Senate debates

Monday, 28 November 2016



12:00 pm

Photo of George BrandisGeorge Brandis (Queensland, Liberal Party, Attorney-General) Share this | | Hansard source

I thank the Senate for giving me the opportunity to make this statement concerning the Bell litigation. Between 1991 and 1993—that is, a quarter of a century ago—members of the Bell Group of companies, a diversified conglomerate based in Western Australia, went into liquidation. That liquidation is still ongoing and nowhere near being completed. It is the most complicated and costly corporate winding-up in Australian history. So far, it has involved some 30 separate legal proceedings in four countries. In Australia, it has involved complex proceedings in the High Court, the Federal Court and the Supreme Court of Western Australia. The hearing of the main case alone, in the Supreme Court of Western Australia, lasted for 404 days and resulted in a judgement by Justice Owen running to 2,643 pages. There is no reliable figure as to the costs so far incurred in the winding-up, in professional fees paid to insolvency practitioners, solicitors, barristers and others. However, everybody agrees that the costs so far are in the order of hundreds of millions of dollars. And, of course, every dollar spent on professional fees and other costs is a dollar that the creditors will never see.

It is a feature of this winding-up that several of the original creditor companies have long since been taken over by professional litigation funders, whose interest was in prolonging the litigation. Those familiar with corporate insolvency—and this is one of the fields in which I used to specialise when I was in practice—have seen enough examples of administrations in which, after all the costs have been incurred in litigation, there is literally not a cent left over for the creditors. So, in order to avoid that eventuality, in 2015—that is, at a time when the matter had been going on for more than 20 years already—the Parliament of Western Australia passed a special act of parliament, the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Bill 2015, which I will refer to in these remarks as the Bell act. The purpose of the Bell act was, as was explained in the second reading speech by the Hon. Michael Mischin, the Attorney-General and Minister for Commerce:

That litigation threatens to consume more time and resources of this State, judicial and otherwise, with no prospect of resolution in the short term.

This Government is not prepared to allow the continuation of a third or possibly fourth, decade of expensive Bell litigation consuming the judicial and government resources of this State.

Therefore the Government has introduced the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Bill 2015. This Bill ensures a fair and expeditious end to the Bell litigation, providing for an equitable distribution of funds held by the liquidator …

… … …

This Bill provides a framework for the dissolution of those Bell Group companies registered in Western Australia, and the administration and distribution of the Bell litigation proceeds to avoid the perpetual litigation that appears to be inevitable on any issue associated with these companies

So Mr Mischin said in introducing the bill.

The Bell act is complicated, but its intended purpose, in essence, was to use two provisions of the Corporations Act—sections 5F and 5G—to establish a statutory scheme to take control of the winding-up and to establish a single fund from which creditors' claims might be met, with a view to ensuring that the winding-up was brought to completion sooner and that the dividend available for distribution to creditors was maximised.

One of the features of the Bell act was a particular sequence for the prioritisation of creditors. The Commonwealth Corporations Act makes provision, in an ordinary winding-up, for the priority in which proofs of debt are paid so that, for example, secured creditors rank above unsecured creditors. The Bell act made provision for the ranking of creditors which was in some respects different from the ordinary ranking under Commonwealth law. In doing so, Western Australia relied upon particular provisions of the Commonwealth Corporations Act—that is, as I have said, sections 5F and 5G, which provide, in brief, that a state or territory law may declare a matter to be excluded from the operation of the Corporations Act.

The Bell act came into force on 26 November 2015. The following day, some of the Bell group creditors commenced proceedings in the original jurisdiction of the High Court, challenging its constitutional validity. They did so, primarily, on the ground that insofar as the act dealt with debts due to the Commonwealth in the form of taxation revenue, its provisions were inconsistent with the Income Tax Assessment Act and the Taxation Administration Act, and should therefore be struck down under section 109 of the Constitution. A further argument was based on the validity of the reliance by the Bell act on sections 5F and 5G of the Corporations Act. Neither the Commonwealth of Australia nor the Commissioner of Taxation were defendants to the High Court proceedings.

It is relevant here to point out that I subsequently learnt there had been discussions between the former Commonwealth Treasurer, Mr Hockey, and the Treasurer of Western Australia, Dr Nahan, with a view to settling the Commonwealth's claim in the Bell winding-up. Since the Commonwealth's proof of debt was for some $167 million and a total post-liquidation assessment of some $298 million, it was plainly in the Commonwealth's interests that the matter be settled or otherwise expeditiously finalised.

Ms Kelly O'Dwyer became the Minister for Small Business and Assistant Treasurer on 21 September 2015 and assumed ministerial responsibility for the Australian Taxation Office. Neither she nor I were involved in any of the discussions between Mr Hockey and Dr Nahan and we had no knowledge of them at the time, although we subsequently became aware of them in circumstances that I will explain. In particular, we have both subsequently become aware of an exchange of letters between Dr Nahan and Mr Hockey dated, respectively, 13 April 2015 and 29 April 2015, which I seek leave to table.

Leave granted.

Senator Xenophon, you were not in the chamber when I was distributing these copies, but I wonder if I may, through the attendant, provide you with a copy of that exchange of correspondence. This, it should be said—that is, the exchange of correspondence between Dr Nahan and Mr Hockey of April 2015—was shortly prior to the introduction into the Western Australian parliament of the Bell Group Act. Mr Hockey's letter provides no basis for the claim than an agreement or understanding had been arrived at between the Commonwealth and Western Australian governments, although it is clear that some ministers of the Western Australian government had a different view.

The first personal involvement I recall having in the matter was on 3 March this year, although my office had been dealing with the matter prior to that time. On that day I had a visit from the honourable Christian Porter, the Minister for Social Services. Mr Porter had, of course, been the Treasurer and Attorney-General in the Western Australian government, and was familiar with its attempts to bring the Bell winding-up to a conclusion. He told me that on 2 March 2016 his office had received an email from the Western Australian State Solicitor containing a summary briefing and slide show of the history of the matter, as well as copies of the exchange of letters between Dr Nahan and Mr Hockey.

Mr Porter explained to me the background of the Western Australian government's attempt to end the Bell winding-up. He offered the view that a statutory scheme to bring the winding-up to a swifter conclusion and with a better return to creditors was, in principle, a good thing. However, he noted that he had not been involved in any discussions between Mr Hockey's office and Western Australian ministers and he had not had the time or resources to form a view on the constitutional or revenue aspects of the legislation. He suggested I speak to the Attorney-General of Western Australia, Mr Mischin, which I subsequently did.

My first conversation with Mr Mischin, which also involved Dr Nahan, was at about midday eastern time the following day, Friday 4 March. They gave me the Western Australian government's perspective of its dealings with Mr Hockey. Apart from the mention made of the matter by Mr Porter the previous evening, this was the first time I became aware of Mr Hockey's dealings with the Western Australian government. Later that day, I spoke to Ms O'Dwyer. I told her about my conversation with Mr Mischin and Dr Nahan. She told me that she had had a similar conversation with Mr Mischin earlier that day. Just as Mr Porter had suggested that I speak to Mr Mischin, he had suggested to Ms O'Dwyer that she speak to Mr Mischin. Ms O'Dwyer told me that her conversation with Mr Mischin was also the first time she had become aware of Mr Hockey's dealings with the Western Australian government.

I spoke to Ms O'Dwyer again over the weekend. On Monday 7 March, I also spoke, at the suggestion of Ms O'Dwyer, to Mr Andrew Mills, a second commissioner of taxation. The purpose of my conversations with Ms O'Dwyer and Mr Mills was to settle the Commonwealth's position in relation to the High Court proceedings—to which the Commonwealth had not been joined as a defendant—in particular in light of the views that had been expressed to us by the Western Australian ministers. At one stage on Friday 4 March, one of the options I considered, having regard to what Mr Mischin and Dr Nahan had put to me, was that the ATO should not intervene in the proceedings. I should stress that that was never a view I arrived at; it was merely one option among several which I wanted to test with Ms O'Dwyer.

In fact, after my discussions with Ms O'Dwyer and Mr Mills, I arrived at the firm conclusion that it was desirable that the ATO should intervene to protect the interests of the Commonwealth, notwithstanding the views that had been expressed by Mr Mischin and Dr Nahan regarding Dr Nahan's discussions with Mr Hockey and the related exchange of correspondence. I was also of the view, at that stage, that it was not necessary for the Commonwealth to intervene in addition to the ATO. Accordingly, the ATO intervened in the Bell litigation on 8 March, which was the final date for the ATO to lodge with the High Court its application for leave.

The position, therefore, from the time of the ATO's intervention on 8 March, was that the Commonwealth, through the ATO, was before the court and the Commonwealth's interests were represented by the ATO, on whose behalf the then Solicitor-General, Mr Gleeson, appeared. Mr Gleeson's client was the ATO. His instructions were given by the Australian Government Solicitor on its behalf. My view, at that time, was that this was a matter between the Western Australian government and the ATO.

Nevertheless, because a constitutional issue had been raised, a notice under section 78B of the Judiciary Act went to the Commonwealth, as well as to the states and territories, asking if the Commonwealth wished to intervene in the proceedings. It is important to point out that although the ATO is an agency of the Commonwealth it is a different legal personality. It nevertheless represents the interests of the Commonwealth in protecting the revenue. It is not automatic that the Commonwealth intervenes in proceedings every time it receives a section 78B notice. Every section 78B notice is assessed according to its own particular facts.

After I indicated that I did not intend to intervene in the proceedings on behalf of the Commonwealth, I was contacted by the Solicitor-General, Mr Gleeson. He gave me certain advice. I do not, by what I am about to say, waive the Commonwealth's privilege in that advice. It is sufficient to say that Mr Gleeson was strongly of the view that the Commonwealth should intervene, in particular because of the issue of sections 5F and 5G of the Corporations Act, which also arose. Although, as I have said, my view of the litigation is that it primarily involved section 109 issues concerning the Income Tax Assessment Act and the Taxation Administration Act and was likely to be disposed of on that basis, I saw the force of what Mr Gleeson put to me and I accepted his advice.

Accordingly, on 30 March, on my instructions, the Commonwealth gave a notice of intervention in the proceedings. After the Commonwealth's notice of intervention was served, there were several conversations, instigated by Western Australian ministers, in an attempt to resolve the matter. The option put to the Commonwealth by Western Australia was that the Commonwealth make a regulation, under section 5I of the Corporations Act, to provide a carve-out for Western Australia to enable the Bell act to operate. Those conversations included discussions between the Western Australian Solicitor-General, Grant Donaldson SC, and Mr Gleeson.

I am informed by Ms O'Dwyer that she sought advice from her department, which was received on Sunday 3 April. The advice, which included AGS advice, made it clear that even if such a regulation were made under section 5I, the Bell act would nevertheless be inconsistent with the provisions of the Income Tax Assessment Act and would fail under section 109 of the Constitution for that reason.

On Monday 4 April—the day before the High Court hearing commenced—I met with the Solicitor-General. He told me that his discussions with the Western Australian Solicitor-General had not resolved the issues raised by Western Australia. He was of the view that a carve-out under section 5I was not appropriate. Ms O'Dwyer and I then wrote a letter to Mr Mischin, which I seek leave to table.

Leave granted.

The letter was prepared by Mr Gleeson's assistant, who was present at the meeting, with his input. The High Court proceedings were heard over three days on 5 to 7 April. Mr Gleeson represented both the ATO and the Commonwealth of Australia. In the week following the hearing, I had a meeting in Perth with Dr Nahan and Mr Mischin, who expressed in strong terms their disappointment that I had given instructions for the Commonwealth to intervene and that the ATO had intervened.

The High Court delivered its judgement on 16 May. It upheld the constitutional challenge to the validity of the Bell act on the basis of the revenue question—that is, on the basis that there was an inconsistency between the Bell act and the Income Tax Assessment Act and the Taxation Administration Act—so the former was struck down under section 109 of the Constitution. The court did not find it necessary to decide the issue concerning sections 5F and 5G of the Corporations Act, so the issue was moot. If I may say so, that was what I had anticipated all along—that this was a revenue case and would be decided on the issue of inconsistency with the Commonwealth revenue statutes.

There has been much mention of an asserted agreement between the Commonwealth and the Western Australian Government. If Western Australian ministers considered their dealings with Mr Hockey to constitute some form of agreement, I can only observe that the only written record of those dealings—the exchange of letters between Dr Nahan and Mr Hockey of April 2015—does not, in my view, constitute or evidence such an agreement. In any event, whatever may have been discussed between Mr Hockey and Dr Nahan, neither I nor Ms O'Dwyer was aware of it at the time; we first became aware of the position asserted by Western Australian ministers after speaking to them on 4 March 2016. Nothing in any of my discussions with Mr Mischin constituted an agreement, as Mr Mischin himself has said.

It has also been suggested by some commentators that there is some relationship between this matter and the question of Western Australia's share of the GST—not so far as I am aware; however, as I have said, I have no knowledge of what passed between Mr Hockey and Dr Nahan other than what is revealed by the April 2015 exchange of letters, which lends no credence to that view.

Finally, it has been asserted, absurdly, by Mr Dreyfus and the opposition that I have somehow failed sufficiently to protect the interests of the Commonwealth. But every decision I made in this matter did protect the interests of the Commonwealth: by supporting the decision of the ATO to intervene in the matter and by deciding to accept Mr Gleeson's advice that the Commonwealth of Australia should also intervene in the matter.

In summary, the position is, firstly, so far as the Commonwealth was concerned, it was my view that this was first and foremost a case about revenue and the operation of taxation laws, which is what in fact it turned out to be. The Commonwealth's interests in that respect were fully and appropriately protected by the decision of the ATO to intervene, which decision I supported. Secondly, I had not initially considered that there was a need for the Commonwealth of Australia to also intervene in the proceedings. However, when subsequent to the ATO intervention Mr Gleeson told me he thought that there were strong reasons for the Commonwealth to also intervene on the Corporations Act point, I accepted his advice and gave instructions for the Commonwealth to intervene.

Thirdly, I was not involved in, and at the time they took place had no knowledge of, the discussions between Mr Hockey and Western Australian ministers, nor did Ms O'Dwyer. Mr Hockey never mentioned them to me. The only Commonwealth ministers with whom I have had discussions about this matter are Ms O'Dwyer and Mr Porter, as set out in this statement. Fourthly, there was never any agreement between me and Mr Mischin in relation to the High Court proceedings, as Mr Mischin himself has acknowledged. Fifthly, the case was disposed of on the basis of the ATO's submissions, supported by the Commonwealth. Had the Commonwealth not also intervened, the result of the case would have been no different.

Ms O'Dwyer and Mr Porter have seen a copy of this statement and they have authorised me to say that it entirely accords with their recollection of these events. I thank the Senate.

12:24 pm

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I move:

That the Senate take note of the statement.

That was a very lengthy and detailed statement. One does wonder why it took a front page of The West Australian before the Attorney-General and the government fronted up on this. Why did it take the front page of the papers before the Attorney-General came into this chamber and told the truth about what happened in relation to the Bell litigation? Let us recall that this is not the first time that this matter has been raised in this parliament. There were questions in question time and questions before the legal and constitutional affairs committee about these matters and yet it took a weekend, the front page of the papers and, frankly, a lot of media concern about what has occurred to have the Attorney-General come in here.

I also make the point that the Attorney-General declined to comment over the weekend in response to the allegations, telling everybody, 'We don't comment on matters to which the Commonwealth is a party.' Well, he has certainly commented at length today. I wish a few more of his colleagues were in here to listen to his statement today, commenting at length on the litigation. The one thing you can say about that statement is it throws Joe Hockey under a bus. How convenient that you go after the bloke who cannot defend himself. How convenient that somehow it was all the bloke who has left. It was all him. All of this constitutional advice and this kerfuffle that Senator Brandis was involved in—all the discussions with lawyers and the Attorney-General from Western Australia—was actually all Joe's fault. It is very convenient.

I suppose the first question is: are you going to recall him? Are you going to recall him from our most important ally? He is the ambassador to the United States, our most important ally. That is our most important security and defence relationship. If you do not have confidence in him because he did a dirty deal, are you going to recall him? We wait to hear. How convenient.

Senator Cormann interjecting

I will take that interjection from Senator Cormann. He said that we have not got much to say. Do not worry, we will be going through this statement very carefully and comparing it with what has been said in the Western Australian parliament because, as always with Senator Brandis, you have to look at what he does not say. You have to look at what he does not say. You have to look at all the careful things he says and does not say.

There were a couple of things he did not tell us about. One of them was why he put in place the direction to the Solicitor-General. If you look at the sequence of events—and I am sure my colleague Senator Watt will go to this—it is very interesting that it appears we have this dispute between ministers. There is discussion about how you put in place this political fix for a few hundred million dollars. What are a few hundred million dollars between friends anyway? It is very interesting that out of that appears the direction that requires Mr Justin Gleeson to get this bloke's permission before he acts for people, before he provides advice. Where was that in the statement? It was all of a sudden. Did it just come out of the ether?

The second point I want to make is in relation to the GST. We do not know yet what relevance the GST debate had to this political fix.

Photo of George BrandisGeorge Brandis (Queensland, Liberal Party, Attorney-General) Share this | | Hansard source


Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I will take the interjection from Senator Brandis. He said—

Photo of George BrandisGeorge Brandis (Queensland, Liberal Party, Attorney-General) Share this | | Hansard source

There is no evidence.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

Senator Brandis says there is no evidence of that. Don't you love it? He is always a lawyer. He said there is no evidence, but he could answer the allegation, couldn't he? Others are very clear that the GST payments to Western Australia were a political issue for the government. We know that. We know that from questions in here—

Senator Cormann interjecting

I will take the interjection from Senator Cormann. He said, 'We dealt with it.' How did you deal with it? Was this part of the deal?

Government senators interjecting

Oh, the infrastructure. Let us remember what Mr Nahan—I am not sure how one says it—

Photo of George BrandisGeorge Brandis (Queensland, Liberal Party, Attorney-General) Share this | | Hansard source

Dr Nahan.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

Thank you for correcting me again, Senator Brandis. I am always pleased to be corrected by you. It is Dr Nahan I am told. Dr Nahan said:

The understanding was that the commonwealth would not use the powers under the Corporations Act with the regulations null and void and it would not take an action to the High Court on the ATO and tax issues. In the end the ATO and the commonwealth Solicitor-General did join the action and they were successful in throwing the issue out.

I think the question here, which no doubt will be considered in detail in the coming weeks and days, is about the difference between what we have just had in the statement and what we know from the parliament of Western Australia, because it is quite clear from what the Western Australians have said that they had a very different understanding of this deal. I think what Senator Brandis is asking the Senate to accept is that somehow they were stupid. They got the wrong end of the stick. They were incompetent. It was never actually something that they were going to agree with. Let us understand: we have the Treasurer and the Attorney-General of the state proceeding on the basis that they had an agreement.

I want to make this point also. The Attorney-General says that he was happy for the Commonwealth to intervene—I am sorry; I am paraphrasing—'It was fine; we didn't have to intervene initially, because the ATO was there, and then I decided, after Mr Gleeson set me straight, that we did actually have to intervene.' I make the point that we are talking about the Constitution. We are talking about a law that sought to override a federal law, and we know that because that is what the High Court decided. I think one of the principles that we ought recall here is this: you do not get to ignore the Constitution just because there is a complex problem. As the first law officer of the country, you do not get to ignore the Constitution just because there is a political problem with one litigation that is before the High Court. The Attorney-General, in his opening to his statement, spent a lot of time explaining to us why the Bell litigation was a problem. Just because it was a political problem, it does not mean that the Commonwealth gets to cut a deal on legislation that is clearly unconstitutional—that is not my opinion; that is the judgement of the High Court.

Can I also make this point in relation to that statement, and, as I said, I think all of us will certainly be going through this in great detail, because it is the first time that Senator Brandis has broken his silence on this issue—

Photo of George BrandisGeorge Brandis (Queensland, Liberal Party, Attorney-General) Share this | | Hansard source

It's the first time I've been asked about it.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

He says it is the first time he has been asked about it. That is not true. We actually asked you in question time about it, and, as usual, you avoided the question. I will provide you with the transcript of that—

Senator Watt interjecting

I suspect Senator Watt probably asked Mr Gleeson about it in the Legal and Constitutional Affairs References Committee. You were also asked about it, Senator Brandis, by the media on Friday, when this matter broke, and your spokesperson said the Commonwealth does not comment on litigation matters to which it is a party—a blatantly false statement. So do not come in here and tell us, 'I've never been asked.' You are only doing this because you knew you had to, probably because Mr Turnbull finally asked you to. That is the only reason you are doing this. You are not doing this because you thought it was the right thing to do; you are doing it because you have been forced to do so, dragged kicking and screaming.

Government senators interjecting

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Order! Senator Wong has the right to be heard in silence.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I want to go through a couple more matters in relation to what has been said publicly about this. First, Premier Barnett has responded to the report in The West Australian. Let us remember that that is a pretty damning report. The report, which ran on Friday of last week, said:

Despite Senator Brandis’ instruction, the ATO's written submission to the High Court — authored by Mr Gleeson — used the precise legal argument that the Attorney-General had assured his State counterpart Michael Mischin would be avoided by the Commonwealth.

There are two ways of understanding that. One is that Senator Brandis has done one of those deals he walks away from. That is always possible. The other is that Mr Mischin got the wrong end of the stick, which, I think, is Senator Brandis's proposition. The point is: that is clearly on the record, and I do not believe it has been answered properly by the statement the Attorney just gave. The Western Australian government's position is very clearly that they had been assured by this minister, this Attorney-General, that that argument would be avoided:

Mr Mischin was infuriated by the ATO's move, not only because its argument in the High Court was on a basis the Commonwealth had promised not to advance, but because he thought the tone of the agency’s submission professed WA's ignorance of the Constitution.

In fact, the Commonwealth was kept well abreast of the State’s intentions, with WA openly discussing the constitutional issues concerning its legislation and even sharing early drafts.

It is not like this is a new thing—they cannot have had an exchange of papers, an early draft here, an early draft there, checking out if this is okay—but Senator Brandis wants us to believe he was not part of it at all; he knew nothing about it; it is all that pesky Mr Hockey's fault. Bring him back from Washington and let him explain to everybody what happened. Then:

WA Treasurer Mike Nahan had received personal and written assurances early last year from then Federal counterpart Joe Hockey that the Commonwealth would not oppose the State Governments move.

…   …   …

… five days after the High Court had heard the case, Mr Mischin and Senator Brandis had what witnesses say was a ''blazing row'' when the two attorneys-general met in Perth. Mr Mischin told Senator Brandis he was unhappy that the Commonwealth intervened in the case on the grounds pursued in court.

Let us remember also the sequence here. This is all happening in March and April, and then:

On May 4, Senator Brandis issued a directive that any department or agency seeking legal opinion from the Solicitor-General must first get Attorney-General approval.

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

Locking the gate after the horse has bolted.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

Senator O'Neill says, 'locking the gate after the horse has bolted'—I think that is true, but now he wants us to believe, as I infer from his statement—

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

There's no link.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

there was no link, like it was just happenstance.

Photo of Louise PrattLouise Pratt (WA, Australian Labor Party, Shadow Parliamentary Secretary for the Environment, Climate Change and Water) Share this | | Hansard source

A happy coincidence.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

It was apparently just a happy coincidence that there was this flaming row. Mr Gleeson did what he should have done, which was to unpick it under constitutional law. He gave advice about that. How dare he actually do his job! Then magically the Attorney-General gave him a direction which said, 'You have to get my permission before you do that again.' There was nothing in the statement today about that, was there, Senator Brandis? There was nothing at all.

In fact, this Attorney-General has never given an adequate explanation for why he sought to muzzle the Solicitor-General in the way he did. We know he was not able to proceed with that because this Senate had the numbers to disallow that direction. Senator Brandis beat a hasty retreat when he realised he did not have the numbers to defend the direction. And then we disallowed it in any event to prevent him making the same direction in six months.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

What about a bit of fact?

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I will take the interjection on 'a bit of fact'. A fact is that a direction was made. A fact is that the Attorney-General never explained adequately why the direction was made. A fact is that this direction came shortly after a big blazing row with Western Australia involving the actions of Mr Gleeson.

Senator Ian Macdonald interjecting

Those are all facts, Senator Macdonald. They might be inconvenient facts to you, but they are the facts. They are also the reason—

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Senator Wong, please address your comments to the chair.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I am happy to do that, but Senator Macdonald is yelling at me, so I have to yell back, you know? I expect I was raising my voice! I said that—

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I ask Senator Macdonald to cease his interjections.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

If he would cease interjecting, that would be very helpful.

Senator Ian Macdonald interjecting

I do not think he is listening, Mr Acting Deputy President.

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I will ask you again, Senator Macdonald: please do not interject.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I am very happy to address the chair. There is a gaping hole in the statement that has been provided. Why is it that shortly after these events the Attorney-General moved to muzzle Mr Justin Gleeson?

Photo of George BrandisGeorge Brandis (Queensland, Liberal Party, Attorney-General) Share this | | Hansard source

There is no relationship—

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

He now says there is no relationship! This is the problem, isn't it? You treat people like mugs, Senator Brandis. You really do. You really treat people like mugs. You expect everyone to believe that the Solicitor-General essentially telling you, 'This political deal contravenes the Constitution and the Commonwealth ought to intervene to uphold the law and the Constitution'—as is your duty—

Senator Brandis interjecting

Yes, you followed his advice, but only after it was required. Before that point you were happy to go along with the deal, Senator Brandis, won't you? You were happy to go along with the deal.

The reality is that Senator Brandis is asking everyone—all of this chamber and all of the public—to believe that his direction to Mr Gleeson had nothing to do with this. It just beggar's belief. The time frame just beggars belief. So he just woke up one morning and magically thought, 'I am going to muzzle the Solicitor-General. That is a good idea. I'm going to do that today. Let's muzzle the Solicitor-General today.' He says it has nothing to do with this obviously problematic political circumstance which was arrived at in great part because Mr Gleeson stood up for a proper application of the law and for the right constitutional reading.

I am sure that Senator Brandis was aware that the opposition and the crossbench had sufficient numbers to suspend standing orders this morning in order to move the motion I moved today. I am sure that Senator Brandis knew that he would have to give a statement, not because he wanted to. We all know from observing him in this chamber that he is not someone who likes coming in here to explain himself. He is not someone who likes answering questions. He is not someone who likes to have to give an account of his behaviour. He has been forced to do so because he did not have the numbers in the Senate. I suggest this. I would be happy if he stands up and says I am wrong. I suspect the Prime Minister phoned him and said, 'You've got to do something about this.' I suspect Mr Turnbull finally found a backbone when it came to dealing with Senator Brandis and said, 'You've had a bad week, George. You have called your colleagues "very, very mediocre". You've had a bad week. But you really need to get into the chamber—

Senator Brandis interjecting

I am not surprised you are interjecting, Senator Brandis. I suggest the Prime Minister said, 'Get into the chamber and explain yourself.' I do not think this comment of, 'We do not comment on matters to which we have been a party,' is going to cut it. It does not cut it.

We know from the statement that there remain many questions unanswered. We know from the statement that this government is seeking to throw Mr Hockey under a bus. This was a deal which involved Commonwealth taxpayers basically being deprived of money for the Commonwealth budget because it suited a political deal with their mates in Western Australia. We know that that occurred. We know that Mr Hockey was involved. But what is clear is that all the responsibility for that is now being sheeted home to the person who is now the Australian Ambassador to the United States. There are many more questions to answer.

If it is the case that the rest of this government were somehow magically unaware of this, you would have to ask, 'What were they doing?' If hundreds of millions of dollars were to be provided to the Western Australian government under a political deal, a deal that was contrary to the Constitution, how was it possible that the cabinet was not informed? How was it possible that the Minister for Finance did not know, because it affects the budget he has responsibility for? How is it possible that the Assistant Treasurer did not know until later, because the ATO is her or his agency, depending on who it was at the time? And how is it possible that the Attorney-General did not know that there was some arrangement about how this matter was to be dealt with before the High Court?

The reality is that there was a political deal to seek to circumvent the Constitution, and the Attorney-General's statement today does little to throw any light on the matter. What it does do is seek to blame Mr Hockey for this agreement. It is quite clear what the tactic is, and I look forward to the ambassador making his views clear about this issue.

12:44 pm

Photo of Nick McKimNick McKim (Tasmania, Australian Greens) Share this | | Hansard source

It is good to see the Attorney-General out of witness protection and in here today attempting to explain himself to the Senate. It shows that in politics you can run for a while but you cannot hide for ever. The statement we have just heard from the Attorney is instructive more for what it does not contain than for what it did contain. Specifically, there was no rebuttal that I recall hearing in his statement of the most serious allegation made in The West Australian article, dated 25 November this year. For clarity, I will put that allegation now and directly quote from that article. It is this:

A senior Federal source told the West Australian that Attorney-General Brandis verbally instructed Mr Gleeson earlier this year, as counsel for the A-G, not to run a particular argument in the High Court when a Bell creditor and its liquidator challenged the constitutionality of WA's attempt to take control of the group's $1.8 billion.

I presume it meant there are $1.8 billion of debts. The West Australian goes on to say:

The West Australian understands Senator Brandis told Mr Gleeson and understanding had been reached between the Federal and WA governments to finally end more than two decades of litigation stemming from the group's collapse.

Let us be very clear about what that allegation is. That allegation is that the Attorney-General instructed that then Solicitor-General, Mr Gleeson, to effectively run dead on the strongest argument he had at his disposal in the High Court challenge to the Bell Act, which was the section 109 arguments. The statement we have just heard from the Attorney-General did not rebut that allegation. The statement also did not contain a confirmation of precisely what the instructions were that the Attorney-General gave to the then Solicitor-General, Mr Gleeson. It is vague at best on details of precisely how the deal was struck between the Commonwealth and the Western Australian governments; and precisely by whom and when the deal was struck.

It is silent on the nature of the dealings that the Attorney-General's office had on this matter before the Attorney-General became aware of this matter, although he did confess that his office had dealings on this matter before he, Senator Brandis, became aware of it. But we do not know precisely what those dealings were. It does not contain any confirmation at all of exactly who asked the Attorney-General to give effect to the deal by instructing the then Solicitor-General not to run a particular argument in the High Court. It is vague at best in regards as to exactly how the Attorney-General became aware of the conversations and letters between the then Treasurer Hockey and Treasurer Nahan from Western Australia. Can I say: that is as good and as dangerous a hospital handpass as I have seen in my political career to date—the one that Senator Brandis has just fired out of the pack in front of Joe Hockey; Joe Hockey is running along; he has his eyes on the ball but he cannot see what is coming at him. It is a hospital handpass that Senator Brandis has fired out today. Make no mistake about that! It is Joe Hockey who is going to get crunched here. Make no mistake about that!

The statement is also vague at best on explanations of the precise role of a number of key players in the deal, including former Treasurer Joe Hockey, Western Australian Treasurer Nahan, the Western Australian Attorney-General Mischin, Commonwealth minister Kelly O'Dwyer, Mr Christian Porter, who is, of course, the former Western Australian Attorney-General and, for that matter, finance minister Cormann. It beggars belief that Joe Hockey did not have a chat over a cigar with Senator Cormann about this deal. It beggars belief; and we do not believe it. There is no doubt that during one of their collegial cigars Joe Hockey would have mentioned this to Senator Cormann. All of those people have now got significant and serious questions to answer as a result of Senator Brandis's statement today.

There is no doubt that Senator Brandis has further muddied the waters today, and that is why the Australian Greens remain absolutely firmly of the view that we need a reference to the Senate's Legal and Constitutional Affairs References Committee so that we can get to the bottom of this in good time, with careful consideration and with evidence from the key players.

What we have here is a situation that is murky enough, but when you apply the context of the situation it gets even murkier. Remember the Western Australian government was bleating continually about the fact that their share of GST revenue was not high enough—again and again conveniently ignoring, of course, that as recently as 20 years ago they were a net recipient of GST revenues. In the mid-1990s the Western Australian government was a net recipient of GST revenue. Conveniently ignoring that, they were bleating; they had the begging bowl out to the Commonwealth; they were applying political pressure to their liberal mates here in Canberra. And then suddenly, oh, there is a dodgy deal—a dodgy deal. 'We'll run dead in the High Court on section 109 so that you can prioritise yourself'—that is, the Western Australian government—'through the Bell act in order to claw back the money that you are owed at the expense of, potentially, the $300 million that the Australian tax office was owed by the Bell Group of Companies.' This is the most serious situation that the Attorney has faced, and he has not by any stretch of the imagination got himself out of trouble with his statement today.

The Attorney-General can say all he likes, as he did in this chamber today. He can say that there was no relationship between the public debate on GST and the deal that was done—no relationship at all. Well, I would say to the Attorney-General: it is well and truly open to the courts to convict on circumstantial evidence—and, boy oh boy, the circumstantial evidence is mounting up here against the Attorney-General, against the Commonwealth government and against their Liberal mates over in Western Australia. Seriously! Did they really think that a state effectively inventing its own version of Commonwealth tax laws would not be an issue for the High Court? Of course it was going to be an issue for the High Court, and, as it turned out, it was an issue for the High Court. There was a seven to zero decision by which the High Court struck down the Bell act. That is as clear cut as it can get. It was a most extraordinary deal that occurred here between the Commonwealth Liberal government and the state Liberal government.

It is worth pointing out that the Attorney-General portfolio is not your average or garden portfolio. It has a responsibility—in fact, a range of responsibilities—that sets it above all other portfolios, because the Attorney-General is the primary law officer of this nation, and as the first law officer of the Commonwealth the Attorney-General is the person who ensures that the rule of law is upheld in Australia. If the Attorney instructed the then Solicitor-General not to run the strongest argument at his disposal, the section 109 argument, against the Bell act in the High Court—and, remember, he did not deny doing that today—the Attorney has no option but to resign, and, if he does not resign, the Prime Minister has no option but to sack him.

To be clear, the Attorney-General's primary responsibility should have been to do everything possible to ensure that the Constitution of Australia was upheld. It is not his job to give effect to murky deals between the Commonwealth government and its Western Australian counterpart. We know there was a deal because Western Australian ministers have said, on the record, that there was a deal. The questions remain: who cooked up the deal; how was it cooked up; and, crucially for Senator Brandis, how was the deal given effect to? Again, the allegation in TheWest Australian is that Senator Brandis instructed then Solicitor-General Mr Gleeson 'not to run a particular argument in the High Court', and that allegation—the substantive allegation, the one that we have all been talking about over the last three days—was not explicitly denied by the Attorney-General in his statement. That is the biggest hole in the statement just given to this chamber by the Attorney.

The ATO, of course wanted to ensure that it acted in a way that would maximise its opportunity to receive the revenue it believed was due to it—in round figures, $300 million worth of potential revenue. Again unsurprisingly, the ATO thought it should not be in a position where it was bumped down the list of creditors, which was the effect of the Bell act. So of course the ATO was going to take this matter to the High Court, and, of course, as history shows, the Commonwealth, as Senator Brandis has confirmed today, did join that case.

But it does answer a question that has been puzzling many of us for some time, ever since the Attorney just prior to the election tabled the legal services direction, the controversial instrument that he tabled, that set himself up as a gatekeeper to the Solicitor-General: why on earth did he do it? It was never a reasonable response to the concerns raised by the then Solicitor-General, Mr Gleeson, in a letter he wrote to the Attorney-General in November last year. It was never a reasonable response to those concerns. But now we know. Now we know it was because the Attorney-General was annoyed and dissatisfied by the fact that the ATO went directly to the former Solicitor-General, Mr Gleeson, without going through the Attorney-General's office or the Attorney-General himself.

There are a number of questions that remain unanswered here. Did the Attorney really act to prevent agencies like, in this case, the ATO, from recovering potentially $300 million of funds that the ATO believed were owed to it? Remember, if money is owed to the ATO, it is owed to Australian taxpayers. This is taxpayers' money. Remember, the other effect of the Bell act was to prioritise the Western Australian government over and above private sector creditors in Western Australia who collectively were owed over $600 million by the Bell Group of Companies. Remember, in regards to the controversial legal services direction, which thankfully was disallowed by this Senate, the former Solicitor-General said during the recent inquiry that the Solicitor-General is independent and that independence is protected by statute, and the Solicitor-General has an important role in assisting the government to uphold the rule of law for the benefit of the whole community. Thank goodness someone had the rule of law front of mind during this matter—and that someone was former Solicitor-General Justin Gleeson, who clearly had the rule of law front of mind. What a shame that it does not appear that the Attorney-General had the rule of law front of mind. So it is no wonder that he tabled the controversial legal services direction.

Senator Brandis's statement has not gone anywhere near satisfying the Australian Greens. Notwithstanding Senator Brandis's statement, we still have significant concerns and, having heard that statement, we are even more certain than we were that there needs to be an inquiry into this matter by the Legal and Constitution Affairs References Committee so that we can shine the disinfectant of sunlight on this whole sorry, sordid saga. We need to get to the bottom of how the deal was cooked up and by whom and of how the deal was given effect to and by whom. Specifically, we need to hear not only from Senator Brandis but also from the ambassador to the United States, Joe Hockey, who has been absolutely towelled up by Senator Brandis in the Senate today, given a hospital handpass the likes of which I have never seen in my political career. We need to hear from Mr Mischin. We need to hear from Mr Nahan. We need to hear from Senator Cormann. We need to hear from Ms O'Dwyer. We need to hear from all these players. We need to hear from Commonwealth government officials and we need to hear from Western Australian government officials. There is a lot of work to be done to get to the bottom of this affair. Senator Brandis has come in here to try to clean it up, but he has only made it murkier with what he said today. As I said at the start of my speech, he has made a statement that is more notable for what it did not contain than for what it did. We will not rest until we have got to the bottom of this, and we look forward, we hope, to the concurrence of the Senate with our view that we need to refer to this matter to the Legal and Constitutional Affairs References Committee for an inquiry.

1:02 pm

Photo of Christopher BackChristopher Back (WA, Liberal Party) Share this | | Hansard source

Isn't it amazing how outrage can be confected out of absolutely nothing? I intend to commence my contribution by advising people in this place, and those who might be listening, what the history of this sad saga is. If those who are in the chamber now were listening to this situation, they would think, 'Here is a scenario where a group of Western Australians thought they could grab a few dollars to the exclusion of the wider taxpayer of Australia. How unfair is that! Why the billyo should that be happening?' And then we get the Senator Wongs and the Senator McKims of this world coming in with this confected outrage.

I was in business in Western Australia in the 1980s through to the time I came into this chamber, and the period from about 1987 to about 1993 was characterised by a Labor government led initially by Mr Brian Burke—he got out when the temperature became too hot—and then by Mr Peter Dowding, and then Ms Carmen Lawrence was left holding the baby. Those of you who are not Western Australians might vaguely remember a term that was used: WA Inc. The WA Inc era, led by Mr Brian Burke and his cronies, represented the worst corruption and the worst features of any interaction between government and industry, business and communities. His cronies were the late Mr Laurie Connell and the late Mr Alan Bond—people who, for example, when it came to a diamond mine in the north of WA, were, on the one hand, helping the vendor in selling assets to the Western Australian government through Mr Burke and who were, on the other hand, with the other hand out, supposedly acting for the people of Western Australia. They were getting a commission on the way in and on the way out.

So we come to 1988 and to the time of the late Mr Robert Holmes a Court, a corporate raider, a very successful businessman and a very successful lawyer. He owned the majority of Bell Group, Bell Resources. And who came on the scene wanting to buy Bell Group but Mr Alan Bond. So, for an inflated price, Bond Corp took over the Bell Group. This happened in 1990, and of course, by 1990, Bell Group and Bond Corp were in significant financial difficulty. So to whom did they turn? They turned to their best mates. Mr Laurie Connell had a company which had been a shirt manufacturing business in Queensland. It became supposedly his bank, an investment bank called Rothwells. If anyone in the chamber or listening might remember Rothwells, it was a men's shirt company in the 1960s. Mr Connell turned it into an investment bank, which became his personal bank. Time does not permit me, in the 24 hours I might have, to tell you the events that took place surrounding it, so I now come to 1991, when Bell is insolvent. To whom did Bond and his mates turn? 'Burkie', the architect of WA Inc. You may have heard all the confected outrage in this chamber today from Senator Wong and Senator McKim, but, until you start to understand the history of this whole event, you will not come to a comprehension of the events.

You have heard Michael Mischin, our Attorney-General in Western Australia, being besmirched. You have heard Dr Mike Nahan, the Treasurer of our state, being besmirched. There is even an attempt to draw Christian Porter into this along with the Attorney-General for cheap political gain. But understand the background to this, because what do you think Burkie did? Mr Acting Deputy President Whish-Wilson, you were probably a kid in school in Perth when all this was happening. My good colleague Senator Siewert, like me, was possibly an agricultural scientist in the service of the Department of Agriculture at that time. I was in business in Western Australia. And how ashamed do you think we all were of the rotten Western Australian Labor government and the possibility that Burke was being talked about as a future federal Labor politician and, dare I say it, even the Prime Minister of this country? Burke was rewarded by getting to be the ambassador to the Holy See and Ireland. He got into strife again for the importation of vehicles and also for a stamp collection—he could not remember whether it was Burke personal assets or the property of the Labor Party or of the poor old taxpayer of WA, so he enjoyed some hospitality at Her Majesty's pleasure during that period.

So basically a liquidator was appointed, and probably the only accurate thing Senator McKim said was that some private sector creditors were associated with the liquidation of Bell. There was the Australian Tax Office—in other words, the Australian taxpayer. But let me tell you who carried the can, and that is the point of the contribution I wish to make before I get on to the disgraceful statements from Senator McKim about Western Australia's share of GST. I will tell you who carried the can, Acting Deputy President, because you were too young. What did the Burke WA Inc. rotten WA Labor government do? They funded the litigation through a levy on compulsory third-party vehicle insurance—people like me, my family, pensioners, older people. We were all levied to the tune of $50 per vehicle per year in what became known as the rotten WA Inc. levy. Let us not forget that, in this proud moment of Senator Wong and Senator McKim getting up here and carrying on in some unctuous way.

The people of Western Australian funded the litigation that became a case between 2003 and 2006 before Justice Owen—404 sitting days. Let me remind you: Bell goes to the wall in 1991; the case comes before Justice Owen, sitting as a judge alone, so excellent was that man's commercial knowledge, between 2003 and 2006. This is the point I want everybody in this place to understand. When the WA government approached the federal government with a view to the federal government contributing to the cost of the litigation, how much did the federal government offer to contribute? Not one cent, not a penny, nothing! So it was funded by the Western Australian community. Every time we paid our insurance on our vehicle registration we paid another 50 bucks to the rotten Western Australian Labor government funded WA Insurance Commission.

When I sit in here now and listen to the nonsense I have heard here this morning about the poor old Australian tax office—I will tell you how much the tax office put into it: nothing. Why? Well, I will lay a shade of odds, not being a gambling man: they reckoned they could not win. So it left itself to us—not Brian Burke, not Peter Dowding. It was the Western Australian community of motor vehicle owners who paid the lot. And I will tell you how much it was between those years. It was in excess of $200 million, in year 2000 dollars, that the Western Australian community paid. The total cost of litigation would appear to have exceeded about $500 million, because the banks—Commonwealth, Westpac, NAB—of course were the defendants. And after 404 days, Justice Owen found in favour of the Western Australian government, found in favour of the creditors. The only one who had paid anything towards that were the WA community.

Let me tell you a little bit about how this legal case was run. It was not just a few solicitors down the road in St Georges Terrace. All the legal advice came over from the eastern states of Australia. Every Monday morning they were flown in; every Friday afternoon they were flown out—not one or two or 10 but hundreds, funded by us. Rooms were secured in the high-rise building in Perth, and nobody was allowed into them. Even the cleaning contractor was excluded from going in to that section. That is how important they regarded this as being. Why did that happen? It was because most of the legal firms in Perth were conflicted or potentially conflicted as a result of all the actions that had gone on—prosecutions and litigation associated with WA Inc. Can anybody who has ever been to a lawyer imagine the hourly costs of flying in lawyers—solicitors, barristers—from the east every week for that number of years? It was massive. Yep, we got a judgement in our favour. Fantastic, wasn't it? It was absolutely fantastic. There was money there. Do you know what the amount was going to be, Acting Deputy President Whish-Wilson? It was in the order of $2 billion. I do not reckon that was a bad return. You put in $200 million, and you might get up to $2 billion—10 to one. Go to the track on Saturday, and 10 to one is not a bad gamble. But what do you think the banks did? They appealed. It went on and on. It went to appeal.

How much do you think at this stage the Commonwealth government was going to contribute to legal costs associated with attacking and then defending the appeal? My right hand is too tired now. It is too sore, so I will not have another go with it. I will leave it to those in the gallery to tell me how much the Commonwealth was willing to contribute. It was nothing. It was not a bad deal for the Commonwealth, was it? They were due for $300 million, those mugs in the West have paid the costs, it looks like there is a judgement, but the banks are appealing it. Do you think the ATO might throw a few bickies in this time? No. Where do we get to? We get to 2015, and Treasurer Nahan is watching the money going down the gurgler in legal fees. What would you have done, Acting Deputy President Whish-Wilson—you are a person with a high degree of commercial knowledge—if you were up against the three big banks and the bickies were dwindling away? I will tell you what you would have done. You would have used every mechanism at your disposal to try to bring this event to a conclusion on behalf of your community of people who are paying for it.

That was why Treasurer Nahan brought in the legislation in 2015 to try to bring this whole sad, sordid mess—which had its genesis in the Burke Labor WA Inc era—to a close. It was so that there might be a few shekels left to be shared. I am not a party to any conversations or communication between Michael Mischin, Mike Nahan, Joe Hockey, the Queen of England, Freddie the racehorse or anybody else. I am saying to you that it appears to me that this was a very sensible course of action to try to bring this to a conclusion before there was nothing left in the bickie barrel, in which case there would not be anything for any of the creditors. These people on the other side of the chamber can carry on as much as they like about the action of the Attorney-General. He made it very clear in his statement today in terms of actions taken, by whom, when and who knew what.

I am going to finish my contribution by addressing myself to the slur that was visited upon Western Australians by Senator McKim. It is true that Western Australia today is getting back 30c of every GST dollar that we generate. Those in the Northern Territory are getting 530c per dollar; that is $13,000 for every person. Tasmanians, represented by Senator McKim—I do not know why he complains so much; he does not have a bad deal—get $4,444 per person out of the GST share. Tasmanians get almost $1.80 for every dollar they contribute. It goes down from there. South Australians get just under $4,000 per person; Queenslanders get just under $3,000 per person; the ACT gets almost $3,000 per person—Senator Seselja will be pleased to learn they get 115c per dollar—and Victoria and New South Wales get just under $1 for each dollar; they get $2,278 per person. Remember that figure of $4,444 per head that Tasmanians get? I hope Senator McKim is listening—he will not be. Western Australians get 760 bucks per person for generating 48 per cent of the nation's export wealth. We are getting $760 a head—contrasted with those in the Territory getting $13,200.

The deepest insult that Senator McKim has visited upon us is that Western Australia was a recipient state for many years. Yes, we were. I will tell Senator McKim why: in those years when manufacturing in the rustbelt states of Victoria and New South Wales was active, there was a very high level of tariff protection on manufacturing. Why was Western Australia—and to some extent South Australia—a recipient? It was because we were agricultural economies, not manufacturing. Senator McKim is right when he says that Western Australia was a recipient state—but not for the purposes of a handout, a subsidy. We were a recipient state to try to balance the high levels of tariff protection that those other states enjoyed.

I will conclude with this comment: it is hardly a Federation when one member of the family gets 30c in the dollar for the contribution it makes and other members of the family get $4 to $5. How does it play out? I will tell you how it plays out. There is only one state in Australia this year that will declare a deficit. Every other state will declare a surplus. WA's deficit is $3.9 billion. Do you know why that is important? If we were getting dollar for dollar, we would be getting $4.2 billion. We also would be in surplus, but the others would not. I will tell you about what happened in WA Inc. It is a long story, and today is only its final chapter.

1:22 pm

Photo of Murray WattMurray Watt (Queensland, Australian Labor Party) Share this | | Hansard source

I rise to speak on what is a growing scandal that is enveloping the Liberal-National Party government here in Canberra and also in Western Australia. We know that this is a scandal not just from the newspaper reports that we have been reading over the last three days; we also know that this is a true scandal from the incredible efforts the Attorney-General made in his statement to this chamber today to blame one person and one person only for this dodgy deal, and that is the former federal Treasurer, Joe Hockey. It was about 19 times that Senator Brandis named Joe Hockey as the architect of this deal, from the federal point of view. The reason that they have decided to go after Joe is that he is no longer part of this government. Their thinking is that, if they can pin the blame on a former minister—even though he is now Australia's representative to our most important ally, the US—then they can all get away with it.

We had a long, rambling contribution from Senator Back trying to give us the history of this Bell Resources case. What it ultimately got to, I think, was that he felt that the Western Australian government had done the right thing in trying to reach some sort of agreement with the federal government over the payment of taxes and to resolve litigation. I have spent a bit of time working in a state government. I do not mind state governments trying it on in their negotiations with their federal counterparts, to try to get the best deal that they can possibly get, but I do mind it when state governments enter into dodgy deals to try to avoid the payment of taxes which are legitimately owed to the Commonwealth. It is those taxes that the Commonwealth government relies on to fund health services and to fund education services. Those payments should not be subject to dodgy sweetheart deals between one leg of the Liberal Party and another. Senator Back, in his conclusion, admitted that he was not party to any discussions himself but described this deal as 'a sensible course of action'. I think quite the contrary: it is a dodgy deal that was designed to avoid the payment of taxes to the Commonwealth.

Earlier this afternoon we sat through a long statement from the Attorney-General, who tried his best to distance himself from this entire scandal that is enveloping the government. Essentially, the Attorney-General tried to characterise this deal as what might be called a sensible deal between Liberal chaps. The Liberal chaps got on the phone to each other and they had a bit of a chat. They might have had a few cucumber sandwiches to go with it and they worked it out. Rather than having this messy litigation and rather than having the potential for the Commonwealth to take the legitimate taxes that it was owed from this litigation, they came to a deal to hide a payment that was going to be made to the Commonwealth government and say that the Commonwealth would write off a debt and all would be forgiven. They could get on with being the Liberal chaps that they love to be.

This might have been a sensible deal or a sensible course of action, as Senator Back said, but let's have a look at what some other people have said about this deal that was struck between the Western Australian Liberal Party and their counterparts here in Canberra. When the Solicitor-General was finally given permission to draft advice and to act for the Australian tax office in this matter, challenging the Western Australian government's litigation, Mr Gleeson, the then Solicitor-General, said in the concluding remarks of his submission as follows:

The basic problem is that the drafter of the Bell Act has either forgotten the existence of the Tax Legislation, or decided to proceed blithely in disregard of its existence. No mechanism has been provided for in the Bell Act to allow for the continued operation or paramountcy of the Tax Legislation.

So the Solicitor-General of this country, our most senior legal representative, described the legislation that the Western Australian government had put through—the very legislation that federal Liberal ministers did not want to see challenged—as either having forgotten the existence of tax legislation or having decided to proceed blithely in disregard of its existence. I would have thought that was a pretty damning criticism of this deal.

But it is not only that. When the High Court ultimately made its decision on this legislation, it was with a seven-nil result. All seven High Court judges ruled that this Western Australian try-on legislation was invalid and inconsistent with the Commonwealth Constitution. They concluded that the Bell act was invalid in its entirety by the operation of section 109 of the Constitution, because of the inconsistency between provisions of the Bell act and provisions of the tax acts. It does not get a lot clearer than that. The High Court of Australia felt that there were absolutely no grounds whatsoever for this legislation to have been put through. It was invalid in its entirety.

One thing that we have not learnt yet from the statement by Senator Brandis, or any other statements that we have heard so far, is what Senator Brandis's department, some of the other Commonwealth departments and the Australian tax office had to say about this Western Australian legislation. We know what the Solicitor-General's view was and we know what the High Court's view was, but we have not yet heard what the departments who were in charge of collecting Commonwealth revenue thought of this blatant attempt by the Western Australian government—in cahoots with its Liberal Party mates here in Canberra—to avoid the rightful payment of taxes to the Commonwealth.

Senator Brandis did make the claim, and I see that he has repeated this claim in media comments since his statement, that he always supported the Australian tax office's intervention in this case. I really question whether that is actually true. I invite the Attorney-General to reflect on his remarks and to see whether he is still prepared to say to this Senate that he always supported the Australian tax office's intervention. That is not what we have been reading in media reports about this, going back several months now. I ask the Attorney-General to really think very hard about his own conduct in this matter and whether he actually did support the Australian tax office's intervention.

I know that this dispute, as with many disputes involving the Attorney-General, tends to get lost in a lot of legalese and jargon. Putting very simply what this is all about, ordinarily in the liquidation of a company, as occurred here with Bell Resources, there is not enough money to go around to pay all of the creditors. Under federal law, the tax office gets the first priority when it comes to distribution of the proceeds. So the tax office will always get to take the amount that it is owed before other creditors get an opportunity to share in the remaining proceeds. The consequence of this Western Australian legislation was that the tax office's right to be paid back first was relegated below the rights of other taxpayers, including arms of the Western Australian government.

You might ask: why would any federal government sign up to this kind of arrangement? We have had claims made that it was about settling litigation, but we all know the constant refrain we hear from Western Australian governments and Western Australian senators about Commonwealth-state relations about how they feel dudded by GST arrangements. Their view might change now that the Western Australian government and the Western Australian economy are not going so well, but for several years now we have been hearing the bleatings of Western Australian governments about how they are dudded by the GST arrangements.

Senator Brandis claimed to not have been aware of any discussions that occurred between the then Treasurer Joe Hockey, other ministers of this government and their Western Australian counterparts which made any connection to GST arrangements. Notice that he did not deny that that occurred. He did the old, 'I don't know about it; nothing to see here'—a bit of wilful blindness. Of course, there are many questions remaining for other current and former ministers of this government. I note that Senator Back of Western Australia, in his contribution to this debate immediately before me, did seem to spend a lot of time complaining yet again about how he feels that Western Australia is dudded when it comes to the distribution of GST moneys. I would say there is yet another link here. He was effectively arguing that the deal that was struck between the Western Australian and Commonwealth governments about the taxes owed by the Bell group of companies was okay because in some way it was compensation for the GST arrangements which he feels dud the Western Australian government.

There was another thing that the Attorney-General omitted to mention in his long statement. Over the course of the Attorney-General's statement, he found time to blame Joe Hockey about 19 times, but he did not really go near what we all know is emerging as the real background to the direction that he issued to restrain the actions of the Solicitor-General. I have been involved in this matter now for some months. The Senate committee that I was a part of reported that it was very clear that Senator Brandis had not consulted the Solicitor-General about the direction which restrained his independence and that further on a number of occasions he had misled this Senate about doing so.

What was never very clear was why the Attorney-General had felt it so necessary to make an unprecedented restriction on the independence of the Solicitor-General. Well, we are now understanding what that was all about it. I will refer to a timeline which I have prepared and which goes through some of the key events in the issuing of the direction against the Solicitor-General and this whole sorry saga that we are seeing involving the Western Australian government.

Over the course of the inquiry we held, Senator Brandis continually relied on a meeting that he had with the Solicitor-General on 30 November 2015, where he claimed to have consulted the Solicitor-General about issuing a new legal services direction. Of course, not one other person who was present at that meeting was prepared to back up Senator Brandis, but Senator Brandis stuck to his claim that he had consulted the Solicitor-General on 30 November 2015. What we do know, and everyone agrees, is that over the next few months there were a series of discussions between the Attorney-General's Department, the Solicitor-General and various other people about the process that Commonwealth ministers and departments should use when seeking legal advice from the Solicitor-General. But at no point in those few meetings taking place over a few months was there any discussion about the Attorney-General's intention to issue a direction restraining the independence of the Solicitor-General. So this meeting happened on 30 November and lots more meetings occurred.

We learnt today from the Attorney-General that he claims that he first became aware of this dodgy deal with the Western Australian government on 4 March 2016. On 8 March 2016, the tax office intervened in the litigation. Shortly after that, in early March, the Attorney-General also intervened. So months and months went by during which discussions have been underway about how the Solicitor-General should be briefed and at no point was anyone talking about the Attorney-General issuing a new direction which would restrain the independence of the Solicitor-General. Then things started getting interesting in early March 2016, when the Attorney-General said that he became aware of this dodgy deal involving the Western Australian. The High Court matter proceeded and ultimately the Western Australian legislation went down 7-0 in a ruling of the that court. On 30 March, the Attorney-General himself filed his submissions intervening in this case. Interestingly, at the Senate inquiry that we held into the legal services direction the Attorney-General's Department told us that they first became aware of any new idea about issuing a direction to restrain the Solicitor-General on 20 April 2016—not even a month after the Attorney-General had intervened in this litigation. So for months and months and months people were talking about what the process should be around briefing the Solicitor-General and no-one was talking about issuing any sort of a direction to restrain the Solicitor-General. Then, out of nowhere, on 20 April the Attorney-General's Department first became aware of this idea about a new direction. Of course, shortly after that, on 4 May 2016, the Attorney-General issued that direction.

Senator Brandis in here before, responding to Senator Wong, said there was no connection whatsoever between the dodgy deal with the Western Australian government, him finding about that and him issuing a direction to the Solicitor-General. He says that they are not connected at all. It is kind of like in Muriel's Wedding, which I know Senator McAllister is familiar with as well, and the mayor of Porpoise Spit happens to be in a Chinese restaurant and who should walk in? Deidre Chambers, what a coincidence! George Brandis is now emulating the mayor of Porpoise Spit, by saying we never were talking about this legal services direction for months and months and months, all of a sudden I became aware of a dodgy deal with the Western Australian government and, what a coincidence, I might go out there and issue an unprecedented direction to restrain the independence of the Solicitor-General to make sure that in the future he can never, ever be issue or be requested to issue independent legal advice by a tax office without going through me.

Further reports emerged over the weekend about how unhappy the Prime Minister is with Senator Brandis. We now know from one of Senator Brandis's own senior cabinet colleagues that the Prime Minister is infuriated with him and cannot wait to bring on a reshuffle. We all know that is going to happen by Friday. The only question is whether it is going to happen any sooner than that. In a desperate attempt to cling onto his own job and deflect blame, Senator Brandis decided to throw the former Treasurer Joe Hockey under a bus. Over the course of half an hour, he blamed Joe Hockey 19 times for this dodgy deal, suggesting it was nothing to do with him whatsoever. He named Joe Hockey so many times that I reckon Joe Hockey could hear that all the way across the Pacific over in Washington DC. Right about now, it is about 9.30 pm in Washington DC and poor old Joe was just trying to have a nice, quiet presleep cigar on his own. Well, he is choking on that cigar as he is being thrown under the bus by one of his own colleagues Senator Brandis.

They all think that if they can just pin the blame on Senator Brandis the rest of them can get away with it. Well, unfortunately, that is not going to happen. We know that there are far more people involved in this than just Senator Brandis and just former Treasurer Joe Hockey. We know that Christian Porter, the senior Western Australian minister, was involved in this. The Western Australian government has said so and Senator Brandis had said so; they have said that Christian Porter was involved in this. What exactly was his role?

What was the role of Senator Cormann? He has tried to pretend that he has had nothing to do with it. Do we seriously believe that a finance minister, who is from the state of Western Australia, knows nothing about a deal with the Western Australian Liberal Party that will cost the Commonwealth taxpayer $300 million—really? Do we really believe that he would know nothing about that? We need to know more about what Senator Cormann knew. We need to know more about what Kelly O'Dwyer, the Assistant Treasurer, knew about this arrangement. We really need to know what the former Assistant Treasurer Josh Frydenberg knew about it. Was he involved in discussions with the Western Australian government, and his cabinet colleagues over here, about this dodgy deal?

But the person I most want to know about, as to what he knew about this, is former Prime Minister Tony Abbott. You cannot tell me that a deal that was going to deprive the Commonwealth taxpayers of $300 million did not go through some version of an expenditure review committee that Prime Minister Abbott had in his cabinet at that point in time. What did Prime Minister Abbott know about this? Did he approved this deal or did people go around his back? I think we know what the answer to that is.

This is just the beginning of this saga. We are only just starting to learn what went on here. It is very clear that Senator Brandis was in this up to his neck, along with the former Treasurer Joe Hockey and along with the log list of current and former ministers. We are only beginning to hear the beginning of this. This is going to stretch on over the course of this week and probably into the new year while we get to the bottom of it.

Question agreed to.