Coroner & Legal
STATE: Deal … or No Deal? Revelations from the Triabunna Chip Mill Inquiry …
THE HOUSE OF ASSEMBLY STANDING COMMITTEE ON COMMUNITY DEVELOPMENT MET IN COMMITTEE ROOM 2, PARLIAMENT HOUSE, HOBART, ON MONDAY 10 NOVEMBER 2014. TRIABUNNA WOODCHIP MILL AND FUTURE DEVELOPMENT DR JULIAN AMOS WAS CALLED, MADE THE STATUTORY DECLARATION AND WAS EXAMINED.
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Dr AMOS – He was the CEO or chairman of the Wilderness Society at that time.
Gunns was suffering from a number of different attacks. In April 2011 – and you have this
document – they wrote chairman to chairman – Newman to Adrian Kloeden, the Forestry
Tasmania chair – saying that they were terminating their contracts and at that time FT
determined there was some money outstanding in the vicinity of $20 million.
In my view and in the view of many people, when they wrote that letter terminating the
contract they were in breach of contract, they were walking away and they owed money.
Later, Gunns placed conditions on their walking away and sought compensation and I don’t
have the answer but the question I ask is what caused the change of attack? My own view
in respect of this, and this is after the mill had been sold, is that there was a political
imperative going down at a commonwealth level to support the IGA and that as a result
Gunns had the opportunity to get some of that IGA money.
The FT and industry view was that it was a breach of contract – and you have legal advice,
I think, or advice from Forestry Tasmania that that was so. The government view, as I
understand it, is that they had legal advice from the Solicitor-General. To the best of my
knowledge that advice was that there was a dispute and not as to the merits of which side
of that dispute had the stronger case, but there was a dispute. The Government had put
itself into a time line where it had to resolve its IGA issues and therefore sought to pay
compensation to Gunns for the purposes of getting the IGA signed off.
I make comments about the probity audit and I have no issue with that except that the terms
of reference of the probity audit note that there is an amount of money to be paid, not
whether money should be paid, and I think the probity audit should have looked at whether
money should have been paid at all.
Mr SHELTON – Did FIAT investigate that at all?
Dr AMOS – I was no longer with FIAT at this point. This is knowledge I have gained from
conversations, as distinct from a position.
You know that the first offer was made on 26 August. There are some statements in the
letter from the Premier regarding that offer which read strange to me, but having that offer
rejected, a second offer was made within a week or two for $23 million and that was
accepted. FT’s debt was written of with $11.5 million paid and FT thought that they were
over $20 million. There was a deal done there which in my view was pretty much driven
by the commonwealth’s desire to get the IGA resolved and they just put money on the table
to make it happen.
CHAIR – Julian, you refer to this letter from the Premier to Greg L’Estrange of Gunns, dated
26 August that says:
The state is determined under this agreement and based on Crown legal
advise that it is appropriate to make an offer of payment to Gunns as provided
under clause 22 and 34 of the TFA in return for particular commitments to
enable essential processes that are required to give effect to the TFA’s
objectives to be immediately progressed.
Dr AMOS – Which I presume is the IGA.
CHAIR – That is right, which is the point you just made:
I wish to emphasise that this payment is not for the purchase of sawlog
allocations or as compensation for relinquishing licence rights, as proposed
in your letter of 12 July 2011. It is the state’s view that you terminated the
relevant contracts of sale, 917 and 918, on 18 April with six months notice,
therefore the valuation of these contracts attached to your letter of 12 July
2011 is not considered relevant to determining your proposed settlement.
Dr AMOS – Correct.
CHAIR – Key points noted from the Premier to Gunns on 26 August.
Dr AMOS – The view industry had at that time was that the contracts had been surrendered or
terminated.
Mr SHELTON – The question is what was the money for?
Dr AMOS – The point I was making to you was that it seemed as though there was a wedge.
The government had got itself into a wedge with the time line issue where in order to
resolve the IGA it had to resolve the conflict with Gunns, irrespective of whether that
conflict was relevant or not. The fact was that there was a dispute, they had to get rid of
the dispute and money was put on the table to get rid of it, irrespective of the merits of the
case. That is my view.
Ms O’CONNOR – You will recall that the government made that payment on the basis of the
Solicitor-General’s advice.
Dr AMOS – I haven’t seen the Solicitor-General’s advice.
Ms O’CONNOR – No, none of us have.
Dr AMOS – I suspect – and this is the point I am making, Cassy – that the Solicitor-General’s
advice was that a dispute existed and it would take a long time to resolve, it would be
expensive to resolve and therefore, if there was an issue with respect to time – that is, to
resolve the IGA issues – they would need to find another way through.
Ms O’CONNOR – My understanding of the question that was put to the Solicitor-General was
whether or not there was a residual right that Gunns could claim from the termination of
the contract.
Dr AMOS – Yes, and if the Solicitor-General said a dispute existed then it would take a long
time to resolve, it would be expensive to resolve and you might need to find another way.
CHAIR – But Julian, the letter from the Premier makes it very clear that the Crown legal advice
says that it is appropriate, not required or compelled. The letter from the Premier makes
it very clear that the Crown legal advice says it is appropriate, they are entitled to to meet
the objectives of the TFA according to her, but there is no requirement, no compulsion to
pay. Is that the way you –
Dr AMOS – That is my reading of it.
CHAIR – Thank you.
Dr AMOS – And that was the way everybody felt at the time.
CHAIR – Exactly. Keep firing away.
Dr AMOS – I make the point that even though Gunns thought the market had collapsed and
there was no further market, and that they were the new age and we were the old age, the
interesting fact remains that the industry still exists and they do not. They are my points
regarding moving out of native forest.
I should make one other point, I guess, which is at this stage Gunns was suffering. It was
obvious to the world that it was suffering. It was selling assets and it got out of the mill,
et cetera. If we were paying money to Gunns in order to resolve this contractual issue,
however that was defined, where was the due diligence done by the government,
Commonwealth or state, that Gunns was in fact solvent? I believe there was no due
diligence done at that time to determine whether any money should have been paid because
of the state of the company.
Ms O’CONNOR – These questions about Gunns’ solvency though had actually pre-dated, as I
understand it, that point in time.
Dr AMOS – Yes, what I am saying is, before money is paid to somebody, one would have
assumed that they were solvent.
Ms O’CONNOR – They were still trading.
Dr AMOS – Exactly. I think you have made a point, Cassy.
CHAIR – You are saying that money, the compensation funds, purportedly compensation –
Dr AMOS – I am not saying they were insolvent. I am just saying, where was the due diligence
done to determine whether they were? It is a lot of money and the $11.5 million that was
put on the table was rejected and within a week it went up to $23 million, it doubled. That
seems to me to be a very odd move to make and a very short time in which to make it.
CHAIR – Why do you think that is?
Dr AMOS – Again, it suggests to me a political imperative, to resolve the IGA.
Mr JAENSCH – On that then, if the state government took legal advice, which we cannot see
but which appears to point rather to that it would be legitimate for a payment to be provided
but not necessary.
Dr AMOS – No, I think it is slightly different to that. A dispute exists, irrespective of the merits
of the dispute. If the government asked the question: is there relevance in this dispute?
Well, there are two sides and it would be costly to resolve and time-consuming to resolve,
there is no way to fix it – have to buy them out.
Mr JAENSCH – Okay, that advice was given to the state government but the payments were
made using federal government money, weren’t they? Commonwealth money.
Dr AMOS – All the money was Commonwealth money.
Mr JAENSCH – Where is the Commonwealth’s hand in this, or on what basis was that money
released or on what case was it released do you think from the Commonwealth? You have
inferred that there was a will to support the IGA and move things along. Who was driving
that?
Dr AMOS – The Commonwealth.
Mr JAENSCH – Who is the Commonwealth though, in this case?
Dr AMOS – Burke.
Ms O’CONNOR – To be fair though, there was a will from the participants in the IGA process
that it progress and be supported, so it is not the Commonwealth operating in isolation. It
has a range of players at the table who have invested in the process and want it to succeed,
including industry.
Mr JAENSCH – Yes, but where does the Commonwealth pursue its own due-diligence type
of inquiry on the case to release that amount of money or does it just go on the state’s nod?
Dr AMOS – One doesn’t know. That is a conversation that occurred between the state and the
Commonwealth. I was not privy to it.
Mr JAENSCH – Were the CFMEU, the ACF and the NAFI perhaps initiating some of this?
Dr AMOS – They were involved with the IGA process and Cassy is quite right that the
signatories to the IGA were keen to resolve the issue – not because of any payment to
Gunns, that was almost a sort of irrelevance from their point of view. Their relevance was
that, with the IGA in place, the reserves could be established and the industry, what was
left of it, could continue on. This was secondary, from their point of view. It was not their
money. It was not their involvement. Fix that so we can get on and do the other things
that we need to do. I presume timelines were laid down between the Commonwealth and
the state in order for that to happen. In fact I remember the minister, Mr Burke coming
down at one stage and I think he threw another $100 million on the table – didn’t he need
to resolve something because it was stuck with the Legislative Council? Anyway, I
digress.
Mr SHELTON – From the industry’s point of view the critical thing was to get Triabunna open.
Dr AMOS – Yes, keep it open. That was part of it and that was written into the IGA as well.
The terms of keeping Triabunna as a facility were, throughout this whole process, a part of
the deal. I think ‘best endeavours to keep the mill open’ were words we used at one time.
With respect to the sale of the mill, Gunns had made the announcement it was no longer
in the woodchip industry, it was no longer viable for them to remain in the industry. It
should read ‘no longer viable for Gunns to remain in the industry’. But they were happy
for the mill to continue to be available to the industry. I doubt that. In my mind, I dispute
that was ever their intention, that the mill be made available to the industry. The reason I
say that is all the things L’Estrange had said before then, that in order for the industry to
survive it had to get out of native forest. There was not much point in keeping the mill
going as a native forest operation if that degraded his position that he was part of an
industry that was New Age.
The question at that time was whether FT should buy the mill. I do not know whether they
put a bit in, I think they were part of a bid, weren’t they?
Ms O’CONNOR – Yes.
Dr AMOS – Most people in the industry thought that was a bad idea because they were a
provider of product, not a trader, or they should not have been one.
By the end of the tender process there were five bids – you pointed out I was wrong with
six bids, it should be five: one from a group of sawmillers in which I think FT played a
part, for $5 million; $10 million from Triabunna Investments, which was Cameron and
Wood; $16 million from a company that I know as Aprin, which is Mr O’Connor;
$16 million, which I learnt from your papers that Bob Horner had mentioned, as quoted
by Mr Sealey, who was a participant in your process.
Ms O’CONNOR – I am not sure we ever saw details of that offer.…