter use of a rising sewer main pipeline through that land at Morrisset.



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In addition to the above, your company will also ensure the execution of an appropriate Agreement between the Land Council and the Hunter Water Corporation to ensure that there will be no destruction by any parties during the construction phase of the pipeline or any subsequent use of the pipeline. This condition will be subject to the Hunter Water Corporation meeting its obligations under the Agreement between it and the Land Council for construction of the pipeline. No part of the Agreement will be inconsistent with the terms of this letter.

…

Sanpine Pty Ltd will accept primary responsibility to negotiate and fi nalise the Agreement between the Land Council and the Hunter Water Corporation for permission to construct and thereafter use the pipeline, and Villa World provide any reasonable assistance as may be requested by Sanpine Pty Ltd to achieve this result.

Essential term of any agreement reached with the Land Council must incorporate an irrevocable undertaking from the Land Council that it will ensure that none of its members initiate or become involved in any activity, objection, complaint or protest to prevent the subsequent development of the Villa World land at Wyee Point but rather cooperate with Villa World to prevent any such impediment restriction or delay in the development of the Villa World land.

The consideration payable by Villa World to Sanpine Pty Ltd for the above services is as follows:

1. $40,000.00 plus GST to be paid upon receipt by Villa World of a copy of the letter duly signed by an appropriate offi cer of Sanpine Pty Ltd. The letter should be accompanied by a GST invoice quoting an appropriate ABN.

2. A further $40,000.00 plus GST upon receipt by Villa World of a letter under the hand of the appropriate offi cers of the Land Council addressed to Hunter Water Corporation granting the Land Council’s permission to the construction and subsequent use of the sewerage rising main pipeline to traverse the Koompahtoo land as shown on the Hunter Water Corporation plan. The terms of the letter shall be such as to satisfy the Hunter Water Corporation that it can commence construction of the sewerage rising main pipeline through the Koompahtoo land. If required by the Hunter Water Corporation, the Land Council will grant

an easement to the Hunter Water Corporation to secure rights to construct, maintain and use the pipeline on terms generally required by the Hunter Water corporation in similar easement documents.

3. In the event that clause number is satisfi ed by the delivery of the appropriate letter prior to 31st December 2000, a bonus payment of $20,000.00 plus GST will be paid.

4. All payments payable by Villa World under this Agreement will be made within seven days of receipt of a tax invoice from Sanpine Pty Ltd evidencing the terms of payment.

The term of this Consultancy Agreement will commence on the date of the signing by you and delivery to Villa World Limited of a copy of this letter. The termination date of the Agreement will be the 28th February, 2001.

On the same date, Mr Perkins sent an invoice to Villa World, to the attention of Barry Cronin, seeking an initial payment of $40,000 plus GST “for consulting services in regard to the sewer pipeline on KLALC land at Morisset”. Three days later, Mr Perkins sent by facsimile a letter to Mr Cronin seeking acknowledgment for the following statement:

This serves to confi rm the content of the letter dated 24 November 2000 sent by Villa World to Sanpine and signed by both parties shall remain absolutely confi dential between the parties and there shall be no disclosure whatsoever to any third party without the prior consent of Sanpine Pty Limited.

Mr Cronin added, at the end of that statement, the following handwritten material:

Except as required by law or to each company’s offi cers and directors.

With that addition, the facsimile from Sanpine was signed by Mr Cronin and Mr Lambert and returned. In returning the letter, Mr Cronin wrote:

At the time of signing Friday’s letter, its contents were known to a number of senior personnel within Villa World who have a part to play in this development. Additionally, this company has certain legal obligations as a public entity. I am therefore returning your letter of today’s date duly signed with a minor amendment to allow for the fact that some disclosure of our agreement was already made to key personnel within our Group. The same situation may well apply within your own company structure.

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When asked in evidence why he thought that such a confi dentiality agreement was sought, he said that he had no explanation as to the need for it, and did not seek one. When asked if one purpose of the clause was to maintain its confi dentiality from KLALC he agreed that it may well have had this purpose at the time. He could not recall whether the fact that KLALC might want to know how much money Villa World was paying Sanpine was a matter of concern to him.

Mr Holt asserted that senior management had knowledge of the proposals put forward in relation to KLALC because he passed them on. It seems not to be at issue that he arranged for his personal assistant to pass on to his immediate superior, Mr Stuart Whitewood, the proposal of 20 November 2000. There is documentary evidence to support that inference. The position in relation to the earlier draft is less clear. He received the 16 November 2000 proposal at home, having been sent it by facsimile by his personal assistant. Mr Holt believes it was forwarded to others in senior management, including Mr Gerry Lambert. His evidence in this regard cannot be treated as persuasive, to the extent that he now asserts an actual recollection of the arrangements made in that regard. Even at the time of preparing his statement of 1 September 2004, he did not assert such a recollection. However, his evidence may be treated as a reconstruction based on practice, at which level it is at least plausible.

Taken in isolation, the Commission could not be satisfi ed on the balance of probabilities that the proposal of November 16 was passed on to senior management in the manner Mr Holt suggests. However, there are other factors which strengthen that claim. First, the proposal was intended to become a contractual arrangement, Mr Holt is not a lawyer and it seems most unlikely that he would have assumed the authority to approve the terms of a contract. Secondly, the arrangement involved the expenditure of $100,000, which Mr Holt said he would not authorise, and did not have the authority to authorise, on behalf of the company. Given the caution Mr Holt displayed before approving Mr Wilson’s invoices for payment, that evidence may be accepted. Thirdly, Villa World employed an in-house lawyer, Mr Barry Cronin, as a member of the senior management team. It is highly unlikely that managers in charge of particular developments would, in such circumstances, take it upon themselves to approve the terms of contractual arrangements. Fourthly, the terms of the proposal were, in their context, curious. Mr Simmons had employed Mr Wilson, as a consultant, to obtain the KLALC consent. That arrangement had been continued

by Villa World. The proposal Mr Wilson was now putting forward was to employ others, whether Mr Smith and Mr Scott or Sanpine, to carry out consultancies at the expense of Villa World for the same purpose. It is highly implausible that Mr Holt would approve such an expenditure without obtaining the support of senior management. Finally, on 21 November 2000 Mr Holt showed both of the two proposals then in existence to Mr Phillip Blackley. As noted above, Mr Blackley was an independent consultant working on the Wyee Point project for Villa World. Mr Blackley had experience in dealing with bodies such as the City Council and Hunter Water: he was not, however, either a lawyer or a member of Villa World senior management. It is unlikely that Mr Holt would have taken the proposals to Mr Blackley and not have shown them to senior management. Further, it seems unlikely that Mr Holt would have shown them to Mr Blackley had he felt confi dent in his own judgment or authority to deal with the matters raised.

In his affi davit of 1 September 2004, Mr Holt stated, in relation to the 16 November 2000 proposal:

I distinctly recall instructing Julie to send it to Whitewood, Cronin and Lambert. I also recall Julie advising me that Stuart Whitewood was out of the offi ce (or away) on that day so I reiterated to ensure that she passed the “draft proposal” on to Barry Cronin and Gerry Lambert because both of them were anticipating its arrival.

The reference to “Julie” is a reference to Julie Smith, who was Mr Holt’s personal assistant at that time. Ms Smith signed a statutory declaration on 21 September 2004 asserting that she had no electronic record of forwarding the proposal of 16 November 2000 to anyone and had no recollection of receiving any instructions or doing anything physically with the document, apart from faxing a copy of it to Mr Holt at his home.

In his oral evidence, Mr Holt asserted a recollection of speaking with Ms Smith in relation to the 16 November 2000 email and expressly asking her to hand it to Mr Gerry Lambert, whom she had seen in the offi ce that day. That was a detail which, as Mr Holt agreed, he had not included in his detailed statement of 1 September 2004. The omission was not satisfactorily explained. What Mr Holt described in his evidence may have happened; there again, it may not. After the passage of four years, it is not safe to rely upon such an asserted recollection in the circumstances. However, there are other reasons to suppose that Mr Lambert may have been kept informed of the proposal as it developed. First, it seems clear that the failure to obtain the consent of



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KLALC had become something of an embarrassment in the promotion of the project. Indeed, even as late as 28 November 2000, four days after entering into the agreement with Sanpine, Mr Blackley wrote to Lake Macquarie City Council seeking an extension of the development consent for a further year, citing delays with the construction of the rising main frustrating commencement of work on the project. The possible expiry of the development consent would have been no small concern for the development. Indeed, as Mr Barry Cronin explained to the Commission, a condition of the agreement between Villa World and Goldris, from whom Villa World purchased the Wyee Point development, was that consent be obtained from KLALC for the construction of the rising sewer main. It was to that end that Mr Simmons (for Goldris) had employed Mr Kim Wilson. At some stage in 2000, it is clear that Villa World took over the responsibility for Mr Wilson’s consultancy and in September 2000, Mr Holt became responsible for authorising payments to Mr Wilson. The signifi cance of the consent to the developers was made clear by Mr Barry Cronin in his evidence. The agreement pursuant to which Villa World purchased the land from Goldris required payment of $4.5 million, but $2 million of that amount was not payable until such time as the approval for the sewer line had been obtained. There can be no doubt from those fi nancial arrangements that the construction of the sewer line was of great importance to the very existence of the development at Wyee Point.

It is also clear from their own evidence that, whatever else the senior management of Villa World knew in November 2000 about Sanpine, each offi cer knew that Sanpine had close links with and, presumably, infl uence over, KLALC. Thus, Mr John Potter, the Chief Executive Offi cer of Villa World in November 2000, stated that, although he had only a vague recollection of the agreement with Sanpine,

My understanding was that Sanpine Pty Ltd was associated with Adam Perkins, a member of the family of the late Charles Perkins and that some $40,000 was at risk if the consent was not obtained. I recall being of the view that obtaining the consent was suffi ciently signifi cant to warrant risking $40,000 as I believe that the Perkins family were suffi ciently well connected with the Aboriginal community to have a good prospect of obtaining the consent of the Land Council.

It is apparent that Mr Lambert had a greater involvement with the arrangements with Sanpine and was one of two Villa World offi cers who signed the letter of agreement pursuant to which the $100,000 was paid. Because

the email from Mr Kim Wilson of 16 November 2000 expressly sought authority to negotiate in principle on the proposal which accompanied that letter, it is entirely possible that the content of the proposal would have been communicated to the Chief Financial Offi cer.

If it had not been so communicated, it is diffi cult to understand why such a payment would have been authorised. The payment of $100,000 to an independent consultancy would have been a commercial nonsense without some understanding as to how the payment might in fact facilitate the grant of consent. It is therefore likely that Mr Gerry Lambert was aware of the intention that a signifi cant part of the sum to be provided was to be paid for the benefi t of Messrs Smith and Scott. Although that intention was no longer refl ected in the proposal of 20 November 2000, unless it continued to operate in the manner earlier suggested, the 20 November 2000 proposal would not have had reasonable prospects of achieving the desired result. Although the Commission cannot specifi cally conclude that Mr Lambert saw the proposal of 16 November 2000, it seems likely that he would have been aware of its substance when he approved and signed the agreement with Sanpine on 24 November 2000.

The other signatory to the agreement was Mr Barry Cronin, who operated as in-house legal counsel for Villa World and was part of its senior management team. There are a number of aspects of the proposal of 20 November 2000 which, on their face, are curious. Although Mr Blackley appears to have had no role to play in the approval of the agreement by Villa World, the comments he made in handwriting on the two draft letters of agreement shown to him by Mr Holt on 23 November 2000 indicate that these curious aspects of the letters were readily apparent at the time to a person with the relevant professional background and an understanding of the nature of the development. It is inconceivable that Mr Cronin, a trained and experienced commercial solicitor, would not have had similar concerns. In fact the agreement of 24 November 2000 refl ects changes made by Villa World to the proposal of 20 November 2000: it is reasonable to conclude that those were drafted by Mr Barry Cronin. Mr Cronin gave evidence to the Commission before Mr Holt made his statement of 1 September 2004. He denied knowledge of the suggestion that payments would be made to Messrs Scott and Smith. He agreed that he had some information as to the background to the proposal of 20 November 2000 because he had been briefed by Mr Holt with whom he had had “a number of conversations round about that time”. He also had a conversation on the telephone

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with Mr Kim Wilson. He knew about Mr Adam Perkins’ involvement with Sanpine. In addition, he said he had conversations with other members of the management team including Stuart Whitewood, Gerry Lambert and the CEO.

Mr Cronin was asked by Counsel Assisting, in relation to the senior management committee of Villa World:

[Counsel Assisting] Q: … The committee were advised that Sanpine were associated with the Perkins family who had an involvement with Koompahtoo. Did anyone query why no payment was being made direct to Koompahtoo?

[Mr Cronin] A: No — but Koompahtoo — no — answer, short answer’s no.

Q: Right. Did that not strike you as unusual?

A: No.

Q: And why not?

A: Well, running an easement, a series of easements through the Koompahtoo land was, were some advantages. …

Q: But didn’t it strike you as odd that a company associated with Koompahtoo would be getting $100,000 to get Koompahtoo’s approval but on the face of it, Koompahtoo wouldn’t be getting a cent?

A: Well, it wasn’t $100,000 to get, it was $100,000 if they got it within a certain period of time. …

Q: And indeed, did it not strike you as odd that … if the letter was obtained, the $100,000 would go to Sanpine, and not to the party who was actually giving the consent, and not to the party that owned the land?

A: No.

Mr Cronin was also asked:

Q: Did it occur to you in this period that there might be some comfort in ensuring that Koompahtoo was appraised of the terms of the agreement between Villa World and Sanpine?

A: No, it did not.

Finally, Mr Cronin was asked questions about the request by Sanpine to maintain strict confidentiality in relation to the agreement which had been executed. He said that he received no indication as to why confidentiality was sought, but made a

handwritten variation to the clause in the form received from Mr Perkins. He was then asked:

Q: Did it not occur to you that one object of the confi dentiality clause was to maintain its confi dentiality from Koompahtoo?

A: It may well have at the time.

Q: Wouldn’t that have struck you as a matter of concern?

A: What, that Koompahtoo might want to know how much money we were paying Sanpine?

Q: Yes.

A: It may have. I can’t recall, to be honest.

Mr Cronin was then asked as to his understanding of the respective roles of Mr Kim Wilson and Sanpine. It was put to him that Wilson was negotiating for Villa World and Sanpine for KLALC.

Q: Was that your understanding of what had been occurring to that time?

A: Well, Sanpine had connections with Koompahtoo. Whether they had a brief from Koompahtoo or not, I didn’t know.

Q: Sanpine was certainly indicating that they had a capacity to exercise infl uence?

A: Yes.

Q: They were getting a payment for the exercise of that infl uence?

A: From us?

Q: Yes.

A: Yes.

Q: Then they were asking for that payment to be kept confi dential?

A: Yes.

Q: Didn’t those three facts alone raise a concern in your mind as to the propriety of the payment?

A: No.



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In giving evidence on 2 July 2004, Mr Cronin was also asked questions by counsel for Mr Wilson. The following exchange occurred:

[Mr Buscombe] Q: It’s clear, isn’t it, that the proposal that was sent on 20th November 2000 wasn’t simply just holus bolus accepted by Villa World, correct?

[Mr Cronin] A: Correct.

Q: It was considered and refi ned, correct?

A: Correct.

Q: Resulting ultimately in the agreement that is signed on behalf of Villa World and dated 24th November 2000. Correct?

A: Correct.

Q: The senior management at Villa World including yourself, considered the terms of the agreement the company was going to enter into, correct?

A: Correct.

Q: Did you seek any external legal advice about its terms?

A: We did not.

Q: You formed the view yourself signing as legal consultant that there was nothing improper in the agreement. Correct?

A: I did.

Q: And that was of course after you made substantial amendments to the draft that had been sent to you on 20th November, correct?

A: Correct.

Because the senior management of Villa World Limited refi ned and approved the fi nal agreement, the Commission, taking all the circumstances set out above into account, considers it likely that some members of Villa World senior management were informed of the proposal put forward in writing on 16 November 2000 at the time it was received or at least by 20 November 2000.

Nature of the transaction

The proposal, in its original form, involved a payment of a signifi cant sum of money to Mr Bill Smith in connection with the obtaining of KLALC’s consent to the rising sewer main traversing its property. In giving (or refusing) that consent, the KLALC was acting in its capacity as property owner, albeit in the context of qualifi ed statutory powers. Whether or not the giving of the consent may have involved a disposal of an interest in land which may, in turn, have required the consent of NSWALC does not appear to have been a point considered by anyone. However, given the statutory context in which the KLALC operated, there is some analogy between its powers and functions and those of a local council. Without seeking to press the analogy too far, the possibility that a developer might make a substantial payment to the mayor (say) of a local council from which it seeks development consent would immediately strike most people as improper. Furthermore, it is diffi cult to conceive of circumstances in which such a payment could be justifi ed as, for example, a payment for services provided by the mayor’s private business. The reason why such a justifi cation would not be acceptable is that a mayor should not operate a business which assesses aspects of development approvals sought from the council.

In the present case, the fi rst proposal for payment to Mr Smith was sought to be justifi ed on the basis that he was to provide services to Villa World, in considering whether KLALC should give consent to the rising sewer main. That situation did not change when the proposal became one for a payment to Sanpine for it to provide such services and to subcontract to Mr Smith’s company. The only relevance of the interposition of Sanpine between Smith & Sons and Villa World was that the impropriety of the transaction may have been thought to be less obvious. However, it is highly unlikely that Villa World senior management would have approved a signifi cant payment to Sanpine without knowing what was expected to be provided by Sanpine.

It will be necessary to return to these considerations, as they demonstrate the inherently unsatisfactory relationship between Mr Bill Smith and KLALC, of which he was the Chairperson. The elements of impropriety in that relationship may be put to one side for the moment: the Commission is satisfi ed that the justifi cation for the payment to Smith & Sons was a sham. There are a number of reasons for that conclusion. First, although Smith & Sons was paid $40,000 for its “consultancy”, at no stage were the terms of the

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consultancy formalised by way of a written agreement between Sanpine and Smith & Sons. Had Sanpine believed it was entering into a genuine consultancy, for payment of $40,000, it is at least highly likely that the terms would have been reduced to writing, by way of an exchange of letters.

Even more telling is the evidence of Mr Bill Smith himself. He said that the consultancy work required that the line for the rising main needed to be “walked” and “supervised” by members of KLALC during the time of the excavation. The suggestion that any such work was required in relation to the laying of a sewer over this land is little more than a contemptible misapplication, for private profi t, of the principle that cultural heritage surveys should be undertaken prior to any developments on land which is of cultural signifi cance to Aboriginal people (this, the KLALC had certifi ed, was not) or land on which Aboriginal relics might be found (much of this land had already been surveyed for this purpose with largely negative results). Secondly, to suggest that Smith & Sons were competent to do such work was to demean the nature of the work. Thirdly, Hunter Water Corporation in fact employed KLALC members to undertake such “work” at the time that the rising sewer main was constructed. The payments for that work were entirely separate from the amount paid by Villa World to Smith & Sons. Thus, the condition which Mr Bill Smith told the Commission he had made clear to Messrs Perkins, Scott and Steer, as the price of KLALC’s consent, had nothing to do with the payment of $40,000 of Villa World funds by Sanpine to his business: it was a separate matter and occurred later.

In fact the terms of the proposal agreed to by Sanpine and Villa World unambiguously required that, for Smith & Sons to be paid the full amount of $40,000, KLALC had to give consent to the rising sewer main and had to do so before the end of December 2000. Mr Smith well knew that and eventually conceded in his evidence that he knew that. His evasiveness in dealing with questions going to that state of knowledge demonstrated to the satisfaction of the Commission that he was, at least by the time he came to give evidence, fully conscious of the fact that he had been paid a signifi cant sum of money to give consent on behalf of KLALC. The Commission has no doubt that, at least by the time he gave evidence before it, he was conscious of the fact that it was improper behaviour. In fact it was worse than that. Although Mr Smith was not inclined to accept the factual premises, it is clear to the Commission that prior to 13 December 2000 the only occasion on which the membership of KLALC had been asked to consider at a properly convened meeting the request with respect

to the rising sewer main it formally resolved not to give its consent. When, on 13 December 2000, Mr Smith (with Mr Griffen) signed a letter of consent, he had no authority to do so. The Commission is satisfi ed that he signed the letter, not because he thought that the KLALC had given or authorised him to give approval, but because he would receive $40,000, which he would not receive unless the letter was signed. His conduct in that regard was a betrayal of the trust placed in him by a majority of the KLALC membership in electing him as Chairperson of the Land Council. As will be explained below, it was undoubtedly corrupt conduct for the purposes of the ICAC Act.

The other party to the supposed consultancy agreement with Smith & Sons was Sanpine. As noted above, the joint venture management committee minutes of 9 November 2000 authorised Adam Perkins to reach an agreement with Mr Bill Smith and Bob Scott in relation to payments. This was no doubt a comfortable arrangement, since all three were on the management committee. However, it may be assumed that Mr Perkins was also the authorised agent of Sanpine for the purpose of any agreement between Sanpine and the proposed consultants. Thus, when on 24 November 2000 Mr Perkins wrote to Villa World after the letter of agreement had been signed, he sent an invoice for $40,000 plus GST and wrote:

I have instructed both Bob Scott and Bill Smith to commence on your project immediately.

He continued:

I have reinforced the two deadlines within the agreement and from these conversations feel very positive in regard to a successful outcome.

For reasons noted below, the Commission is satisfi ed that this letter was no more than the carrying through of a fi ction, namely the fi ction that moneys payable to Bill Smith and Bob Scott were for the provision of services to Sanpine or Villa World.

In relation to Mr Bill Smith, Mr Perkins knew that the suggested consultancy was a sham. When asked in evidence about the purpose of the payment to Mr Smith, Mr Perkins was asked and answered as follows:

[Counsel Assisting] Q: The clearance work was just a ruse, some form of defence, [if] anyone actually questioned what the payment was for?

[Mr Perkins] A: I think the — I agree with you. The money being paid was over the top, however Villa World offered it to us.



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Mr Perkins went on to say that Mr Smith “did the clearance work”, without noting that he was paid separately for that “work”. It follows that Mr Perkins, and thus Sanpine, was fully aware of the impropriety of the agreement and the payment to Mr Smith.

The role of Graham Steer, in relation to the negotiation of the agreement with Villa World and the payments to Mr Smith, is less clear. As a member of the management committee, the Commission is satisfi ed that he was involved in the delegation of authority to Adam Perkins to act on behalf of Sanpine (or possibly the joint venture); he was aware that payments were intended to be made to Bill Smith and Bob Scott; he was a signatory to the agreement on behalf of Sanpine, and he authorised the payment to the companies associated with Smith and Scott respectively. The Commission is not satisfi ed that he was a moving party in any of these respects: but it is satisfi ed that he was aware of the scheme proposed and authorised the arrangements on behalf of Sanpine. Accordingly, if the behaviour constituted corrupt conduct in which Sanpine was involved, Mr Steer was involved. His explanation for the payment to Smith & Sons was that it had been made for work done in assessing “the cultural impact” if the pipeline were to be established. For reasons already noted, however, the payment was clearly made in order to obtain the consent of KLALC to a particular use of its land and, despite the fact that Sanpine purportedly contracted with Mr Smith or his company to provide some form of assessment, the Commission is satisfi ed that Mr Steer, like Mr Perkins and Mr Smith, was aware that this was a sham.

Mr Steer was at pains in his evidence to distance himself from any active involvement in the negotiations, agreements and payments to do with the Villa World transaction. If he deliberately distanced himself from these arrangements, it is likely to have been because he was conscious of the impropriety involved. Finally, on the Sanpine/KLALC side, there is the role of Mr Bob Scott. As with the company associated with Mr Smith, the company associated with Mr Scott’s partner was paid $40,000 by Sanpine for work as a consultant. As with Mr Smith, no consultancy agreement was ever entered into and the nature of the work done remains obscure. Mr Scott said he was required to assess the benefi ts and disadvantages of giving consent from the point of view of the joint venture. Because Mr Scott was project manager for the joint venture, there may be some truth in that claim. What is less clear is why Bronzewing should be paid a separate fee for doing something on behalf of the joint venture which it was arguably contracted to do in any event. Mr Scott stated in his evidence that this work

was additional and it took “the large majority of four weeks” to undertake. There is no suggestion that there was any four week period at this time for which he was not entitled to his remuneration as project manager.

There was also a diffi culty with Scott’s explanation, arising from the initial proposal that the consultancy would be between Villa World and Bronzewing, with Bronzewing to supply services to Villa World rather than to Sanpine or the joint venture. At fi rst, Mr Scott accepted that this was the initial proposal, but later sought to deny emphatically that he had knowledge of such a proposal.

On one view, if Villa World wished to make a payment to Sanpine, part of which was paid by Sanpine to Bronzewing, whilst curious in commercial terms, those arrangements could not involve any element of corrupt conduct as defi ned in the ICAC Act. On the view suggested by Mr Perkins, Sanpine had a role to play in relation to the consent, because, pursuant to the joint venture agreement, Sanpine had a controlling vote in relation to the use of the land over which the agreement operated. There is no doubt that a signifi cant part of the path of the rising sewer main was across KLALC land which was not subject to the joint venture agreement. However, presumably Mr Perkins was saying that even if one metre of the land was subject to the joint venture agreement, Sanpine could exercise control by requiring KLALC to refuse consent or could have required KLALC to give consent. The fi rst part of the proposition can be accepted, but the second part does not follow. There was nothing in the joint venture agreement which could permit Sanpine to require KLALC to use land, which was not subject to the agreement, in a particular way. The reason why Mr Perkins tried to make the second and larger claim was that he wished to deny any connection between the payment to Smith & Sons and the letter of consent provided by Mr Smith and Mr Griffen on behalf of KLALC. Mr Perkins stated:

They are not connected. He would have signed that if we had asked him to do it and paid him nothing, because it was joint venture development that was required.

The Commission understands this answer to mean that because part of the sewer main would go through joint venture land, Sanpine could require KLALC to approve the proposal. The Commission does not accept that Mr Perkins believed that proposition to be true. The explanation was a fabrication to justify the improper arrangement between Sanpine and Villa World, of which he was a moving party.

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Nevertheless, the question remains as to why Sanpine would have agreed to a payment of $40,000 to Mr Scott, conditional on KLALC providing consent. In the Commission’s view the answer is that the joint venture was, by late 2000, a business being run for the private benefi t of Mr Scott and Mr Smith, who shared the proceeds. The need for the Villa World development to obtain KLALC consent was used opportunistically as a means of extracting a signifi cant sum of money from Villa World, the bulk of which was shared between Mr Scott’s and Mr Smith’s associated companies, with a smaller payment going to KLALC, perhaps in recognition of the fact that there might be some diminution in the value of its land from its acceptance of the rising sewer main. Put somewhat differently, in terms suggested by Mr Perkins to Mr Wilson, to get to Bill Smith, one had to go through Bob Scott. Mr Wilson, and therefore Villa World, appear to have worked on that basis and accepted that, directly or indirectly, both Mr Smith and Mr Scott would have to be remunerated in order to obtain KLALC consent. Mr Scott was being paid for a favourable exercise of his infl uence over Mr Smith.

Turning from the Sanpine/KLALC side of the equation, it is necessary to complete the picture on the Villa World side. As already noted, the Commission is satisfi ed that Mr Holt was aware of all the elements which demonstrated that the proposed payment to Sanpine was a corrupt payment. The Commission is not satisfi ed, however, that Mr Holt had any authority to approve the proposal on behalf of Villa World. On the contrary, that approval came from senior management. The agreement itself was signed by Mr Gerry Lambert, the Villa World Chief Financial Offi cer and Mr Barry Cronin, Villa World’s in-house legal counsel. For reasons noted above, the Commission believes it is likely that, when they signed the agreement on 21 November 2000 on behalf of Villa World, they were aware, at least in general terms of the reasons for and purposes of the payment being made to Sanpine. In other words, it is likely that they were aware that parts of the $100,000 would be paid for the benefi t of Mr Bob Scott and Mr Bill Smith. If anyone of senior management had suffi cient knowledge to be implicated in the corrupt conduct, Villa World as a body corporate would be treated as having the relevant intent.

It is likely that others in Villa World were also aware of the circumstances relating to the payments to Sanpine. These persons included Mr Stuart Whitewood, the Chief Operations Offi cer, to whom Mr Holt was responsible. Mr Whitewood provided a declaration stating that he had no knowledge of the proposal of 16

November 2000 which included payments to Scott and Smith. He recalled, however, seeing the draft letter of 20 November 2000 and discussing the proposal with senior management, including Gerry Lambert, Barry Cronin and, “to a lesser extent”, John Potter, who was the Chief Executive Offi cer of Villa World having taken over that role from Mr Doug Merritt.

It is clear that Mr Wilson presented the proposal of 16 November 2000 to Villa World, containing a patently improper proposal, namely the payment of $40,000 to the Chairperson of KLALC, in exchange for the Land Council’s consent. The next version of the proposal avoided that express provision. Rather, the money was to be paid to a third party, Sanpine, with no indication of any further payments or arrangements. At least on its face, the 20 November 2000 proposal was not expressly improper. The obvious inference is that the change was made at the instigation of someone in Villa World, which did not give the authority sought by Mr Wilson on 16 November 2000, in relation to the terms then proposed.

It is apparent from the emails of 11 and 20 November, set out above, that there had been some communication between Villa World and Mr Wilson which suggested that the amount proposed would be acceptable. For reasons already noted, it is implausible that Mr Holt would have given approval to this payment without higher authority. Given that he was no longer an offi cer of the company, it is also implausible that Mr Merritt would have done so either. The only plausible explanation is that a member of senior management of Villa World, possibly Mr Lambert or Mr Cronin, was asked to approve the proposal of 16 November 2000 and did so, subject to the changes subsequently made in relation to the identifi cation of the payees.

As Mr Cronin effectively conceded, there was no signifi cant difference in the nature of the arrangement entered into by Villa World with Mr Kim Wilson and the arrangement, as refl ected in the agreement of 24 November 2000, with Sanpine. Mr Cronin explained the reason for the second agreement as Mr Wilson’s failure to achieve a result and the belief that, because of its contacts with KLALC, through Mr Perkins, Sanpine might be better placed to do so. The question, however remains: what did Villa World management think that Mr Perkins (with whom they had no contact) could use to persuade KLALC to take a different view of the rising sewer main, beyond such persuasive arguments as Mr Wilson may have been able to muster?



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Secondly, there is one dramatic difference between the nature of the agreement with Mr Wilson and the agreement with Sanpine. Mr Wilson was paid, entirely properly and appropriately, at an hourly rate for the expenditure of his time. According to the 24 November 2000 agreement, Sanpine was to be paid $40,000 on signing the agreement. It was then to be paid a further $40,000 on receipt of an appropriate letter of consent from KLALC addressed to Hunter Water Corporation. The additional sum of $20,000 was to be paid if the letter were to be received prior to 31 December 2000. As it was put to Mr Cronin, a payment to KLALC would have been understandable: a payment to Sanpine in this amount with no explanation as to its purpose or intended destination, and without any questions being asked, makes no sense.

Although it seems possible that Mr Whitewood and Mr Potter were aware of the proposed payment to Sanpine and the eventual intended recipients of the payment, each has denied having such knowledge. In the absence of any documentary or oral evidence, beyond the general material concerning the administration of the company, in relation to the Wyee Point development, the Commission cannot be comfortably satisfi ed that they had the requisite knowledge as at 24 November 2000. Accordingly, the Commission is not satisfi ed that they were implicated in the corrupt conduct.

For reasons already noted, the Commission does not accept that such approval was given without some understanding of the manner in which the payment of $100,000 might achieve success. It is likely that Mr Cronin, who was responsible for the fi nal draft of the agreement accepted by Villa World, and Mr Lambert who, alone or in concert with other members of senior management, was responsible for approving the payment, understood what was to happen to the money. However, each claimed lack of recall, or denied involvement. Whilst the Commission is not satisfi ed that those denials are reliable, it cannot be satisfi ed that they are false in all material respects. Plausible inferences do not lead to a comfortable satisfaction that any individual was implicated in the corrupt conduct. Accordingly, the Commission is not comfortably satisfi ed that either Mr Cronin or Mr Lambert had the requisite knowledge to be implicated in the corrupt conduct. As it is possible that no member of senior management was so implicated, the Commission is not satisfi ed that Villa World, through its senior management, was knowingly implicated in the making of a corrupt payment, through Sanpine, to Mr Bill Smith.

In reaching this conclusion, the Commission has not treated the knowledge of Mr Holt as the knowledge of the company. Although Mr Holt had quite signifi cant seniority in the company as Development Manager (Qld and NSW) it appears to have been common ground that he had limited authority to approve expenditure, was not an appropriate offi cer to sign a contractual arrangement on behalf of the company and was not part of senior management. At least for the purpose of criminal liability, his state of mind was not, therefore, the state of mind of the company.

There was also a question as to the role of Mr Doug Merritt in the activities which took place in November 2000. The proposal of 16 November 2000, as noted above, was addressed to Mr Merritt, though at an incorrect email address. Whether or not he obtained a copy of the proposal is unclear, but the proposal of 20 November 2000 was sent both to Mr Holt and to him, at his correct email address. Clearly Mr Wilson had identifi ed his error of 16 November 2000 and had sent the further proposal to Mr Merritt on 20 November 2000. Further, Mr Wilson’s invoice, which was paid by Villa World, referred to spending three hours discussing a draft proposal with Messrs Merritt, Simmons and Scott. Mr Wilson’s invoice also referred to a telephone conversation with Mr Doug Merritt on 2 November 2000. Mr Merritt, for his part, denied any on-going involvement with Villa World after his departure from its employment on 31 October 2000. In particular, he denied meeting with Kim Wilson on 20 November 2000. His successor, Mr John Potter, stated in a statutory declaration of 12 July 2004:

I have no recollection of Douglas Merritt carrying out any work on behalf of Villa World Ltd subsequent to his departure on 31 October 2000. I have caused a search to be made and have not located any records that would indicate Douglas Merritt was paid for attending any such meeting or any travel expenses for such an attendance.

On the other hand, a Villa World document, constituting the minutes of a planning and development meeting held on 7 November 2000, noted that a further meeting was to be held “with Kim Wilson and Adam Perkins. DM to attend this meeting on behalf of VW.” The persons responsible for that “action” were John Potter and D. Holt. The reference to VW is, of course, a reference to Villa World; the reference to “DM” is a reference to Doug Merritt. The Commission is satisfi ed that Mr Merritt continued to have some on-going involvement after 31 October 2000, although the extent of that involvement is unclear. Mr Merritt provided evidence

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to the Commission that he was in Melbourne on other business on 20 November 2000 and did not attend a meeting with Mr Wilson on that date. That fact is not, however, inconsistent with a possible conversation with Mr Wilson on 20 November 2000 and further communication between Mr Merritt and the on-going members of the Villa World senior management team. This, however, is a matter of speculation. Whatever knowledge can be attributed to Villa World in these circumstances, cannot be based upon the on-going involvement of Mr Merritt, about which it is impossible to reach any conclusions.

It is now necessary to consider the question of criminal conduct in relation to the payment to Mr Bill Smith. In relation to Mr Smith himself, the Commission is comfortably satisfi ed that he, as Chairperson of the Land Council, received a benefi t – being the payment made to Smith & Sons Consultancy Pty Ltd – as a reward for procuring the consent of KLALC to the construction of a rising sewer main across the KLALC land for the benefi t of Villa World. The receipt of such a payment is capable of satisfying the requirements of section 249B(1)91 of the Crimes Act.

The benefi t was in fact paid from funds received by Sanpine Pty Ltd. The offi cers of Sanpine who arranged for the payment were complicit in the offence committed by Mr Smith.92 Sanpine authorised Mr Adam Perkins to enter into an agreement with Villa World and with the proposed consultants. As already noted, Mr Perkins knew that the suggested consultancy with Mr Smith was a sham and, accordingly, he could be held to be directly implicated in the arrangement to make a corrupt payment to Mr Smith. A similar fi nding is made in relation to Mr Steer, for the reasons set out above.

The position in relation to Mr Scott is more complex. On the one hand there is the payment which his partner’s company (which employed him as project manager) received through the Sanpine arrangements. As suggested above, the payment to Mr Scott appears to have been a reward for using his infl uence over Mr Smith. However, Mr Scott was not an agent acting on behalf of a principal in relation to the business of the principal, nor was he the person responsible for providing a benefi t to the agent. Accordingly, the payment to him does not fall directly within the terms of section 249B(1) of the Crimes Act. However, Mr Scott

was instrumental in setting up the arrangement whereby, not only he, but Mr Smith received payment. In the case of Mr Smith, receipt of the payment was an offence, as was the giving of the benefi t by Sanpine and, indirectly, by Villa World. Mr Scott could be held to be complicit in that arrangement, involving an offence under section 249F of the Crimes Act.

Mr Wilson, who negotiated the arrangement involving a payment to Mr Bill Smith could also be found to be complicit in the offence committed under section 249B of the Crimes Act and thus himself guilty of an offence.93

Of members of the management of Villa World, Mr Dale Holt was most directly involved in the arrangements by which Villa World provided the funds, part of which were to be paid to Mr Bill Smith’s company. Although he did not have authority to approve the payment or the terms of the agreement, Mr Holt, like Mr Wilson, was directly implicated in making the arrangements by which the corrupt payment was effected. Accordingly Mr Holt also, pursuant to section 249F of the Crimes Act, was involved in conduct which could constitute a criminal offence.

Corrupt conduct?

The Commission is satisfi ed that the payment of $40,000 to Smith & Sons Consultancy Pty Ltd was a payment made for the personal benefi t of Mr Smith in return for his act in procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land. (It is not relevant for this purpose whether the consent given was legally valid.)

Each person with knowledge of the proposed payment to be made to Mr Smith by Sanpine, out of money provided by Villa World, was complicit in the corrupt conduct. For the reasons set out above, the Commission makes the following fi ndings of corrupt conduct:

Mr Dale Holt, former Development Manager with Villa World Ltd, engaged in corrupt conduct in relation to his involvement in arranging for a payment of $100,000 from Villa World Ltd to Sanpine Pty Ltd in the knowledge that part of that money ($40,000) would be paid by Sanpine

91 For the terms of the provision and generally, see Chapter 3.92 Crimes Act, section 249F.93 Pursuant to section 249F.



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Pty Ltd to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, the Chairperson of KLALC, in return for Mr Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

Mr Adam Perkins, a director of Sanpine Pty Ltd, engaged in corrupt conduct in relation to his involvement in the payment of $40,000 from Sanpine Pty Ltd to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, in return for Mr Bill Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

Mr Robert Scott, a consultant and project manager, engaged in corrupt conduct in relation to his involvement in the payment of $40,000 from Sanpine Pty Ltd to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, in return for Mr Bill Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

Mr Bill Smith, former Chairperson of KLALC, engaged in corrupt conduct in relation to his involvement in the payment of $40,000 from Sanpine Pty Ltd to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, in return for Mr Bill Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

Mr Graham Steer, a chartered accountant and director of Sanpine Pty Ltd, engaged in corrupt conduct in relation to his involvement in the payment of $40,000 from Sanpine Pty Ltd to Smith & Sons Consultancy Pty Ltd, a company associated with Mr Bill Smith, in return for Mr Bill Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

Mr Kim Wilson, a native title and land rights consultant, engaged in corrupt conduct in relation to his involvement in negotiating a payment of $100,000 from Villa World Ltd to Sanpine Pty Ltd in the knowledge that part of that money ($40,000) would be paid by Sanpine Pty Ltd to Smith & Sons Consultancy

Pty Ltd, a company associated with Mr Bill Smith, the Chairperson of KLALC, in return for Mr Smith procuring and conveying the consent of KLALC to the installation of a rising sewer main across KLALC land.

It is possible that Mr Barry Cronin and Mr Geoff Lambert were each aware of the relevant end purpose of the payment to Sanpine and, in signing the agreement on behalf of Villa World, were parties to a corrupt act. However, in relation to them any such conclusion would be based to a signifi cant extent on matters of inference. On the material before it, the Commission is not comfortably satisfi ed as to their knowledge of the critical matter and is therefore not satisfi ed that they were involved in the corrupt conduct. It follows that its state of satisfaction in relation to Villa World Limited is not suffi cient to fi nd that this company was implicated in corrupt conduct.


In relation to Mr Holt, it is clear that he received the proposal of 16 November 2000 and therefore had knowledge of the intention that a payment be made to Mr Smith. His involvement with the on-going negotiations would have led him to understand that the payments to Mr Smith and Mr Scott were the price for obtaining the consent of Koompahtoo to the rising sewer main. Accordingly, although he had no authority to approve the payments on behalf of Villa World, he was complicit in the corrupt conduct. Whilst his later evidence sought to provide a basis upon which the Commission could be satisfi ed that senior management of Villa World knew of the purpose of the payments, that evidence did not exonerate him from responsibility in relation to his own involvement. The Commission recommends that consideration is given to prosecuting Mr Dale Holt for an offence under section 249F of the Crimes Act 1900 (NSW).

The Commission also recommends that consideration be given to the prosecution of Mr Bill Smith for an offence under section 249B(1) of the Crimes Act and for the prosecution of Messrs Adam Perkins, Robert Scott, and Kim Wilson for offences under section 249F of the Crimes Act.

85

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On 20 November 2002, after the fi re at the KLALC offi ce in September 2001, the KLALC Executive signed a “statement” which purported to set out the terms of a resolution with respect to a “housing policy” adopted by members of the Land Council on an earlier, unidentifi ed, occasion. For reasons which will become apparent from the record of events set out below, it appears that the document was created in anticipation of an investigation into the KLALC’s accounts, which might have revealed that a property was transferred to the son of the Chairperson for no consideration. Nevertheless, the Commission is satisfi ed that two elements of the “housing policy” set out in the document were agreed to by members of the KLALC, probably at a meeting between May and October 2000. These elements were:

Members only would be eligible to purchase a block of land at the full amount of $5,000.

Members are eligible to purchase land under this arrangement once.

There are two other elements of the supposed “housing policy” about which the Commission takes a different view. First, there was an additional provision which stated:

All other land parcels not allocated to Members must be sold at not less than 90% of full market value as provided by a fully qualifi ed valuer at the time.

Read literally, this motion would have required KLALC, after allowing a period for members to claim parcels at the reduced price, to sell “all other land parcels”. What was probably intended was that, if a member who had already received a parcel of land at $5,000 wished to obtain a further parcel, he or she would be required to pay not less than 90% of market value. Accepting that this was the intention of the suggested provision, there is no evidence that KLALC in fact put any such provision into effect. Accordingly, the Commission is not satisfi ed that such a resolution was carried, although it may have been. Resolution of this uncertainty is unnecessary for the purposes of the investigation.

A fourth limb to the resolution is of more signifi cance and reads as follows:

Members have the opportunity for Mortgage, Sale for whatever the valuation of the land to ‘Spot Purchase’ elsewhere as a land and housing package deal or build.

The terms of this resolution are – and would have been at the time – almost unintelligible: for that reason alone, it is unlikely that such a resolution was adopted. In fact, the Commission is satisfi ed that no such resolution was

adopted by the KLALC, but that it was intended to provide some form of justifi cation for the transfer of land to the Chairperson’s son who on-sold at a substantial profi t, as recounted below.

A number of resolutions concerning transfer of land, passed during the year 2000, survived the fi re in September 2001. Copies of these resolutions were provided by NSWALC, to whom they had been supplied. The fi rst meeting took place on 22 May 2000. The timing of this meeting and subsequent meetings is signifi cant: it will be recalled that dissent had broken out openly within the KLALC membership in 1999 in relation to the arrangements for the Sanpine joint venture. Although it is not entirely clear whether the letter was ever sent, the Commission accepts that instructions were given by the joint venture to solicitors to send a letter, which can only be described as intimidating, to persons who had requisitioned an extraordinary general meeting of the KLALC and who sought to raise questions about the joint venture. The draft letter available to the Commission was dated 17 May 1999. It threatened defamation proceedings and suggested that damages in excess of $1 million might be obtained against the dissidents. The list of persons identifi ed as dissidents included Mrs Zelma Moran, Mr Glen Green, and Mrs Barbara Green. It will also be recalled that on 16 October 2000 a management meeting of the Sanpine joint venture recorded that “issues associated with George Parry, Dargin etc continue to frustrate our sensible operation of the Land Council.” It was at that meeting that Mr Bill Smith apparently “confi rmed” that consideration was being given to transferring the joint venture land to a trust.

In relation to the meeting of KLALC held to discuss transfer of land to members, held on 22 May 2000, the page of the minutes available to the Commission provides only a partial record of the events of that evening. Nevertheless it commences with the notation:

Mrs Z. Moran is now suspended.

Although every motion put to the meeting was apparently “unanimously carried”, after two further motions following Mrs Moran’s suspension, a motion was put in the following terms:

To suspend Jillian Green for a period of six months with the option of two years to be held four weeks from tonight.

The motions in relation to members Moran and Green tend to belie unanimity among the KLALC membership. Three other motions were passed on that

Chapter 7: Land transfers to KLALC members


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evening, including one which simply stated: “to sell seven blocks at Morisset”. Another motion provided that Mr Edward Smith (a son of the Chairperson) “to take 99 year lease ‘Bucketty’ with option to buy at today’s price, lease start May.” At the meeting on 24 July 2000 it appears that the lease proposal for this land was made on behalf of Mimaga Wajaar Pty Ltd, a company in which the Chairperson, Mr Bill Smith, had a signifi cant interest. Nothing seems to have come of that resolution, but it could not be described as a form of resolution one would expect from a responsible Land Council. The fi nal resolution was in the following terms:

That Mr S. Griffen and W. Robertson have option to buy 212 acres at Wyee Point over three years for 5 million dollars.

The minutes then record:

After discussion it was decided to go home and think about it.

In his evidence, Mr Griffen treated that motion with some derision, pointing out that it was never within his fi nancial means to obtain land on such terms. Without knowing the market value of the land, it is not possible to comment defi nitively on that statement, but it seems entirely plausible.

On 19 June 2000 there was a further meeting, of which a copy of part of the minutes is available. During the course of the meeting, it was resolved to make a number of blocks of land available to various members. It was clearly not the fi rst time that the matter had been raised because, as stated by Mr Briggs and as noted in the minutes, letters requesting blocks had been received from “M. Smith, R. Briggs, S. Newlin, A. Smith, E. Smith, R. Briggs”. (Whether Mr Briggs had really made two requests is not clear: a motion was passed accepting his application to lease a specifi ed block, with an option to purchase.) Of the three Smiths referred to, both M. and E. Smith are sons of Mr Bill Smith; Mr Alan Smith is unrelated to the Chairperson’s family.

Early in the discussion, the following exchange is recorded:

J. Gamble: Asked if Koompahtoo needed to sell land to assist members.

M. Smith: Told of his experience and how he went about applying for loan.

J. Gamble: Asked about others not being able to do it fi nancially.

An explanation was apparently given by the Chair (presumably Mr Bill Smith) as to the resources available through ATSIC and the State government. The relevance of this material, as a response to Ms Gamble’s question, appears to have been related to the fact that whereas fi nance may have been available to assist Aboriginal people with housing construction, a loan would need to be secured over land owned by the individual. An inference that second mortgages would not be acceptable may have been intended. At another stage in the discussion, the Co-ordinator, Mr Briggs, apparently spoke about the burden of rates being incurred by the KLALC, which would be avoided once the land was transferred to members.

By the time of the meeting on 24 July 2000, further requests for land were noted as having been received, including one from the Treasurer, Mr Stephen Griffen, and one from a member, Mr Daniel Heterick. Seven motions were passed accepting options from members “to lease with the option to buy” identifi ed parcels of land. No outright purchases were approved. The fi nal motion read as follows:

A delegation of up to seven members to go to the State Land Council meeting on August 1 to support the above and future applications and also to receive a better understanding of State Land Council business and effects on [our] Land Council.

It is clear that a KLALC delegation did attend a meeting of NSWALC on 3 August 2000. (The discrepancy in dates probably refl ected the fact that NSWALC meetings continued over two or three days.) It also appears that the NSWALC approved in principle the disposal of land to members “at current market value”.

The copy of the minutes (or part thereof) of 14 August 2000 commenced with the statement:

Koompahtoo cleared of charges and acquisitions [sic – accusations?] by the breakaway group.

What this matter refers to is not entirely clear: the formal complaint made to the Registrar under the Land Rights Act had been disposed of in December 1999. It is possible that there had been further complaints to NSWALC, as this statement appears to occur in the course of a discussion of matters raised at the NSWALC meeting. Thus, the minutes continue:

Motions need to be rectifi ed – reading disposal of land. Repayments will be suitable to the need’s [sic] of our families and land can be used as collaterol [sic] for home loans. Value of land and payments for 10

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years approx. Stephen Griffen and Veronika Bailey gave report on visit to NSWALC.

A further meeting was held on 17 October 2000, at which some 18 motions were passed approving the disposal of various blocks of land to individual named members. The motions are all incomplete, in that details of lot numbers and addresses are partly blank and a dollar fi gure is missing from the price in a number of cases, although every motion ends with the words “which is a price equal to the current market value”. This appears to have been done in compliance with the form of the in-principle approval given by the NSWALC in August.

On 23 October 2000 the Co-ordinator, Mr Briggs, appears to have rung Mr Terry Millott, who worked for the Land Rights Unit at NSWALC, in relation to the sale of three lots which Mr Millot identifi ed in a letter confi rming the telephone conversation. Mr Millott’s letter continued:

NSWALC’s approval that the above lands may be disposed of at current market value given at its 170th meeting held on 3 August 2000 is now operative.

There was some delay in taking action on these transfers, for two reasons. First, there was a delay in obtaining certifi cates of title for the land in the name of KLALC LALC; secondly, there was confusion as to which sales were to go ahead. Thus, the land identifi ed by telephone to Mr Millott constituted lots 2 and 4 of Sec 11, DP 758041, together with lot 236, DP 82376. A certifi cate given for the purposes of section 40D of the Land Rights Act, over the hand of the Secretary of KLALC, and dated 24 September 2001 referred to lots 2 and 4 as noted above, and lot 236, DP 823726. In relation to the third block of land, the error appears to have been that of Mr Briggs or Mr Millott: the correct block is identifi ed in the certifi cate, at least if it is intended to refer to one of the lots apparently approved for sale to Mimaga Wajaar.

The motions of 17 October 2000 had approved lot 2 for sale to Mr Malcolm Smith and lot 3 for sale to Mr Alan Smith. Curiously, lot 4 was approved for sale to Ms Michelle McBride. When the transfers were undertaken, lots 1 and 2 were sold to Malcolm Smith, and his partner, Ms Debbie Barwick, and lots 3 and 4 to Mr Alan Smith and his partner, Ms Kim O’Leary. Precisely how these changes were made, when they were made and why no action was taken on the other approved sales is unclear to the Commission. These changes and inaccuracies gave rise to diffi culties when it became necessary to register the transfers at the Land Titles Offi ce.

On 24 September 2001 (almost 12 months later) Ms Bailey signed certifi cates under section 40D in relation to the approvals given at the meeting held on 24 July 2000. Those approvals were presumably relied upon because they were the only approvals given prior to the meeting of the NSWALC on 3 August 2000. However, the motion is ambiguous as to what lot was to be disposed of to Mr Malcolm Smith, but it is clear that one lot only was involved. Similarly, the motion in relation to Mr Alan Smith refers to a lease with option to buy “partial to lot 11 Mulbring Street, Awaba”. The motion of 17 October 2000, which was in accordance with the NSWALC requirements, in that it referred to a precise lot and a specifi c price said to be equal to the current market value, identifi ed only lot 2. Similarly, the motion in relation to Mr Alan Smith identifi ed only lot 3. On 1 November 2000 the solicitor for KLALC, Mr Nicolas Dan, received instructions in relation to lots 2 and 4 respectively. It appears that Mr Dan was also provided with a separate copy of a motion of the KLALC which referred to lots 1 and 2, and no longer simply lot 2. Who prepared that document, and when, is not known to the Commission. At that stage the solicitor appears to have taken no steps in relation to the matter, because certifi cates of title had not been issued. However, on 6 February 2001 Mr Malcolm Smith’s partner, Ms Debbie Barwick, rang to advise that she and Mr Malcolm Smith would be purchasing lots 1 and 2. The note taken by the solicitor handling this fi le, Mr David Guest, included the following:

Understand no consideration passing on sale - !! Price $50k – pay off.

There is then reference to the need to clarify title details.

The certifi cates of title were issued on 19 June 2001. Mr Guest then spoke to the KLALC Co-ordinator, Mr Robbie Briggs, and proceeded to prepare draft transfers. The transfer in relation to the land being purchased by Mr Malcolm Smith and Ms Debbie Barwick, was executed by Mr Bill Smith, Ms Veronika Bailey and Mr Stephen Griffen, the Executive of KLALC. It stated that the transferor (KLALC) –

Acknowledges receipt of the consideration of $50,000.

That statement was untrue and would have been known to be untrue by each of the members of the KLALC Executive, if they had read the document.

The transfer was signed at the premises of the solicitors on 27 July 2001. On the same occasion, Mr Malcolm



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Smith executed a “declaration by purchaser” stating that this was his fi rst purchase of real estate and was intended to be his principal place of residence. The property was described as vacant land and the consideration for the purchase was identifi ed as $50,000, being “not less than the full value of the property and is the bona fi de consideration paid for the property”. The declaration was made under the Oaths Act. The purpose of the declaration was to obtain an exemption from stamp duty on the transfer. The copy of the stamped transfer, as lodged with the Offi ce of State Revenue, notes the consideration as $50,000 and that no duty was payable.

The evidence of Mr Guest in relation to the completion of the declarations confl icted with that of Mr Malcolm Smith and Ms Barwick. Ms Barwick’s evidence was, at fi rst, that the form was entirely blank when she signed it. However in oral testimony, she agreed that details in the declaration were supplied verbally by herself and her partner at the solicitor’s offi ce and were fi lled in by Mr Guest. Her assertion, as it turned out, was merely that the part of the form in which the value of the land was to be inserted was blank at the time she signed it. The evidence of Mr Malcolm Smith was to similar effect. Mr Guest on the other hand was fi rm in his view that all elements of the form were fi lled in before they were signed by the declarant.

It is at least unlikely that a responsible justice of the peace would take a declaration, which was partly blank, and insert the details later. Mr Guest impressed the Commission as a responsible person who understood his legal obligations. Secondly, there is nothing on the form which suggests that the entries were undertaken at different times. Thirdly, the insertion of the amount in paragraph 8 of the form is not a conclusive issue. The printed paragraph reads as follows:

8.The consideration for this purchase is $ and is not less than the full value of the property and is the bona fi de consideration paid for the property. I undertake to provide evidence of the value of the subject property if required.

In other words, whether or not the consideration was identifi ed, the declaration asserted that the consideration for the property was the full value, whatever that might be.

The effect of Ms Barwick’s evidence was that she was confi dent that the amount was blank when Mr Smith signed it, because if that amount was there, “it just would have sent alarm bells straight away, for the whole four of us, not just Malcolm and myself”. The reason for that

was that they all knew that they were not purchasing land for the full value. Mr Malcolm Smith gave evidence to similar effect. His attention was drawn to the part of paragraph 8 which stated “the consideration for this purchase is $50,000”. His attention was then drawn in a separate question to the further statement that the value was “not less than the full value of the property”. He sought to deny that those statements were on the form when he signed it, but the denial can only have been intended to refer to the fi gure of $50,000. He too said that had it been there he would have noticed it and stopped the process, because he knew that they could not afford that sum.

The Commission accepts that none of the four purchasers understood that they were required, nor intended, to pay any amount beyond $5,000 for the land they were purchasing. The Commission is also satisfi ed that the respective amounts of $50,000 and $40,000 were set out in each declaration prior to it being signed. When Mr Malcolm Smith signed the declaration in relation to the land being transferred to himself and Ms Barwick, he paid no attention to the price because he knew that KLALC, under the control of his father, would not demand payment. The declaration was signed in order to obtain a further fi nancial benefi t, namely waiver of stamp duty. He signed the document knowing that the contents of paragraph 8 were false.

The declaration was not signed by Ms Barwick, although she is described in it as the “second purchaser”, nor did she sign a separate declaration. In relation to the other couple, the declaration was signed by Mr Alan Smith alone. However, the Commission did not hear evidence from Mr Alan Smith and is not able to form any fi rm conclusion in relation to his state of mind when he signed the document.

Mr David Guest gave evidence that, prior to the meeting of 27 July 2001, he had prepared a mortgage and a deed of covenant in addition to the transfer. However, he stated that when the four transferees, being Mr Malcolm Smith and Mr Alan Smith and their respective partners, attended at his offi ces with Mr Bill Smith,

Bill Smith instructed me that KLALC did not require a mortgage or any security over the properties as the transactions were aimed at assisting the transferees to obtain housing. In addition, construction fi nance would have been diffi cult to obtain if the land was encumbered by a mortgage. I reiterated the signifi cance of simply transferring an unencumbered title to the purchaser without a mortgage or deed of covenant, ie KLALC’s [sic] would be unprotected in

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the case of a default. However, Bill Smith instructed me that KLALC had decided that this was the only way the purchaser could obtain construction fi nance and that it was to be done in the manner discussed.

On 27 July 2001, transfer and stamp duty declarations were also executed by Mr Alan Smith. The consideration for the land being transferred to Mr Alan Smith and his partner was identifi ed as $40,000. A copy of a receipt provided to Mr Alan Smith on 18 October 2002 indicated that payments of between $20 and $80 had been made, approximately monthly, between 8 August 2002 and 16 August 2002. On 16 October 2002 a further payment of $4,340 was made, bringing the total payments to $5,000.

In relation to Mr Malcolm Smith and his partner, no such record exists. Rather, there is a statutory declaration prepared in the name of Mr Stephen Griffen, as Treasurer of KLALC, and, curiously, signed by all members of the Executive and Louise Charles, the bookkeeper. That declaration stated:

On 4th March 2002 I received from Ms Debbie Barwick the sum of $1,535.00, in cash being part payment of total sum $5,000.00 that is to be paid to Koompahtoo Local Aboriginal Land Council for purchase of land parcel at Awaba, lots 1 and 2 for Mr Malcolm Smith and Ms Debbie Barwick. This money was utilised for staff wages however on refl ection after being informed by our bookkeeper I realise the importance that the money should’ve been shown in our bank records. At the time the Council was under considerable stress and this was an unfortunate oversight.

That left an amount of $3,465 outstanding of the total purchase price. On 4 March 2002 Mr Smith and Ms Barwick withdrew that amount from an account they held with the ANZ Bank in Toronto and obtained a bank cheque payable to KLALC.

If, on 4 March 2002, Mr Smith and Ms Barwick had available to them an amount of $5,000 in cash, it is implausible that one part of that amount was used to obtain a bank cheque and the other part was provided to Mr Griffen in cash and that a receipt was not issued for the full amount. The more likely inference is that the only moneys available to the purchasers at that time were those used to purchase the bank cheque. However, if that is correct, the statutory declaration prepared by Mr Griffen and signed by all members of the Executive and the bookkeeper must have been fraudulent. Some support for that inference may also be obtained from the

fact that no contemporary record appears to have been made by way of a receipt book butt or other journal entry on 4 March 2002. In addition, a document signed by the three members of the Executive and dated 1 March 2002 purported to be a receipt on KLALC letterhead (not in a receipt book) for an amount of $5,000 for the payment “of” lots 1 and 2 Mulbring Street, Awaba NSW. If the statutory declaration is true (and in relation to the date it accords with the bank cheque), the date on the receipt is false, or the contents of the receipt are false. Finally, it is apparent that the form of the receipt was prepared by KLALC’s solicitors on 1 March 2002, but with the date left blank. The form was not used, although it refers to receiving the sum of $5,000, no doubt because it included the statement “by way of part consideration” for the transfer of the property. The form of the receipt on KLALC letterhead also contains the handwritten addition opposite the words “received with thanks from:” the sum of “$50,000”. When that handwriting was added is unclear. Nor is the Commission able to say whose handwriting it is. However, on the receipt dated 18 October 2002, prepared in relation to the purchase by Mr Alan Smith, there is also a handwritten notation “$40,000”. That receipt was apparently prepared by Ms Julie Williams, Manager, and dated 18 October 2002. The other details were apparently obtained by reference to direct deposits into a bank account.

Because a fi nding that a statutory declaration was made falsely is a serious matter, it should not be based on uncertain inferences. In this case the Commission is not able to make any fi rm fi nding in relation to the payment, if any, made on behalf of Mr Malcolm Smith and his partner. It is, however, necessary to note that the transfer was not ultimately registered until 22 October 2001. The delay in registering the transfer was caused by the discrepancy between the Section 40D certifi cate provided to the solicitors and the identifi cation of the land. As the offi cers and Executive of KLALC arranged for the registration of the transfer, those matters were not within the knowledge of the solicitor. However, it is apparent that on 16 October 2001 Ms Veronika Bailey signed a further certifi cate dealing with the disposal of lot 1 to Mr Malcolm Smith. The meeting at which KLALC approved that disposal is described as “a special meeting” but is not identifi ed by date. Apparently the certifi cate was deemed acceptable by the Land Transfer Offi ce. (A similar certifi cate in relation to lot 3, being part of the transfer to Mr Alan Smith, with a similar defect, was also accepted.) At some time prior to 30 November 2001, the solicitor for KLALC, Mr David Guest, received instructions from Mr Malcolm Smith and Ms Debbie Barwick to sell their land. Those



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instructions must therefore have been given within fi ve weeks of the transfer being registered in their names. Mr Guest stated that he had a meeting with Mr Bill Smith and Mr Stephen Griffen, on unrelated business, on 30 November 2001, when he raised with them the matter of the instructions from Malcolm Smith and Debbie Barwick. His fi le note of that date reads:

They aware Malcolm and Debbie looking to sell – no objection.

He further stated in his evidence:

I raised this with them as I needed to clarify whether NSWALC’s approval would be required and secondly, I was concerned about the original purchase price of $50,000 still due to KLALC.

Mr Guest, acting as instructed by Mr Malcolm Smith and Ms Debbie Barwick, prepared a contract of sale dated 16 January 2002, by which the land was sold to two independent purchasers for the sum of $100,000. A deposit of $10,000 was paid on signing the contract.

In relation to Mr Malcolm Smith and Ms Debbie Barwick, the Commission is comfortably satisfi ed that:

(1) they attended the relevant meetings of KLALC at which it was explained that NSWALC approval required that the land transfers would need to be made at “current market value”;

(2) prior to the transfer of the land they were each aware that market value was at least $50,000;

(3) they did not believe they were required to pay KLALC more than $5,000;

(4) the arrangement for purchase involved the transfer to them of an unencumbered title which they could use by way of fi rst mortgage for security for a loan;

(5) for personal reasons they decided to sell the property as soon as they had obtained title;

(6) with the express understanding of Mr Malcolm Smith’s father, Mr Bill Smith, and Mr Stephen Griffen, they were permitted to sell the land and dispose of the proceeds without making any payment to KLALC;

(7) a request that they make a payment on account of the $5,000 owing was only acted on at a time when their available funds were less than $5,000; and

(8) the stamp duty exemption declaration was false and known to be false at the time it was executed by Mr Malcolm Smith.

In relation to Mr Alan Smith, the Commission makes fi ndings (1), (2), (3) and (4), but substituting in (2) $40,000 for $50,000. It is unable to make any fi ndings in relation to Ms O’Leary.

To the extent that each stamp duty declaration was knowingly false, an offence was committed94 and the Stamp Duties Offi ce was induced to forego revenue to which it was entitled. The signing of the declarations thus constituted corrupt conduct under the ICAC Act.

While the Commission is satisfi ed that Mr Malcolm Smith signed the declaration containing the full statement of the purchase price, there was a lack of clear evidence before the Commission as to his understanding of the statement at the time he signed the declaration and as to his understanding of the purpose of the declaration itself. That was because the signing of the declaration was a peripheral issue in the investigation, the primary focus of which was conduct in relation to KLALC and the disposal of its land. It is, accordingly, not appropriate to make any fi nding in relation to that conduct.

In relation to Mr Bill Smith and Mr Stephen Griffen, the Commission fi nds that each was aware of the matters set out above at all material times. In relation to the Secretary, Ms Veronika Bailey was aware of those matters set out in (1)-(4)above. The Commission fi nds that she was a willing signatory to any document presented to her by Mr Bill Smith or Mr Stephen Griffen without regard to the truth or falsity of its contents. She adopted that attitude in relation to the statutory declaration which she signed acknowledging the receipt of the cash payment and with respect to the Section 40D certifi cate she signed in relation to the unidentifi ed meeting at which approval was supposedly given for the transfer of lot 1 to Mr Malcolm Smith and Ms Barwick for $25,000.

The Commission considers it likely that the statutory declaration in relation to the payment of $1,535 was false and that no such amount was paid on or about 4 March 2002 by Ms Barwick, or by Mr Malcolm Smith. The effect of that would have been to deprive KLALC of money to which it was entitled. However, the Commission could not be satisfi ed of the true state of affairs, beyond an assessment of the likelihood that the money was not paid and, accordingly, no fi nding can properly be made in relation to that conduct.

94 Stamp Duties Act 1920 (NSW), section 21.

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Although the Commission is not able to make a positive fi nding that Mr Bill Smith and Mr Griffen intended to ensure that Mr Malcolm Smith and Ms Barwick paid a sum of $5,000 for the land transferred to them, the following fi ndings are based on the assumption, in their favour, that they did so intend. Such an intention was, nevertheless, inconsistent with the approval given by NSWALC for disposal of land to members of KLALC at “current market value”. Secondly, it was inconsistent with resolutions passed by KLALC to that effect. It followed, assuming (again in their favour) that the sum of $5,000 was payable in relation to both lots, and not each lot, in accordance with earlier KLALC policy, that they intended to waive a debt in an amount of $45,000 payable by Mr Malcolm Smith and Ms Barwick to KLALC. They had no authority to do so. Such conduct constituted a misappropriation of KLALC funds in favour, in the case of Mr Bill Smith, of his son Malcolm Smith who, according to the address given on correspondence at and around the time of the transfer, was then living with his father.

The assumption that $5,000 only was payable, in accordance with KLALC policy, is, at least, doubtful. The “housing policy”, as formulated in November 2002, referred to members being entitled to purchase “a block of land”, but only one. The purpose was to provide housing for members. Although there is reference in a motion of 19 June 2000 to making available residential land of one hectare per member, the fact that Mr Malcolm Smith obtained two blocks, casts some doubt on the proposition that each lot should be treated as worth $2,500 only. Nevertheless, the issue is not signifi cant, in the context of the wider principles at stake.

The Commission is comfortably satisfi ed, in relation to Messrs Bill Smith and Stephen Griffen, that each was aware in July 2001 that:

(1) to the extent the transfers signed on 27 July 2001 had been approved by KLALC, each transfer required approval of NSWALC, which approval was expressly conditional on the sales being for current market value;

(2) each pair of transferees expected to pay no more than $5,000 for their respective lands;

(3) the transfers were not made in accordance with the requirements of section 40D of the Land Rights Act;

(4) the consideration stated in each of the transfers was false in the sense that it was not the amount which the transferees were

expected by KLALC to pay, nor the amount which the transferees intended to pay: to the extent that the only documented agreement in relation to the sale of the land was the transfer, it was to that extent a sham, and

(5) Mr Malcolm Smith and Ms Debbie Barwick, were allowed to sell their land without payment of the $5,000 then outstanding to KLALC, thus conferring an unauthorised fi nancial benefi t on Mr Bill Smith’s son and his partner.

The Commission also makes fi ndings (1)-(4) above, but not (5), in relation to Mr Robert Briggs.

The transfer of these parcels of land was treated by Mr Bill Smith as a matter of some importance. It was not the solicitors who arranged for the registration of the documentation, but Mr Bill Smith himself. Mr Bill Smith and Mr Robert Briggs, the Co-ordinator of KLALC, collected the certifi cates of title and transfers from Mr Guest to lodge them with the section 40D certifi cate. The discrepancy between the land identifi ed in the certifi cate and the land being transferred resulted in rejection of the lodgement and the execution by the Secretary of a further certifi cate dated 24 September 2001. The transfer and the certifi cate were ultimately taken to the Land Titles Offi ce by Mr Robbie Briggs.

The Commission is satisfied that Messrs Bill Smith, Stephen Griffen and Robert Briggs each took steps to procure the registration of the two transfers, knowing that the transfers contained false statements with respect to the consideration paid and knowing that the consideration intended by the parties to be payable did not comply with approval granted by NSWALC.

It was, at the time of these transactions, an offence under section 141 of the Real Property Act 1900(NSW) for any person fraudulently to procure, or assist in fraudulently procuring, or be privy to the fraudulent procuring of a recording in the register of land dealings created under that Act. In addition, it was at the relevant time an offence under section 178BB of the Crimes Act to make or publish a false or misleading statement in order to obtain for oneself or another person any financial advantage.

It was put to the Commission that the lodgement of the transfer, for the purposes of registration, containing a false statement as to the consideration for the transfer, was a fraudulent procurement of the transfer of the interest in land. The fraudulent procurement fl owed from the fact



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that the disposal of the land was not lawful, within the terms of section 40D of the Land Rights Act, unless the false statements were true. There may, however, be some doubt as to whether those circumstances fall within the intended scope and operation of section 141 of the Real Property Act.

On the other hand, the Commission is satisfi ed that each of Mr Bill Smith, Mr Stephen Griffen and Mr Robert Briggs was involved in making or publishing a statement in writing, namely the transfer, which they knew to be false or misleading in a material particular. The purpose of that action was to provide a signifi cant fi nancial advantage to the transferees.

The Commission is also satisfi ed that the two transfers involved a dishonest or partial exercise of an offi cial function by Mr Bill Smith and Mr Stephen Griffen as offi ceholders of KLALC. That action therefore constituted corrupt conduct on their part.

Mr Robert Briggs was also a public offi cial for the purposes of the ICAC Act, when acting in his capacity as a paid employee of KLALC. His own involvement in obtaining NSWALC approval for the transfers and in registering the transfers with the Land Titles Offi ce, with knowledge of the falsity of the statements concerning the consideration, involved corrupt conduct for the purposes of section 8 of the ICAC Act. In lodging the transfers, he made or published a statement which he knew to be false in a material particular and thereby committed an offence under section 178BB of the Crimes Act. Although he was not an offi ceholder of KLALC, Mr Briggs had intimate involvement in relation to these matters, being party to the motions in relation to the transfers of land at the KLALC meetings, being a member of the delegation which attended NSWALC, and being the person who had conversations and correspondence with offi cers of NSWALC, as well as being responsible for lodging the transfers for registration.

In relation to the land transferred to Mr Malcolm Smith and Ms D. Barwick, the further sale by them has resulted in the land being acquired by third parties who are almost certainly bona fi de purchasers for value. So far as the Commission is aware, the land transferred to Mr Alan Smith and Ms O’Leary has not been the subject of any further disposal. As it seems likely that they were on notice that the transfer to them did not comply with the approval given by NSWALC, it may well be that the section 40D certifi cate with respect to their transaction is not conclusive evidence that the disposal of the land did not contravene section 40D. In

that event, the land may be recoverable by the KLALC, or KLALC may be able to require payment of the value recorded in the transfer.

Corrupt conduct fi ndings

The Commission makes the following fi ndings:

Mr Robert Briggs, former Co-ordinator of KLALC, engaged in corrupt conduct in relation to his involvement in:


b) procuring the registration by the Land Titles Offi ce of the transfer of land from KLALC to Mr Alan Smith and Ms Kim O’Leary knowing that the transfer signed on 27 July 2001 contained a false statement, and namely the amount of consideration.

Mr Stephen Griffen, former Treasurer of KLALC, engaged in corrupt conduct in relation to his involvement in:


b) procuring the registration by the Land Titles Offi ce of the transfer of land from KLALC to Mr Alan Smith and Ms Kim O’Leary knowing that the transfer signed on 27 July 2001 contained a false statement, namely the amount of consideration.

Mr Bill Smith, former Chairperson of KLALC, engaged in corrupt conduct in relation to:

a) procuring the registration by the Land Titles Offi ce of the transfer of land from KLALC to Mr Malcolm Smith and Ms Debbie Barwick knowing that the transfer, signed on 27 July 2001, contained a false statement, namely the amount of consideration; and

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b) procuring the registration by the Land Titles Office of the transfer of land from KLALC to Mr Alan Smith and Ms Kim O’Leary knowing that the transfer, signed on 27 July 2001, contained a false statement, namely the amount of consideration.


The Commission has given careful consideration to the question whether the relevant authorities should consider prosecution in relation to any of the matters dealt with in this chapter. The matters themselves are moderately serious. State Revenue has been deprived of stamp duty which was properly payable and the KLALC has been deprived of the true benefi t of land obtained by it under the Land Rights Act. On the other hand, the conclusions reached by the Commission have in part been based on evidence given before it, which would not be available in that form in criminal proceedings. Finally, the matters giving rise to the Commission’s fi ndings cover a period which ended more than three years ago.

In relation to Mr Robert Briggs, the actions which he undertook were done in his capacity as an employee of KLALC. He was acting on the instructions of the Executive, and particularly, the dominant member thereof, Mr Bill Smith. In these circumstances it is not recommended that consideration be given to his prosecution for a criminal offence.

In relation to Mr Bill Smith, the relevant actions were more morally reprehensible than were those of the other parties involved. Not only was Mr Smith well aware that a transfer for less than current market value did not have the approval of NSWALC, but he pressed ahead with arrangements which would nevertheless result in the transfer of KLALC land to the joint ownership of his son and his son’s partner. The fact that other members of KLALC, some of whom may have hoped to benefi t from similar arrangements themselves, knew of the intended transaction does little to exonerate Mr Smith. Furthermore, the Commission has little doubt that Mr Smith was aware of the fact that his son and Ms Barwick had not paid even $5,000 for the land at the time they sold for full market value to third parties, but did nothing to recover even that amount from the proceeds of the further sale. Whilst not directly relevant to the corrupt conduct involved in the original disposal of the land, it demonstrates an on-going intention on the part of Mr Smith to provide material benefits to his son at

the expense of the KLALC. Further, the Commission is satisfied that there is sufficient evidence likely to be available on a prosecution to permit a conviction for an offence under section 178BB of the Crimes Act. Accordingly, the Commission recommends that consideration be given to prosecution of Mr Smith for such an offence in relation to the transfer of land to his son, Malcolm Smith and his son’s partner, Ms Debbie Barwick.

Mr Stephen Griffen stands in a similar position to Mr Smith in all respects bar one. The difference is that Mr Smith was the moving party in the arrangements: the role of Mr Griffen was that of loyal lieutenant. Nevertheless, Mr Griffen was not in the position of Mr Briggs, being merely an employee of the KLALC. He was the Treasurer of the Land Council, with responsibility for its fi nancial affairs. He was capable of exercising judgment of his own in respect of the transfers of land. Accordingly, the Commission is satisfi ed that a similar recommendation should be made in respect of Mr Griffen, namely that consideration be given to prosecution for an offence under section 178BB of the Crimes Act, in relation to the transfer of land to Mr Malcolm Smith and Ms Debbie Barwick.



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At some stage prior to November 2000 KLALC had obtained title to a parcel of land known as Lot 559, Ourimbah Street, Morisset, comprising an area of a little over 8,000 square metres. On 29 November 2000, KLALC entered into a joint venture with another party to develop the land as eight residential blocks. Mr Bill Smith assured the Commission that the development and sale of the land was an initiative of the members of KLALC. At a later stage, there was a proposal to mortgage the land and a certifi cate under section 40D of the Land Rights Act was signed by the KLALC Secretary, Ms Veronika Bailey. However, in her evidence to the Commission Ms Bailey could not recall the CKT joint venture, nor any discussion at a meeting of members concerning it. Indeed, she could not recall signing the relevant documents.

In relation to the matters discussed in the previous chapter, KLALC supplied to NSWALC extracts from the minutes of various meetings relating to approval of disposal of particular blocks to individual members. Amongst that material was a copy of a notice, dated 4 October 2000, of an extraordinary general meeting to be held on 17 October 2000. Apart from the disposal of the individual blocks, the agenda noted a proposal from “CKT Developers” and another party, each proposing to enter into a joint venture to develop residential land “north of Morisset High School”. This may refer to the Ourimbah Street land, although that land is not north of the High School. It probably refers to other land: but the inference may be drawn that such proposals were put before KLALC members. No extant minute refers to the particular proposal in question, but the Commission is satisfi ed that the matter was probably discussed at a meeting and approval given to the CKT proposal. No information as to the material put before such a meeting is available.

On 29 November 2000 a joint venture agreement was entered into between KLALC and a company known as CKT Property Developments Pty Ltd (“CKT”). On behalf of KLALC, the agreement was signed under seal by Mr Bill Smith (Chairperson), Ms Bailey (Secretary) and Mr S. Griffen (Treasurer). At that time, the sole shareholders of CKT were Mr Christopher Lloyd Gallegos and his wife. Each was a director of the company. Mr Gallegos was apparently introduced to Mr Bill Smith by Mr Graham Steer, in relation to an aspect of the Sanpine joint venture. Between 1987 and 2003 CKT had apparently carried out only one development, but Mr Gallegos, as its sole full-time employee, provided consulting services in relation to land development generally.

The joint venture provided for KLALC to provide the Ourimbah Street property for the purposes of subdivision and sale. The land was to be made available by KLALC as security for a mortgage, the proceeds of which were to be received by CKT. CKT was to indemnify KLALC unconditionally in respect of liabilities arising from the loan agreement. Expenditure was provided for according to a “projected cash fl ow” which was annexed to and formed part of the joint venture agreement. Three months prior to the joint venture agreement, KLALC had obtained a valuation of the land as one home site. On that basis, a registered valuer placed a fi gure of $150,000 on the unimproved site. The projected cash fl ow, however, estimated that seven lots could be obtained following subdivision, with a total value of $635,000. The accuracy of that fi gure would have been important commercially, as the expenditure was estimated at $438,000. The expenditure included two sums of $12,000 each, one as payment to an “Aboriginal liaison offi cer”, the other for “project management”. The project manager was Mr Bob Scott, through the agency of his partner’s company, Bronzewing Property Holdings Pty Ltd. Given Mr Scott’s commitment to the project, the contribution of CKT is obscure. Nevertheless, pursuant to the Agreement, it was to receive 50% of the profi t from the subdivision and sale.

If the consideration provided by CKT is unclear, the benefi t to be obtained by KLALC, as the land owner, is equally unclear. Assuming the estimated revenue and expenditure fi gures were accurate, KLALC stood to receive $128,600 from the development, together with a payment of $25,000 upon Council approval of the subdivision. If, as the valuation suggested, it could have realised $150,000 from a sale of the unimproved site, less marketing expenses and a sale commission, it would have been little worse off, and possibly better off, without the burden of the joint venture. It seems unlikely that, if KLALC members had received a copy of the one page projected cash fl ow and had been advised of the valuation, they would have approved of the joint venture. If they did approve it, it seems likely that they did not have that information provided to them.

Apart from Mr Scott, who was to receive payment as project manager, the other individual benefi ciary of the joint venture was likely to be the Aboriginal Liaison Offi cer, who was also expected to receive an amount of $12,000, although his or her role was not adverted to in any way in the joint venture agreement.

The author of the joint venture agreement also remains obscure. Mr Smith thought that the agreement was

Chapter 8: The KLALC–CKT joint venture

95

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drafted by Mr Peter Stern, who was KLALC’s lawyer in relation to the mortgage. Mr Stern denied that he played any role in relation to the joint venture agreement and said he did not see a copy until he was instructed to act in relation to the mortgage in 2001. In any event, the person who drafted the agreement evidently saw no need to specify, in respect of the Aboriginal Liaison Offi cer, any role or duties to be fulfi lled in consideration of the anticipated payment. Mr Bill Smith agreed that there was a proposal for an Aboriginal Liaison Offi cer but said that none was appointed. The Commission accepts that that was so.

The funds which were allocated to that position were used to make three payments of $3,950 each (a saving of $150 on the budgeted expense) to three members of KLALC for work in clearing rubbish from the site. Two of the recipients were the Treasurer of KLALC, Mr Griffen and Malcolm Smith, Mr Bill Smith’s son. Mr Gallegos agreed to the payments and wrote out three cheques, payable to cash in an amount of $3,950 each. What happened to those cheques was a matter of some dispute before the Commission. Mr Gallegos told the Commission that he provided them to Mr Bob Scott. However, he also requested invoices to cover the work done. Invoices were prepared by a Mr Paul Le Mottee under a business name operated by him, “Rural Magic”. Mr Le Mottee agreed that he did not undertake that work himself, nor did he employ or supervise others to do to the work. Mr Le Mottee’s evidence was that the cheques written by Mr Gallegos had already been cashed when he was asked to provide invoices from Rural Magic. He believed it was Mr Bob Scott who asked him to do that. Mr Le Mottee was a surveyor and project manager and had undertaken some work on the Sanpine joint venture in that capacity. He had an existing relationship with Mr Bob Scott, whom he had known since 1985.

The contradictions in the evidence extended to the physical delivery of the three cheques. Although Mr Gallegos stated that he provided them to Mr Scott, two of the recipients, Mr Stephen Griffen and Mr Malcolm Smith each asserted that they collected their cheques directly from Mr Gallegos. Mr Scott gave similar evidence. One cheque was simply unaccounted for.

The facts which are known to the Commission are that two cheques of $3,950 each were paid to the Treasurer of KLALC and the son of the Chairperson. There appears to have been an attempt, instigated by Mr Scott, to conceal the recipients of those payments. Although the Commission is not satisfi ed that the third cheque was payable to Rural Magic or Mr Le Mottee, it is not able

to say with confi dence to whom it was paid. If Bill Smith is to be believed, it was probably distributed amongst a number of members of KLALC who gave some limited assistance in clearing the site. Who did clear the site is not known, although it appears that some rubbish, including old car bodies, was removed. The evidence before the Commission tends to support the view that the payments made were for work which was actually carried out and the Commission accepts that that was the case. The attempt to conceal the identity of the recipients remains curious: however, the only inference which can be drawn is that, as in the case of the Sanpine joint venture, when money became available for some form of work associated with the KLALC, arrangements were made to distribute the money amongst a small clique involving the offi cers of the KLALC, their relatives and associates. The absence of proper record-keeping and other transparent administrative practices in relation to the distribution of funds, ultimately obtained by use of KLALC assets, gives rise to situations which are susceptible to corrupt conduct and should be avoided. However, in the circumstances of the specifi c payments made in relation to the CKT joint venture to members of the KLALC, the Commission is not able to make a fi nding that there was corrupt conduct and it does not do so.

The joint venture agreement provided that KLALC should “make available to the joint venture” the Ourimbah Street land. In addition, the agreement was stated to be conditional upon two circumstances, namely:

i. the granting of approval for the subdivision of the land abovementioned by the relevant authorities

ii the granting of approval of NSW Aboriginal Land Council for the abovementioned subdivision and sale of the land in accordance with the provisions of section 40D of the Aboriginal Land Rights Act 1983.

The agreement provided that the joint venture should be at an end if the approvals were not granted within 90 days of the date of the agreement (being 29 November 2000) or such longer period as might be agreed.

The documentation before the Commission does not reveal whether, and when, a development application was submitted to Lake Macquarie City Council for its consent to the subdivision. Nor is there any documentation before the Commission approving the subdivision. It is also unclear how any relevant expenses in seeking Lake Macquarie City Council approval for


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a development application were met prior to the fi rst mortgage being arranged in October 2001. However, it appears that no approach was made to NSWALC until the second half of 2001.

The Commission has no copy of any material provided to NSWALC when its approval was sought prior to the execution of the mortgage. However, on 18 September 2001 a letter from the Manager, Land Rights Units of NSWALC, addressed to Mr Bill Smith, set out the resolution passed by NSWALC in the following terms:

That NSWALC approves the disposal by Koompahtoo LALC of Lot 559, DP 1025295, Ourimbah Street, Morisset for a purchase price equal to the current market value. NSWALC approval is subject to NSWALC receipt and acknowledgement of

(1) a current market valuation prepared by a registered valuer;

(2) confi rmation the sale price is equal to or above the valuation.

The letter goes on to acknowledge receipt of the valuation referred to above that current market value was $150,000. The letter then sought a copy of “the agreement for sale of land contract” to establish satisfaction of the second condition. It seems unlikely, in these circumstances, that NSWALC was advised of the joint venture agreement, the proposed subdivision, or the intended mortgage. The valuation of the Ourimbah Street land, obtained in September 2001, was prepared on the basis of a sale as a single home site. That was despite the fact that the joint venture agreement, entered into in November of the previous year, involved subdivision and sale of seven separate lots. Presumably NSWALC was not advised of that fact. It must have assumed that it was being asked to approve the sale of the land as a single site. That was wrong: in fact, the proposed disposal was by way of mortgage to LKM Capital Ltd, a transaction which was executed on 25 October 2001. Had NSWALC been advised of the proposed transaction, it might have been surprised to learn that the joint venture intended to supply the land as security for a sum exactly double the valuation. That arrangement had been documented by the solicitors for KLALC in June 2001. There is no record of any KLALC meeting to approve the mortgage, nor did the Secretary, Veronika Bailey, recall one. Nevertheless, she signed a certifi cate of compliance with section 40D of the Land Rights Act on 20 December 2001, some two months after the execution of the mortgage and four months after the NSWALC approval.

Mr Bill Smith gave evidence that he had personally gone to the meeting of NSWALC to obtain the approval. The meeting had been held at Wagga Wagga. He recalled travelling to Wagga Wagga for that purpose. The Commission accepts that he did so. However, the Commission is also satisfi ed that NSWALC was not informed as to the true nature of the proposed transaction. It appears that NSWALC simply gave effect to the policy referred to in the previous chapter, namely of approving disposal of land not of cultural value, so long as there was evidence that the proceeds obtained were not less than a registered valuer’s assessment of current market value.

Mr Bill Smith was cross-examined in relation to the reason why he appeared to have taken the trouble to go to a distant NSWALC meeting in order to obtain approval for a sale of the land, without apparently referring to the joint venture and associated mortgage. He was also cross-examined as to whether the KLALC members had approved the mortgage. As was put to Mr Smith, this transaction occurred at the time that the Sanpine mortgage was being increased. The same lender was involved. Thus, a mortgage of the Morisset land was made to LKM Capital for the amount of $1.65 million on 10 April 2001. That mortgage was varied to increase the principal sum to $1.95 million on 16 November 2001. No approval was obtained from NSWALC for either of those transactions. The Morisset land had in fact been transferred (or purportedly transferred) to a trustee on 30 March 2001. As discussed in relation to the Sanpine joint venture, the Commission is satisfied that those steps were taken to avoid any further investigation by NSWALC of the dealings in relation to the joint venture. The Commission is also satisfied that, in relation to the land at Ourimbah Street, Mr Bill Smith deliberately avoided telling NSWALC about the joint venture agreement and proposed mortgage for the same reason, namely to avoid enquiry into the arrangements entered into by KLALC with CKT and Mr Bob Scott.

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Corrupt conduct and section 74A(2) statement

The conduct of Mr Bill Smith in that regard was dishonest: it involved dishonesty in relation to his official function, namely his action as Chairperson of KLALC in seeking the approval of NSWALC in relation to a proposed disposal of land. However, in order to be corrupt conduct for the purposes of the ICAC Act, that conduct must involve a criminal offence. No submission has been put to the Commission that it involves a criminal offence. It is important to bear in mind that the facts do not demonstrate that Mr Bill Smith himself obtained any financial or other material personal benefit from the CKT joint venture agreement or the mortgage of the land. Accordingly, the Commission makes no finding of corrupt conduct on the part of Mr Bill Smith in relation to this transaction. Nor does the Commission make a finding of corrupt conduct in relation to any other person with respect to the various aspects of the CKT joint venture discussed above.

Chapter 8: The KLALC–CKT joint venture 97


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The accounts

The Land Rights Act required that Local Aboriginal Land Councils prepare fi nancial statements for each fi nancial year in accordance with section 41B(1) of the Public Finance and Audit Act 1983 (NSW).95 The fi nancial statements were required to be submitted for verifi cation and certifi cation by an auditor selected by NSWALC and submitted to the Minister for Aboriginal Affairs, together with the audit certifi cate, not later than four months after the end of each fi nancial year.96

NSWALC was obliged to cease to provide funds to any Local Aboriginal Land Council that failed to obtain a satisfactory audit certifi cate, or otherwise failed to comply with section 32 of the Land Rights Act.97

The Public Finance and Audit Act required that fi nancial statements were to be prepared “having regard to current accounting standards and industry practices relating to the statutory body”.98 It also required that the statements be accompanied by a summary of the land owned or occupied by the relevant body and, where it was appropriate to value the land and the value could readily be established, a statement of the value.99

The Commission was provided with the audited accounts for KLALC for each of the fi nancial years ending on 30 September, from 30 September 1996 to 30 September 2002. The audit reports for each of the fi rst three of those fi nancial years are described as “Special Purpose Financial Reports”. Each of them contained a disclosure by the auditor in the following form:

The [KLALC] is responsible for the preparation and presentation of the fi nancial statements and the information contained therein, and have determined that the basis of accounting used and described in Note 1 to the fi nancial statements is appropriate to meet the requirements of section 32 of the Aboriginal Land Rights Act 1983 and the needs of the members. We have conducted an independent audit of the fi nancial statements in order to express an opinion on them to the members of Koompahtoo Local Aboriginal Land Council on their preparation and presentation. No opinion is expressed as to whether the basis of accounting used, and described in Note 1, is appropriate to the needs of the members.

The financial statements have been prepared for distribution to members for the purpose of

fulfilling the requirements of the Aboriginal Land Rights Act.

We disclaim any assumption of responsibility for any reliance on this report or on the fi nancial statements prepared as a special purpose fi nancial report to which it related to any person other than the members, or for any purpose other than that for which it was prepared.

Each of the audit reports for the last four years in the period is described as a “General Purpose Financial Report” and contains a statement similar to that set out above.

Note 1 to each set of accounts is headed “Statement of Accounting Policies”. It asserts that the accounts have been prepared in accordance with the relevant accounting standards, being either AAS 6 or AASB 1025 and lists various exceptions. With all years’ accounts AAS 22 (“Related Party Disclosures”) was identified as a standard not applied. None of the accounts makes any reference to Mr Bill Smith’s appointment as Aboriginal Liaison Officer, nor any disclosure of the amounts he received.

There is no reference to the KLALC–Sanpine joint venture, nor to any expenses incurred by it, in the accounts for the fi rst three years of the period, other than the $100,000 payment made in July 1997 which is described as “income” in the accounts for the year ended 30 September 1997. The accounts for the year ending September 2000 contained a note referring to the joint venture agreement, its object, the mortgage with Inteq and the fact that, as the costs were said to have been incurred by Sanpine, “no profi ts or losses have yet been generated by the joint venture and hence no profi t or losses have yet been equity accounted by [KLALC] in respect of the joint venture”. The note further asserted that once the rezoning had been completed the proceeds of the development would be disclosed in KLALC’s fi nancial statements.

The notes to the accounts for the year ended 30 September 2001 refer to an alleged receipt of $850,000 for the transfer of the Morisset property to KLALC Investments. There is also a note to the accounts referring to the existence of the joint venture agreement. No reference is made to any mortgage. The note asserts, in relation to the joint venture that:

Chapter 9: Departures from accounting standards

95 Former section 32(2).96 See former sub-sections 32(3)-(5).97 Former section 34C(1).98 Section 41B(1)(a).99 Section 41B(1)(d).

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KLALC Property & Investments Pty Limited is to contribute the land for the development while Sanpine Pty Ltd is to arrange the development funding and contribute its expertise.

There is no specifi c reference in the accounts to KLALC’s units in the Unit Trust of which KLALC Property & Investments was the trustee. These units should have been treated as an asset.

The accounts for the year ended 30 September 2002 contain a note referring to both the Sanpine joint venture and the CKT joint venture. The note for the Sanpine joint venture refers to KLALC Property & Investments mortgaging the property and also adds: “Amounts received from the joint venture of $25,000 in 2002 and $72,000 in 2001 may be refundable”. The note in relation to the CKT joint venture describes the purpose of the joint venture and notes “a sum of $25,000 was received by the KLALC which is not refundable”. The accounts contain no reference to KLALC’s joint loan with CKT from LKM Capital for the CKT joint venture.

Mr South’s evidence

The auditor of KLALC, Mr Richard South, confi rmed that he had known Mr Bill Smith for 25 years and provided accounting services to a number of his businesses. He said he had been auditing the accounts of KLALC for some seven or eight years prior to 2003. He also audited the accounts of a number of other Local Aboriginal Land Councils in that time. He stated that typically the audit would be conducted in the period from 1 October to the end of the calendar year and involved a verifi cation of the balance sheet items and review of source documentation. He stated there would be possibly two or three meetings with members of the executive of KLALC to discuss the scope of the audit and for him to formally present the audited accounts. He said the staff of the KLALC did not prepare draft accounts, just lists of balance sheet and profi t and loss items.

Mr South was questioned about a number of aspects of his audits. First, contrary to the statement describing the scope of the audit, Mr South said that the determination of what accounting standards would and would not be applied was a judgment that he exercised and not KLALC. He stated that some time prior to the preparation of the 30 September 1996 accounts he determined that the related party transactions standard would not be applied and he did not reconsider that decision at any subsequent time. He said that the decision not to apply

the standard was not discussed with the executive or members of the KLALC. He said that the reason why he did not apply the standard was his perception that there may be a signifi cant volume of transactions between the KLALC and its members. He accepted that there would not have been any diffi culty in applying the standard to dealings between KLALC and members of its executive. In hindsight, he accepted that he could have exempted the application of the accounting standard generally but disclosed some particular transaction or transactions. He stated he did not consider that at the time.

Mr South confi rmed that he was aware that Mr Bill Smith was appointed Aboriginal Liaison Offi cer for the KLALC–Sanpine joint venture because Mr Smith had approached him for advice on the terms he was negotiating with Sanpine. It was his understanding that Mr Smith was being paid by Sanpine but working for both parties. Mr South did not discuss with Mr Smith or any other KLALC offi ce-holder or employee whether the payments to Mr Bill Smith should be disclosed in KLALC’s accounts. Mr South could not recall whether he specifi cally addressed whether these amounts should be disclosed or whether he did not address it at all. He conceded that in hindsight the approach he would adopt might be different.

Mr South was also questioned about the change in the description of the audit reports from a “Special Purpose Financial Report” to a “General Purpose Financial Report”. He stated that he understood the concept of a Special Purpose Financial Report as one prepared for a specifi c user or a specifi c use. He said that he had a discussion with Mr John Carter from NSWALC who requested that Local Aboriginal Land Councils be treated as “general purpose reporting entities”. His understanding of the signifi cance of the change was to widen the scope of persons who could rely on the statements. He confi rmed that he did not give any fresh consideration at the time of the change to the appropriateness of the identifi ed exclusions from the accounting standards, although he speculated that a manager within his fi rm might have done so.

Each set of accounts from 30 September 1999 onwards referred to KLALC as a “reporting entity” in the context of describing the scope of the report as a “General Purpose Financial Report”. Mr South understood that those concepts were synonymous because if KLALC were a “reporting entity” it could not have a Special Purpose Financial Report, only a General Purpose Financial Report.


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Mr South was questioned separately about the disclosure of matters concerning the KLALC–Sanpine joint venture. Mr South agreed that accounts for the year ended 30 September 1999 should have raised, at least as a contingent liability, KLALC’s exposure under the mortgage to Inteq. He said that he did not seek to disclose the expenses that had been incurred in the joint venture for the reasons set out in his note to the accounts for the year ended 30 September 2000, namely that it was his understanding that prior to the rezoning those costs were “to the account of” Sanpine. (In any event it is diffi cult to see how Mr South could have obtained the necessary information, given that Sanpine’s offi cers would not disclose it to him.)

A question arose concerning Mr South’s knowledge of the transfer of the Morisset property to KLALC Investments & Property Pty Ltd and its treatment in the accounts. At some time in 2001 he was asked by the solicitor acting on the conveyance, Mr Peter Stern, as to the appropriate value to be noted on the transfer. He was advised that the property was being transferred to a trust. He said he did not see the records of the transfer nor did he enquire whether there was a receipt for the consideration included on the transfer. He did not enquire as to whether there was any documentation concerning NSWALC approval, although he accepted that one would ordinarily expect that to be part of his audit function. He also accepted that it would ordinarily be part of his function as an auditor to check whether there were minutes of a meeting of KLALC members approving the transfer of the property to the trustee company. He could not recall doing that.

Mr South became aware of the CKT joint venture just prior to signing the audit report for the fi nancial year ended 30 September 2002. He saw the CKT joint venture agreement, and was aware of the mortgage of the land to LKM and the fact that a $25,000 payment had been made to KLALC. He said he would ordinarily expect to see the mortgage but did not do so because of time constraints and because he expected there would be a signifi cant surplus from the proceeds of the joint venture. Equally, he accepted he would ordinarily expect to see a NSWALC approval for the mortgage but he did not ask for it because of the late inclusion of this item in the accounts.

Finally, Mr South was questioned about his knowledge of the sale of the two blocks of land to Malcolm Smith and Alan Smith, and their respective partners, for $5,000 each. He said that the sale of the blocks for those amounts was brought to his attention by the investigator

appointed under the Land Rights Act and that he queried the sales with Mr Stephen Griffen. He said he was advised that there had been “an understanding” that members would be able to buy land for reduced amounts. He recorded the sales as a profi t to the KLALC of $10,000 in the accounts for the year ended 30 September 2002. This land had not previously been noted in the asset register of the KLALC. He agreed that this accounting treatment assumed that KLALC had only acquired the property during that year and he did not check to see if that had occurred. There is no evidence as to when this land was granted to KLALC. However, as noted above, certifi cates of title were not issued by the Land Titles Offi ce until July 2001.

Conclusions

The matters set out above disclose to the satisfaction of the Commission that there were material defi ciencies in the audit of the KLALC accounts over a number of fi nancial years. These may be summarised as follows:

(1) the decision to exempt the application of the accounting standard on related party disclosures;

(2) the inclusion of a disclaimer limiting the use of the fi nancial reports to KLALC members only, notwithstanding that they were supposed to be general purpose fi nancial reports;

(3) the omission from all of the accounts of reference to Mr Bill Smith’s position as Aboriginal Liaison Offi cer for the Sanpine joint venture, and the failure to record the amounts paid to him;

(4) the omission from all of the accounts of the expenditure of the Sanpine joint venture;

(5) the omission in the 1999 accounts of the contingent liability of KLALC under the mortgage to Inteq;

(6) the failure to review the documentation concerning the transfer of the Morisset land to KLALC Property & Investments Pty Ltd;

(7) the failure to review the documentation concerning the mortgage of the Ourimbah Street property for the CKT joint venture;

(8) the omission from the 2001 and 2002 accounts of the expenditure of the KLALC–CKT joint venture, and

(9) the omission from the 2002 accounts of reference to KLALC’s joint liability with CKT in respect of the loan for the KLALC–CKT joint venture.

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The long-standing business relationship between Mr South and Mr Bill Smith, set out above, may have contributed to the failure on Mr South’s part to ensure that their distinct and separate interests were kept apart and properly addressed. If Mr Bill Smith was faced with a conflict of interest in relation to disclosure of his remuneration, it was a conflict which should have been apparent to Mr South. Indeed, a responsible and diligent auditor would have been alert to ensure that necessary disclosures were made on instructions, or there might be a separate conflict of interest for the auditor. None of these concerns appear to have been addressed by Mr South.

One serious consequence of the defi ciencies in the auditing process was that conduct which might have been justifi able if disclosed was not disclosed. A properly conducted audit can both reveal corrupt conduct and prevent circumstances arising in which corrupt conduct may occur. Without seeking to exonerate those primarily responsible for the corrupt conduct addressed above, it is apparent that the defi ciencies in Mr South’s auditing processes constituted the failure of an important protective measure.

The NSW Aboriginal Land Council (NSWALC)

At all material times, NSWALC was responsible for supervising the fi nancial accountability of Local Aboriginal Land Councils. A supervisor cannot necessarily be expected to know what has been omitted from an audit report, but there were indications in the case of the KLALC reports which should have alerted NSWALC to at least some of the defi ciencies noted above. The primary evidence in relation to that process came from Mr John Carter.

Mr Carter, prior to his retirement in December 2003, was the Director of Land Council Services at NSWALC. Mr Carter was a qualifi ed company secretary with qualifi cations and experience in accounting. He commenced work as a senior accountant with NSWALC in June 1989. Shortly after his commencement he supervised the establishment of the Aboriginal Land Council Accounting Service (“ALCAS”). ALCAS evaluated the performance of land councils and provided them with accounting and fi nancial assistance. It undertook reviews of their fi nancial performance in order to determine eligibility for funding. ALCAS was disbanded in 1995 and Mr Carter became the Evaluation Manager for NSWALC. As Head of the Evaluation Unit,

he and the one or two staff who worked for him would review the accounts and the budgets of Local Aboriginal Land Councils. He said that, in contrast to ALCAS, the Unit would primarily look at audit certifi cates rather than performance-related issues.

It was Mr Carter’s view that a special purpose fi nance report did not satisfy the requirements of section 41B(1) of the Public Finance and Audit Act because he did not regard such a report as being necessarily prepared in accordance with the prevailing accounting standards.

Mr Carter reviewed the KLALC accounts for the year ended 30 September 1997, noted that the audit report was a special purpose fi nance report and that there had been an exclusion of the accounting standard pertaining to related party disclosures. He stated that he discussed this with the auditor, Richard South, and requested that all future reports be general purpose fi nance reports. In the following year he noted that the report was still a special purpose fi nance report. He enquired of Mr South why that was and was told it was an oversight. He said he brought to the attention of NSWALC that the report was a special purpose fi nance report, but that the Councillors were of the view that an unqualifi ed special purpose report satisfi ed the legislation, and funding was approved, but that this position later changed. During this period a number of other Local Aboriginal Land Councils, albeit a minority, were fi ling special purpose fi nance reports and were excluding the operation of the related party disclosure standard.

On 29 March 1999 Mr South and Mr Carter met to discuss KLALC’s accounts and, in particular, the treatment of the Sanpine joint venture. This was followed by a letter from Mr South to Mr Carter on 31 March 1999 and Mr Carter’s response of 6 April 1999. Correspondence between Mr South and Mr Carter revealed discussion about the treatment of the revenue and expenses for the Sanpine joint venture, particularly the refundable nature of half of the $100,000 advance made in July 1997. Mr Carter recalled that there was resistance to disclosing the expenses of the joint venture. Mr Carter also recalled discussion about the exclusion of the related party disclosure standard. He said he told Mr South that related party transactions associated with joint ventures had to be disclosed but accepted that related party transactions associated with the rental operations of KLALC need not be disclosed.

Although the accounts for the year ended 30 September 1999 were described as a general purpose financial report, Mr Carter considered that the



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limitation on the use made them “for all intents and purposes ... actually a special purpose report”. Mr Carter said that he reviewed the subsequent years’ reports and again noted the limited nature of the report and the description of the scope of the audit and the exemption of the related parties standard.

Mr Carter said that following each Local Aboriginal Land Council fi ling accounts for the year ended 30 September 1999, he prepared a “funding statement” for NSWALC. To the best of his recollection, he believed he would have advised that the KLALC audit report was not satisfactory and did not comply with the legislation. He believed he would also have stated that it was non-compliant because of the exemption of related party disclosures and the form of disclaimer from the auditor. He said he would have prepared a similar report for the subsequent years. He said it was never explained to him why KLALC’s funding was still being approved by NSWALC, notwithstanding the exemption of the related party disclosures. He said he raised his concern with the Auditor-General’s Department.

The Commission sought from NSWALC the reports and correspondence referred to by Mr Carter in his evidence. The only relevant material supplied was an electronic version (or versions) of a memorandum and accompanying “status report”, apparently prepared by Mr Carter on or about 31 March 2000. The documents appear to be in draft form. The memorandum commented on the position of the various Local Aboriginal Land Councils having regard to their most recently fi led fi nancial statements. The draft schedule queried whether KLALC’s accounts were a special purpose fi nancial report, but otherwise categorised its accounts as only having “minor problems”. There is no reference to exclusion of relevant accounting standards. Given the nature of this document and the incompleteness of documents produced, it is not possible to draw any conclusions from them which are inconsistent with Mr Carter’s evidence. Generally, the Commission accepts Mr Carter’s evidence, as set out above, with the qualifi cation that he may have been more robust in his criticism of the KLALC reports to the Commission, than he was to NSWALC.

Nevertheless, Mr Carter’s evidence indicates that it was or should have been obvious to NSWALC that KLALC (and possibly other Local Aboriginal Land Councils) were seeking to exclude, inappropriately, all possible applications of the related party disclosure accounting standard. It does not appear that any substantive action

was taken or even threatened against KLALC as a result. The exclusion of the related party accounting standard should have raised immediate and serious concerns with any funding body considering such accounts. It may be that the wholesale application of the accounting standard would be cumbersome, particularly because of the volume of transactions that may occur between a Local Aboriginal Land Council and its members. However, that is not a proper basis for exempting disclosure of transactions between a Local Aboriginal Land Council and its executive. This failure on the part of NSWALC to ensure that proper accounting standards were followed was at least conducive to the perpetuation of corrupt conduct.

Conclusions

Under new section 153(3) of the Land Rights Act, NSWALC is responsible for appointing auditors who verify and certify Local Aboriginal Land Council fi nancial records.100 Whether or not Mr South has been so appointed is not known to the Commission. If he currently holds such an appointment, the Commission recommends that NSWALC give consideration to inviting him to show cause why he should be allowed to remain on the list in the light of his conduct in relation to KLALC, as noted above.

With respect to NSWALC itself, there is a concern that it may have continued to fund KLALC in the absence of proper audit reports and financial records, and in the face of partly adverse reports in that respect from its responsible officer. However, given that the councillors who would have been responsible for that conduct are no longer members of NSWALC and that an administrator has been appointed, the Commission sees no purpose in recommending any further steps be taken in relation to the former councillors responsible.

Finally, there is the position of the officers of NSWALC, and in particular Mr Carter. The Commission was impressed with Mr Carter’s evidence in the sense that he demonstrated a clear understanding of the problems which had arisen in relation to KLALC and as to the correct standards to be applied. There is also no doubt that he raised a number of pertinent issues with Mr South and sought to have some problems rectified. It is also not in doubt that he reported his principal concern to

100 See also Aboriginal Land Rights Regulations 2002, clause 95.

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NSWALC. Whether he reported the full extent of the problems identified above is unclear. However, even if he did not, the Commission is firmly of the view that no responsibility for the corrupt conduct which it has identified can properly be placed at the feet of any officer of NSWALC. The Commission formed a clear general impression that staff employed by NSWALC who had dealings in relation to the KLALC transactions discussed above acted competently, diligently and with integrity. The lack of a clear distinction between executive or administrative functions (on the one hand) and policy-making by the Council (on the other) was not statutorily entrenched at that time and appears not to have been followed as a matter of practice. It is apparent that this situation caused difficulties for the staff, including the CEO, from time to time.



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Disposal of land: what is expected

Underlying the conduct discussed in this report are profound ambiguities in the purposes, principles and mechanisms of the Aboriginal Land Rights Act 1983. At all stages during the conduct of this investigation, the Commission was alert to the possibility that genuine differences of opinion as to the operation of the statutory scheme may have given rise to accusations of corrupt conduct. To the extent that the Commission has made the adverse fi ndings set out above, it is satisfi ed that the conduct in question was not motivated by beliefs which were genuinely held, though mistaken. However, there have been instances in which statutory ambiguity and uncertainty has been put forward as a justifi cation for otherwise unacceptable conduct. A law which leaves open such opportunities to justify inappropriate conduct requires reform, in part because such a law is likely to cause the conditions in which corrupt conduct is more likely to occur.

First, there is the question whether the transfer of land to a Local Aboriginal Land Council is intended to provide a land base for future generations of Aboriginal people, or has some different purpose. The very name of the Land Rights Act and the events leading to its enactment101

suggest that it was indeed intended to provide land which would be held for Aboriginal people in perpetuity. This was made express in the original Act, which rendered the title inalienable.102 There seems little doubt that the thinking in this regard was confused. Thus, the Minister who spoke of inalienability also spoke of the separate “dual purposes” of land rights, namely those refl ected in the cultural and economic values of land. However, economic use, through development, treats land as a valuable asset which may be sold or mortgaged. That purpose may not be consistent with the cultural value of land, which, pursuant to traditional laws and customs, could not be alienated.

These confl icting goals were not of course unrecognised. Indeed, a primary purpose of section 40D, introduced in 1990, appears to have been to provide a controlled power of disposal of land which was not of cultural signifi cance. The element of control was provided by the requirements that the Land Council holding the land at a properly convened meeting determine by a special majority that the land is not of cultural signifi cance and that the NSWALC approve the disposal of the interest. The legislative refl ection of these elements of control was, however, too simplistic.

First, the term “cultural signifi cance” was not defi ned and its existence or otherwise was left to the determination of the Local Aboriginal Land Council membership. The test which the members, at a properly convened meeting of the Council, are to apply is whether the land is “not of cultural signifi cance to Aborigines of the area and should be disposed of”. There are several problems with this criterion.

First, the criterion has two entirely independent limbs: one concerns cultural significance, the other concerns the desirability of disposal of the land. The apparent purpose of section 40D is to ensure that land is not disposed of unless a special majority of members attending and voting at a meeting, agree that it is not of cultural significance. Including the second limb of the criterion (“and should be disposed of”) is apt to confuse the issue. Indeed, it is almost inevitable that the resolution put before a meeting for consideration will follow the terms of the section, which is likely to ensure a failure of members to consider the two limbs separately.

Secondly, the phrase “cultural signifi cance”, in relation to particular land, is vague and imprecise. It is now well understood that, under traditional law and custom, there is a wide range of degrees of intensity in the relationship between particular Aboriginal people and land. The most intense relationship is between Aboriginal people leading a traditional lifestyle and what are commonly known as “sacred sites”. However, there are at least three separate elements involved in an assessment of any such connection:

(a) the identifi cation of particular land, or a place or site;

(b) the signifi cance of that area, place or site under traditional law and custom, and

(c) the degree to which the people involved continue to acknowledge and observe such traditional connections.

Further, the concept of “cultural signifi cance” may not be limited to traditional association. A contemporary association may satisfy this criterion. Nor is this ambiguity resolved by reference to the concept of “Aboriginal owners”, being Aboriginal persons who have a cultural association with land”.103

Chapter 10: Corruption prevention

101 See Chapter 2 above.102 Section 40(1), at which time sections 40A-40D were not yet in the Act.103 Section 171, Land Rights Act.

105

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Thirdly, there is a lack of clarity in identifying those in relation to whom the test must be applied, being people described as “Aborigines of the area”. Given that membership of a Local Aboriginal Land Council may include Aborigines “who have an association with that area” (being the area of that particular Local Aboriginal Land Council) and those who merely reside within that area, it is conceivable that land which has signifi cance for some members of the Council may not have signifi cance for others. Further, in traditional society, signifi cance is not to be assessed in a generic fashion, but will depend upon particular mechanisms of association, such as place of birth, signifi cance to father or mother, together with a range of other relevant factors.

Fourthly, the presumed inverse relationship between cultural signifi cance and the desirability of disposal may not necessarily be the case in all circumstances. For example, Aboriginal people having a cultural association with a particular area of land may well think it quite undesirable that the land be held by the Local Aboriginal Land Council at all. They might legitimately prefer that the land be transferred to a trust of which they were the benefi ciaries and controlling custodians. Similarly, land may be “disposed of” subject to conditions which ensure that any area of cultural signifi cance is preserved and not treated in an inappropriate manner. None of these complexities are refl ected in section 40D of the Land Rights Act. No doubt the lack of statutory clarity may be explained, to some extent, by the policy that members of the Local Aboriginal Land Council concerned have a degree of fl exibility which will allow them a greater level of self-determination. On the other hand, a sense of purpose and self-control is not promoted by unclear legislative provisions. Such provisions need not, if appropriately redrafted, unnecessarily limit the scope of a Local Aboriginal Land Council to deal with its land.

Similar criticisms apply to the requirement that NSWALC approve a proposed disposal. All the latent ambiguities noted above apply in relation to the factors which NSWALC should take into account and the degree to which it should, for example, assess the fi nancial viability of a proposal. A mechanism for control of disposal of land, which does not in fact operate to prevent misuse or abuse of a power conferred on a Local Aboriginal Land Council, can be positively disadvantageous to Aboriginal people. It will provide the appearance of protection, without the reality. As became clear during the present investigation, the role of NSWALC can be resented by Local Aboriginal Land Councils and their members, as intrusive and paternalistic. No doubt the point can be made that such

resentment is likely to be lessened in a case where a Local Aboriginal Land Council has done its homework, has adopted an open and transparent process and can readily justify the benefi ts of a proposed disposal in accordance with established criteria. On the other hand, resentment is more likely where the purpose and scope of the external inquiry are unclear or undefi ned. A more principled approach to the issue is to seek to reduce any possible resentment by establishing clear guidelines identifying the nature of, and the purposes underlying any inquiries or decisions which NSWALC may make. There is nothing in section 40D, nor in the Regulations, to assist this process.

Role of the Registrar

The present investigation also disclosed limitations on the power of the Registrar to receive, investigate and resolve complaints arising between members and a Local Aboriginal Land Council or the executive of a Local Aboriginal Land Council. In particular, evidence was presented to the Commission concerning a complaint made to the Registrar, which alleged, amongst other matters, that Mr Bill Smith had an undeclared pecuniary interest in the Sanpine joint venture. Concerns were raised in the course of the Commission’s investigation both that the investigation undertaken by the Registrar was less thorough than it should have been and that the Registrar had misconstrued section 56B(2) of the Land Rights Act in assessing the signifi cance of the confl ict of interest which had arisen.

For the purposes of its investigation, the Commission was not concerned directly with whether the Registrar had made a correct decision, either legally or factually, but rather whether his function provided a relevant and useful form of protection against the possibility of corrupt conduct. Two constraints on the usefulness of a complaint to the Registrar appeared from the matters put to the Commission. First, although the powers of the Registrar extended to any dispute between a Local Aboriginal Land Council and a member (or other individual) relating to any matter concerning the administration of a Local Aboriginal Land Council, the Registrar’s power was to refer the matter to the Land and Environment Court for determination. That was a somewhat cumbersome process, and one not likely to be undertaken by the Registrar except in a clear case, as presumably it was the Registrar who would bear the costs involved. Accordingly, it is unlikely that the Registrar will proceed unless he or she:


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(a) has the resources to carry out a thorough investigation and prepare any necessary material for presentation to a court, and

(b) is comfortably satisfi ed that the complaint has merit.

These constraints are likely to limit the practical use of this mechanism as a means of discouraging or exposing possible corrupt conduct.

Furthermore, as the Registrar noted in his submission to the Commission, there is an additional limitation imposed on the power of the Registrar to refer matters to the Court, namely that he or she shall not do so “if provision is made for the determination of the dispute or matter under another section of this Act”. As noted in Chapter 2, the Registrar suggested that this constraint effectively precluded a reference in relation to a matter arising under section 56B or section 56C of the Land Rights Act. A contravention of either of those provisions gave rise, the Registrar suggested, to an offence which was a potential subject of proceedings before a local court under section 67 of the Land Rights Act. The precise scope of section 59(2) is open to doubt. For example, the Land Rights Act provides not only for offences, but for appeals with respect to Local Aboriginal Land Council rules to be determined by the Land and Environment Court and for claims in relation to “claimable Crown lands” under section 36 of the Act to be determined by the Land and Environment Court. Whether it was intended that the Registrar not be able to deal with disputes about matters which could constitute offences is unclear. However, it is at least arguable that this view of section 59(2) is correct and that the role of the Registrar is constrained accordingly.

As the Registrar also noted, questions of the kind raised in the present matter, concerning possible confl icts of interest involving offi ce-holders of a Local Aboriginal Land Council, may now be dealt with under new provisions concerned with complaints under Part 10, Division 5 of the Land Rights Act.104 The Registrar may decide to take no action concerning such a complaint if satisfi ed that there is a “satisfactory alternative means of dealing with the matter”.105 The fact that there is an independent Pecuniary Interest Tribunal established to consider such a complaint would no doubt result in matters involving such confl icts now being left to the Tribunal.106 The Commission has not been privy to

the practical operation (if any) of the new Tribunal, established by the amendments which commenced in 25 October 2002, but is satisfi ed that the new structure overcomes the constraints noted above in their particular area of operation.

The proper functioning of Local Aboriginal Land Councils gives rise to similar issues to those which have been considered by the Commonwealth in recent years in relation to the operation of the Aboriginal Councils and Associations Act 1976 (Cth), pursuant to which several thousand Aboriginal associations have been incorporated for a wide variety of purposes, which include the holding of land. Particular attention has been paid to the role of the Registrar under that Act. In earlier years, the function of the Registrar was treated as largely regulatory, in the sense that his or her primary focus was on compliance by incorporated associations with formal requirements of the Act, including compliance with statutory requirements, for the keeping of proper accounts and records and fi ling copies of relevant reports with the Registrar.107 More recently, however, the Registrar has adopted a facilitative role, which includes providing a greater level of assistance and advice to associations to assist them to comply with their statutory obligations and to run their affairs effectively. In relation to the Land Rights Act, such a function may more properly be vested in NSWALC than in the Registrar: nevertheless, the need for appropriate assistance should be recognised and the obligation to provide assistance should be expressly vested by statute in the appropriate entity. Nor should the appropriate entity necessarily be one which has no regulatory functions in relation to a Local Aboriginal Land Council. There need be no inconsistency in one body having available to it the carrot of helpful assistance, whilst holding the stick of mandatory regulation, should the carrot prove ineffective. Such assistance should not be seen as intrusive or paternalistic: bodies which hold and manage signifi cant assets on behalf of sections of the community need signifi cant levels of managerial and administrative skill and need to be accountable in a public manner. To leave their proper functioning to the vagaries of the skills of the elected offi cers or a limited staff is irresponsible and should be unacceptable.

104 See Part 10, Div 5 “Complaints concerning non-disclosure”.105 Section 192(1)(e).106 Part 10, Div 5, Subdiv 2.107 Aboriginal Councils and Associations Act 1976, section 59.

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Structural and governance issues for Local Aboriginal Land Councils

The discussion set out in Chapter 2 above with respect to section 56B of the Land Rights Act identifi ed a number of defi ciencies in the manner in which this provision dealt with confl icts of interest. However, those criticisms should be understood in a broader context in which the precise roles of offi ce-holders of a Local Aboriginal Land Council are ill-defi ned and unclear.

The 2002 amendments to the Land Rights Act reformulated the provisions with respect to the obligations of offi cers and members of staff. Thus, new section 176 imposes a duty to act honestly and exercise reasonable care and diligence; new section 177 provides for a code of conduct which, until otherwise resolved by a Local Aboriginal Land Council, is to be the code of conduct prescribed by regulation. There is also a new Division concerned with duties of disclosure with respect to pecuniary interests. The term “pecuniary interest” is defi ned as:108

An interest that a person has in a matter because of a reasonable likelihood or expectation of appreciable fi nancial gain or loss to the person or another person with whom the person is associated… .

No such interest will arise if it is “so remote or insignificant that it could not reasonably be regarded as likely to influence any decision the person might make”.109

It is apparent that complaints raised in relation to the conduct of Mr Bill Smith before the Commission could readily have fallen within the new pecuniary interest provisions under the Land Rights Act, had they then been in force. However, there may be real doubts as to whether they would have been suffi cient to ensure prompt and appropriate disclosure of the potential confl ict before it arose, or effective disclosure of the confl ict after the appointment of Mr Smith as Aboriginal Liaison Offi cer. A recalcitrant offi ce-holder is likely to be able to evade the effective operation of those provisions, and maintain his or her infl uence over the Local Aboriginal Land Council, at least whilst enjoying the broad support of the active membership. Underlying that concern is the need to identify more precisely the appropriateness of an offi ce-holder holding a position of profi t in relation to some of the affairs of the Local Aboriginal Land Council. The point is related to the

broader issue of whether a member of a Local Aboriginal Land Council should be able to obtain employment with, or obtain remuneration from, an entity such as a joint venture partnership in circumstances where the remuneration ultimately diminishes the value of the interest held by the Local Aboriginal Land Council in the particular asset or project. If such positions or remuneration are acceptable, the circumstances in which they can be achieved, and the level of disclosure required, should be expressly defi ned.

The Commission stated, in its 1998 Report on investigation into Aboriginal Land Councils in New South Wales, that:

The optimal way to avoid confl icts of interests is for offi ce-bearers and staff of LALCs not to hold dual positions. However, the small pool of people from which some LALCs draw both staff and elected offi cials has created problems in some of the LALCs examined by the ICAC. Any new provisions restricting the holding of dual positions may need to be relaxed in some circumstances. 110

The 1998 report also made the following corruption prevention recommendation:

Recommendation 16: Limit scope of offi ce-bearers and staff holding dual positions.

Local Aboriginal Land Council offi ce-bearers should be ineligible for appointed positions within their Local Aboriginal Land Council, unless special circumstances, as certifi ed by the Registrar, exist and even then only for the minimum period necessary .

...

With assistance from the ICAC, the NSW Aboriginal Land Council should develop a staff secondary employment policy and a model staff secondary employment policy for Local Aboriginal Land Councils.

The Aboriginal Land Rights Regulation 2002 now contains a model code of conduct for Local Aboriginal Land Council offi ce-holders. The 2002 amendments to the Land Rights Act introduced a new section 79 which provides that an offi ce-holder of a Local Aboriginal Land Council must not be employed as a member of staff of the Council. The Regulations, however, go a little further. They make the following provision in relation to confl icts of interest:

108 Section 182(1).109 Section 182(2).110 Independent Commission Against Corruption, Report on Investigation into Aboriginal Land Councils in New South Wales, Corruption Prevention and Research

Volume, April 1998.



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7. Offi cers must not enter into any agreement or undertake any activity that may be in confl ict with the interests of the [name] Local Aboriginal Land Council, or that would prejudice the performance of their duties.

The circumstances of the present investigation demonstrate that confl icts of interest must be addressed at both a structural and a procedural level. The changes made in 2002 were largely directed to the procedural level. That is, they were concerned with the circumstances in which confl icts should be disclosed and the circumstances in which a dual role, giving rise to a confl ict, should be prohibited. There is, however, a more fundamental issue which needs to be addressed. Some Land Councils, of which KLALC was one, have fi nally, after many years of existing largely as social clubs, obtained valuable tracts of land. Management and development of those lands (assuming development is deemed appropriate) cannot readily be carried out by an organisation which resembles a community social club. Different skills and resources are required: even the structure of the organisation will need to change.

Upon receiving a large tract of potentially valuable land, KLALC needed to decide whether to sell the land and invest the proceeds; hold the land as a passive investment; develop the land as a residential subdivision and sell individual blocks, or use the land for community purposes. In the case of KLALC, it is doubtful whether any sophisticated consideration was given to the choices, or even to identifying the choices. The decision taken was to develop the land and sell the blocks for residential use, and use the proceeds for community purposes. However, there is no evidence before the Commission that any detailed proposal for use of the proceeds of sale was ever formulated. Whilst Mr Bill Smith was clearly the driving force and inspiration behind much that KLALC did, he appears to be more a man of ideas than an administrator. In any event, neither he nor anyone else within KLALC either had or professed to have land management and development skills, let alone skills at project management, marketing or other elements essential to a successful land development. They needed external expertise, but had no means to pay for it. Their only source of funds was the land which, if to be developed, would need to be mortgaged.

The story of the Sanpine joint venture is suffi ciently described above and need not be repeated here. The important point to note here is that the decision-making process and, if thought appropriate, the involvement in a joint venture, would require signifi cant investment

of time and effort by members of the executive. No commercial organisation would expect such work to be done on a voluntary basis.

Apart from the possibility that offi ce-holders might be paid for such work, there is also the question whether it is appropriate for an Aboriginal organisation to insist on providing, where reasonably possible, employment for its members. If that is permitted, then clear rules must be adopted which would allow for real employment, on a commercial basis, to those best qualifi ed for the work. In this context, care must be taken in assuming that cultural heritage supervision or site clearance work is appropriate work which requires remuneration. If it is not, the Land Council is merely distributing its funds to particular members for no real consideration.

A different issue arises where such “make-work” employment is not funded directly by the Land Council, but by a third party. Such a situation may have arisen in the present case in relation to the “supervision” of the laying of the sewer by the Hunter Water Corporation. If a Land Council is in a position to persuade another entity, whether a commercial interest or a public corporation, to pay wages to members of the Land Council for no real purpose, that would appear to be a diversion of funds which might otherwise have gone to the Council itself.

These comments are not intended to diminish the value of steps necessary to identify and protect cultural heritage, nor to undervalue the very real need for Aboriginal employment. Pursuing those goals inappropriately will, however, diminish their creditability in other circumstances.

Returning to more important aspects of a joint venture arrangement, if a Land Council is to enter into such an arrangement, it must be in a position to commit resources to the project, which may well need to be the time of the offi ce-holders. Not to pay them for their time, in appropriate circumstances, will either discourage experienced and competent members of the community from standing for such offi ce or will lead to underhand transactions, of the kind revealed by this investigation, as a means of providing some form of remuneration.

The Commission recognised in its 1998 report on Aboriginal Land Councils that there was a need for fl exibility, to allow for such arrangements in appropriate circumstances. It reiterates that view. If someone in the position of Mr Bill Smith is to be encouraged to spend time bringing a joint venture to fruition, there is no reason not to remunerate him for his time. The preferable course is to identify the circumstances in which such

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remuneration should be payable, to ensure that the best qualifi ed person obtains the position and to ensure that any such transaction is transparent and approved by the membership at properly convened meetings.

It remains possible, even if such reforms are introduced, that clandestine arrangements will be entered into at the expense of the best interests of a Land Council. That possibility will, however, be reduced by ensuring that proper arrangements may be entered into following an identifi ed procedures and in specifi ed circumstances.

Before leaving governance issues, the Commission notes its awareness of the on-going inquiry constituted by the Minister and chaired by the Registrar under the Land Rights Act, which had broad terms of reference with respect to reform of that Act. The members of that Inquiry will have a broader perspective than that obtained by this Commission in conducting an investigation of one Land Council and with respect to specifi c transactions. Accordingly, the Commission does not propose to make specifi c and detailed recommendations with respect to the matters raised above. Indeed, the appropriate response to a number of the matters raised involves a choice based on policy considerations. From the Commission’s point of view, the actual choice to be made is not as important as the recognition that certain choices need to be considered and expressly dealt with in the legislation.

Effective audit requirements

In the course of the investigation, the Commission was concerned by serious inadequacies of the audit carried out in relation to the KLALC annual financial accounts. These concerns have been set out in the previous chapter.

Since the period during which this conduct occurred, a number of changes have taken place in relation to the arrangements for auditing Local Aboriginal Land Council accounts and in the manner that NSWALC deals with reports prepared for it by staff. Thus, one of the major aspects of the 2002 amendments to the Land Rights Act was to provide for a clearer division of functions between the Chief Executive Offi cer and the Councillors. To the extent that the evidence before the Commission revealed a willingness on the part of the Land Council to ignore or override views expressed by its CEO or members of its staff in relation to compliance with administrative requirements, it is anticipated that the new structure will prevent a repetition of such events. Furthermore, since the events

in question an Administrator has been appointed who, together with the Chief Executive Offi cer, demonstrated to the Commission that they were fully cognisant of the diffi culties which had arisen at the NSWALC level in the past and intended to take the necessary steps to avoid repetition. As noted above, they invited the Commission to avoid making recommendations which extended beyond the problems identifi ed in the evidence before the Commission.

As noted above in relation to governance issues, the Commission is content to avoid detailed recommendations in relation to accounting processes and audit requirements. The Commission is conscious of the need to understand how procedures and standards operate across the State. There is undoubtedly a danger in seeking to generalise from a limited perspective. The views of the Commission in relation to KLALC, during the period 1996–2001, have been suffi ciently identifi ed above. The need for more effective controls in relation to fi nancial matters is clear. To be effective, change must be tailored, in a practical way, to the organisations concerned, with a realistic appreciation of the resources available to them. These are matters which may be taken into account by the Administrator of NSWALC and by the Inquiry established by the Minister to review the Land Rights Act.

Authority of executive

The material before the Commission reveals serious defi ciencies in the statutory scheme in relation to the authority of members of the executive of a Local Aboriginal Land Council. In part, the defi ciency relates to the manner in which confl icts of interest were dealt with at the time. These matters will be dealt with further below, but briefl y, given the statutory reforms that were introduced in October 2002.

The circumstances before the Commission reveal that the Executive of KLALC, effectively acting on the say-so of Mr Bill Smith, both formulated Land Council policy and put it into effect. For example, in relation to the joint venture, whatever approval was given at a general meeting of the KLALC, was expressed in the broadest terms and appears to have been based on meagre information as to the benefi ts to the KLALC. In other cases, and in particular in relation to the negotiations with Villa World Limited concerning the rising sewer main, Mr Bill Smith appears to have been content to act contrary to a resolution of the KLALC in general meeting. It is not necessary to consider here



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whether the acts of Mr Smith and Mr Griffen in signing the letter of consent to the Hunter Water Corporation were later ratifi ed. If such ratifi cation was given, it was without disclosure of the personal benefi t obtained by Mr Smith and Mr Scott as Chairperson and Treasurer for providing the letter of approval.

The reforms of 2002 incorporated into the Land Rights Act represent a long overdue clarifi cation of the distinct roles of the NSWALC councillors (as those responsible for policy) and the Chief Executive Offi cer and his or her staff (being those responsible for the execution and administration of the business of the Land Council). In theory, a similar separation of powers might be thought appropriate in relation to a Local Aboriginal Land Council. In practice, however, the situations of Local Aboriginal Land Councils are by no means comparable to those of NSWALC. First, a meeting of members of a Local Aboriginal Land Council is closer to a meeting of shareholders of a company or of members of an association than it is to the meetings of NSWALC. (That, however, is not to say that there is any close analogy between a Local Aboriginal Land Council and a private or public company.) Further, the executive of a Local Aboriginal Land Council is comprised of three honorary appointees who do not receive remuneration for time spent on Council business. Local Aboriginal Land Councils also have employed staff, whether in a full-time or part-time capacity, but unlike NSWALC, the staff of a Local Aboriginal Land Council is often limited to a co-ordinator and a bookkeeper/receptionist. That was the case in relation to KLALC, and it was not suggested that that arrangement was unusual – given the limited funding available to Local Aboriginal Land Councils on an annual basis, that result is inevitable.

In effect, what happened in the present case was that the Chairperson of the Local Aboriginal Land Council usurped the authority and functions of both the general meeting and the administration. That he did so in circumstances which involved corrupt conduct illustrates the point that unclear guidelines as to the extent of authority and responsibility create an environment where corruption is more likely to occur and less easy to identify.

Corruption prevention recommendations

The primary recommendations concern the policy issues with respect to the holding of land by Aboriginal land councils in NSW.

Recommendation 1

That consideration be given to whether, and if so on what grounds, Local Aboriginal Land Councils may dispose of land held by them.

If the intention of the Government is that these matters should rest with the Local Aboriginal Land Councils, subject to oversight by NSWALC, then the next question is what criteria the NSWALC should apply in the course of exercising its oversight function. Again, the Government can specify the criteria or it can leave them to NSWALC. In either case, a decision must be made whether the purpose of granting Crown land to Local Aboriginal Land Councils is satisfi ed by the immediate sale of the land and dissipation of the proceeds amongst the current membership. At present, there is no statutory or NSWALC policy which appears to prevent that occurring.

Recommendation 2

That consideration be given to the oversight function of the NSW Aboriginal Land Council in relation to Local Aboriginal Land Councils and how this function should be carried out.

Recommendation 3

That, the above policy matters having been resolved, sections 40B-40D of the Aboriginal Land Rights Act 1983 be amended to refl ect the policy so determined.

Recommendation 4

That, if Local Aboriginal Land Councils are to be encouraged or permitted to undertake commercial development of land, clear guidelines be laid down as to how such development can be pursued.

A body which operates by general meetings of a large and disparate membership cannot readily undertake commercial ventures with the necessary degree of certainty and efficiency which will permit them to find appropriate partners and finance and achieve desirable results.

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Recommendation 5

That processes by which Local Aboriginal Land Councils enter into consultancy or partnership agreements with third parties be required to be open and transparent.

Representative bodies operating under the Native Title Act 1993 (Cth) are required, as an administrative arrangement, to have registers of consultants, which set out the qualifi cations of the consultants and the terms on which consultancies will be entered into. Similar arrangements should be considered in relation to all land councils operating under the NSW Land Rights Act.

Recommendation 6

That proper roles for employed staff, honorary members of the executive and the membership in general meeting be established for Local Aboriginal Land Councils.

Recommendation 7

That consideration be given to legislative change to confer an express obligation on an appropriate entity to provide assistance and advice to Local Aboriginal Land Councils to help them to comply with their statutory obligations and to run their affairs effectively.

In relation to the Land Rights Act, such a function may more properly be vested in NSWALC than in the Registrar: nevertheless, the need for appropriate assistance should be recognised and the obligation to provide assistance should be expressly vested by statute in the appropriate entity.

Implementation of corruption prevention recommendations

As a further step in performing the functions as required in the ICAC Act, it is important to follow up on the implementation of the Commission’s corruption prevention recommendations with the body to whom the recommendations are made.

All of the recommendations made in this report are to the State Government and requests for reports on implementation of the Commission’s recommendations will be directed to the Minister for Aboriginal Affairs. The Commission requests the Government to submit to the Commission within three months of the tabling of this report,

an implementation plan for the recommendations which should include actions, timeframes and the responsible organisation or individual.

The Commission requests that the Minister provide a progress report on the implementation of recommendations 12 months from the date of tabling of this report and a fi nal progress report on the implementation of recommendations 24 months from the date of tabling of this report.

These reports will be posted on the ICAC’s website www.icac.nsw.gov.au for public viewing.

Unless the Commission determines that an additional follow-up is required or that more detailed examination of the implementation of these recommendations is required, the Commission will not require further implementation reports after the fi nal progress report is provided. However it remains the responsibility of Government to advise the Commission of any subsequent changes to the status of implementation – these changes will then be posted on the ICAC website.


report on investigation into certain transactions of koompahtoo local aboriginal land council...

Documents

icac chapter

land transfers

land rights act chapter

investigation hearings

independent commission

corruption act

transaction corrupt

steer transfer of land