Chapter 1 - THE BASIC FACTS
Chapter 2 - WHY NO TENDERS?
Chapter 3 - ANY CORRUPT CONDUCT?
Chapter 4 - FINDINGS AND RECOMMENDATIONS
REPORT ON INVESTIGATION INTO THE SILVERWATER FILLING OPERATION
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CHAPTER 1 - THE BASIC FACTS 4
CHAPTER 2 - WHY NO TENDERS? 10
CHAPTER 3 - ANY CORRUPT CONDUCT? 16
CHAPTER 4 - FINDINGS AND RECOMMENDATIONS 20
SCHEDULE 1 24
List of witnesses 24
SCHEDULE 2 25
Exhibit list 25
CHAPTER 1 - THE BASIC FACTS
On 20 February 1989 Mr Noel Day, then Acting Director-General of Corrective Services, attended upon me at the direction of his Minister to make a report of possible corrupt conduct. This chapter outlines the course the resultant investigation took, and states the uncontroverted facts.
Course of Investigation
Documents left by Mr Day were perused and considered, and certain inquiries made, as a result of which it became evident that statutory powers would have to be exercised and a public hearing should be convened. On 12 April I gave formal approval to an investigation of the matter, the scope and purpose of which, as somewhat refined on 20 July, was as follows:
"TO INVESTIGATE the facts and circumstances pertaining to the grant, performance and enforcement of a licence to excavate, fin and otherwise operate upon certain land at or near the Silverwater Prison Complex to Bradshaw Waste Industries Pty Ltd by the Corrective Services Commission or the Department of Corrective Services, after January 1982, and the conduct of persons including present and former public officials in relation thereto during the currency of the licence and to date.
TO ASCERTAIN whether any such conduct amounts to corrupt conduct within the meaning of section 7 of the Independent Commission Against Corruption Act 1988."
The hearing commenced on 15 August, on which date appearances were taken, Mr P Roberts as counsel assisting made an opening address, and certain evidence was led. The hearing then adjourned until 11 September, and then successively to 12, 13, 18 and 19 September, when it concluded. There will be found at Schedules 1 and 2 lists of witnesses and exhibits respectively.
Certain persons and bodies were legally represented, as follows:
Bradshaw Waste Industries Pty Ltd and Mr JJ Watt
Mr JS Coombs QC, Mr JH Tuckfield QC and Mr PF Esler
Mr VJ Dalton
Mr AR Ashburner and Mr PF Garling
Department of Corrective Services, and its Director-General
Mr TJ McCue
Mr RF Jackson
Mr W McNally
The M92 Site
The Silverwater prison complex houses both male and female prisoners. As to, the former it comprises a work release centre and a periodic detention centre, which together look after about 260 prisoners at a minimum level of security. Some do work on the site, and others are employed in outside industry. There are about 170 female prisoners - the figure has increased from about 100 in 1981-82 -who are within the Mulawa Training and Detention Centre. It houses maximum, medium and minimum security prisoners.
The site with which the investigation was concerned comprises some four hectares. It is square in shape, bounded by the men's prison to the north and west, by Holker Street to the south and by Jamieson Street to the east. It used to slope generally from west down to east, and there was a gully through which a small watercourse ran. The lower portion of the land tended to be swampy. Its upper levels were sometimes utilised by prisoners for rudimentary games of cricket and football, which they no doubt enjoyed and obtained some benefit from, although some twisted ankles also resulted, because the land was no better than a paddock. Indeed it was at one stage used by the Superintendent for grazing a few head of cattle.
The M92 site, as it was known in departmental circles, had earlier been the subject of a proposal for expansion of the prison, but funds for the purpose had never been allocated. At all material times the erection of more prison buildings at Silverwater was quite unlikely. At this time, the Corrective Services Commission was commonly referred to as a Department, and those terms are used interchangeably in this Report, as they were by witnesses during the hearing.
Watt and Jackson
John Joseph Watt is 57 years of age, and has spent most of his working life with the Bradshaw group of companies. Since 1973 he has been manager of Bradshaw Waste Industries Pty Ltd. One of his chief functions is to discover sites in the Sydney metropolitan area which might be used for waste disposal purposes, and to negotiate the best deal he can with those in charge of such sites. The company (which will on occasions be described as "Bradshaws", as it was at the hearing) has filled a lot of land with waste in the Homebush area, which surrounds the Silverwater prison complex. Mr Watt is well respected in the waste disposal industry, and holds top elected positions in that industry at both State and Federal levels.
Mr Watt owns, trains and follows greyhounds. It is through his interest in dog racing that he got to know Rex Frederick Jackson. The two men have been the closest of friends for many years. Each has visited the home of the other. Mr Watt often went to Mr Jackson's office for convivial purposes. They went to greyhound meetings together just about every week, but Mr Watt rarely went to horse racing and trotting meetings, as Mr Jackson habitually did. He was described by Mr Watt as an avid punter. Mr Jackson described himself as average in that respect, but it is clear that he outlaid large sums of money on betting, and I believe counsel assisting had it right when he put to Mr Watt, who agreed, that his friend was an almost uncontrolled punter.
The two men customarily lent money to each other, particularly for gambling purposes. When they did this no interest was charged, as is fitting between friends. Mr Watt lent Mr Jackson greater sums of money than he received from his friend by way of loan.
Mr Jackson was Minister for Youth and Community Services from May 1976 to late 1981, and then became Minister for Corrective Services for some two years. He resigned in disgrace on 27 October 1983, and was subsequently sent to prison following conviction on a charge of conspiracy in relation to the early release of prisoners: that is to say he had been found guilty of abusing his office as a Minister.
Mr Watt mentioned to Mr Jackson the M92 site, and his company's interest in doing some work there. As a result Mr Jackson convened a meeting on site.
Meeting on Site
Those present were:
_ The two principals, Mr Jackson and Mr Watt.
_ The Chairman of the Corrective Services Commission, Mr Vern Dalton.
_ His deputy, Mr Day, who is mentioned at the outset.
_ Mr Duff and Mr Muter, respectively Superintendent of the men's prison at Silverwater and his deputy.
The meeting took place in or about June 1982. It was there and then agreed by those present, on an "in principle" basis, that Bradshaws would fill the M92 site, using clean, dry waste for the purpose, and that the Department would benefit by being provided with a recreation site including facilities for football, tennis and basketball, all of this without cost to the Department. Mr Watt, a man given to a laconic turn of phrase, described the meeting as "an arm waving exercise", and that generally accords with the impression I gathered from the evidence of the others present. However at the end of the meeting nobody present had any doubt that the proposal put by Mr Watt would proceed. A 12 month period for completion of the work was spoken of by him, and generally acceded to as reasonable.
Greater detail can be gleaned from the contemporaneous documents. On 29 June 1982 Mr Watt wrote to Mr Dalton on behalf of his company "in regard to our proposal to perform filling and drainage works to an area of land at Holker and Jamieson Streets, Silverwater" and a portion of the letter read:
"Under our plan, what is now an unusable, unproductive area of land would be transformed into a well-drained sport and recreation site, aesthetically enhancing the neighbouring environment and providing a beneficial rehabilitation facility to the inmates of the adjoining Departmental complex.
We are informed that the Superintendent of the complex is most enthusiastic to have available the usage of the proposed completed project.
The site would be filled to the levels and grades shown on the attached plan and the final surface established with a healthy grass surface. 'Me drainage installations shown on plan have been designed by a competent qualified engineer and will cope with maximum requirements.
To compensate for these limited filling opportunities, we will be responsible for all costs involved in the supply and installation of all access and drainage works and the grassing of the finished surface to complete an excellent sporting area. The existing top soil and grass will be removed by us prior to filling and stockpiled within the site for later re-use on the finished surface.
All work will conform with the requirements of the Metropolitan Waste Disposal Authority and the Auburn Municipal Council.
Filling material will comprise spoil from excavations, demolition debris and clean industrial trade waste - no putrescible, liquid or offensive wastes will be allowed on the site. Filling will be deposited in shallow layers and maximum compaction obtained through the use of a Caterpillar land-fill compactor. The imported filling material will be entirely covered and sealed with a layer of clean clay prior to placing the top soil."
Following internal departmental procedures which will be dealt with later, Mr Dalton replied to that letter on 16 August in these terms:
"I refer to your recent letter in which you indicate that your Company is prepared to construct a sporting oval and recreation facilities on an area of land which forms part of the Silverwater Complex.
Following a site inspection with the Deputy Chairman, the Superintendent of Silverwater, other Senior Departmental Officers and myself, I am aware that major drainage work is involved in the filling and reclamation of an unusable area.
I also note that you have recently satisfactorily completed the filling and restoration of Commonwealth land adjacent to the site in question.
The Corrective Services Commission is prepared to accept your proposal pending formalisation of proper contractual arrangements and would appreciate the reclamation and development of recreation facilities being completed as soon as possible."
Late in August Mr Watt wrote to the Town Clerk of the Auburn Municipal Council enclosing a development application, and a copy of Mr Dalton's above letter. The proposal was described as:
"...proposed filling and reclamation, including provision of drainage, footpath crossing and grassing to provide sporting and recreation facilities within the Silverwater Prison Complex at Holker St., Silverwater."
Sixteen separate points were conveyed in the letter, in numbered paragraphs, and those that matter for present purposes follow:
"9. The planned reclamation as outlined in the application is essential to provide the finally treated area to a standard and design required by the Department of Corrective Services to meet the ultimate usage requirements.
10. It is anticipated that the project will require approximately twelve months to completion."
'13. The final aesthetic appearance will be that of mown sporting area with planting of ornamental and screening trees to batters. The project has been designed to harmonize with and compliment the adjacent Newington Magazine and Council's foreshore reclamation areas.
14. 'Me finished project will meet the urgent requirements of creating a much-needed sporting and recreation facility to assist in the welfare and rehabilitation of inmates of the Corrective Complex."
Necessary consent was given by each of the Metropolitan Waste Disposal Authority and the Municipality of Auburn. In its notice determining the development application, which was accepted without demur by Bradshaws, the latter described the development as:
"...for the purpose of the filling, grading, grassing and drainage of the land to provide sporting and recreational facilities within the Silverwater Prison Complex."
and it was clearly stated that "this consent relates only to filling of land" as shown in the drawing. A condition of the grant of permission for the works to be carried out was:
"Submission of a landscaping plan prepared by a qualified landscape architect or consultant indicating the proposed site treatment for the approval of Council's Chief Town Planner."
Bradshaws never submitted any such plan. Nor did the Municipality of Auburn press for one.
The Filling Operation
Fill began to be dumped on the site in late 1982. The site was still being used for tipping purposes in February 1986. Gross income derived by Bradshaws from the site totalled $1.78M, expenditure both direct and indirect referrable to the site totalled $1.02M and the difference, which represents profit before tax, was about $0.76M.
Allegations were made that Bradshaws accepted putrescible matter at the M92 site, and doubtless some quantities of such matter found their way into the fill material. However, the MWDA did not consider such quantities significant, and accepted that the depositing of some such material was inevitable.
In the result the prisoners do not have, and have not at any stage had, anything which resembles a sporting complex or oval, or a recreational area. Any recreational activity more vigorous than kite flying would, if carried out upon any part of the land, be almost bound to result in injury, at least at the level of abrasions and contusions. The M92 site is now barren and unattractive, although it is flat where once it undulated, if flatness is to be looked upon as a virtue.
A deed of licence was entered into between the Corrective Services Commission of NSW and Bradshaw Waste Industries Pty Ltd. Perhaps surprisingly, the deed was drawn up by Bradshaws' solicitors rather than by the Department or by the Crown Solicitor, although the draft deed was considered by the latter before its acceptance by the Corrective Services Commission. It bears the date 10 October 1983, has annexed to it a plan showing original and finished contours, and the outline of a football field and tennis and basketball courts, and contains a recital as to Bradshaws' desire to fill, level and carry out drainage works on the land as shown on the plan "so as to provide a rehabilitation and recreational site as an adjunct to the neighbouring lands of the licensor".
By the operative clauses of the deed the Commission granted Bradshaws "full licence to use the said land for the purpose of filling it with material of the nature hereinafter specified and of consolidating and grading the said material The licence is expressed to commence within seven days of advice by the Council of the Municipality of Auburn of its approval of use of the land for the purposes of the agreement, and to continue for 12 months subject to the right of the licensee to request an extension of six months if the work was not completed within the initial period, in which event "the licence conferred by this Agreement shall be extended for the additional period so requested". It is expressly provided that no fee is payable.
The licensee is obliged by clause 4 to remove existing top soil and grass prior to filling, and stockpile it within the land perimeter, for later use on the finished surface. Filling material must be only building demolition debris, clean industrial trade waste, spoil from excavations and the like, not including any liquid, putrescible, toxic, odorous or offensive waste. There are provisions about the manner of filling and compaction, and by clause 8 (a):
"Upon the completion of the filling and consolidation of the said lands to the levels and grades referred to in the said plan and the completion of the necessary drainage works, the licensee shall respread the top soil referred to in Clause 4 hereof as evenly as possible and shall replace the grass of a similar kind as shall be necessary to fully cover the whole of the area of land."
Other provisions relate to hours of operation (6.30am to 4.30pm Monday to Saturday), insurance, a bank guarantee to be provided by Bradshaws in the sum of $10,000, and the right of the Commission to determine the agreement in the event of continued default after notice. By clause 21 the agreement is deemed to have commenced to operate on 14 October 1982. That means that it had four days to run as -at the date it bears, which was presumably the date upon which execution was completed, although the common seal of the Commission appears to have been affixed on 30 September.
The agreement was not apt to produce the result which had been agreed on site. Those who signed it included Mr Dalton and Mr Watt.
CHAPTER 2 - WHY NO TENDERS?
The short history already stated is an unhappy one. How did these events come to transpire? In my judgment one serious failing was that no tenders were called. In this chapter attention will be concentrated upon how that happened, and what it led to. At the outset it will be useful to say something about the tendering process generally.
Sometimes tenders are called in private enterprise, particularly relative to the sale of property. So far as the public sector is concerned, the tender process is resorted to as a general rule whenever substantial contracts are to be entered into, whether for the sale of land or goods, or the acquisition of goods or services. It is not unusual these days for tenders, particularly for the provision of services, to be on a selective basis.
The tender process doubtless has its drawbacks. One is that it takes time, typically longer than would negotiations with a single party. Secondly, it can give rise to an undesirable rigidity of approach if unduly tight specifications are drawn in relation to a field of human activity which is undergoing rapid change, for example, information processing.
The benefits are however great, and are generally seen to more than compensate for these drawbacks. In its first Report on Public Sector Tendering and Contracting in New South Wales, published in August 1989, the Legislative Council's Standing Committee on State Development commented:
"The Committee concludes that the principle of tendering for the goods and services that are required by government is essential to the integrity of the purchasing system and for the maintenance of competition."
One benefit is that a fair competitive tendering system is apt to result in a good price - it will produce the benefits of the free market in operation. Another is that before one goes to tender appropriate specifications must be drawn, because otherwise those interested cannot know on what basis they are bidding, and they will tend to complain about specifications which are vague or inappropriate. One very valuable consequence of preparing such specifications will also be that the party preparing them will acquire a reasonable idea as to the costs and benefits of the proposed works, enabling it to bargain for the best deal from an informed position. Finally, and this is of special application to the public sector, a fair competitive tendering process leads to the result that there cannot be favouritism displayed to a particular party. That is important because when public monies and other resources are being dealt with every member of the public who has appropriate skills should be placed on an equal footing relative to them. The public purse should not be used for the purpose of private patronage. This last factor is sometimes overlooked, as happened in the present case.
Bradshaws were Favoured
I have no doubt that Bradshaws obtained the right to fill the land because of the close personal relationship between Mr Watt and Mr Jackson. That gave the former easy access to the latter, it enabled Mr Watt to put his proposal to the Minister on a social occasion, as he conceded he doubtless did, and it disposed the Minister to agree to the proposal. Others who could have done the work did not receive an equal or any opportunity to have their claims considered. Indeed the matter may be put more strongly than this, when it is remembered that Bradshaws derived substantial profits from the exercise. It is more accurate to say that others did not obtain the same or any opportunity to derive the large benefits flowing from acquisition of the right to dump fill on the M92 site.
An attempt was made to persuade me that the Minister and his Department were under an obligation, binding in honour and decency if not law, to grant Bradshaws the exclusive right to do the work and derive the benefits because they had come up with the idea. This notion is related to that of intellectual property - ideas can be valuable, to an extent that exceeds the worth of physical labour. An analogy was drawn with the Sydney Harbour Tunnel, and it is true to say that a justification for not calling tenders for those works was that the contractors were said to have come up with a novel package of ideas which solved what was said to be a pressing urban problem. Whether or not the justification was adequate in that case I do not know, but there are enormous differences in scale, complexity, money and time, such that the comparison becomes worthless.
There was absolutely nothing unique in what was proposed for the M92 site, nobody suggested that the techniques adopted were special, and the idea lacked all novelty. Indeed Mr Tough, Assistant Superintendent at the Silverwater prison complex, gave evidence that he and a workmate named Roberts had thought of the idea and had in mind that the necessary work might be done by the Municipality of Auburn. Contractors other than Bradshaws should have been given an opportunity to put forward their claims.
It is also clear that the Commission did not do the best deal it could have done, in two respects. The first is that Bradshaws would have paid something for the dumping rights if pressed. Mr Watt said so. The figure he was prepared to concede was $40,000. I consider that to be a minimal figure, and certainly it is small when compared with the amounts Bradshaws derived, the amount they spent, and their profit from the deal. It is in my judgment realistic to expect that had others been given an opportunity to put a proposal, by tender or otherwise, the Commission and therefore the State would have been better off to the extent of some tens of thousands of dollars, probably closer to $100,000 than $50,000. Nobody will ever know exactly because it is difficult to recreate now the commercial circumstances that prevailed in the middle of 1982.
There was another way in which Bradshaws did well as a result of the fact that only they got to bid for the site. It is that the contract was remarkably loose in stipulating just how the land had to finish up. Because the matter was handled informally in the early stages, and no real specifications were prepared, the ultimate deficiencies in the contract are not surprising. Had others been given an opportunity to put forward a price, then they would have needed to know, and if necessary would have demanded to know, just what they had to do. That would have necessitated preparation of specifications, spelling out what was to happen in relation to levelling the land, placing top soil upon it, planting and perhaps also fertilising and watering grass, and so one could go on. There is a wide range of arrangements that could have been entered into between Commission and contractor as to precisely what was to be done by each. The more the contractor had to do, the less it would have paid for acquisition of the dumping rights.
However I have no doubt that even if the responsibilities imposed by the contract were relatively stringent there would still have been monies of the order mentioned above flowing to the Department. Certainly a specification which was properly drawn and adhered to would have led to the prisoners having the sporting facilities which were intended.
Dalton was Warned
There can be no doubt that Mr Dalton knew of these matters. On 20 July 1982 Mr Lawlor, the Acting Co-ordinator, Building Services, sent him a minute which was in these terms:
An initial assessment has been made of the proposal from Bradshaws and the following comments are forwarded for your consideration.
Generally landfilling operations of this sort would require supervision by this Department or P.W.D. to ensure that the quality of filling is maintained. The manpower is not available within this Department to carry out this task adequately.
The technical aspects covered in the proposal can only be regarded as superficial and preliminary. We would need to examine in greater detail aspects such as stormwater disposal and run off. A proper specification would need to be produced and agreed to by the other party.
3. Overall Planning
P.W.D. are currently developing a masterplan for Silverwater. At the present time they are unable to make a recommendation for the future use of the particular site in question. If it is carried out it would probably increase the cost of any future buildings erected on that area. (i.e., more expensive footings required). If the area is to be developed into a sport and recreation site in the long term, that aspect is obviously of little consequence.
Waste disposal is a large commercial industry within the Metropolitan area. Dumping sites can have commercial value for the owners as such areas are becoming scarce. It may well be that we could secure more favourable terms from another company.
Acceptance of any such proposal by this Department could be regarded as entering a contract.
In respect to the above points the proper procedure would be to invite proposals from other companies (ie., public tender).
Any contract entered should be supported by suitable documentation (ie., General conditions of contract, specification etc).
In broad terms the proposition is very attractive and certainly offers cost savings over other means of construct a sportsfield.
The long term use of this area as a sportsfield should be confirmed prior to agreeing to any such proposal.
In order to follow normal procedures public tenders should be called based on the proposal developed by Bradshaws. Any contract entered into should be supported by a more detailed specification than is included in the Bradshaw proposal."
On 21 July 1982 Mr Dalton endorsed upon the minute, "Please prepare appropriate contract and recommendation to Minister", signed it and sent it back to Mr Lawlor.
What went Wrong?
Mr Lawlor gave evidence, which I accept, that he interpreted these words as conveying the wish that the sporting field proposal be proceeded with, that a contract be prepared, and a recommendation supporting adoption of the contract be prepared for submission to the Minister. That submission and recommendation were not prepared because Mr Lawlor discovered that Bradshaws were on-site and doing work. He said this about the way in which the proposal was handled, which he agreed was unusual:
"In what way? --- The fact that we didn't have a proper contract, we didn't go out to tenders, that the people started on site before there was anything formal drawn up. I would have normally expected that that would have preceded any action on site.
Did this manner of dealing with the matter cause you any concern at the time? --- Yes, it did. I felt that the department hadn't been commercially sensible about the operation. We, I think, let quite a valuable piece of land go for filling operations and I felt that the procedures that had been followed, it made it very difficult for the department to control the matter as it should have.
Did you express your concerns to anyone within the department?A think amongst my colleagues we were all certainly concerned about it.
Colleagues on the level as yourself? --- Yes.
But you didn't express it to anybody higher up the chain? --- I think probably in conversations with the Chairman I expressed concerns but my recollection is that Mr Dalton was also concerned as to the way the contracts had been - or not gone into.
The impression that you're left with is that Mr Dalton was equally concerned about the method of procedure?-The fact that they had started on site without a contract, yes. He was concerned about that."
Mr Lawlor also said that a specification should have been drawn up.
Mr Dalton said that the words he wrote were not an instruction to prepare a contract between the Commission and Bradshaws. However he had no recollection of the "issues of the matter going to tender ever seriously being considered". He expected his subordinates to take appropriate steps to protect the interests of the Commission. I have no doubt that the intervention of the Minister led to the matter being handled within the Commission in a manner less thorough than would otherwise have been the case. I also have no doubt that Mr Lawlor and others who worked with him accepted that the Commission Chairman shared the Minister's view that Bradshaws should do the work. Mr Lawlor's understanding of the position is made clear in a memorandum of 27 July 1982 in which he referred to a decision in principle, requested that documentation be arranged, and further that a recommendation to the Minister for the use of the land as a sportsfield be prepared.
Had Mr Dalton desired to make clear that active steps were to be taken to protect the interests of the Commission he should have said so to Mr Lawlor, but that he did not do.
In my judgement that is because he was simply following the wishes of the Minister. That raises for consideration the proper relationship between Minister of the Crown and senior public servant.
The Minister's Wishes
Within the public sector Ministers of the Crown have very great power, and are held in awe by most public servants. As to the power, the situation can hardly be otherwise. They are elected representatives, appointed to administer portfolios, and answerable in the Parliament for any failures. It is in all respects consistent with principle that Ministerial decisions as to matters within their proper purview, if not inconsistent with any Cabinet decision and not illegal, must prevail.
However Ministers cannot, and should not seek to, do everything themselves. Their proper role has to do with policy, strategy, resource allocation, and the sorting out of major problems. They should leave management of Departments and agencies within their portfolio to the properly appointed and tasked senior executives, and all matters of administration to appropriate functionaries. They should not involve themselves in matters of small moment, or do favours. They are not running personal fiefdoms, and must not act as whimsical dictators.
A difficulty which can arise is that the Minister's wishes, actual or perceived, are translated into commands requiring instant obedience. Anybody who has held high office knows this can easily happen. Subordinate staff can take a mere intimation as conveying a decision, and then pursue the matter with a vigour which is excessive. Those who hold positions of power must be careful to deny operation to the old adage: "Your slightest wish is my command".
An appropriate balance will best be achieved if the Minister restricts his or her area of active involvement to matters of difficulty or controversy, and seeks and considers carefully the views of senior officers with respect to such matters.
The public interest requires that the best decisions be taken for the community generally, and few people are so knowledgeable and wise as to be able to always make the best decisions without consultation. Indeed it will frequently be necessary to obtain a range of views. A prime responsibility of senior public servants is to help Ministers make the best strategic and policy decisions.
That cannot happen unless the advice given by them is frank and fearless. And it should be pressed if necessary, unless and until the Minister has reached a decision, or said that he or she will hear no more. If the senior public servant considers that a Minister is embarking upon a course which is mistaken and contrary to the public interest, then he or she should always consider the option of putting considered views to the Minister formally and in writing. This step should not be undertaken lightly or too often, because excessive frequency may lead to a Ministerial perception of obstructiveness. But public servants are there to serve the public, not to please their Minister. Accordingly they must be prepared to press their views if the public's interest as they perceive it so requires.
No public servant should be heard to say that something was done because it is what the Minister wanted, and that is that.
This matter was taken up by me with Mr Dalton when he gave evidence, and except in minor respects he can be taken to agree with what is here said. So would almost all senior public servants, and I think most Ministers. These observations are worth making because the proper relationship between Minister and public service advisers can become distorted, perhaps by power going to the head of the former, or by the latter becoming excessively anxious to please a political master.
There is nothing inconsistent between what is stated here and the Code of Conduct for Public Service Executives published in September 1989.
CHAPTER 3 - ANY CORRUPT CONDUCT?
The M92 site has had an unfortunate history over the past eight years. Perhaps most importantly, inmates at the Silverwater Prison Complex have not enjoyed a facility which was intended for them. A number of aspects were such as to cause grave concern. In this chapter they are spelt out, and the conduct of persons principally concerned is examined, with a view to detecting any impropriety.
Causes for Concern
It is quite clear that each of the following occurred -
_ A contract was entered into which reaped large rewards for Bradshaws.
_ Mr Watt was very friendly with Mr Jackson, who was personally involved in the granting of the contract.
_ No tenders were called, although advice was given to Mr Dalton to do that.
_ Considerable sums of money passed between Mr Watt and Mr Jackson at or about the relevant time.
_ Mr Jackson was later imprisoned, it having been proved that he received improper payments in connection with unrelated transactions.
_ The contract was loosely drawn and poorly enforced with the result that the principal benefit which motivated the State to enter into it has not been forthcoming.
_ The relevant file is "missing", as are relevant logs listing visitors to the Silverwater complex.
In such circumstances, an investigation was certainly called for. The most troubling possibility, clearly open for consideration given the known facts, was that Mr Jackson received money or other benefits for favouring Bradshaws.
No Illicit Payments
It is clear that Mr Jackson received money from Mr Watt, and also that he paid money to him, although equally clearly the bigger amounts and the more frequent payments were by Mr Watt to Mr Jackson. Each man gave evidence that these were loans, which have been repaid. One payment of $10,000 was made in about April 1983. It was not repaid for a number of months. On another occasion the amount lent by Mr Watt to Mr Jackson was in the order of $16,000 to $18,000. No interest was ever charged. This was explained on the basis that the transactions were between close friends, which is a credible explanation.
It is troubling that a Minister should be a heavy punter, that he should have to borrow large sums to pursue that activity, and that he should have had business dealings on behalf of the State with a friend who had advanced large sums of money to him. In the end there is no evidence or other information which tells against the testimony given by each of Mr Watt and Mr Jackson that the monies paid were loans, subsequently repaid. Accordingly that testimony must be accepted.
The Independent Commission Against Corruption Act 1988 ("the Act") contains a definition of corrupt conduct which conditions the Commission's power to investigate. Included in the definition - by s.8(1)(a) - is "any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the honest or impartial exercise of official functions by any public official Ministers of the Crown are public officials - see the definition in s.3(1) of the Act.
I have no doubt that Mr Jackson did not exercise his official functions in an impartial manner with respect to the M92 site. He clearly allowed his friendship with Mr Watt to lead to a situation in which favourable treatment was given to the company of which he was the Manager. Bradshaws through Mr Watt had access to the Minister which was denied to others, Mr Watt was given the exclusive advantage of a meeting on site with the Minister concerning a matter which in his view was of no great importance, and Bradshaws obtained the contract without public tenders being called. Had it not been for the Minister's personal involvement, and the favourable treatment given by him to Bradshaws because of his friendship with Mr Watt, it is likely that tenders would have been called, or at least that other waste disposal businesses would have been given an opportunity to register interest in filling the M92 site. In either of those events the process would have been fairer and the outcome more favourable to the taxpayers of New South Wales than those which occurred.
Mr Jackson can be criticised for his conduct. However nothing can be done unless it amounts to a criminal offence, or could lead to his discipline or dismissal - see section 9(1) of the Act. In view of the fact that he did not receive money or other benefit, no question of criminal prosecution arises. As he is not now a member of the Parliament, and perforce is not a Minister, no question of discipline or dismissal arises.
Bradshaws Took Advantage
Those who work in the public sector should have as their chief aim and concern the furtherance of the public interest. Different considerations apply to those in private industry. Businesses may be run in such a way as to promote the interests of the community generally, and some are, but the prime concern of most people who are active in business is to make a profit.
I have no doubt that Mr Watt took advantage for Bradshaws of his friendship with Mr Jackson. However it does not follow that he is to be criticised for that. One of the major parts of his job was to obtain dumping sites, on the best terms possible. 'Rat he did in the present case. He knew he was getting a good deal from his friend, because he now says that if pressed Bradshaws would have paid a cash sum to obtain the dumping rights. However in lobbying and negotiating exercises it is for each side to look after itself. It would be futile to urge that in generally similar circumstances those dealing with State instrumentalities should show restraint and not take advantage of such opportunities as arise or can be created. Those in the public sector must realise that they will be taken advantage of if possible, and they must strenuously resist that happening.
Dalton was Busy
In fairness to Mr Dalton it has to be said that the meeting on site and its immediate aftermath occurred only some six months after he became Chairman of the Corrective Services Commission. As Chairman, Mr Dalton effectively held the position of a Departmental head with respect to the Minister, Mr Jackson. Both men's actions were consistent with this relationship. Mr Dalton was working to a Minister who was an activist and keen upon reform, he had undertaken a major review and re-organisation of the Department, and the work demands were very heavy. There were many other matters of greater difficulty and importance than the M92 site and what should happen to it. It must also be recognised that no Departmental head can do everything; it is necessary to delegate functions, and when that happens those given the job must be allowed to do it. Mr Dalton was at all material times a busy man in a demanding job, and he should not be criticised for any failure to personally oversee the course of dealing between the Commission and Bradshaws.
Having said all of that, I think he could and should have been more sensitive to certain aspects of the developing situation, and on the particular occasion he was unduly deferential to the Minister's wishes. However care must be taken to ensure that conduct be assessed on the basis of the facts which prevail at the time it occurred, and judgement not be clouded by knowledge of an undesirable outcome. While Mr Dalton's conduct will be analysed, I make clear that nothing he did or failed to do is such as could give rise to criminal or disciplinary consequences.
Mr Dalton said when giving evidence that at the time of the meeting his "impression and distinct understanding" was that Mr Jackson had, in effect, given him "a direction that, subject to satisfactory completion of contractual and other arrangements", the project should proceed, and that Bradshaws were to get the job. He said that within a week after receiving Mr Lawlor's memorandum of 20 July 1982 he raised with Mr Jackson the various matters contained in it. He said he had a clear recollection of the discussion, which occurred in Mr Jackson's office. Mr Dalton thought it included the question of going to tender, but cannot recollect the Minister's response, "but he made it very clear that he felt that the expertise the Bradshaw group had, the benefits that were going to accrue to the Department, which had been concurred to by myself and others, were sufficient to warrant the proposal proceeding". He did not advise Mr Jackson that the proper and usual procedure was that the matter should go to tender, because:
"I thought that very clearly that because of the nature of the project, that is that I didn't appreciate gains to anybody else, that at no cost to the government, or no cost to the Department, a proposal which had been put to be undertaken by a reputable organisation and agreed to by the Minister, was within the authority of the Minister."
It may be accepted that neither Mr Jackson nor Mr Dalton anticipated that the deal done would give rise to such a large profit on the part of Bradshaws. However in his July minute Mr Lawlor specifically warned Mr Dalton that the Commission might well secure more favourable terms from another company, and that public tenders should be called. In that he was absolutely right. It is not clear whether Mr Dalton did convey that view to the Minister. Mr Jackson when first asked said that nothing of the sort happened, although when questioned by Mr Dalton's counsel he said that the matter may well have been drawn to his attention, but he had no recollection one way or the other. Had the matter been raised he would have said that the Department should sort the matter out as it saw fit.
It can be difficult to recollect events that occurred years in the past, and it is a natural human tendency to remember events in a way which casts the recollecting individual in the best light. I am inclined to think that Mr Dalton did not pass on Mr Lawlor's view to Mr Jackson. If he did, it is clear he did not do so with appropriate clarity. He knew or should have known that no submission concerning the M92 site ever went to the Minister, because they all went through him. In view of the terms of the direction he wrote on Mr Lawlor's minute, I do not think the recipient of it could have been expected to prepare documentation urging the Minister to undertake a process of public tendering. Almost anybody would have read Mr Dalton's written direction as negating that possibility, and I accept that Mr Lawlor so interpreted it.
Mr Jackson impressed me as a resolute individual, even after suffering the ignominy of imprisonment. He might well not have accepted advice to call tenders even had that course been pressed upon him, and I have doubts as to his evidence that he would have accepted such advice. Be that as it may, Mr Dalton had been warned that tenders should be called, and told why. I find it surprising that he said when giving evidence that he could not recollect serious consideration ever having been given to the calling of tenders. He did not pass the warning on to the Minister by way of advice, at least adequately, or perhaps at all. He should not be judged too harshly for that failing, because of the factors mentioned earlier: in particular it is certainly the case that he was very busy with other matters throughout the latter part of 1982.
As has been made clear, I think that partiality was shown by Mr Jackson to Bradshaws, who took advantage of the situation, and that tenders should have been called. Another factor which led to the undesirable end result was departmental inefficiency. The failure to properly document the agreement reached was regrettable, and the failure to properly supervise the contract and enforce its performance even more so. Contributing factors were the fact that work started before the contract was entered into, a situation frequently encountered but never desirable, and a widespread and understandable perception that as the filling by Bradshaws of the M92 site had the blessing of the Minister there was not much that officers could do about it. The perception provides a partial explanation, but not an entire excuse. The standard of competence displayed by Commission officers when dealing with Bradshaws was not high. It is a lamentable situation that an operation that should have been completed in 12-18 months dragged on for about five years. The fact the relevant file cannot be found gives rise to the possibility that there has been a cover up. Or that may merely be a further indication of inefficiency within the Department.
I do not propose to take this aspect further, for two reasons. The first is that in my view the prime causes of the entire imbroglio were the Minister's partiality, and the failure to call tenders accompanied by a proper specification. Secondly, there is absolutely no reason to think that any Commission officer has been involved in corrupt conduct of any sort.
CHAPTER 4 - FINDINGS AND RECOMMENDATIONS
A Report such as this is required by statute to contain certain statements. 'That is done in this concluding chapter, which also contains certain recommendations. ]be most important of them have to do with the tendering process.
There is insufficient evidence to warrant consideration of the prosecution of any person for any offence, or the taking of disciplinary action against any person, or the taking of action against any public official with a view to dismissal. That global statement necessarily includes all persons substantially and directly interested in the subject-matter of the investigation, and accordingly the requirements of s.74(6) of the Act are satisfied.
For reasons that have been explained, suspicions that illicit payments may have been made have not been proved, and the partiality shown by Mr Jackson towards Bradshaws cannot in the circumstances have criminal sanctions attached to it. The failure to call tenders, while unfortunate, and something that should not be repeated in generally similar circumstances, is not such as to lead to adverse personal consequences. Despite the criticism levelled by Mr Dalton's counsel against individual officers of the Commission, and the inefficiency which certainly occurred, in all of the circumstances of the matter lesser officials should not be dealt with in circumstances where their transgressions were minor and no steps can be taken against others, especially the Minister whose favouritism of Bradshaws was the prime cause of all that occurred.
By the time this report is completed and ready for printing, some four months will have expired since completion of the hearing. That is a greater period than is acceptable, or will generally occur.
A significant contributing factor was delay on the part of the Court of Appeal in delivering judgement in Balog v ICAC. In those proceedings the plaintiff contended, in effect, that the Commission in a report to the Parliament must restrict itself to providing basic factual information and making findings pursuant to section 74 and such recommendations as might be appropriate. In particular he said that the Commission cannot in a report make any statement, finding or determination which expresses any conclusion adverse to a person substantially and directly interested in the subject-matter of the investigation. A decision favourable to the Commission was brought down by Mr Justice Smart on 27 July, the plaintiffs appeal was heard on an expedited basis on 31 July, and the decision of the Court of Appeal - again favourable to the Commission - was not delivered until 14 December. Particularly in view of the delay, it seemed possible that the views which the Court of Appeal would express might have a significant impact upon what content a report could properly contain, and accordingly I did no more than preliminary work after the hearing and until the decision was handed down. The summer break then intervened, and hence the delay.
I recommend pursuant to s.78(3) of the ICAC Act that this report be made public forthwith. 'Rat enables but does not require either Presiding Officer of the Houses of Parliament to make the report public notwithstanding that the House is not in session when the report is received by the Presiding Officer. That should advance the general publication of the report by a couple of weeks. I think the delay that has occurred should not be prolonged to that extent.
Completing the Work
Near the end of the hearing I sought submissions from counsel for Bradshaws as to whether I could properly recommend that the proper authorities should approach Bradshaws with a view to persuading them to do that which was agreed upon at the original site meeting. In response Mr Coombs QC for Bradshaws said two things. The first was that the Commission ought not act, or be seen to act, "as a contractual performance supervisor, a kind of super clerk-of-works or as a public consumer protection agency, arbitrator or conciliator, or in any similar role." With that I agree entirely.
The second statement made was this:
"The Bradshaw company, because of prior failures by the Commission for Corrective Services to communicate with it, and because of a lack of confidence in the mechanisms and procedures for supervision of any work at Silverwater, is not prepared to enter upon any further works at the gaol. It does not accept that the job was completed other than in accordance with the contract, nor does it accept that it was in any way responsible for the communication breakdown.
Nonetheless, the company, upon release of the bank guarantee, will pay to the superintendent of Silverwater or such authority as thought to be appropriate, the sum of $25,000 as a contribution to the production of a playing field. This sum, in its view, exceeds the fair cost of satisfactory topsoiling and grassing of the site by prison labour, together with an allowance for a watering system. It offers this contribution in the hope that the prisoners at Silverwater will at long last receive what all parties intended for them in 1982"
I recommend that early and sympathetic consideration be given to this offer, because in my view nothing better is likely to be achieved, and the prisoners at Silverwater should have for their enjoyment the fairly modest sporting facilities which were proposed for them so long ago. Had it not been for failings as documented in this report, they would have had them years ago. Furthermore, the taxpayers would not have been denied income of substance from the filling operation.
The Tendering System
Finally, and most importantly, this matter should serve as an object lesson to all of those involved in the public sector as to the virtues of a proper tendering system. The questions which apparently occurred to those who turned their minds to the possibility that tenders might be called were whether the transaction involved any payments, whether the Minister had authority to let a contract direct, and whether there were precedents for tenders not to be called in circumstances of a generally similar nature. It may be that the third factor was a rationalisation after the event. All of this was quite simplistic. A more sophisticated approach is called for.
Detailed regulations governing government contracts and tenders have been in existence for many years.
The Public Service Regulations in force in 1982 provided that regulations 197 to 243 applied, unless otherwise prescribed, to the purchase of stores and the provision of services, and regulation 197(v) provided:
" 'Services' shall, without limiting the generality of the expression, include advisings (other than legal advisings), consultancies, installations and the performance of professional or trade operations of any kind."
This definition remains unaltered in the current Public Sector Management (Stores and Services) Regulation 1988.
By Regulation 202(1) the State Contracts Control Board was made "the authority for inviting and accepting tenders, determining conditions under which tenders are invited and completing contracts for all stores or services for all Departments...", although authority to accept tenders could be delegated. No relevant delegations were in force for the Department or the Commission at the time the agreement was entered into in relation to the M92 site. It may be doubted whether the license granted to Bradshaws involved a "provision of services" by that company, and it was certainly not a "purchase of stores".
There is obviously a grave defect in the tendering system. And it persists to this day - see in particular the present Regulation 8(1). In deciding whether tenders should be called the question should not be what the monetary cost to Government will be. Of equal importance is the value of benefit conferred. On the face of the deed, it conferred a right upon the company. That right was of considerable value to Bradshaws. Yet the rules, while they did not of course preclude tenders being called, did not require that to be done unless the Minister decided otherwise.
In deciding whether and when tenders should be called, either as a matter of obligation or in the exercise of sound administrative judgement in the particular circumstances of a matter, certain precepts should be borne in mind. They are set forth below, with comments applicable to each of them. They apply equally to contracts let by the State Contracts Control Board and to those entered into by all public authorities whether acting under delegation from the Board or exercising independent contracting authority.
1. Public property must be utilised so as to maximise public benefit.
This applies to whatever is owned or controlled by Government and its instrumentalities, that is to say not just monies and goods, but also interest of all sorts in public land, and intellectual property of all types. The duty to ensure that maximum benefit is derived rests upon public officials within their respective spheres of activity.
2. All should have equal opportunities relative to public property.
This statement needs to be qualified. It assumes that there are no existing rights with respect to such property, which is therefore free to be dealt with. It also assumes that those who might want to enjoy opportunities have appropriate capacities. The fact many will not can justify an approach other than a traditional calling of tenders, for example seeking expressions of interest, limiting the class that can tender, and so on. In special cases it will justify a deal being done direct. One such will be where a concept put forward to a Government department or agency is unique. As the present case demonstrates, such an argument is easily put forward, and should not be accepted save after careful consideration.
3. Accordingly tenders should be called whenever large benefits will pass to or costs be incurred by either the State, or a party contracting with the State, in relation to public property.
This is a general rule. The emphasis must be upon the true nature of the deal proposed to be done, not its external manifestations. If the proposal is large, then others may be interested, and should be seen as entitled to put in a bid.
4. If that general rule is departed from, the reasons for so doing should be recorded.
This will enable the responsible Minister to give an account of what transpired should the necessity arise.
Although the precepts are simply expressed, they are by no means simplistic. Special circumstances may call for their occasional refinement, but I do not think there are any circumstances in which they are rendered inapplicable.
I recommend that all tendering rules throughout the public sector be amended to render them consistent with the foregoing.
This report will be widely disseminated, in order to ensure that its message is widely received. The Commission stands ready, willing and able to assist any Department or agency in drawing its tendering rules afresh.
A survey will be conducted at a later stage as to what steps have been taken, both formally and in practice, to implement the recommendation just stated. It is appreciated that what has been said is general in nature, but the Commission has started the process of consulting with appropriate authorities so as to see that its recommendation is implemented in a manner both timely and effective.
List of witnesses
Witness Occupation Date Transcript Pages
Budden, Ross Operations Controller 15/08/89 48-69
Churches, Director 18/09/89 514-517
Creighton, Peter Director 12/09/89 289-301
Dalton, Vernon Director-General 13/09/89 392-410
Day, Noel Consultant 13/09/89 371 -382
Duff, Henry Former Prison 11/09/89 137- 160
Farrell, Thomas Waste Control Manager 11/09/89 106-122
Geddes, Donald Engineer 11/09/89 85-106
Hunter, John Manager 12/09/89 284-289
Jackson, Rex Former Minister for 18/09/89 413-438
Lawlor, Chris Management Consultant 12/09/89 262-284
Shepherd, John Co-ordinator 13/09/89 358-371
Snook, Henry Company Secretary 11/09/89 122- 136
Tomkins, Gregory Senior Health Surveyor 19/09/89 519-538
Tough, William Assistant Superintendent 12/09/89 248- 262
Unicomb, Michael Prison Superintendent 13/09/89 383- 392
Watt, John Manager 15/08/89 69-78
No. Exhibit Transcript
A Tendered by Counsel Assisting
A1 Plan of the M92 site 11
A2 Returns of Solid Waste 45
A3 Plan with site levels 65
A4 10 MWDA site inspection reports 75
A5 Estimated cost of installing sports fields 91
A6 Booklet of basic source documents 5
A7 Fax from Mr Snook, 12 September 1989 192
A8 Fax from Mr Farrell, 12 September 1989 192
A9 Notice of 4 February 1986, and Mr Watt's reply of 6 March 1986 198
A10 Copy of agreement with Auburn Council/Bradshaws, February 1986 205
A11 Mr Unicomb's statement of July 1989 383
A12 Document as to dates security fence at Silverwater erected 440
A13 Photo of the site, taken first half of 1988 440
A14 Statement of Mr Churches 514
A15 Report to Government by Mr Churches 514
A16 Statement of Mr Comock 539
A17 Statement of Mr Musgrave 540
A18 Statement of Mr Keenan 540
A19 Record of Interview with Mr Muter 542
B - Tendered by Counsel for Bradshaws
B1 Document headed "Total Income, Silverwater" 40
B2 Document headed "Creditors Expenditure - Silverwater Tip" 41
B3 Document headed "Tipping Fees per Cubic Metre" 41
B4 Map of M92 site 47
B5 Photographs of M92 site 100
B6 Income and expenditure statement relative to the operation
of Silverwater tip
B7 Map 227
B8 Photographs of M92 site 229
B9 Letter Mr Watt to Auburn Town Clerk, 20 July 1988 357
B10 Statement of Mr Phelps 371
B11 Report from Ernst & Young, chartered accountants 546
C - Tendered by Counsel for Corrective Services
Cl Description of the Silverwater complex at the Silverwater prison, 441
with annexed plans
D - Tendered by Counsel for Mr Dalton
D1 Memo from Mr Dalton to senior legal officer 412