GUNNING COMMITTEE OF INQUIRY INTO FAIR TRADING BOARDS AND COMMITTEES MR I.R. GUNNING, Chairman DR D. NEWMAN, Member MR D. BLIGHT, Member TRANSCRIPT OF PROCEEDINGS AT PERTH ON MONDAY, 12 JUNE 2000 Transcription by - SPARK AND CANNON PTY LTD 3rd Floor International House 26 St Georges Terrace PERTH WA 6000 Telephone: 9325-4577 1/1/rmo 1 12/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. If Mrs Bunbury could be recalled. BUNBURY, JENNY: THE CHAIRMAN: You're still under oath, Mrs Bunbury. MR CHANEY: Mrs Bunbury, on Thursday we had got as far as the final section of your statement dealing with the matter of Avey and A1 Real Estate. Mr Chairman, before I proceed in relation to this issue, this is a matter in respect of which Mr Wallace gave some evidence and in the interests of preserving confidentiality you will recall that I had him identify the file he was referring to by written note. Despite that it appeared in the paper the next day who it was that was being referred to and I think that was as a result of the minister tabling either at that point or subsequently correspondence in the House which identified the matter in respect of which the evidence had been given. I'm in your hands really as to whether we seek for the purposes of this inquiry to avoid reference to names of the complainants or whether in all the circumstances that's now a pointless exercise. I take the view that really I think we're at that stage, that no purpose would be served by us studiously avoiding the use of the names of those involved. THE CHAIRMAN: If the names are to be made public then proceed. MR CHANEY: Thank you. Mrs Bunbury, can I ask you to have a look at this bundle of documents please? I think you're aware that Mr Wallace when he gave his evidence made an assertion that he had been - - - THE CHAIRMAN: Mr Chaney, do you have the page number of Mr Wallace's evidence? MR CHANEY: Yes, page - well, it's a bit misleading. I obtained an advance copy and I don't know what you have, Mr Chairman. It's at page 25 of the transcript of Mr Wallace's evidence. I think that will have been renumbered when the transcript catches up, so to speak. It has a continuous numbering system. The copy from which I'm working has it at page 25 of his evidence. THE CHAIRMAN: What's the name of the file? 1/2/rmo 2 J.A. BUNBURY XN 12/6/00

MR CHANEY: Avey and Gough, A1 Realty. The evidence of Mr Wallace was - he said:

In fact, one matter I was - where Doug Shave's office approached us and I was told to stop an investigation.

THE CHAIRMAN: Yes, I remember it well. I know he's in the book but I don't know what page he's on. MR CHANEY: Do you have the running numbers? THE CHAIRMAN: Yes - well, I would have thought, naturally. MR CHANEY: Yes. My copy, I don't think it caught up yet, but if you go at 25, to whatever the first page of his - - - THE CHAIRMAN: What's the date of this file? MR CHANEY: The file? THE CHAIRMAN: Yes. MR CHANEY: The transcript? The transcript was 29 May. THE CHAIRMAN: It's got here, exhibit 88. Is that it? Yes, I'm told it is. So I have it here. I have the page. It's page 28 of the running transcript. This is the - - - MR CHANEY: Yes, that's the sheet of paper, the handwritten note, yes. THE CHAIRMAN: Yes. MR CHANEY: Now, Mrs Bunbury, you're aware of that evidence given by Mr Wallace and the fact that the reference to having been stopped on the inquiry was done by way of a memorandum from you to Mr Wallace. I think you have had the opportunity of going through the relevant file and reviewing that file and refreshing your memory as to the events which occurred. Is that correct?---That's correct, yes. I want to take you through this bundle of documents. The first is a facsimile to Dr Martin Forrest of 24 November 93. Who was or is Dr Martin Forrest and what was his position at that time?---Dr Forrest at the time was the executive director of the Ministry of Fair Trading. I'm just trying to think, was it Fair Trading then or Consumer Affairs? I think it was just about when it changed, just about 2 weeks after it changed, I think, to Fair Trading. 1/3/rmo 3 J.A. BUNBURY XN 12/6/00

It's referred to as Fair Trading in the - - -?---Yes. THE CHAIRMAN: He's referred to as, "The Commissioner, Ministry for Fair Trading"?---Yes, so it must have changed about 2 weeks before. Dr Forrest was the executive director. The facsimile was addressed to him and he was also the commissioner for Fair Trading. He held both appointments. MR CHANEY: That facsimile bears some handwriting, "Will you please provide advice on this matter as soon as possible." Can you explain whose handwriting that is and what it's about?---Yes, that's my handwriting, my initials at the bottom, 24th of the 11th. The dark black ink is my handwriting. The facsimile would have come in to Dr Forrest's office. I can't recall whether Dr Forrest was actually in the office at the time. I don't recall any personal discussion with him on this. My recollection, such as it is, is probably that the facsimile came into his office, his personal assistant brought it down to me as I was the director of housing and real estate and normally matters of that nature would be referred to me and on that basis I would have asked for advice from Will Morgan who is the manager of real estate and hence that handwritten note. The nature of the complaint is in the attachment which is a letter from A1 Real Estate, Mr Gough, to Dr Forrest, saying:

I wish to strongly register a complaint against senior investigator Mr Gary Wallace of your department and that the complaint is slanderous and unfounded?

---That's correct, yes, and that, to my recollection, was the first time that I had heard of A1 Real Estate and this matter. Is that the first involvement you had in relation to the matter at all?---Absolutely the first involvement. I don't think I had heard of the company before then, as far as I'm aware. The next document in the pile is a handwritten note. The date on that is obscured. It should be 24 November 93. Do you know whose handwriting that is?---Yes, that's Will Morgan's handwriting, I think. THE CHAIRMAN: Excuse me, Mr Chaney, the bottom of what appears to be a signature on that added note has quite a clear date, 25/11/93?---No, I think - - - MR CHANEY: Yes?---I understand that Mr Chaney is referring still to the first sheet of paper in the pile. Is that - Mr Chaney? 1/4/rmo 4 J.A. BUNBURY XN 12/6/00

The handwritten note, yes?---All right. My understanding is you're still referring to this? No? No, I'm sorry, I was moving through to the next one. THE CHAIRMAN: No, we have progressed - - -?---I beg your pardon. You're referring to the document which has got a 23 at the top? MR CHANEY: Yes. Could we go back though - I'm sorry, you have drawn my attention to that handwriting underneath the note to Will?---Yes. That's Mr Morgan's writing as well?---I think that's Mr Morgan's writing. There is, as you see, no signature. I would expect that it would be given that I had given him the fax and that would have been in accordance with what I would have asked him to do. All right. Can you read that note?---"Phone A1 and advise that copy of letter needs to be given to - - -" "Investigating"?---"Investigating officer," sorry - "investigating officer - - -" THE CHAIRMAN: "To report"?---"- - - to report on your complaint," and the second note is, "Legal position needs to be clarified what A1" - I can't read - Mr Chaney, can you help me out there? "What A1" - can't read the last two words. I think we did decipher them before. No, I can't help you out?---Anyway - - - Anyway, all right. Well, that, you think is Mr Morgan's writing?---I think that would be Mr Morgan's writing. I would expect so, yes. Then we go over the page to the document which has the date as the chairman has pointed out, 25 November 93, at the foot of it?---Yes. Whose handwriting is that?---That's Will Morgan's writing. Right, and again to assist us so that we can all understand - be at one mind as to what it all says, can you read the first entry?---The date is obscured but I think it's 24/11/93, "Spoke to Mr Gough and advised I would get information and phone back." I'm not sure if that's "I". Is it "I"? It looks like "I". The next entry is also a date which is obscured in the photocopy:

I spoke to Mr Gough, advised him that investigation is continuing. Investigation officer will contact him as soon as possible.

1/5/rmo 5 J.A. BUNBURY XN 12/6/00

New paragraph:

Also advised Mr Gough to seek independent legal advice with regard to section 28 of the Real Estate and Business Agents Act. Did not recommend he close down as he would need legal advice on that matter.

That's signed Will Morgan, 25/11/93. There is then a direction to make investigation or inquiry. That's a document with which we're not familiar. Without looking at this specific document, what's the nature of the document?---The document is a form document signed by Mr Rossi, the registrar of the Real Estate and Business Agents Supervisory Board and this form was normally sought by investigators, investigating officers, who wished to undertake investigation into an alleged breach of the act and Mr Rossi's signature would normally be sought before any significant inquiries took place. That is dated 25 November. Obviously because A1 and Mr Gough had complained earlier than that - it looks like 23 November that he had complained about an investigation already under way. What's the explanation for steps having been taken in the investigation prior to the direction being given pursuant to the act?---Well, at this distance in time I can't give you a chapter and verse explanation as to why that had taken place. When I refreshed my view of the file last week I was, I must admit, quite surprised to see that investigations had taken place before the registrar issued a direction to investigate. You would probably need to ask Mr Rossi about that. I think in some circumstances it was usual for investigators to just make some preliminary inquiries in order to determine whether there was, as it were, reason for an investigation. Normally such a direction would have been issued at the beginning of the investigation. Can I just make another comment? Sorry, yes?---Mr Chairman, I think the issue of who told who to do what is really part of the difficulty of this dual relationship between the ministry and the boards as to what relationship the registrar has, what the ministry had and what the board had in matters of this nature. The investigating officers - the investigators saw themselves really as agents of the board but the board because it is a supervisory body and had the powers to have inquiries really couldn't acquaint itself with details of the inquiry. So there was always a matter of some - some lack of clarity, I guess, as to the extent to which the investigators were directed by the registrar or by their superior officers within the ministry. Was that something which was taken on board by you as a director, to try and seek clarification?---I think it was 1/6/rmo 6 J.A. BUNBURY XN 12/6/00

a matter we discussed from time to time. I think we took it generally that the investigators did need to answer in a general sense to the directors and the executive director and the commissioner. When it came to sort of day-to-day activities in relation to specific cases, I think the issue remained somewhat cloudy. THE CHAIRMAN: So how long had that been going on?---I think it was a matter of always trying to work within the legislation that we had. So it had been going on all the time?---I think it was always an undercurrent of what was there. We had to work with the legislation. The ministry certainly did see itself as - the employees were the employees of the ministry, but there was certainly - the board had a role in this and under the act the investigators were investigators of the board. So you couldn't get away from, I guess, the slight confusion of the legislation. Well, all right, slight confusion, but was any attempt made to clear up the slight confusion at any time at a superior level, really top level?---I'm not sure that it was ever really an issue that we actually attempted to make amendments to the act in relation to, if that's your question, I guess, to clarify this. Thank you. MR CHANEY: It's another example, is it, of the fact really the finance brokers side of things was a small portion of everybody's commitment in the department and it simply didn't reach the top of the pile in terms of requiring attention for various legislative amendment? ---I would like to say yes to your question, but to be honest I think the issue was not just - the issue that I have referred to wasn't just related to the Finance Brokers Board. I think it was also related to the Real Estate Board, which is what we're talking about this morning, because this matter is a real estate matter. It has got nothing to do with finance brokers. Yes?---So I think the issue really was about the boards in general, not a particular board. DR NEWMAN: Ms Bunbury, did any of this problem arise from the fact that there seems to have been some fairly substantive changes over a period of time in people with the responsibility for these various areas, including the director level?---No, I don't think that had a great bearing on the issue. THE CHAIRMAN: Did any of the investigators ever express frustration about, "Who am I answering to and why can't I get on with it"?---Yes, I think it would be fair to say that the investigators were concerned from time to time 1/7/rmo 7 J.A. BUNBURY XN 12/6/00

about being directed to do something which they regarded as part of their relationship with the board, and not just investigators. I think it was also true of administrative staff for the board. There was a feeling of - well, whether you work for the board or work for the ministry, that was part of life, I think. Who paid their salary?---The ministry - government. Of all the - - -?---Government. There were no employees of - at this time, no employees of any of the boards. DR NEWMAN: In November 1993, at that stage the changes with the real estate fidelity funding hadn't been implemented so far as payment - - -?---No, no, we're talking - I mean, that didn't happen until July 1996 and that's when the new arrangements came into place and that was a whole different set of circumstances in which the board - even after that the board didn't employ staff, it had a contract with the ministry for the supply of services. MR CHANEY: Moving through the pile of documents, the next one is a facsimile. It appears to be of 20 November 93. It's addressed to a Bill Martin. Are you able to tell the committee about that document?---The person it's addressed to - the person is actually Bill Marmion. Bill Marmion was at that time the - I'm not sure what his title was, but it was something like what we would now call the chief of staff in the minister's office - principal private secretary, I think, at that time, in Minister Foss's office. Minister Foss at the time was the minister for fair trading, and the document was or is a facsimile followed by - I guess it's a memorandum from A1 Real Estate and it's asking the minister's office to assist and pass this document on. Perhaps if I just read it:

Further to our phone conversation, please find herewith my statement as ordered by Mr Wallace. Would you please pass it on to Mr Wallace and advise that I will open my office for him between 4.00 and 5 pm today as he has a warrant to search it. Mr Wallace has taken it on himself to harass me to the point of which aren't without foundation. I am unable to deal with him. I would appreciate your assistance.

So that has been sent to the minister's office. Who was the minister then?---Mr Foss. Attached to it is a statement which we needn't go into in much detail, but simply explaining the business relationship between Mr Avey and Mr Gough and its history and then there is a facsimile cover sheet from the office 1/8/rmo 8 J.A. BUNBURY XN 12/6/00

of Mr Gough to Alan Tenger. What was Mr Tenger's position at that stage?---Well, I think that the fact that it's written to Mr Tenger is probably - you will have to check the ministry records, Mr Chaney, but I think between the 23rd and the 26th is probably the time at which Dr Martin Forrest left the department to take up a secondment at the Health Department and Mr Tenger then became acting executive director and acting commissioner of consumer affairs. I can think of no other reason why Mr Tenger would have received the facsimile from Bill Marmion. In any event it obviously encloses that facsimile you have just referred to from A1?---"Forwarded to you to forward to Mr Wallace. Have told Mr Gough not to deal through his office in future, " and then there's a handwritten note at the back bottom which says, "Did you introduce yourself and Colin?" THE CHAIRMAN: There's a couple of notes up the top right-hand corner too?---There's a note for me, "Will, for Gary," and JB is my initials, 12.45, 29th of the 11th, and then there's an unsigned note there which says, "Advise Bill Marmion that matter under investigation and refer to - office." Mr Chaney, can you read the word above that? I can't read it, I'm sorry. To something "office". MR CHANEY: I'm afraid I can't. THE CHAIRMAN: Or "officer". "Investigating officer"? ---"Investigating officer". I beg your pardon, right - - - MR CHANEY: So at this stage - sorry, go on?---Yes, go on. At this stage the communication comes from the minister's office saying, "Here's a complaint"?---Yes. It records that Mr Gough has been told not to deal through "our office" - that's the minister's office, is it - in future?---Yes. And the investigation is continuing?---Yes. There was nothing unusual about that. That would have been normal minister's office practice on a matter of this kind. Normal and appropriate, would you - - -?---Normal and appropriate. The next document is a report to Mr Morgan dated 1 December. It's from Mr Wallace and that's just giving Mr Morgan an update in response to his inquiries, I take it?---Yes, and giving Mr Wallace's view that the investigation needs to continue. 1/9/rmo 9 J.A. BUNBURY XN 12/6/00

It says: In my submission there's sufficient initial evidence to conduct further inquiries for a breach of section 26 of the Real Estate and Business Agents Act?

---Yes.

Then on 7 December a letter from Fair Trading - in fact from Mr Wallace to Mr Gough recording the fact that there was an attendance by Mr Gough at the minister's office on 7 December - sorry, at the ministry's office, and suggesting certain changes are going to be made, change in the proprietorship of the business name and business cards and letterheads being acceptable. "Upon receipt of photocopies of the bank and corporate affairs changes I will close the ministry file," and there is a handwritten note which is a little difficult to decipher?---Yes. It says, "Gary, I will forward this file to Jenny Bunbury - - - "When we have confirmation," I think?---"When we have confirmation - - -" "On the above matters"?---Yes. Do you know whose writing that is?---It would be Will's - Will Morgan's. At that stage it seems the matter was resolved substantially, subject to Gough doing certain things. Is that how you read that, Mrs Bunbury?---Yes. There is then a letter 10 December 93, again from Mr Gough. I simply draw your attention to the second paragraph:

Mr Avey is no longer employed with A1 Real Estate. He has refused to offer to transfer ownership in the name of A1 Real Estate to myself -

and again complaining about the effect of the inquiry on his business, second-last paragraph. We then have another handwritten note at the bottom of that document dated 13 December. Can you tell us what that says?---I'm finding it a little hard to decipher that one. It's 13th of the 12th, 11.10, "Phoned and asked if Avey," something, "calling not here. Left message for Gough to phone." I'm not sure about that one. I find that rather hard to read. Do you know whose writing it is?---Well, it says Mr Morgan's writing, but I don't know. Could be Mr Wallace's. I'm not sure about that one. 1/10/rmo 10 J.A. BUNBURY XN 12/6/00

That letter has been copied, or so it records at the bottom, to Mr Shave MLA, Mr Foss - presumably - yes, just to those two, and we have a further letter from Mr Wallace to Mr Gough on 13 December 93?---Yes. Which records in the second paragraph:

The Real Estate and Business Agents Supervisory Board's records have been amended to show Mr Avey is no longer employed at A1 Real Estate. I will continue with my investigations in respect of the partnership and section 28 of the Real Estate and Business Agents Act.

So at that stage it seems that some investigations were continuing notwithstanding that the matter had earlier seemed to be resolved. Do you understand why that was? ---Not entirely, no. THE CHAIRMAN: Could it be because Mr Gough wrote to Mr Wallace on 10 December, that previous page, and said, "It's going to cost a fortune and I would have to close business if I had to change all my stationery and name," etcetera, etcetera. MR CHANEY: Yes?---Yes, and I think it was also because it was proving difficult to transfer the business name only to part of the - - - Then on 14 December there is a letter from Mr Shave, member for Melville. At that stage do you know whether Mr Shave was a minister?---No, I'm not sure whether he was a minister at this stage. There was a period when Mr Shave was - I think when administration first came in he was minister for housing, I think. There was a period when he wasn't in the ministry and I'm not sure at this stage - I haven't researched that - whether this was a time when he was a minister or not. He certainly didn't write in his capacity as a minister if he was one, he wrote as a member. He says:

I'm writing on behalf of my constituent Mr Avey. Apparently there is some problem regarding Mr Avey being struck from the board's records as a representative. As you will see from the enclosed letter, he is fully aware of his obligations in this regard under section 51 and therefore would be grateful if you could take the appropriate action on Mr Avey's behalf to allow him time to renegotiate his employment with Mr Gough. Your help and assistance in this matter would be appreciated.

1/11/rmo 11 J.A. BUNBURY XN 12/6/00

Now, is a letter from a private member asking for intervention on behalf of a constituent unusual?---No, not particularly unusual in the way that it was an inquiry asking, you know, something - no, I don't think it was particularly unusual. Are there protocols in place in relation to the way that members of parliament approach ministry officers in relation to matters that might arise?---Yes, approach, in terms of writing letters, I think it was acceptable that if a member of parliament wrote to the ministry he would receive a written reply. Is that as far as the protocol goes? Are there rules about through whom approaches should be made or correspondence should be passed?---Certainly it would be through the executive director or the commissioner if a member wrote or had involvement with the ministry. So is that a practice that - - -?---Look, I'm not - things have changed since 1993, and I know at a later date there were all kinds of protocols between minister's office were put in place, but with regard to members of parliament, I think it has always been accepted that there is not communication between individual officers and members of parliament. If members of parliament wish to seek advice they would write either through the minister or to the executive director seeking that information, normally. That was the case in 1993?---Yes, I would say. So in that sense then is this letter unusual because it doesn't seem to have gone through that - - -?---Well, the letter was written to the acting commissioner. It wasn't unusual in that sense. No, but not through the minister's office?---No, I said either through the minister's office or direct to the executive director. I see?---In this case this letter went to the executive director, and that would have been - - - So that therefore is in keeping with normal practice at that time?--- - - - in keeping with normal practice if you received a letter that you would respond in that way.

There's some handwritten annotations at the top of that letter?---Yes, the handwritten annotations - there's a box which says, "Noted by the executive director," and then it's given a number and it's allocated to DHRE, which was myself, director of housing and real estate, and it says, "Draft response, please, by 23rd of the 12th," and that's Mr Tenger's writing, the acting executive director at the time. There's also a 1/12/rmo 12 J.A. BUNBURY XN 12/6/00

handwritten note from myself which says, "Will, please draft response." There's an attachment to that letter which is the next page to the letter, also of 14 December, which appears to have been enclosed with the letter from Mr Shave because of the reference to, "As you will see from the enclosed letter he is fully aware of his obligations in this regard," and in the third paragraph that assertion is made by Mr Avey in the letter?---Yes. It complains that Mr Wallace had stated that Mr Avey was no longer working for Mr Gough so he had amended the board records and this letter says, "I did not" - that's Mr Avey did not - "nor do I authorise Mr Wallace to make this change on my behalf," and he says he's currently renegotiating his employment with the licensee, Mr Gough." So it seems inconsistent with the advice Mr Gough had earlier given, Mr Avey was no longer acting. Is that the case, no longer working for him?---Correct. All right. If we move through, there is then a response to Mr Shave. Was that the response drafted by Mr Morgan for you in relation to the earlier correspondence from Mr Shave?---To the best of my recollection, yes. What was the state of the inquiry or investigation at that stage as a result of - or what was the state of the investigation?---At that stage the matter was still under investigation because Mr Gough had failed to satisfy Mr Wallace that - he had failed to make the changes that had been requested and Mr Wallace had advised Mr Gough that he was continuing his investigations. If we go through to a further letter from Mr Shave on 10 February 94, and writing on behalf of Mr Avey again. It refers to a meeting arranged between Mr Gough, Avey and the registrar of the Real Estate Board to discuss the process required to rearrange the business affairs in a legally acceptable matter:

The principals have been alerted by a client the investigations are still ongoing as advised in the enclosed letters. Your help and assistance in bringing this matter to a satisfactory conclusion as soon as possible would be greatly appreciated.

Again, is there anything unusual about that correspondence?---No, I didn't find anything unusual about it. Given the previous interest of Mr Shave, I didn't think it was unusual. This letter was actually written to yet a third acting executive director. By this time Dr Chris Whittaker had taken over as acting executive director and the letter was actually addressed to him. 1/13/rmo 13 J.A. BUNBURY XN 12/6/00

Do you know whether a meeting - there's reference to the meeting being arranged. That's a reference to the earlier letter on the previous page where it's said:

On the basis of information to date it appears -

this is the response to Mr Shave - that Mr Avey and Mr Gough need to rearrange their business affairs in terms which are legally acceptable under the act. To assist in this process the registrar of the Real Estate and Business Agents Board has agreed to meet Mr Avey and Mr Gough together. The registrar has already conveyed this offer to Mr Avey and Mr Gough.

So presumably that is the reference to a meeting being arranged in December?---Yes. Do you know whether that meeting actually took place in December?---I don't know. I'm a little confused. There were meetings that took place and some that didn't and just asking me that, I'm not sure that one did take place, no.

Again, handwritten notes on that letter?---The handwritten notes are from Chris Whittaker:

Jenny Bunbury, please background me on this as soon as possible. Thanks, C. Whittaker. 13/2/94.

And a note from me: W. Morgan, as discussed, please provide by COB 15th of the 2nd at the latest.

There is also a handwritten note - the letter says that it has provided enclosed letters and there's a note from Chris Whittaker saying that the letters were not enclosed. At the same time, it seems, as the letter of 10 February 94, Mr Gough wrote direct to Mr Whittaker, again complaining about Mr Wallace's attitude and threatening in the final paragraph to refer the matter to the state ombudsman, supply copies of the complaint to the premier and the minister for fair trading. So that letter presumably was received around about the same time as the letter from Mr Shave. Is that your assumption?---It would seem, yes. There's then some briefing notes for Mr Whittaker prepared by Mr Wallace. Is that - - -?---That's correct. 1/14/rmo 14 J.A. BUNBURY XN 12/6/00

It says on the second page inquiries were suspended during December and January while he was on annual leave and saying he's now recommenced investigations:

Understandably, witnesses do not wish to become involved.

Do you know what that's a reference to?---Well, I assume he's saying that, "People who might be able to give me information don't want to talk," in simple terms. That's what I assume it says, but I don't know otherwise than that. Right, and then he complains that Mr Avey's letter is libellous. If we move to a letter then from Mr Whittaker to Mr Gough and Avey of 17 February. Was that a letter that you had any involvement in the preparation of?---I probably would have. Again, I can't recall under oath that I did or didn't. It looks like the kind of style of letter that I would have written or would have had a hand in. The reference at the bottom on the second page of the letter has actually got Will Morgan's initials on it, which suggests that it was probably generated by him. I might well have had some hand in the drafting of it, but I can't recall. Right?---It would be unusual that - I mean, certainly no letter would have gone to Chris Whittaker for signature, provided that I was there at the time, without going through me, because that was the normal procedure. The letter says:

Mr Wallace is under a directive to investigate the trading practices. Prima facie evidence indicates that A1 Realty continues to trade in contravention of section 26 of the act.

Further down: The ministry's principal aim in this matter has been to ensure compliance with the statutory requirements. That may be a technical issue. Implications under the act may well be significant. Once I am satisfied there is adequate compliance with the act the file will be closed. Investigations were put in hold in December 93 to give you the opportunity to discuss the abovementioned issued with the registrar. I have now instructed Mr Wallace to suspend this investigation for a further short period.

Do you know what under lay that instruction? That's at the foot of the first page, that paragraph I was just reading, sorry?---I would say - and this is really from my recent reviewing of the files, because I can't recall 1/15/rmo 15 J.A. BUNBURY XN 12/6/00

the original sequence of events - that in December 1993, as we have already understood, Mr Wallace went on leave. At the same time Mr Tenger for a while was acting executive director and there is a reference - there is no reference in the ministry's files but there is a reference in the letter to Chris Whittaker from Gough and Avey of 10 February referring to a telephone conversation between Mr Tenger and Gough or Avey, I'm not sure which - probably Gough. It said Mr Tenger had a conversation with him and Mr Tenger is saying that Mr Wallace is no longer involved. Now, that was probably a bit of the background to writing that the investigations were put on hold, because Mr Wallace was on leave in any event, and also there were the discussions that were supposed to be taken with the registrar. For whatever reason, I don't know why, those didn't take place, and it would have been for that reason that we would have said we obviously needed a bit more time to get this matter worked out if we possibly can without taking the investigation any further. So I think that would have been the reason for instructing Mr Wallace to suspend the investigation for a further short period, but we also made it clear in that letter that should the matters remain unresolved the investigation would be opened with a view to prosecution. So we made it clear that it was subject to the matter being resolved between the parties and the meeting with the registrar taking place. Right, and calls on Mr Gough to urgently take up the registrar's invitation to meet?---Yes. The next development is a letter of 21 February 94, again from Mr Whittaker. That bears a different document reference number at the foot of the signature. Does that suggest some different genesis of that document from the normal course that we discussed earlier?---Well, it probably does in the technical sense that the one we saw before was probably actually typed by Will Morgan himself and the WM would have been his own reference number. This is really taking me back now, but from memory, we had a directory for temp, which was where the keyboard operators did a lot of their work and that would suggest that that was probably done by a typist, but I can't tell you who - you know, exactly how and why. Who would have dictated it or written it out?---Probably like that, yes. Just like the previous letter, it was on the executive director's letterhead. He had a different letterhead from the rest of the ministry, so it definitely went through Chris Whittaker's office and was personally signed by him. That advises - - -?---That advises Mr Gough and Mr Avey that the meeting occurred with the registrar on - that a meeting occurred with the registrar and the meeting 1/16/rmo 16 J.A. BUNBURY XN 12/6/00

raised some legal issues as a result of which the registrar is now seeking legal advice. The letter then goes on to say:

You refer in your fax to legal advice which you have received. It will assist the ministry in its consideration of these matters if you are able to provide us with a written copy of that advice.

The third and last paragraph states: Until the registrar receives advice on the matters which have been raised, the ministry will not be progressing the investigation of this matter. As soon as Mr Rossi has the legal opinion he will be contacting you further and I will contact you again shortly thereafter.

All right. So we then have a memorandum from Mr Rossi to the senior legal officer at the ministry seeking legal advice in relation to the matter. I don't think we need dwell on that. That's the next document of its nature, I take it?---I'm sorry? That's simply Mr Rossi seeking the advice that he foreshadowed?---That's Mr Rossi seeking advice from the legal officer, yes. Yes. It's an undated document?---It is an undated document. Are you able to put any date on it?---Well, I would say it was around about - it must have been on or before 21 February, or around about that date, which is the date on which Chris Whittaker wrote, because his advice says that the registrar is now seeking legal advice. So it would have been around about that date. Then there's a letter, 1 March 94, from Mr Whittaker to Mr Shave, replying to the letter of 10 February?---Sorry, I'm not sure whether I - the document after the advice - right, okay. Sorry, yes, I have got it now. Yes, there's a couple of attachments to that letter? ---Yes, there's a couple of attachments, right. Yes, that's providing Mr Shave with an update. Again, that's usual practice, I take it, to respond to a minister?---Yes, that would be usual practice. MR McKERRACHER: Not the minister. MR CHANEY: Sorry, to the member, and it says:

1/17/rmo 17 J.A. BUNBURY XN 12/6/00

The ministry's principal aim remains to resolve this matter so that Mr Avey and Mr Gough's business affairs comply with licensing requirements under the act -

promises to keep him advised and advises the minister of the fact that the investigation was being put - did I say the "minister" again? Advises the member that the investigation has been put on hold pending the obtaining of legal advice. Can I ask you, just going back a step, this sort of negotiation and discussion going on between the subjects of complaint and the ministry about the problem and putting the thing on hold while legal advice was obtained, is there anything unusual or untoward in your view in relation to those events?---No, I don't think there was anything unusual or untoward about those events. The ministry was always very conscious of the fact that these kinds of issues affected people's livelihood and their business and it was absolutely vital that while we wished to uphold the provisions of the act and ensure that the public was protected, at the same time we wanted to make it, you know - well, satisfy ourselves that a real estate agent or people in any business really were not being - that it was a valid issue to pursue, I suppose I would say. Did Mr Shave's intervention in this matter have any bearing on the course of the inquiry and investigation, or the course of the investigation?---Well, absolutely - I would say definitely not. The decision to put the matter on hold was made on the basis that we were seeking to resolve it without recourse to furthering the investigation, to actually - you know, to resolve it to the manner of all parties. We would have looked to do that whether we had had a letter from a politician or not. Again, it was a matter of being fair to all parties and if we thought there was a need for legal advice then we would certainly seek it. The next document in the bundle is a memorandum from you to Gary Wallace of 11 March. Can you tell the committee what gave rise to you producing this memorandum?---Well, I can tell the committee what I can recall would have given rise to it, and you will appreciate after sort of 6 years I can't remember all the ins and outs of this and this matter went on for a long time. It would appear that when Mr Wallace came back from leave he undertook some more activity in relation to this matter, and we have already seen from the correspondence that Avey and Gough had suggested this, and as a result of that and because of the action that was in place, the undertaking was given that investigation would be suspended until the legal matters, etcetera, had been resolved. I can't recall exactly what gave rise to actually writing this memo except that it was clear, as I said, from the 1/18/rmo 18 J.A. BUNBURY XN 12/6/00

previous correspondence, and there was at least a suggestion that Mr Wallace had been undertaking further inquiries and we would have been very concerned to make it absolutely clear that the direction or the undertaking we had given to Mr Gough to hold the investigation until legal advice was being maintained. We would have wanted to ensure should there be questions at a later date, that we had made it clear to the investigator in case there should be any ambiguity as to whether we had on the one hand said that it was on hold but on the other hand allowed the investigation to somehow go ahead. Did the fact that you had received an inquiry from a politician's office about this particular matter have any bearing on the zeal with which you wanted to ensure this didn't proceed?---No, it had absolutely no bearing as far as I can (1) recall and (2) looking at the files again, there would seem to be no connection between the fact that we happened to have received a letter from a politician on that and this memorandum. The connection to this memorandum was the fact that Chris Whittaker had written a letter saying that the investigation was on hold and that various correspondence had been sent to Gough making it clear that the investigation was on hold until legal advice had been received. That was the trigger for writing this memorandum and that alone, because the ministry's credibility was at stake over this. It would also have been important if the matter had later been investigated by anybody else - for example, the ombudsman - to make it clear where the ministry's position was in this matter. You therefore in this memo gave an instruction that no action was to be taken as a result of any information during inquiries carried out on 1 March 94?---Yes. What was the significance of inquiries on 1 March 94? ---Well, I'm not sure what the inquiries on this - it would appear to be that some action had been taken by Mr Wallace on 1 March, but there isn't, as I can see, anything on the file to make it clear what actually happened on 1 March.

Then there's a further direction that no action of any kind which relates to this inquiry is to be taken by yourself or any officer under your supervision without his written permission?---Yes, and that was the way we ran things, in that the ministry certainly regarded itself as having the authority and the management of the investigating officers in this way. I take it - and I appreciate we're talking here about real estate matters, not finance matters, but was the board involved in this process at all?---No, the normal practice was - and I think we sort of touched on this matter - was for the board not to be involved in these 1/19/rmo 19 J.A. BUNBURY XN 12/6/00

practices, because the board at the end of the day might well have to hold an inquiry and it was important that the board not have prior knowledge of the matter in order to be able to make its mind up on the evidence before it. So the general situation was that the board received - or at least it did after we established the relationships with the boards - 1994, 1995. The board received regular updates on the fact that investigations were proceeding but it didn't receive any details about those investigations. That was normal practice and that would apply to all the Fair Trading boards, I would think, for the same sorts of reasons. Then there's a response from Mr Wallace in the next document in the bundle dated 14 March 94 saying:

At no stage after the direction of the acting executive director have I conducted further investigations and I have not contacted any potential witnesses -

and saying he had been around long enough to know that orders must be obeyed and:

Under no circumstances would I have made a casual reference in passing conversation to the acting executive director if I was in breach of the Public Service Act.

The tenor of these memos is suggestive of some level of strain between Mr Wallace and you. Is that a fair conclusion to draw from the memos?---Mr Wallace, I think, felt, particularly in relation to this matter, that he had been unreasonably, you know, restrained from carrying out work that he thought was important to do. To that extent I'm sure he wasn't happy with the fact that I had written to him in this way, but more importantly probably the fact that he was not being allowed to pursue the inquiry. So from that point of view, I don't think I would have been Mr Wallace's favourite person at the time. Was it an unusual exchange of correspondence, for want of a better word?---It wasn't particularly unusual to receive - well, it wasn't unusual to receive memoranda from Mr Wallace about various issues. I suppose a little strange in that there's no copy to Will Morgan and Will Morgan was his manager. I would have expected if he had felt he wanted to respond directly to it that he would have, as I did, copied to Will Morgan. That's the only unusual thing I can think about it. It's just that, you know one wonders whether in the ordinary day-to-day course of things you would simply deal with this by going out and saying, 'Listen, Gary, 1/20/rmo 20 J.A. BUNBURY XN 12/6/00

don't do any more on that thing," rather than reduce it to writing and put it in mandatory terms?---I think, Mr Chaney, I have already explained to you the reasons why we would have put it in writing on this occasion and I think in the circumstances it would have been important to put it in writing, because there was obviously a concern outside the ministry that some inquiries might be taking place and it would seem there was probably some - from Mr Wallace's memorandum, I think it's likely - and it would have been quite - probably not unusual for Mr Wallace to have made some off-the-cuff comment to Dr Whittaker as he passed him in the corridor, something which obviously gave Dr Whittaker some concern that there were investigations still going on, and while, yes, I could have done it - I may well have done it as well verbally - I can't remember now whether I talked to him before I wrote this - I think for everybody's including Mr Wallace's sake it was probably important in this case to put this statement in writing. As I have said, there could have been inquiries later on. It would have been important to know - everybody to know exactly where they stood. The next document is 2 days later. It comes from Mr Rossi to - a fax to Mr Avey, saying:

I'm keen to finalise this matter and expect to hear from you on Friday as to whether you are going to come in and see me or not continue with the business.

Do you know what had happened that brought about that response, which clearly suggests the matter is back on the agenda?---Not specifically. Clearly Mr Avey and Mr Gough were not - I presume that Mr Rossi must have told them he had some legal advice and they needed to sort out their affairs and he was clearly finding it difficult to get them to come in and talk to him, and it was probably the situation where we were going to have to start taking action again, but there's nothing really surrounding this, so it's a little difficult for me to recall the exact situation. You don't know when the legal advice was obtained? ---Well, yes, I do. The legal advice, I don't think, is in this bundle, is it, but the legal advice is dated and I have seen it on the file. I'm not sure whether we have it here, Mr Chaney, but Mr Gray's legal advice is on the file and there is a date on it and it would have been some time before this fax was sent, I think. Yes. So your assumption is the advice had been received prior to that?---I think it was on - yes. 1/21/rmo 21 J.A. BUNBURY XN 12/6/00

Well, in fact we can assist and tell you it appears to be dated - - -?---8 March, I think. - - - 8 March?---Yes. We can perhaps ask Mr Rossi a bit more about this memorandum later on?---I think so, and on the dates, I mean, I wrote my memorandum on 11 March. I would say that although Mr Gray's advice was dated the 8th, it was probably in typing or floating around at that time and - "floating is the wrong word, but it would have been in process at that time and Mr Rossi would have received it some time around the 11th, 12th. I'm not sure what the days of the week were at that stage, and it was clear that once Mr Rossi received that he presumably has telephoned them. That's all I can say. I think you would have to ask Mr Rossi about that. Then Mr Rossi wrote a letter on 22 March really outlining that he believed there was sufficient evidence of partnership and suggesting that there may be a breach of the act, presumably as a follow up on the legal advice that's been obtained?---Mm. Then we go to April 94. There's a note to you suggesting that no good purpose would be served in pursuing the issue, and this is in relation to the renewal of the triennial certificate. Can you tell the committee about the background to this particular note?---Again, my memory is a bit hazy about all these things. All I can tell you is really what's on the file, is that obviously Mr Rossi had received the advice, discussed the matter with A1 Real Estate and had asked them to produce some information and this memorandum is really saying to me that Mr Gough has given the registrar advice that he's the sole signatory to the trust account and Mr Rossi is actually saying that he doesn't have the formal evidence but his view is that he is satisfied that Mr Gough has complied with the direction to be the sole signatory and that he, Mr Rossi, as is his right to do as the registrar of the Real Estate Act, is to issue the triennial certificate to A1 Real Estate. The triennial certificate means that Gough could then trade as an individual trader as A1 Real Estate. Do you know whether their triennial certificate had been held up by the investigation?---Look, I don't know the details. Again, well, perhaps Mr Rossi might be able to assist? ---I would say that it was a matter of what kind of certificate you were going to issue, and that was really at the heart of this matter - was it a partnership, was it a sole business, what was it? So I don't know the dates and details. I think Mr Rossi would be - that was 1/22/rmo 22 J.A. BUNBURY XN 12/6/00

an area really of the board's jurisdiction, to issue the certificate. The ministry had no role in that. The next memo is one from Mr Wallace saying that he still had concerns about the matter and was of the view that a triennial certificate ought not be issued?---Yes. Well, perhaps that's putting it too strongly. In any event, concerning the issue of a triennial certificate and saying that the inquiry was still incomplete. The next document is a cover note for a note to the principal private secretary to the minister. That's still Mr Foss at this stage?---Yes, I think so. I think the next couple of pages in the bundle - yes, the next two pages go together, the cover sheet and then the draft letter. Can you explain to the committee what those documents are?---There is a cover note from me to the executive director saying that - well, it's the normal standard form that we used for advising the executive director about ministerial correspondence, then there is a note which is signed by myself and endorsed by the acting executive director which is written to Bill Marmion, who was still the minister's principal private secretary at that stage, and this note is advising Bill Marmion that we have not resolved the matter and the investigation is being reopened and that we have also undertaken to keep Mr Shave informed. So it's attaching a copy of the letter to Mr Shave and saying - - - That's the letter of 1 March that we have seen earlier? ---Yes, and saying, "We're letting you know because - you, Bill Marmion, know because you may hear from Mr Gough, Mr Avey or Mr Shave that the matter is still under investigation. So just so that you're really up to date with events." That was the purpose of this. You say on the cover sheet that that's your handwriting at the foot?---That's my handwriting. It says, "Chris" - that's Chris Whittaker, is it?---Yes. "Letter to Doug shave to forestall possible problems"? ---Yes. What problems are you referring to there?---Well, I guess the problems would be that if we didn't let them know that the investigation was still continuing, we would get more representations about, "Well, what are you doing and why are you doing it?" So problems in them raising the issues rather than us telling them what's going on. The next document is enclosing a draft letter. It's dated November 94, so considerably later?---Later. 1/23/rmo 23 J.A. BUNBURY XN 12/6/00

I know that we have got the draft letter in the bundle. Just bear with me for a second. Excuse me for a moment. Yes, just have a look at these please?---Thank you. Sorry, and I think to put that in context it needs this covering letter. So the scheme of that is that there's a letter which encloses a copy - a letter; that is, from the minister's office to Mr Avey enclosing the advice from the ministry, Mr Morgan's advice, that the matter can be expedited if Mr Wallace is provided with every assistance to complete his investigation and making it clear the investigation is continuing. Is that a fair summary?---I'm not sure, Mr Chaney. I think you have actually lost me now as to where we're at. We seem to have gone from July to November very rapidly. To November. In the bundle there's a letter to Bill Marmion from Chris - - -?---To Bill Marmion, yes. Saying, "Please find attached a draft reply to Mr Avey"? ---All right. What I'm suggesting to you is the file shows that this is the draft reply which itself has an enclosure?---I see, right. Yes, all right. Sorry about that confusion?---That's all right. Perhaps we should just insert those in the bundle. It's clear at that stage still at November, it seems, that the matter is still proceeding, although there have been delays through the extensive correspondence and the matter being placed on hold, etcetera. At that stage it's still going?---It would seem so, yes. I realise we have skipped through the file, because I don't think for present purposes it's greatly significant, but there was obviously continued correspondence to the minister and the premier from Mr Avey. Is that the case?---Yes. The next document in the pile is a memorandum which is signed by you to the minister. Can you put that into a context for us?---Sorry, which one is this? This is the memorandum of 17 March 95?---All right, yes. "Please find attached a draft letter to the Ministry of Premier and Cabinet." This is in response to a complaint from Mr Avey about harassment by the ministry and I'm telling the minister that Mr Avey had written to him on 29 November and raised the same sort of issues as he had raised in the letter to the premier and stating that the ministry had prepared a draft (indistinct) in the form of a PPS response. In other words, the letter had gone from the principal private secretary to the minister to Mr Avey and it appears - this was the time of the 1/24/rmo 24 J.A. BUNBURY XN 12/6/00

ministerial - this was to do with the fact that Mr Foss was no longer the minister and Mrs Edwardes had now become the minister and that had caused some delays in the correspondence going out from the minister's office. It looks like that response which we have just inserted into the bundle in fact was not sent. It would appear to be a reference to that?---I would seem so, yes. Probably that would have been the case, yes. Then there is a further response drafted to Mr Avey from the premier which is, I think, two pages through in the bundle?---Yes, I have got that one. Which essentially says:

I can reiterate the advice given to you and suggest that if you believe the ministry has acted incorrectly you ask the ombudsman to investigate the matter?

---That's right, yes. Sorry if I'm - I didn't actually look at these documents the other day so I'm a little slow in picking up on these. I'm sorry?---That's all right. Do tell me if you need more time?---No, that's okay. No, I'm with you now. I think the matter was finally resolved in the letter of 9 May, which is the next one in the bundle, 9 May 95, saying that legal advice in respect to the findings is that a prima facie case exists for the offence under section 26 for the period 17 May 93 to 30 June 93:

In keeping with ministry policy it has been decided to formally issue and record a warning in respect of this matter.

The letter then constitutes the warning?---I should also say, Mr Chaney, and I do recall when I looked at the file briefly on Friday, that this letter is actually supported by legal advice from the ministry's legal officer stating that a warning would be an appropriate way of dealing with this matter and I don't think that document is in this pile either. So again, this matter never got to the Real Estate Board, so far as you are aware, and the warning was issued? ---No, the warning would have been issued instead of it going to the board, yes. So the board would not have been party to the decision to issue a warning?---No. As I said, I think I would refer 1/25/rmo 25 J.A. BUNBURY XN 12/6/00

you to the legal advice that stated this. I think that's an important part of the story. Yes. It all seems a great deal of effort over a period of something approaching 2 years to get to the point of a warning?---That's right, it does. Over what in the end turned out to be a partnership - a possible breach which existed for a period of a month and a half in 1993?---And a possible breach of the Business Names Act. Right. When one looks at the efficient use of resources, do you have any comment about that fact, the size of the file and the size of the issue taking so long to resolve?---Well, it clearly is not a - it did take a long time to resolve. It clearly wasn't particularly from anybody's point of view probably a good - or the result didn't warrant the amount of resources, if you like I think there were also a number of delays in sorting this out caused by Mr Avey and Mr Gough and the A1 people themselves which made this more difficult to finally resolve. DR NEWMAN: Mrs Bunbury, if this had not been resolved and if there had been a query hanging over the validity of the trading of A1 and the Gough and Avey working relationship, how would that have left the clients at that agency exposed in terms of any claims that they may have had against the fidelity fund if there had been any losses which could have resulted in a claim to the fidelity fund?---I'm not quite sure I followed your question, but if the matter had not been resolved it would have gone before the board. No, I'm more concerned - if it had just drifted and not been sorted out as to whether or not it was a properly registered partnership or a sole trader structure properly registered in accordance with the Real Estate and Business Agents Act and there had been a defalcation, where would that have left the people who were the customers or clients of that agency in terms of their claim against the fidelity fund?---Well, I can't see that they would still have had a claim against the - they could have still claimed against the fidelity fund, I would have thought. Even if A1 was unlicensed?---I'm not sure about that. I mean, it's a long time since I looked at the Real Estate Act and the background to it, so I'm not entirely sure if I can answer your question. I understand, but reading some of the correspondence, at least, here, and some of the memos, it would seem that one of the major concerns was in fact the protection of the general public in terms of its claim against the 1/26/rmo 26 J.A. BUNBURY XN 12/6/00

fidelity fund. I'm just asking for clarification of my interpretation of what I'm reading?---Yes. Well, certainly, as I said earlier, there was a balance between making sure that there was a case and not unduly hampering the operations of the real estate agency and making sure that the public were protected. I think that is a balance that, you know, has obviously got to be taken. Yes, I think that's probably all I want to say but - - - THE CHAIRMAN: Ms Bunbury, what we are inquiring about are the boards?---Yes. Now, this never got near the Real Estate Agency Board at any stage - the board licensed, etcetera, etcetera, set up under the act to deal with real estate agents - and this never got near the board at any stage. Am I correct in saying that?---I think you are almost correct. You will recall that there was a point at which - I'm not sure whether we took that point, but there was a point at which the board was not comfortable with the registrar deciding to close the file and wanted the matter reinvestigated and at that stage the investigation continued. So it got near the board in that sense. Of course it did, because the board said, "We're not happy," but it never got to them?---Not as an inquiry. It went back again?---The legal advice was that it was not a breach that warranted an inquiry before the board. Yes, but doesn't that link with the question the Dr Newman has just asked. If the fidelity fund is to be operated on, which is the protection of the public, the board has got to deal with it?---Well, it would have gone to the board if the legal advice had suggested that there was a case that the board needed to deal with. So the board never get a chance to say whether they should have a look at it. Is this once again getting back to the confusion between who is acting for who, the ministry or these investigators - who they are acting for?---It may be. I think it's also to do with the fact that the ministry is taking always legal advice on these issues and if it doesn't think there is a case, then it's not going to support that case going to the board. So it's based on the legal advice which we obtain and we obviously are, you know, looking to that to make a decision as to whether a matter should go to the board. That's true of any investigation. Every investigation file - I don't know what happens now, but certainly before it went anywhere near the board it would always go to a legal officer for advice as to whether there was a case that the board should hear and the legal officer would give a view as to whether there was a breach or 1/27/ces 27 J.A. BUNBURY XN 12/6/00

what should be done. The warning policy was a formal policy that was in place as a way of dealing with matters that were not warranted as being of sufficient attention for all the reasons and that's why I think it's probably a pity that the legal advice is not in this bundle of papers that you have before you, but that was the normal situation. It went to the legal officer. If the legal officer thought that there was a case - - - Yes, but the legal officer wasn't approached for nearly 2 years?---Yes, but there was a lot of - in this particular case - - - There was a lot of toing and froing certainly?---There was a lot of toing and froing. MR CHANEY: I think the approach of the legal officer was in February 93?---The first approach to the legal officer was in February 94. 94?---Yes. THE CHAIRMAN: I take it that doesn't apply now with the real estate agents because they have got their own finance and they engage their own investigators. Is that right?---I can't tell you what happens now, Mr Chairman. I'm not involved with the ministry, I'm sorry. Thank you?---The other point that I should make is that once the matter had gone to the legal officer for advice, the final decision as to whether a prosecution should proceed or not before the board or before the court or wherever the prosecution was deemed to be proceeding was made by the commissioner of Fair Trading. Does that mean that a prosecution with respect to a real estate agent could go before a court without reference to the board; in other words, the board officially not knowing about it?---I can't recall. I mean, I can't recall that situation and I'm not close enough to answer your question. I think you would need to ask people who are closer to the ministry at the moment. I'm not trying to avoid it, but I don't think that's something - I'm just trying to explain the process in general terms as I recall it and the process was that the investigation file went to the legal officer. One of the things I think I said the other day was that one of the things we were doing always was to try and encourage the investigators to actually use the legal officers at an earlier stage of their inquiry and to seek their advice before the file was finally, you know, given to the legal officer and then the legal officer might need to go and say, "Well, you need to do this and that before you can sort of - you haven't got enough evidence," or whatever, but the process was the investigator did his or her work, the matter went to the legal officer for an opinion as to 1/28/ces 28 J.A. BUNBURY XN 12/6/00

whether there was a prosecution before the board or whoever the appropriate body was and the matter was then sent to the executive director who then made the final determination on prosecution. MR CHANEY: What about monthly reports from the board, summary reports? Are you aware of those?---The monthly reports were - that was, I think, the matter which Mr Morgan gave you some information on. The monthly reports to the board were in a format of a list of the investigations under way for each board. It was done by board and obviously it went to the relevant board and a statement about who was doing the investigation and roughly where that was up to without again giving a lot of information in case the matter went before the board. So that was a practice that we instituted before that. That was before I took over and was working with Will Morgan. I don't think the board got those kind of regular reports but I can't recall. You don't think the board did?---Well, not in the form that we gave them to them. I'm not sure how it went before that. The balance of the bundle, I think, is a final report to the minister's office in June 1995 with some attachments. I don't want to take you through those in any detail. Let me just recap on what you have said. THE CHAIRMAN: Except this, Ms Bunbury: the final details there, if the real estate agent - I think Mr Avey - is not happy, he can go to the ombudsman. Why not go to the board?---The normal procedure was that if people wanted to look at the ministry's actions, they would go to the ombudsman. The board had no power to inquire into the ministry's actions or activities. The ombudsman did have that power. No, I'm not suggesting the board would inquire into the ministry's actions, but inquire into Mr Avey's complaint?---Well, as I say, it would only have gone to the board if the evidence was there. Yes, all right, thank you?---I'm sorry, I'm not trying to be - - - Yes, I know, I have heard it. Thank you. MR CHANEY: Mr Chairman, that's all I wanted to do in relation to that particular issue. There is one other matter I wanted to ask Mrs Bunbury about and it relates to a document that came to my attention over the weekend which she hasn't had the chance to read and it is some four pages long. I think it might be appropriate if I gave her that opportunity to read it. 1/29/rmo 29 J.A. BUNBURY XN 12/6/00

THE CHAIRMAN: Very well; we will adjourn for a few minutes.

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THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. Ms Bunbury, some long time ago we had evidence from Mr Barr who gave an account of the history of approaches to various ministers and governments from 1979 onwards for amendment to the Finance Brokers Control Act and he produced a bundle of correspondence in that context which included a letter - this is part of exhibit 28, Mr Chairman - from Mr Whittaker - I don't think you will have that?---No. Members of the committee, it is one of the very early volumes in Mr Barr's evidence. It is not necessary that you actually have the letter in front of you, but it's a letter from Mr Whittaker to the president of the Institute of Finance Brokers of WA dated 18 July 1995, as I say, part of exhibit 28, which says at the second page:

I note in late 1993 you wrote to the minister suggesting that your institute might be prepared to initially underwrite the cost of a legal person to rewrite the Finance Brokers Control Act. In place of this offer your industry would be prepared to support the engagement of a project officer or consultant to coordinate a review of the regulatory requirements for your industry. We may be able to make some progress over the next few months. A working party with the type of membership you suggest could then be established to advise on the broad review that we are proposing.

I think you have had a chance to look at that letter? ---Yes. You drafted that letter?---I think I probably did, yes. You have in front of you a memorandum to Mr Whittaker from you dated 7 June 1995?---Yes, I do have. This is a memorandum, I think, which provides the background to the writing of that letter. Is that a fair summary?---Yes, a fair summary. I would like to just take you through it and ask you some questions about it. THE CHAIRMAN: Just before you do that, whose is the note in the top right-hand corner?---Dr Whittaker. I see?---It says, "Noted and discussed; many thanks." Thank you. 1/31/ces 31 J.A. BUNBURY XN 12/6/00

MR CHANEY: The first thing it refers to is some documents referred to at folios by different numbers. Are you able to say if they are folios on a particular file? Where would one find this material?---Yes, they should be on a particular file and I would have thought that this would be on the file that - normally if I didn't quote the file number, I would have expected it to be on one of the files this was on - this memorandum was on. Right, and that's the file number at the top there, is it, 10732?---The file number at the top there, yes. There may have been an earlier volume or whatever but that would have been the way I would have normally done it. Perhaps I could just say that this memorandum was apparently written in response to requests from Dr Whittaker to actually review all the files which related to the background of the Finance Brokers Act and this was a bit of a guide through that up to a point. What precipitated that request? Do you know?---Not from my recollection. It would appear from just quickly reading this correspondence that Dr Whittaker had had some discussions with the minister about the Institute of Finance Brokers and the regulation of the industry and, as a result of that, wanted to bring himself up to speed on these issues. You make reference to the fact that there has been a disappointing response from the institute in relation to amendments. What is that a reference to?---I think it's in response to - again, you know, I'm really relating to what I have here - that there had clearly been some earlier discussions when we had asked them to actually come up with a discussion paper about what was needed and why it was needed and what the issues for them were and the response in fact that came forward was, as I have said here, a detailed schedule of amendments to the act and my comment there - this was a sort of fairly informal memorandum in which I have said it seemed an odd thing to do in advance of a discussion paper because in order to sort of set out detailed amendments of the act you have really got to know what the policy issues are and what you're trying to address and we had been encouraging them to take a much wider view of the issues than simply, you know, rewriting the act. I think events which later when Ms Brazier was involved - was the sort of action that was taken then. I think that was the sort of thing we were encouraging them to do, to take a wider view. The industry reference group-type approach?---Yes, that type of approach and an approach which focused on the issues for the industry rather than the words in the act, if you understand what I mean. 1/32/ces 32 J.A. BUNBURY XN 12/6/00

And then you make the observation in the final paragraph before the heading at the bottom of the first page, "On the face of it" - and this is in relation to a request for the institute for representation on a working party - I'm sorry, can I go back and ask you about that? What was the request? What precisely was the institute suggesting? Do you recall?---No, I don't recall in detail. It was, I think, for the ministry to take part in probably a joint - I'm not sure whether it was industry board, whatever working party, which would look at what needed to be done in relation to the industry or the act or whatever. I don't recall any more details than really what's down on the page. All right. Then you go on to say:

On the face of it, this seems a reasonable request, one can be seen to be doing something while not making a major commitment of resources.

What was the issue for you?---The issue for me was that it would be very easy for us to say, "Yes, we'll sit on a working party and we'll talk about what needs to be done," and on the face of it one could do this without putting a lot of effort into the whole issue, but I think behind this was my view that it was something that if it was worth doing, it was worth doing properly. We really needed to devote a considerable amount of resources and effort to the whole endeavour in order to get an outcome at the end of it. Was it possible to devote the resources necessary to get a sensible outcome?---Well, it was obviously going to be difficult and quite a bit of this memorandum it devoted to that issue and how we might address it. If we just work through it quickly, you then make some observations about the history of the act, the fact that it has never been amended?---Yes. "The board and industry have sought a range of amendments since 1979"?---Yes. "Several volumes of files that show the efforts involved with no results"?---Yes. "In 1990 to 1992 a policy officer spent half his time for several months working with Alan." That's Mr Tenger, is it?---That was Mr Tenger, yes. Yes?---I think I referred to that in my earlier evidence when I said that some work was done and because Mr Tenger had - this was before the 1993 restructure and his division had the responsibility at that stage for finance 1/33/ces 33 J.A. BUNBURY XN 12/6/00

brokers, so although the young man was my staff, he was actually working very closely with Alan on the actual issues involved. You then make the observation that a first draft of a bill was developed, "However, these were only minor amendments and didn't address the issues of major concern to the industry." They, in any event, didn't precede the minor amendments, I take it?---No. But what were the issues of major concern to the industry as you perceived them at that time? We're talking about 1995?---As I recall I perceived them at that time, the major issue was the lack of a fidelity guarantee fund. In other words, the lack of a consumer protection mechanism. That was probably the really big concern and the other area, I think, was the fact that it was a bit unclear who ought and ought not be a finance broker; I mean, who ought to be licensed as a finance broker; who was in and who was out; that kind of thing. I'm sure there were other things, but those were the ones I recall. The second comment about who was in and who was out related to the problems in the act for exceptions that I think you probably heard about. Yes, and then you make the observation in short, "The lack of definitive and effective action in relation to the regulation of the finance-broking industry is really a problem for us, if not for government"?---Yes. I'm saying that as part of the Ministry of Fair Trading's responsibilities it was important to have an effective system which provided sufficient protection for consumers. So for the ministry it was an important issue and, as I said, I suppose, even if it didn't appear to be high on government's agenda, it's a shorthand way of saying that and we were concerned about the act which, as I have said here, seems to please no-one in its present form. Given that situation and that appreciation of the situation back in the middle of 1995, why is it that nothing happened or has happened to date in relation to addressing this problem?---Because there was always something else that seemed to be needed to be done that got ahead of it in the queue, I would say, very simply. THE CHAIRMAN: Do you mean monetarywise?---I mean resource and monetarywise, yes, and I think if you read the whole of this memorandum, that's really - what a lot of it is saying is, "It is important, it is something we need to be doing something about, but there is a limit to what we can do," with what we had and I - - - 1/34/ces 34 J.A. BUNBURY XN 12/6/00

While we are on that subject - I'm sorry, you go ahead? ---Sorry, I was just going to say the other thing is that's behind it is - and I think I really covered this the other day probably as much as I can - there were so many issues pressing on, you know, were we really trying to review the act, were we trying to look at the whole regulatory system. The more you looked at it, the bigger it got so therefore the harder it got, if you know what I mean. On that very point, the fidelity fund, as you said, was a chestnut. Even from a bureaucratic point of view, what was difficult about putting up to the minister, "Let's increase the fidelity fund from a bond of 50,000 to half a million," or whatever, "immediately. Amend the act and do it immediately." What was difficult about that?---I'm only hesitating because I'm trying to recall, you know, the times, not that I'm trying to avoid an answer. Even take it today, right today?---The issue was, as I understand it, if you're going to set up a fidelity fund, where is the money going to come to go into the fidelity fund? That was the key issue, I think, and a lot of debate went on about whether you could have a joint fidelity fund with the other industries. I think it was how did you pay for it? No, no, that was all over. That was agreed that that wasn't on?---Well, it was how would you pay for it - appeared to be the issue. The industry would have to pay for it, wouldn't it, initially, through insurance companies? DR NEWMAN: What was the problem with introducing professional indemnity insurance and increasing the fees that the brokers have to pay and utilising those funds as the commencement of the fidelity fund and then building on it on an annual basis?---Look, I really can't recall, I'm sorry. This is 5 years ago. I haven't had the opportunity to look at any of this, to review the files. All I can tell you at this stage is that I know that there were major issues - and I'm not trying to stonewall and bureaucratic about it. There were a lot of reasons why it was difficult to do and they were genuine reasons and I'm sure that if I had the opportunity to spend half a day with the files I could answer your questions very adequately, but as of this moment I haven't thought about finance brokers in great detail for some time and I can't give you those answers. MR BLIGHT: But at least in theory it wouldn't have been very difficult if you had thought that was a problem area?---The mechanism wouldn't have - - - 1/35/rmo 35 J.A. BUNBURY XN 12/6/00

The mechanism to increase it - - -?---No, the mechanism wouldn't have been - - - - - - would be a relatively simple amendment to the act, would it not?---It would have been a relatively simple amendment to the act if you had the mechanism there. Yes, I'm sure that would have been the case. Probably following a recommendation through to the chief executive then to the legislative program and so forth? ---Yes. It wouldn't have been - - -?---No, the processes would have been very easy. For whatever reasons, it was the mechanism that was proving the problem. Do you know had these things been thrown around? You mentioned earlier on that there were so many pressing issues and that this just seemed to get pushed down to the bottom of the queue?---Yes. Had the issue of, you know, in particular the fidelity fund been thrown around by your staff members? Had the suggestion been made by - - -?---It was certainly an issue that - well, I remember from 1990 onwards I had heard it discussed, it had been talked about, and it definitely was an issue. Again, because, I suppose there were no big problems at the time with the finance brokers, I don't remember it being a particularly live one between 1993 and 1996, but everyone was well aware that $50,000 was quite inadequate and that the consumer protection mechanisms weren't there. Yes, we were all aware of that. I suppose you're saying that normally if you're going to amend an act the tendency is to say, "Let's have a look at what other sections of the act require amending at the time because we may as well do the lot together"?---Well, yes, there were those things and there was the issue of who is a finance broker, who is going to contribute, and all those sorts of things that needed to be looked at, and, as I said the other day, in a climate of an environment in which people were looking for less - when I say "people", I'm saying the political with a small P, if you like. The whole feeling at the time, if you like, was for less regulation rather than more regulation, and they were certainly being questioned in a number of quarters because of the other things I talked about, like mutual recognition and whether in fact the industry should be governed, you know, by an act, or whether there should be a code of practice. There were all those sorts of things that were being tossed around, I guess. DR NEWMAN: In view of what you have said about the problems with the boards hearing evidence and therefore if they later had to sit on a hearing that they could not 1/36/rmo 36 J.A. BUNBURY XN 12/6/00

give a fair hearing, was there any thought at that stage of changing the system so that somebody else dealt with the matters that were brought before the board so the board could look at the normal administrative matters and make a decision as to whether or not something should go to a hearing and then an independent tribunal or board or other entity dealt with the cases on a regular basis? ---No, I don't recall that specifically being discussed. the issue about matters for licensed occupations going to an independent tribunal was something that I understand has been canvassed over a number of years and industries have not shown themselves to be very supportive of that - in most industries, and in particular you will recall - I think you will be looking later at the Builders Registration Act and the proposal for the builders when the disputes resolution procedures were brought in. The whole idea was that it would actually go to the Commercial Tribunal but the building industry didn't support that view and you ended up with the building disputes committee in the board. I think it was similar with all these industries. They actually wanted to have a board, in a sense, and manage their own disciplinary matters and I don't know that there would have been a lot of people in the community or the industry supporting that view. Were they aware to what extent there was a problem in terms of the boards looking at the information and making a decision on whether or not something would go to a hearing and then the fact that they then suddenly changed hats and became judge and jury?---Well, in general the boards didn't look at the information. I think that's what we have been establishing, that the boards did not know much about a matter until the inquiry was listed before them. There were issues in regards to the Settlement Agents Board of that nature as to what extent they should be involved in issues. I do recall that in outline but not in detail, please, but there were some issues with the Settlement Agents Board in that matter. MR CHANEY: I think as you have indicated, a large part of the balance of the memo deals with this general question of resourcing, but at the top of the third page there's reference to the Ontario model. Are you able to say what the Ontario model is?---At this distance of time I really can't recall the details of the Ontario model. Certainly it was something that Minister Foss had put forward as a way of regulating, but I really don't recall the details. No, I'm sorry. I mean, I do suggest that if you need someone to look at this that you get someone to look at it. Yes, look, that's fine. THE CHAIRMAN: Or we go to Ontario?---Or you go to Ontario. Again, you know, if you had asked me - if I had 1/37/rmo 37 J. BUNBURY XN 12/6/00

this on Friday I would have done a bit more homework and, Mr Chairman, in relation to why it appeared to be so difficult to do a very simple thing like bring in the fidelity fund, I do suggest that you actually, you know, have a look back or seek some evidence from people who can provide you with that information, because - - - MR CHANEY: I take it that a lot of this material will be found on this file, or at least - - -?---It should be found on this file, yes. Yes?---The files were - obviously I found them when I gave them to Chris Whittaker. Is it true that the people in Ontario won't tell anybody about their scheme unless you actually go there?---I don't think so. I'm afraid not. I think you could find - there were definitely some - obviously if you find this file and see folio 98 and briefing notes thereafter there is - I probably knew a lot more then than I do now about it. I just can't recall the details, I'm sorry. Thank you, Mrs Bunbury. I have nothing further, Mr Chairman - yes, save to tender some material. The first thing is the statement of Jennifer Ann Bunbury. The only thing, Mr Chairman, is I have not invited Mrs Bunbury to read that section relating to Avey and A1 Real Estate and I think - I know that that was prepared before Mrs Bunbury had the chance of going through the files in detail and it's largely superseded by what she said this morning, so in my submission the appropriate thing is to just delete that - - -?---Mr Chairman, after discussion with Mr Chaney I have actually deleted that section of my statement and I have a copy here which has that deleted, if you wish to take that. THE CHAIRMAN: We will hang onto this just to remind us?---Sure. MR CHANEY: I think what can be done is that the exhibit which represents the evidence she has given can be the one that she has amended. THE CHAIRMAN: Certainly. MR CHANEY: So this one can be maintained rather than cut down another tree with copies. I tender that statement. You will find it under cover of a facsimile cover sheet - transport. THE CHAIRMAN: Yes. That statement as amended by Ms Bunbury will be exhibit 109. EXHIBIT 109 Statement of Jennifer Ann Bunbury 1/38/rmo 38 J. BUNBURY XN 12/6/00

THE CHAIRMAN: What about the other matters that we have dealt with in detail. MR CHANEY: Yes. I would simply seek to tender that as a bundle, Mr Chairman. THE CHAIRMAN: Yes. All those other matters that have been put through this witness in the bundle of documents re Ms Bunbury's evidence is exhibit 110. MR CHANEY: I think for the transcript the description might be in relation to A1 Real Estate. THE CHAIRMAN: Yes, and including A1 Real Estate. EXHIBIT 110 Bundle of documents re Ms Bunbury's

evidence, including A1 Real Estate. MR CHANEY: Finally, I tender the memorandum from Mrs Bunbury to Mr Whittaker dated 7 June 1995. THE CHAIRMAN: Memo, witness to Mr Whittaker of 7/6/95 is exhibit 111. EXHIBIT 111 Memorandum dated 7/6/95, Mrs Bunbury to Mr

Whittaker THE CHAIRMAN: Mr Beech, any questions? MR BEECH: I understand Mr McKerracher might have some questions. THE CHAIRMAN: I beg your pardon. MR McKERRACHER: Mr Chairman, members of the board, yes, I appear for Mr Shave. THE CHAIRMAN: Thank you. MR McKERRACHER: I do have one or two questions, if I may. THE CHAIRMAN: Certainly. MR McKERRACHER: Thank you, Mr Chairman. Ms Bunbury, can I refer you to exhibit 110, which is the bundle of copy documents commented on this morning, and just to recap very quickly, you have mentioned in particular two letters written by Mr Shave MP, before he came the minister for this department, on 14 December 1993 and 10 February 1994. Do you recall that?---I do. I think you have made it clear that both in form and substance those letters were perfectly normal and 1/39/rmo 39 J. BUNBURY XN 12/6/00 XXN

perfectly proper in your opinion. Is that so?---Yes, that's so. That they would accord with the sorts of requests made by members of parliament received in the public sector on matters concerning their constituents on a relatively regular basis?---Yes, I find no problem with that proposition. I think you have also made it clear that those letters certainly played no part in any delay in relation to this issue at all?---Definitely played no part in any delay or any decision in relation to this issue. Thank you, and indeed, the second of the letters in February 1994 was actually pressing Dr Whittaker to bring the matter to a satisfactory conclusion as soon as possible, I think, was it not?---Yes. It would follow, I suggest, from your observations about those matters that to suggest that those two brief letters constituted any form of meddling or interfering would be an absolute nonsense?---Yes. Thank you. Indeed, you have also indicated, I think, have you not, that from time to time departments such as those under consideration in this inquiry would also receive inquiries direct from ministers as well as other members of parliament. Is that so?---Yes, definitely; yes. Is that not simply a normal part of life in the public service, receiving such queries from ministers on behalf of constituents who have raised complaints?---Yes. If you're talking about ministers, it is normal for - I'm not quite sure of the point of your question, but if the minister - it's actually usually clear as to whether the minister is writing as the minister or whether he is writing as a member of parliament. Yes?---I'm not sure whether you're saying that, but, yes, I mean, usually if it's an electoral matter it will come in on electoral office notepaper. If it's from the minister or a minister it will come in - or if it's from a minister it will come to our minister and then from our minister it will come in on ministerial letterhead. THE CHAIRMAN: Yes, that's the point I was just going to make. It's generally from minister to minister?---Yes. Yes, normally another minister would not write as another minister to the department, but another minister might write in his capacity as a member of parliament to us or to our minister. 1/40/rmo 40 J. BUNBURY XXN 12/6/00

MR McKERRACHER: Which is, of course, what happened here in relation to Mr Shave, that he wrote - - -?---It would appear so. As I said, I can't recall whether Mr Shave was a minister or not at the time. You can take it from me that he didn't become the minister until 9 January 1997?---Look, I know he wasn't the - excuse me, I know he wasn't the minister for fair trading. No, no?---My uncertainty was as to whether Mr Shave was a minister of the crown at the time or whether it was during the period when he had retired, I think, to the back benches for a period, and I couldn't recall which of those two it was. Even if he had been a minister at that point in time, to write to you on the MP letterhead rather than a ministerial letterhead would accord with your normal expectations?---Probably. I mean, I can't say really exactly what would have happened, because it could have been - it's pure supposition really and I can't really say what would have happened in those circumstances, but - - - In any event, if you assume that at the point in time he was actually a back bencher, then the process was perfectly normal and proper, as you have said?---If he was - yes, certainly . Indeed, speaking in general terms now, in any department, but including the department which is the subject of this inquiry, one of the purposes of ministers sending inquiries to the department is to ascertain the state of affairs concerning particular activities, is it not? ---Yes. It is normal practice for ministers, of course, not to actually intervene in an investigation, but it is perfectly normal for a minister to inquire as to, you know, how something is proceeding or whatever in relation to inquiries. I think there is a distinction there, a definite distinction. And again, speaking in general terms, such inquiries from a minister can sometimes have the catalystic effect of prompting a greater deal of activity in relation to an inquiry, can they not?---In relation to an - I'm not sure of the way in which you're using the word "inquiry" there. I think when a minister or a member of parliament asks for information, obviously steps are taken to make sure the information is provided as quickly and as speedily as possible. I wouldn't want to say that the fact that the minister makes an inquiry is necessarily going to make things happen - actual events move along more speedily. I think the distinction has to be made between providing the advice to the minister and actually 1/41/rmo 41 J. BUNBURY XXN 12/6/00

taking action in relation to that, especially when you're talking about an investigation. Yes. In the ordinary course of affairs though would you agree with this, that if a minister were to write to the department to say, "There's a suggestion of delay in this particular matter. Can you please report to me?" it's hardly the sort of inquiry that you would sit on without responding promptly?---Absolutely not, no. Just to clarify one aspect, you spoke in terms of the lack of clarity about whether investigators were controlled or should take directions from the ministry or the board. Do you recall giving some evidence on that topic?---Yes. I recall making some statements about that, yes. Yes, and again, would you agree with me that to the extent that that was a problem, you were speaking about the period of time in relation to the A1 investigation as distinct from a later period of time when the structure of the boards changed somewhat?---Yes. I'm reluctant to really answer your question, because I don't really know what happened after I left the department. Certainly in relation - the legislation and the administration didn't change markedly in respect to finance brokers except in where the matters were dealt with. I think my comments really were relating to the real estate - and I should also probably make it clear that my comments about lack of clarify was a lot of this was - the formal lines of communication were clear. They were up through the ministry. It was partly at least a matter of history in the investigators - partly a matter of the legislation and partly a matter of history that the investigators felt themselves bound to the board because they were inspectors of the board in the act and historically a number of the boards had come to us from separate locations and had been brought into the ministry administratively. So I think it was, if you like, a bit of uncertainty or views in their minds that they wished it to be maybe some other way, but administratively it was perfectly clear, the investigators were responsible to the manager, director and ultimately to the executive director of Fair Trading. Just to clarify one final point, the lack of clarity of which you spoke, whether it be in someone's minds or elsewhere, was focused on real estate issues as distinct from finance-broking issues. Is that what you're essentially saying?---No, I wouldn't make that statement. I think that the - remember that the board operations were run in - the four boards were run as an entity. The staff worked for some or all of those boards and I think that you could say what went for one of those boards probably in these circumstances was true of another. The investigators didn't take off their hats and say, "I will 1/42/rmo 42 J. BUNBURY XXN 12/6/00

put on another on and say I'm now working for the finance brokers." There was a feeling of they worked for the boards. Do you recall that there were some changes brought about once Mr Shave became minister in January 1997?---In what regard? What changes are you talking about? I think you left in 1998, didn't you?---April 1998 I left, yes, but I'm just not sure what changes you're actually referring to. There were structural changes in relation to the department generally, I think, weren't there?---Yes, but I'm not sure of the linkage between Mr Shave and those changes. Very well?---That's my problem with the question. All right. Did you have many direct dealings with Mr Shave in terms of the policy of structural changes or was that - - -?---No. The amendments to the Real Estate and Settlement Agents Act came into effect on 1 July 1996. At that time I ceased to have involvement with the real estate and settlement agents boards. I retained my policy responsibilities and all my housing responsibilities. So I did having dealings with Mr Shave in relation to the real estate industry, quite a lot of dealings, not to do with the finance broking industry, because by that time that had moved to another division. I don't recall having any dealings with Mr Shave on anything to do with structural changes. Normally issues on structural changes would have in any event been probably dealt with by the executive director, but by that time, by the time Mr Shave became minister, the structural changes were really in place. There were also some other activities going on at that time as a result of other inquiries into the real estate industry, and so on. So I think the answer to your question is probably no. Right. That means I can be brief and I don't need to ask you any questions about that. Thank you. Thank you, Mr Chairman. THE CHAIRMAN: Thank you. Yes, Mr Beech? MR BEECH: Thank you, Mr Chairman. Ms Bunbury, just before the break Mr Chairman asked you a couple of questions about the idea that the board might have investigated Mr Avey's complaint rather than that it would be dealt with by the ombudsman. Do you remember that topic?---I do recall that, yes. 1/43/rmo 43 J. BUNBURY XXN 12/6/00

Mr Avey, he was one of the subject matters of the investigation undertaken by ministry officers. Is that correct? He was one of the people being looked into by the ministry?---Yes, in the sense that - - - He and Mr Gough and the business of A1?---He and Mr Gough and the business of A1. Yes, I guess you wrap them all up together. He wasn't one of the people who had made any initial complaint, he was the subject of the initial inquiry. Is that a fair summary?---That's right. That's correct, yes. When the ministry people took steps following that, Mr Avey started complaining about what the ministry people had done. Is that right? That's what he complained about?---Yes, mainly. Yes, as far as I - yes. Now, we will have the precise terms of the legislation and I'm not seeking to test your memory too much - - -? ---Thank you. - - - but as a rough guide is it fair to say that each of these boards - and here we're talking about the real estate board - had jurisdiction to inquire into misconduct or conduct in contravention of the code of conduct by real estate agents?---Yes. The board wouldn't inquire into complaints about ministry staff in investigating possible offences or inquiries? ---Yes, that's the point I was trying to make earlier. Yes, and so that if a person who was the subject of an investigation had a complaint, that person's complaint would appropriately be dealt with by the ombudsman who could independently review the conduct of ministry staff. Is that a fair summary?---That's a fair summary and that's the point that I was making, yes. Finally, just in relation to the ideas of a bond and a fidelity fund, is it right to say that on the one hand a bond is something which each person in the industry is required to actually put up by way of money, so that the $50,000 is paid and held? Is that how a bond works? ---I'm not sure how the bond - honestly, I can't remember now how the bond system worked. There was no trust account for the finance brokers, so I'm not - - - Very well. We will deal with that through another witness?---I'm sorry, I'm not trying to be unhelpful, but it really is a long time ago. Yes. We will deal with that through someone else. Thank you, Ms Bunbury?---I think so. I think you - - - 1/44/rmo 44 J. BUNBURY XXN 12/6/00

DR NEWMAN: Could I perhaps clarify that for you, because we have had evidence before you were appearing. The bond is a $50,000 sum which is guaranteed by the insurance company and the finance broker pays a premium to the insurance company for that bond to be put in place, but there no, physically, $50,000 paid into a fidelity fund or anywhere else. It's only available if there is a claim. MR BEECH: Yes, thank you, member?---Thank you. THE CHAIRMAN: Mr Hooker? MR HOOKER: I don't cross-examine, sir. THE CHAIRMAN: Any re-examination, Mr Chaney? MR CHANEY: No, thank you, Mr Chairman. THE CHAIRMAN: Thank you very much indeed, Ms Bunbury? ---Thank you, Mr Chairman.

(THE WITNESS WITHDREW) THE CHAIRMAN: Have you got a witness available or do you want to start after lunch. MR CHANEY: I do have. The only issue - Mr McKerracher mentioned the possibility of going straight on to Mr Rossi when we finished Mrs Bunbury. Yes, well, Mr Buchholz is the next witness, Mr Chairman. I think he's present and we can start him now if you wish. THE CHAIRMAN: Yes. MR McKERRACHER: Mr Chairman, I wonder if I could be excused. We don't understand this evidence has any bearing on us. THE CHAIRMAN: Certainly, Mr McKerracher. Thank you. BUCHHOLZ, GARY PHILLIP sworn: THE CHAIRMAN: Yes? MR CHANEY: Thank you. Mr Buchholz, you live at 5 Mann Place in Roleystone? ---That is correct. What is your present position?---I'm a policy officer in the strategic development directorate of the ministry. Do you hold any formal educational qualifications?---No, no completed tertiary qualifications. 1/45/rmo 45 J. BUNBURY XXN 12/6/00 G.P. BUCHHOLZ XN

I may come back to that issue in relation to particular positions in due course. You are, as you have said, with the Ministry of Fair Trading. How long have you been with the ministry?---I commenced in February 1978 as a complaints officer and then investigations officer. How long were you in that position?---Until July 1987. In respect of that position did you undertake any training courses?---No. There was a training course, I recall, in customer service, but apart from that it was mainly on the job training. What had you been doing prior to February 78?---I worked with the Education Department as initially an internal auditor from about 73 to about 76 and from there I obtained a position as a cashier in the then Department of Labour and Industry. Internal auditor, what sort of tasks did you undertake in that position?---That involved checking the accounts for schools - you know, secondary schools and technical colleges and things like that. Checking their accounts?---Their accounts, yes So it was actually a financial auditor?---Financial auditor. What qualifications did you have for that position? ---Well, that was my first job out of school, so I went straight from my leaving certificate to do that. So you were assisting accountants or something, were you?---Yes, assisting another senior officer in doing the audits of the school books. I see, and did that actually develop some sort of working knowledge of accounting systems and so on?---I think it gave me certainly a good background in the processes of accounting for moneys received and outgoings. So you then went from there to a position of cashier and you held that for how long?---That would have been, I think, for probably about a couple of years, from recollection. And then?---Then I went to the ministry - or it was then the Bureau of Consumer Affairs. All right. So that was February 78 you then moved in - - -?---That's right, yes. You commenced as a complaints officer and investigation officer?---That's right. 1/46/rmo 46 G.P. BUCHHOLZ XN 12/6/00

What did that actually involve? What sort of tasks? ---Initially as a complaints officer it involved answering the telephone queries from the public about consumer legislation and their rights, it involved interviewing complainants and the taking details of their complaints, as well as dealing with the actual conciliation of certain complaints. Was there a particular area within which you worked? For instance, was it retail consumers or just anybody?---No, in those days we dealt with all matters, yes. Right, so it was across the board?---Yes. Including finance brokers?---Well, I don't recall any finance-broking matters, because finance brokers in terms of the act itself wasn't part of the Bureau of Consumer Affairs and as far as - there's a general view that not finance brokers themselves but their clients are not necessarily consumers. So we obviously could only deal with matters in relation to consumers as defined under the Consumer Affairs Act. Can we take it that in the period between February 1978 and July 1987 you effectively had no contact with finance-broking issues?---That's correct, yes.

Thereafter in July 1987 what did you do?---I moved into a project to establish the Register of Encumbered Vehicles Service and from then until November 1993 I was either involved in the initial project in establishing it and also from there managing the service. So that was from July 1987 to November 1993. 93?---Yes. That involved - what, the register of encumbered vehicles is just that, is it?---Effectively it - well, it's pretty self-explanatory, but, I mean, actually what it provides for is a registration of any type of security interest over a licensed motor vehicle and some self-propelled farm machinery, and I also was responsible for managing the bills of sale registration system as part of that role as well. That effectively was what remained after the Chattels Securities Act which established the REVS system came into operation. So it still left securities over crops, livestock and wool as registrable goods under the Bills of Sale Act. After November - well, sorry, I will go back a step. So that process, you were involved really in getting that register off the ground and then - - -?---Yes, and then managing - - - - - - maintaining and managing it?---Yes, that's correct. 1/47/rmo 47 G.P. BUCHHOLZ XN 12/6/00

You were the principal person involved in that process? ---Yes. Then in November 1993, what did you do then?---Following the restructure of the ministry in November 1993 I obtained a position as Fair Trading officer in the service industries branch of the then renamed Ministry of Fair Trading and in May 1994 I became the acting manager of that branch, which I occupied until February 1995. What was your particular function in those positions? ---The branch itself dealt with a range of industries, including travel, finance, insurance, pest control and miscellaneous type services and it also provided administration support to the Commercial Tribunal in relation to licences for credits providers, employment agents and travel agents and also it maintained the REVS and bills of sale registration system as well. It was all part of that one branch. You say that lasted until 1995 some time?---February 1995, yes. Right, and then what?---During my period as the acting manager it became apparent to me that the structure of that branch didn't allow for the development of a strong industry focus, which is what the ministry's strategic plan was about at that time, and also it was impeding necessary system and legislation improvements to the REVS service. That led to a review of the branch and the creation of three new branches, namely the travel industries branch, service industries branch and the REVS branch. From there, in February 1995, I returned to the position of manager of the REVS branch. You held that until about November 96, I think?---That's correct, yes. At that point you became the manager of the newly created finance industry branch?---That's correct, yes. The areas of responsibility in that branch, you might remind us?---Register of encumbered vehicles, bills of sales registration system, consumer credit, including the licensing requirements under the Credit Administration Act and the finance-broking industry. Was this effectively the first involvement you had in the finance-broking industry?---That would be correct, yes. The only point I would make, I didn't actually assume management responsibilities for that area until February 1997, even though the branch itself was created around November 1996. 1/48/rmo 48 G.P. BUCHHOLZ XN 12/6/00

Right. I think at some point you became the registrar of the Finance Brokers Supervisory Board?---That would be correct, yes. When was that?---I can't remember the exact date but it would be around February, March of that year. 97?---Of 97, sorry, yes. That was around about the time you became the manager of the - - -?---That's correct, yes, of the branch - - - finance industries branch?---yes. When you took on the position of registrar of the Finance Brokers Control Board did you undertake any additional training?---No, other than, you know, obviously the normal on the job training. So effectively you came to it cold?---Yes. And had to learn as you went along?---That's a fair comment, yes. Did you - well, let me finish your curriculum vitae. How long were you in that position of manager, first, of the finance industries branch?---I occupied that position from November 1996 to December 1998 when I moved into the policy officer position in the then housing branch. In respect of your position as registrar of the Finance Brokers Control Board, how long did you stay in that position?---I think that was relinquished around January of 1999. So shortly after you made the move into the housing branch?---Yes, that's true. What functions did you perform as registrar of the board?---Well, the main function I performed was with respect to issues directions to appoint inspectors to make investigations for inquiries and if a matter proceed to inquiry I would be responsible for signing the summonses on behalf of the board requiring attendances at inquiries and those sort of matters. So I saw it as effectively a bit of an administrative type role. On what basis did you make decisions as to when you would issue a direction to a registrar? Did you have guidelines?---To an inspector? To an inspector, I'm sorry, yes?---Well, really, I mean, when a complaint matter came in a file was created. It would be referred or allocated to an inspector who would do a preliminary assessment of the complaint matters and 1/49/rmo 49 G.P. BUCHHOLZ XN 12/6/00

if the assessment was that the matter required further investigation, at that point in time they would seek a direction from me. When they did that - let's take it a step at a time. They would come to you and they would say, "Look, we have received a complaint. We have done a preliminary investigation. We need direction to go any further." What criteria did you apply as to determining whether or not a direction should be issued?---Well, they just gave me a brief summary of the facts of the matter and a decision was made from there. So, I mean, in effect, if the inspector told you that he thought this thing should be further investigated, you would give him a direction?---Yes. So you exercised no independent assessment?---Not to any great extent, no. Did you ever not issue a direction when asked?---I don't recall so, no. In effect that process was really a rubber-stamping exercise for the investigators, was it?---To a large extent I think that's probably a fair comment, yes. What other functions did you perform? You have told us about issuing directions, you have told us about signing summonses to attend before the board, and again, that task, that was a task which was effectively - - -?---An administrative task. - - - an administrative thing, that if somebody said, "We need X," you signed the summons?---Well, that was the outcome of obviously the investigation and the matter being put through legal officers for assessment and agreement to proceed to inquiry, yes. What other functions did you perform as registrar? ---There are a number of other functions under the act itself, but apart from maintaining - the keeping of registered licences and holders of business certificates and the like, I took no other formal action. Did you see yourself as having a role beyond a purely administrative role?---As the registrar, yes, but bearing in mind, of course, I was also the manager of the branch itself, which I saw as being a separate role. I think we need to, if we can, try and dissect it - and I appreciate that sometimes you didn't look upwards to see what hat you were wearing when you took a step, but can I ask you in relation to registrar, what did you perceive to be your responsibilities beyond the mere administrative functions that you have indicated?---Well, 1/50/rmo 50 G.P. BUCHHOLZ XN 12/6/00

essentially I acted under the direction of the board and carried out those statutory powers and responsibilities to assist them in carrying out their functions. Did you as registrar exercise any independent review of the operations of the board and perhaps more broadly the operations in the industry and what was happening out there?---No, not as the registrar; no. You saw no responsibility on your part of taking an overview of the industry?---No, I saw that as more being a role as the manager. THE CHAIRMAN: Of the who, sorry?---Sorry, the manager of the whole branch, not just the registrar of the - - - Finance Brokers?---Finance Brokers. MR CHANEY: Which in this case happened to be the same person, you?---Well, exactly, yes. Yes, but I appreciate I'm asking you the questions and I appreciate you are distinguishing between the two roles. THE CHAIRMAN: Excuse me, as registrar did you attend every board meeting?---No. I attended every board meeting, but not in my view as the registrar. I attended as the manager to deal with general administration matters pertaining the operation of the board. Thank you. MR CHANEY: Can we have a look at your role then as manager? What did that involve?---Well, I saw it as being the link between the ministry and the board in respect to those general administration matters and also matters of policy, and in that role I did, as I mentioned before, attend part of the monthly meetings of the board. When you mention "policy", what was your role as manager in relation to the policy of the board?---Policy I'm talking about in the sense of legislative reviews, dealing with exception applications or the processes for exception and those types of matters. How did these policy issues arise? Were they things that you as manager would say, "We had better have a look at this," or was it all external input into that sort of policy review process?---It depends. I mean, obviously some were and some weren't. Certainly with respect to the review that was established when I commenced in the area. As far as exception processes - - - The review, you're talking about - - -?---The review of the legislation itself or the regulation of the industry, yes. 1/51/rmo 51 G.P. BUCHHOLZ XN 12/6/00

That's the industry reference group review?---Yes, that's correct. So that was under way when you started?---Yes, but other matters like - I can recall the matter of the exception. That was a particular issue at the time and - identify that there's a need to put in place some sort of policy for dealing with exception applications and setting guidelines and setting up a system where we can monitor compliance with those conditions. What exactly - well, I will withdraw that. When did that happen?---That would have - putting a time on it, I would say it would have been probably some time in the latter part of 1997. Can you just explain the process that that exceptions issue underwent? How did it arise and how did you deal with it?---The problem was that there had been an increasing number of applications for exceptions from the requirement to be licensed under the act and that essentially arose initially, I think, out of the downsizing, if you like, of banks and a lot of bank employees were applying to be excepted for the purposes of carrying on agency agreements with lenders and the like. I had found that previously, whilst exception applications were granted, there was no actual system for recording those exception applications. So that was something you sort of - - -?---The process, yes. - - - became concerned about, or was it conveyed to you by the board that this was a problem?---The board had a particular view that it didn't support the granting of exceptions, but as part of the acceptance that the minister had a role in doing so, one of the principal concerns they did raise was the fact that there was no system for policing compliance with the conditions of those exceptions. THE CHAIRMAN: Did you put the exceptions up to the minister?---They went up through - they were actually drafted by a policy officer and then processed up through the system to the minister's office. A policy officer from the ministry?---Yes. And the board - - -?---They made the recommendations to - when applications were received - again, prior to my involvement the board wasn't involved in considering these applications, and again that was one of the things they requested, was to receive copies of the applications so they could comment on the applications and have those comments considered by the minister in determining whether to grant an exception. 1/52/rmo 52 G.P. BUCHHOLZ XN 12/6/00

This exception business became quite a thing at the time, didn't it?---Yes, it did. The board generally opposed the idea?---Well, they had a view that it was seen as a means by which operators could circumvent the need to be licensed. Yes?---But the contrary view was that these people didn't have funds - we're obviously talking about these mortgage originators. Yes?---They didn't handle funds and therefore it was quite a legitimate process to apply for exception on the basis that there was no risk of defalcation. Mind you, there were a lot of conditions attached to the granting, such as professional indemnity insurance and also an indemnity from the actual lender who they had a contract with. So there were a lot of restrictions that applied to the granting of those exceptions. DR NEWMAN: So your people who had exceptions had professional indemnity insurance, but as I understand it from previous evidence, the finance brokers who were licensed under the act did not have professional indemnity insurance?---That is correct. MR CHANEY: So in any event, you as manager identified the question of a lack of any register of exceptions as an issue for the industry?---No, I think - well, indirection, because obviously the industry itself also viewed, I think, mortgage originators as being a sector which competed with them but weren't required to be subject to the same restrictions and costs as they were. Yes?---So obviously that was an issue for them too in terms of if these were granted to make sure that they did actually comply with those conditions. Right. So that was actually - - - THE CHAIRMAN: But wouldn't they have greater costs? ---In what - - - Well, if they had to have professional indemnity - - -? ---Well, the industry's view was that because they weren't required to go through a process of having to be qualified to be licensed and pay fees and those types of things, yes. MR CHANEY: Provide a bond?---Well, of course. They weren't required to provide a bond, yes. THE CHAIRMAN: How much was it, by the way, the professional - - -?---From memory, I think it was about 250,000. I'm only going from memory there. 1/53/rmo 53 G.P. BUCHHOLZ XN 12/6/00

Yes. It was certainly different to 50,000 bond? ---Considerably, yes. So, I mean, you could argue that in some respects the exception process was more onerous than the licensing system, to some extent. Yes, you could, and what did the board think about that, the professional members of the board?---They certainly supported those sort of restrictions being imposed, of course. What about on themselves?---What, on the licensees? Yes?---Well, I don't recall any comments being made about that. No. Thank you. DR NEWMAN: What about the other board members who were not finance brokers, did they make any comment?---I don't recall any. Or make you make any inquiry on their behalf as to whether or not it would be preferable to have PI insurance rather than a bond?---No, the issue of professional indemnity insurance for licensed finance brokers was never raised as far as I can recall, other than as an outcome of the reference group deliberations. THE CHAIRMAN: It follows, doesn't it, that professional indemnity insurance would be more expensive than the bond of 50,000?---I can't really comment on the comparative costs, I'm sorry. Very well. Thank you. 1 o'clock. 2.15? MR CHANEY: Thank you, Mr Chairman. THE CHAIRMAN: We will adjourn.

____________________ 1/54/rmo 54 G.P. BUCHHOLZ XN 12/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Mr Buchholz, we were talking prior to the break of the division of responsibilities between the registrar on the one hand and the manager of the finance industries branch on the other. Ms Brazier said the other day that she thought the role of registrar involved somebody who had some working knowledge of the industry. Do you agree with that?---No, not entirely. I would tend to think that that would be required more of my role as the manager. Responsibility for direction of individual complaints, whose responsibility is that?---Well, that can be obviously either the board or the registrar can direct an investigation, but I see it as more of an issue of understanding the legislation perhaps more so than understanding the industry, I would think. In terms of the actual direction in the sense not of a direction under the act but monitoring which way investigations were going and how they're being handled and so on, where did responsibility for that lie?---Well, that was - there was a supervisor in between my position as manager and that was essentially a function of that supervisor, who also was a deputy registrar of the board. Who is that?---That was Chas Fitzgerald. So he was there. Was it his responsibility to take an overview on investigation matters?---His role was to supervise that function in the sense of any issues arising out of the investigation would come through him. What was his background?---He actually was the registrar for many years of a number of the licensing boards when they were actually part of one branch. What were his qualifications?---I can't - - - You don't know?---I don't know. I'm pretty sure he does have a qualification but - - - Sorry?---I'm pretty sure he does have a qualification but I'm not sure what it is. Not what it is and whether it's in the area of investigation in particular?---I wouldn't think so. The general question of responsibility for overview of the industry, where in the structure as you are familiar with it did that lie?---That lay with the manager, because the manager had a strategic responsibility to deal at a strategic level of issues and matters affecting those particular industries. 1/55/rmo 55 G.P. BUCHHOLZ XN 12/6/00

Where did the board fit in in the strategic area? Did it have any role in relation to taking a strategic view of the industry or was it simply in effect a policeman or a court - a judge?---Well, the board certainly was part of the reference group which was formed to undertake that overall review of that industry. Yes, but I'm asking you about the general situation. Forget the reference group which was a one-off thing? ---Right. In the ordinary operation of the board and ministry what role did the board play, if any, in the strategic overview of the industry?---I would expect as part of that regular meeting it had with the board that any issues that they were concerned about in that context they would raise with me. Was your experience that they did raise such issues? ---Well, certainly, you know, in respect to issues such as exceptions which I have touched on previously, the review of the legislation. THE CHAIRMAN: When they raised the question of review of the legislation with you what did you do?---It was more in the context of the work with the reference group. By the time I became involved the reference group had already been set up and therefore the process was in place to review the regulation of that industry. So they weren't raising specific issues with respect to the past views they had on the efficiency or effectiveness of the legislation because obviously that had been superseded by the establishment of the reference group, but I was aware that they had raised concerns about the legislation over a number of years in their annual reports. Did anybody - you see, we have heard evidence which you're well aware of that these concerns had been raised by the board as to the amendment of the act in various ways and nothing even today has happened. We have got a code of conduct mentioned, but that's not a part of the act. Can you give us any explanation from your experiences as to why nothing has happened in over 20 years?---Well, no more explanation than I think what has been given, that it often comes down to a question of priorities, and that can be both within the ministry and also government priorities. The reference group completed its report at the end of 98 which was then tabled and obviously these other issues have sort of overtaken it to some extent and there were some interim measures put in to try and give effect to some of the improvements, but I have got - I can't say exactly where the current problem arises or (indistinct) because now there's a special task force which is looking at managing the finance broking area. 1/56/rmo 56 G.P. BUCHHOLZ XN 12/6/00

It's just that 20 years is over various governments. Is it fair for us to say that it had a pretty low priority? ---I guess that's for others to comment on, because I was only involved for that period of time. Thank you. DR NEWMAN: Mr Buchholz, as the manager and the registrar did you ever sit down and write out what you saw the major problems were and what you felt could be done to correct them?---No, but I was part of the reference group, so as part of the reference group we worked through those sorts of issues. But as the manager you didn't actually become pro-active in setting up a list of things you felt needed addressing, how you thought they would be addressed and perhaps raising them with your director?---Well, not - because as I said, the actual - from my point of view you had in effect a process for doing the review of the regulation of the industry, so I think that was adequate at that time. Thank you. MR CHANEY: I want to ask you about the annual audit certificates required under the act. When a broker sent in audit certificate, and let's assume it was a clear audit certificate?---Unqualified. Unqualified, yes?---Yes. What happened to it?---They were simply placed on the relevant licensing file by the secretary of the board. The secretary of the board, that's not a statutory position, is it?---No. That's just somebody appointed by the ministry?---Well, I mean, obviously certain positions are appointed to enable the board to carry out its functions, but it's not a statutory position like the registrar. No. So there was a person within the ministry who was designated to act as secretary to the board, take the minutes and so on?---That's correct. That person also maintained the registration or the licensing files?---That person was also the licensing officer as well, yes. In your time was that a he or a she?---It was a he. 1/57/rmo 57 G.P. BUCHHOLZ XN 12/6/00

A he, right. So he would receive these certificates - who was it? I may as well - - -?---Peter Wiper. Peter Wiper. Right. He would receive the certificates and if it was unqualified then they would be placed straight on the file?---That's correct. Was there any review of the documents that came in with the covering letter? The standard audit has four things that - - -?---The information really is just simply whether they have complied with the requirements that the act requires of the auditor to comply with. I mean, it's just a statement really, so you couldn't glean any information out of it as far as whether there's some issue there. No, but there were a number of documents. Are you familiar with the audit papers that come in?---I can't recall them at this stage, no. All right. There is a letter which says that the following things have been checked, which are the statutory requirements, then there is attached to that a statutory declaration as to the balances, as at 31 December in the year of the audit?---Okay, yes. Are you familiar with that style of document?---No, I wasn't; no. Do you know whether in filing those documents any critical review would be made of the accompanying documents with the letter which on the face of it was an unqualified audit?---Well, I would say that the answer would be no. So it was a mechanical process really?---Yes. Just is there anything in the A, B, C or D which amounts to a qualification?---Effectively, yes. DR NEWMAN: With the unqualified audit reports if there was a complaint against a broker did anyone go back and have a look at the audit report and see whether or not that matter had potentially been dealt with or raise a query with the auditor as to whether or not anything had occurred in relation to their audit that could perhaps have required a qualification?---I'm not aware of it, but obviously if it relates to an audit query I would have expected that the inspector would refer to the licensing file to ascertain whether there had been any previous comment about that particular issue. Then when the following audit report came in, if that was also unqualified, bearing in mind there had been complaints during the year, would anyone look at that unqualified audit report in a critical review to see 1/58/rmo 58 G.P. BUCHHOLZ XN 12/6/00

whether or not that matter had been dealt with or whether it should have been dealt with?---Not in a structured way, I don't believe, no. MR CHANEY: So that's unqualified audit certificates. When there's a qualified audit certificate what is the process?---The process that we adopted in the finance industry branch when that issue arose was to utilise the services of a Stewart Dowling, who was a Fair Trading officer in the motor vehicle branch of the directorate at that time. He had a bachelor of business management and is a certified practising accountant and he was previously employed with the then Corporate Affairs Department and the Australian Securities Commission as a senior financial analyst. So he was considered a person appropriately qualified to examine those reports. How often did that happen in your time?---Well, I was only there for one audit reporting period, which is obviously the end of 1997, and to the best of my recollection there was only one qualified report that came in and that was the action that was taken. And that was which broker?---I cannot recall. I actually tried to find that but I couldn't find it. I spoke to Mr Dowling. He recalls having to do one, but again, he couldn't recall the specific matter. So what did he do with it?---He examined it and put a report to the board. You don't know what came of that?---I'm pretty certain that it wasn't an issue that required any further action. See, part of the process was that he would liaise with the auditor and maybe the broker to find out further information about the particular query and often they can be clarified that way. With respect to those brokers who don't have active trust accounts in the period under audit, there's an alternative procedure of statutory declaration?---Yes, statutory declaration. Did you have any idea in the period you were there as to the relative number of brokers who availed themselves of that facility, namely filed a stat dec saying they didn't have trust funds in the relevant year?---Not exactly, but I believe they made up the majority of applications received. What sort of majority?---A fairly significant one. Well, you know, I would say probably around 80 per cent, I think, and that's only going from memory. I want to ask you about a couple of items of evidence. The first one is exhibit 91 which is a memorandum to the 1/59/rmo 59 G.P. BUCHHOLZ XN 12/6/00

Finance Brokers Supervisory Board of 2 October 1997 from Gary Wallace. You have seen that document?---Yes. You have seen that document?---Yes. That concerns a problem with over-valuations of blocks in Collie by Ron O'Connor?---Yes. Were you aware of that memo at the time that it was apparently given to the Finance Brokers Supervisory Board?---No, I wasn't aware of that and I checked my personal records which show I was on annual leave from 30 September that year to 16 October. Mr Chairman, I had some minutes of meetings in October 97 and November 1997 of the board but I think I have left them out of court, unfortunately. I wonder if I might have a quick break, because I think it just completes the picture if I can locate those, I'm sorry. THE CHAIRMAN: Yes, certainly.

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THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. I apologise for that delay. Mr Buchholz, it seems that this memo was considered by the board at a meeting - in fact two meetings. Can I show you these minutes? The first is 8 October and I think you have told us you were on leave at that stage? ---Mm. I think it shows that Mr Wallace's memo is 2 October. If you would turn to what is page 9 of the minutes. These are just extracts from the total document. There's reference to the fact that Mr Fitzgerald and Mr Wallace attended for discussions and I take it Mr Fitzgerald would have attended in your absence on leave?---That's correct, yes. The board noted the report, halfway down the page, in relation to Brown and Grubb?---Yes. DR NEWMAN: Did you say page 9, Mr Chaney? MR CHANEY: Yes. DR NEWMAN: It's out of order. MR CHANEY: Is it? THE CHAIRMAN: I have got 8 and then I go to 11. MR CHANEY: 8 October is the meeting. It was on the top of the pile of the one I had but I - yes, there are only two pages from these minutes of 8 October because I haven't copied the other intervening pages which aren't relevant for present purposes. So it's the second page which has 9 at the top. THE CHAIRMAN: What date did you say? MR CHANEY: 8 October. THE CHAIRMAN: It's not on this page though? MR CHANEY: No. These things aren't stapled. THE CHAIRMAN: I see. 10 September. MR CHANEY: Yes, there's a - - - THE CHAIRMAN: I see, right. MR CHANEY: What I have given you is the first page of the minutes which just shows who is present at the meeting and who the apologise were and then the second 1/61/rmo 61 G.P. BUCHHOLZ XN 12/6/00

page in that bundle is actually page 9 of the minutes but I haven't included all the other pages and it just is the item dealing with this issue. The upshot of the consideration of that report is that the matter of independent valuations be on the agenda item for the next meeting of the board, and then the other extract of the minutes of the meeting of 12 November 97, which was the next meeting of the board - Mr Buchholz, that would be right, would it?---That's correct, yes.. Show on the second page in the bundle, which is actually page 8 of the minutes, that you were present with Mr Wallace for discussions on investigations and general matters. See that?---Yes. Do you remember being present at that meeting?---Not particularly, but I don't dispute the fact that I was. Yes, and then item 5.7 over the page there's reference to the question of independent valuations:

The board are concerned that several matters under investigation involve valuations being obtained by the broker which do not reflect the true valuation of properties secured by first mortgage. The board has asked that an article be included in the next newsletter recommending that brokers on behalf of the lenders should seek independent property valuations prior to advancing funds.

Now, that item, 5.7, is, is it not, a discussion following on from the earlier meeting arising from the Brown and Graeme Grubb memo by Mr Wallace?---Well, I can't recall it specifically but I accept that it's likely that would be, yes. Do you have any recollection at all of the discussion in relation to this issue?---No, I don't. Were you aware in late 1997 of concern about over-valuations in the industry?---Well, I was aware of certain matters involving the issue of over-valuations, in particular the matters involving Gamel Ward, Ron O'Connor and blocks in Collie. Those ones I do recall. All right. These involved blocks in Collie, Ron O'Connor, but Grubb, apparently?---Well, I'm not sure they all do relate to Grubb. I'm sorry, the memo from Mr Wallace relates to that? ---Yes. I think the matter he refers to perhaps does relate to Grubb, but I'm not quite sure whether the other blocks he's referring to in his memo do. He talks - - - DR NEWMAN: Mr Buchholz was there any consideration given to trying to run some articles or seek some media 1/62/rmo 62 G.P. BUCHHOLZ XN 12/6/00

assistance in alerting lenders to the fact that they should consider whether or not the valuations that are being submitted to them are something they should be reviewing and perhaps seeking independent advice?---The issue at that time was that the view was that there were only a very small number of matters involving that issue and that this article that subsequently - which I assume Mr Chaney may refer to next - in the newsletter was more as a means of a general warning to he broking industry that if it was a practice, that it's a matter the board is going to be monitoring, but we certainly didn't believe that there was any evidence of any sort of significant problem in relation to over-valuations at that time. THE CHAIRMAN: Did anybody suggest that they call the broker up and have a talk to him about these valuations? ---Well, they were subject to - are you talking about the broker or the valuer? Well, both for that matter?---The broker was subject to investigation, if it's the ones I'm thinking about. MR CHANEY: Gamel Ward?---The Gamel Ward ones, yes, and the matters also were referred in terms of the valuations to the Land Valuers Licensing Board which is the appropriate board obviously to deal with those matters. THE CHAIRMAN: Thank you. MR CHANEY: This clearly arises in relation to the memorandum concerning group, not Gamel Ward?---I appreciate that, yes. Because it flows through?---But he refers to a number of other ones there, and as I said before, the only matters I can recall in relation to those valuations at Collie were Gamel Ward and Ron O'Connor matters. In any event, you have no recollection that the board did anything more than resolve to put the notice or an article in the next Finance Brokers News?---That's correct, yes. I tender the extract from the minutes of 8 October 1997. THE CHAIRMAN: This is 111, I think, from memory. MR CHANEY: 112. THE CHAIRMAN: 112. EXHIBIT 112 Extract from minutes of 8 October 1997 MR CHANEY: I also tender the extract from the minutes of 12 November 1997, and I might point out. Mr Chairman, 1/63/rmo 63 G.P. BUCHHOLZ XN 12/6/00

that there is also an item of late business at the foot of page 11 which is of interest and I propose to deal with it. THE CHAIRMAN: Just a minute. The extract is 113. That's the meeting of 12 November? MR CHANEY: That's 12 November, yes. THE CHAIRMAN: Yes. EXHIBIT 113 Extract of minutes of meeting of

12 November 1997 MR CHANEY: I was just going to point out - - - THE CHAIRMAN: Yes, we have noted that. MR CHANEY: Yes, the reference to clients. Perhaps I should ask you about that, Mr Buchholz, before we leave those minutes of 12 November. Do you have those in front of you? Do you see reference there in item 7.1 to the code of conduct and the board discussing the term "client" or "clients"?---Yes. The purpose was to clarify whether the term related to that person being a borrower or a lender?---Yes. Was that a new issue? It arises as late business at this meeting. Was that something new that emerged at that time in November 1997 or is it an issue which had been around for some time?---Well, I actually thought - sorry. MR ..........: Sir, just in fairness to the witness, his evidence so far has been that he attended part only of meetings and there's no evidence, as the question, I think, assumes, that Mr Buchholz was present at that part of the discussion, so perhaps that should be dealt with first. MR CHANEY: I'm happy to ask him that, Mr Chairman. THE CHAIRMAN: Yes. MR CHANEY: Were you present - and perhaps you need to look at the whole of the minutes?---It's unlikely. I don't recall the issue and my attendance is unlikely, given that it was a late business item, because I invariably was gone well before the end of the board meetings. The minutes record at the bottom of page 8 - that's the reason that's included - that you attended with Mr Wallace for discussion on investigations and general matters. You don't know whether this is a general matter 1/64/rmo 64 G.P. BUCHHOLZ XN 12/6/00

or are you saying you - - -?---Well, I don't recall the matter, and as I said, it would be unusual - if that was the last item on the agenda it would unusual for me to be in attendance. Accepting that and that you may not have been at this meeting, were you aware in late 1997 of there being an issue for the board and for the ministry in relation to this question of who constituted the client?---My recollection is that didn't become an issue until early 98 when these matters I think involving Gamel Ward were put forward to the legal officer for consideration of inquiry and one of our then legal officers raised the issue as to whether the investor was the client or the broker. Who was that?---I believe it was Bronwyn Davies-Taylor. So you became aware of that issue then?---Then. Perhaps if we can pursue that for a moment, we have seen evidence that the issue came to be determinative of a number of complaints, and that was occurring whilst you were registrar?---That is correct, yes. Were you aware of the issue being a live issue affecting the investigations in respect to a number of complaints? ---Yes. Was that a matter of concern to you as registrar of the board or as manager in the area?---It certainly was. So what was done about that issue?---Well, another legal officer at the time, I think, who came on not long after, Robert Castiglione, actually drafted a suggested amendment to the board's code for the purposes of addressing that issue, and that would have been around early 98 anyway, and that was tabled at the board meeting. The board, as I think the minutes will reflect, chose not to pursue that amendment, I think principally because the act was under review and they preferred to wait until such time as the outcome of that review was known. That was my recollection. Yes. That was some time in the first half of 1998?---I believe so, yes. The reason for that was because of the review which was then under way?---That's my understanding, although obviously I would need to confirm that in the minutes of the board's meeting. Yes. I'm just looking for - - -?---And I also do recall it was an issue that was included in the board's annual report. 1/65/rmo 65 G.P. BUCHHOLZ XN 12/6/00

For which year?---Well, that would be 97-98, I would think. We will find those minutes in due course, I think. I think you have mentioned the fact that an article did subsequently appear in the Finance Brokers News in June of 1998?---Mm. That was as a result, one assumes, of the resolution in November 97?---I believe so, yes. What's the explanation for the 7-month delay in publication? Is that just the infrequency of publication of that document?---Well, I mean, we were intending to publish it twice a year, but, you know, other issues sometimes come in over the top of it and may delay the publication. But with that particular one I can recall that Gary Wallace was actually the person who was responsible for preparing that publication and I think they are reflected in the minutes too, one of those of November or December. Yes?---It may be that part of the problem was that he around that time left the directorate and went to work in another area of the ministry. So that may have been a contributing factor to the delay. So the only consequence of Mr Wallace's memo of November 1997 - sorry, 2 October 1997, exhibit 91, was publication 8 months later in the Finance Brokers News, so far as you're aware?---I believe that would be correct, yes. There was also an article in that edition of the Finance Brokers News concerning problems with the - it's entitled Broker Exposes Mortgagee to Risk - do you have a copy of that there - which relates to the risk of delay in registration of a mortgage. Do you know what the genesis of that article was?---Well, I think it was a matter under investigation. Do you know which matter?---Not off the top of my head, no. Or which broker?---No, sorry. I could probably identify it through those status reports but I couldn't off the top of my head. Was that something that you were conscious of as a problem in the industry?---No, I thought that was just a particular issue and I thought it was the basis of a good article. You thought whatever this complaint was was pretty much a one-off issue?---I think it was a one-off issue, that I can recall at that time anyway. There may have been other cases but I don't recall it. 1/66/rmo 66 G.P. BUCHHOLZ XN 12/6/00

How would one track that back through Mr Wallace? Was he the author of this document?---He would have been the author of most of these articles bar the one on the reference group consensus - you know, the original author, but they would have been obviously edited. THE CHAIRMAN: Mr Buchholz, at this time these articles appeared, 8 months later, as you say, in a circular - which was an industry document, wasn't it?---Effectively, yes. Was there any consideration given to some sort of publication or some investigation to advise the lenders to be careful with valuations, etcetera?---It was a matter at the time that the issues, as I mentioned before, were not considered to be a problem in terms of the number of these things happening, so that was a judgment made at that time. Well, then tell me, next question, when did it become - to your notice, you only, that there was a problem in the industry generally?---With respect to what in particular? Valuations, non-payment and the cause for what we are now investigating?---I believe really these matters started emerging late in 1998. So as far as you are concerned they started emerging then?---Well, that would be my recollection, yes. Yes, and you were attending board meetings at that time, from time to time?---Yes, I actually left about the end of November but I did attend at least one board meeting after that time. But when I say they were emerging, they were emerging through a couple of matters under investigation. There had been no outcome to that investigation at the time. MR CHANEY: They were emerging, weren't they, from the increasing number of complaints that were - - -?---No, not at all. I mean, there were very few complaints in relation to that particular period of time. In late 1998?---1998, in total, from my recollection, if you took out the complaints involving mortgage originators - you know, the claim about them being unlicensed traders, and complaints involving Graeme Grubb, which is another issue, there were about seven complaints against finance brokers for that whole year. What was the issue in respect of Grubb?---The issue? Yes. When you say it was another issue, getting complaints in relation to Grubb?---Well, that was a matter that had been developing throughout 1998. There 1/67/rmo 67 G.P. BUCHHOLZ XN 12/6/00

had been a number of complaints in relation to late payment of interest. Yes, but no valuation issues, for instance?---No, not as far as I can recall. Did that excite the board at all that there were late payments of interest and/or valuation problems? ---Certainly with the Grubb matter. I mean, the outcome of that was that the board actually ordered a special audit. MR CHANEY: I think the outcome of that, was it not, that they called Mr Grubb in?---No, they ordered a special audit of his trust account and they also called him in and he excused himself because he had an accident or something, I believe, is my recollection. DR NEWMAN: The special audit, who was that carried out by, his existing auditors or someone brought in independently?---Yes, it was at the time when the annual audit was due so it was considered to be appropriate to include the special requirements of that audit be done in conjunction with the normal audit. So it was done by his usual auditors?---That is correct, yes. MR BLIGHT: So just to pursue that a little bit, it was done at the time of the normal audit. When you say the "normal audit", a normal audit would be expected to cover all of the problems of a trust fund, would it not? ---Well, I'm not qualified to advise as to how a qualified auditor carries out the audit, but what the board request was, it specified particular transactions they wanted the auditor to actually look at. So they added that to the normal requirements of the audit?---Yes. Exactly, yes. DR NEWMAN: But when they did that special audit there was no report on the fact that there were problems reconciling the trust account?---I don't know what the outcome was because I had left by the time that audit came in. MR CHANEY: Yes, I think just looking at the chronology - and the minutes will be tendered in due course - on 11 November 98 the board resolved to have a special audit of Grubb following 19 complaints between 7 November 98 and 15 October 98. DR NEWMAN: Can you clarify that date, Mr Chaney? I thought you said June.. MR CHANEY: November. 1/68/rmo 68 G.P. BUCHHOLZ XN 12/6/00

DR NEWMAN: November, thank you. MR CHANEY: 11 November, the board meeting. MR BLIGHT: Between 11 November and what date? MR CHANEY: The dates of the complaints were between 15 October and 7 November, according to my note. I must say, I'm assuming this chronology is correct, but I typed it myself and it may not be. We will check the minutes in due course or in the fullness of time. It's then noted that on 21 December a letter was written to Grubb's auditor requesting that special audit. 21 December. Would you have written that letter? Was that your responsibility?---No, the inspector, I think, drafted the letter. The inspector?---Mm. Who was the inspector?---Inspector Jack Willis. Willis?---But that would have been discussed at the board meeting as to the requirements of the special audit. Yes, all right. Were you involved in that process in any active way; that is, the process of arranging the special audit of Grubb?---I mean, obviously I was part of the discussion at the board meeting on what was going to be done about it, but that would be about it. I mean, I would have seen the draft letter before it went out. You left just shortly after that?---I left at the end of November that year, yes. So that was before the special audit had even been requested?---Yes, but I still attended the board meeting in December, yes. DR NEWMAN: You said earlier Mr Dowling reviewed the qualified audit reports and made a submission to the board. Would he have been involved in this request? Would he have in fact done any of the work that related to the review of the Grubb situation?---Not to my recollection, no. Thank you. MR CHANEY: So apart from the Grubb incidents which were responded to in that way, is it your position that you had thought that all of the other complaints that had been coming through were simply isolated?---Well, I don't think they were indicative of any widespread problems. 1/69/rmo 69 G.P. BUCHHOLZ XN 12/6/00

You were involved in the complaint by Mrs Searle in the latter part of 1998, weren't you?---Yes, in the sense of dealing with correspondence; yes. And attending some meeting?---A meeting, yes, true. With Mr Mitchell and Mr Rowe?---At the minister's office, yes. At that meeting Mrs Searle expressed concerns about the nature of Global's operations, I think?---Well, in relation to her own complaints, yes. Did she not put her complaints in a context that she was concerned because she had got out but others were going in and there was the endemic problem?---I think it's a fair comment that she believed there were those problems in existence, yes. She forcefully put those views to you and others - Mr Mitchell and Mr Rowe at the minister's office?---I think that's a fair comment, yes. She was agitating over those months of September and October 1998 for activity in relation to Global?---Well, I think it was more in relation to having her matter put before the board. Yes, but did you not understand the basis of her complaint to be that she had a deep-seated - I withdraw that - a concern about a deep-seated problem?---I accept that - - - MR ..........: I'm sorry to interrupt and it may be that I'm in error in doing so, because I wasn't present for the evidence of Ms Searle, however, I must say that having read some of it, my appreciation was that in cross-examination by Mr Allanson Ms Searle accepted Mr Allanson's proposition that the concerns expressed related to her complaints and her recovery of money rather than being of the broader character that Mr Chaney is now putting it. THE CHAIRMAN: Thank you. Mr Chaney, I'm not too sure - - - MR CHANEY: As my questions have indicated, I can't say that's my recollection. THE CHAIRMAN: No, not the board's either - not the committee, I beg your pardon. DR NEWMAN: My recollection is Ms Searle was concerned that there should be an inquiry because she felt there was an overall problem and that her complaint would 1/70/rmo 70 G.P. BUCHHOLZ XN 12/6/00

direct the board's attention to the need for much wider action. MR CHANEY: Yes. I'm looking at part B of her submission which contains a chronology and the entry in relation to this particular meeting reads:

Verbally reiterated our concerns raised in document under the heading Summary, pointing out GFG was continuing to broker loans, advertise and take on new investors, including replacement investors, into loans we had voluntarily or involuntarily been withdrawn from.

She refers to a letter to the minister of fair trading. Perhaps it might be fairer if I put that squarely to the witness so that he can say whether that's his recollection, but that is the evidence that is before the committee. THE CHAIRMAN: Well, fairer still, have you seen her evidence and your documents?---No. Well, I'm aware of it, but I certainly haven't examined it in any detail, no. Don't worry about time, Mr Chaney. We have got plenty. MR CHANEY: Yes. I'm wondering whether - and certainly I should say that I had sought to alert Mr Buchholz to the areas of my examination. This isn't one of them, but it came to me over lunch that there were perhaps some areas I should be asking him about in this respect. THE CHAIRMAN: Yes, because these involve letters that were not only to the - they went to the board, to the ministry. MR CHANEY: Yes, there was a bundle of - - - THE CHAIRMAN: And they're carefully set out. MR CHANEY: It may be that the most helpful way of getting this evidence out would be to give Mr Buchholz some material to look at overnight. Perhaps I can take him through the balance of what I have to ask him about, because I think it would be difficult for him to be given quarter of an hour now to look at material. THE CHAIRMAN: I agree. MR CHANEY: Otherwise he can look at it overnight and I can perhaps formulate my questions in a more ordered way as well. So I might, if that commends itself to you, Mr Chairman, and to the committee, proceed that way. Perhaps I should ask Mr Buchholz whether there's any 1/71/rmo 71 G.P. BUCHHOLZ XN 12/6/00

problem if he were to be required to come back in the morning?---I don't think so, no. As much as you would like one, I'm sure?---As much as I would like not to, that's right. THE CHAIRMAN: What is the program tomorrow? MR CHANEY: The position we have reached is that Mr Rossi will be giving evidence when Mr Buchholz is concluded. At that point I propose that we would should adjourn until Monday the 16th, because - - - DR NEWMAN: The 19th. MR CHANEY: Sorry? DR NEWMAN: Monday the 19th, isn't it? MR CHANEY: The 19th, yes, sorry. Anyway, next Monday, simply because the witnesses we had lined up I'm not ready to deal with, and in any event, we had problems with counsel and it was going to be a short week as it was. So there would be no trouble tomorrow in completing Mr Buchholz and Mr Rossi without inconveniencing other witnesses. THE CHAIRMAN: Mr Rossi will conclude tomorrow? MR CHANEY: Yes. Mr Chairman, there are some other areas which I want to address, so perhaps we can use the time this afternoon by just putting this to one side and limiting tomorrow to this issue. THE CHAIRMAN: Yes, certainly. MR CHANEY: Just one other matter in relation to Mr Wallace's evidence, exhibit 93. There is a further memo from Mr Wallace in relation to O'Connor dealing with some properties in Victoria Park and Maddington. Now, as at 22 May 1997 had you assumed - - -?---Yes. Yes, you had just - you had been a month or so - - -? ---Yes, a month or so there; yes. - - - as registrar and some months as manager. Do you recall seeing this memo?---No, I don't. Did you have any knowledge of the problem about valuations of these properties in Victoria Park and Maddington?---No. I mean, as I said, the only ones I recall in relation to Mr O'Connor are those matters in Collie. Yes, and they were the Gamel Ward matters in Collie? ---Yes. 1/72/rmo 72 G.P. BUCHHOLZ XN 12/6/00

So we have a situation where Mr Wallace appears to be repeatedly - I withdraw that. Mr Wallace on a couple of occasions, at least, is raising issues concerning over-valuations but you don't hear or know anything about them. It tends to suggest there's some sort of - if one accepts it's a problem that's there and Mr Wallace is aware of, there's some sort of communication breakdown in - - -?---Well, bearing in mind, as you mentioned yourself, that this particular memo you're now referring to - I had only been in the area for a month or so and I'm sure that would have been still part of that hand-over period from Will Morgan. In any event, that means, does it not, that there is some sort of communication breakdown, whether it's in the hand-over process or - - -?---Well, I would have expected that if Mr Wallace had particular concerns about this issue that he would have raised them with myself or with the director at the time, Jane Brazier, in these regular meetings that we had with him. And he never raised these issues?---Not to my knowledge, no. DR NEWMAN: Mr Buchholz, wouldn't you have thought it was reasonable that if the memo went to Will Morgan and he was handing over to you, that he would have in fact passed this matter on to you to deal with if he hadn't dealt with it himself?---If I recall, this is an actual memo to the land valuers - in relation to the Land Valuers Act, not the Finance Brokers Control Act. It's actually to Will Morgan and then it goes on to refer to the Land Valuers - - -?---Yes, but I - - - - - - Licensing Act?---Sorry. Yes, I would expect that perhaps he would have passed it on to the person who was responsible for the Land Valuers Licensing Act at that time. Even though the third paragraph says, "As a result of conducting inquiries under the Finance Brokers Control Act"?---Yes, well, I understand that, but the memo itself is obviously for the purposes of raising and bringing to the attention of the Land Valuers Licensing Board these issues. You don't feel that it would have been appropriate for someone who had a responsibility for the Finance Brokers Supervisory Board, in view of the comment on the Finance Brokers Control Act, to at least have been told about it and had an opportunity to deal with it?---I think that's a fair comment, yes. 1/73/rmo 73 G.P. BUCHHOLZ XN 12/6/00

THE CHAIRMAN: When you say it would have been handed to the Land Valuers Licensing Board, I'm not so sure if you read the whole memo - - -?---I'm only assuming that, because I haven't seen it. "At the time the board took the view the behaviour did not relate to land value and refused to hold an inquiry. As a result of inquiries under the - - -"?---He's talking about - - - - - - Control Act, I have found that on two occasions through valuations provided (indistinct) lenders of funds." Now, this is the Finance Brokers Act. "On both occasions Mr O'Connor has conducted a valuation. For example" - another example, then he talks about, "Seems to me sufficient information to warrant further inquiries for possible breaches of the code of conduct"?---Well, I'm assuming that's the land valuers code of conduct. DR NEWMAN: But there has already been inquiry by the board, or they have at least reviewed it. Why would there be comment about the Finance Brokers Control Act throughout it when it comes to the possible breach of the code of conduct? To someone like ourself it would seem to me that this is something that should have gone to the Finance Brokers Supervisory Board and been dealt with? ---Well, it may very well have gone, but the issue that he's - as I read his memo, he's referring to the issue of the over-valuations and the actions of Mr O'Connor who is a licensed valuer. But it had a direct bearing, as I read it, on people who lent money and therefore through brokers who would, I believe, be subject to the Finance Brokers Control Act? ---I accept that. I don't know the matters concerned and I think there may be mention of one - the Beckett one rings a little bit of a memory jog, but the others I certainly know nothing about. You don't know whose writing that is up the top?---No, sorry, I can't help you there. Nobody can?---It's certainly not mine. No; no. MR BLIGHT: But in any event, you're saying this report was addressed to Will Morgan. It's headed Land Valuers Licensing Act Code of Conduct?---That's right, yes. And you had taken up then, what, several months? You took up in that position in February 97, did you say, manager, finance industry branch?---Yes. I mean, obviously there was a hand-over period, but that's when I came back from leave, around that time. 1/74/rmo 74 G.P. BUCHHOLZ XN 12/6/00

If you had taken up at that time why would he address it to Will Morgan?---Look, I really can't answer that, because I don't recall ever seeing the memo and I have got no idea why he would have addressed it to Will Morgan. MR CHANEY: I think Mr Morgan's evidence was that he hadn't seen it because he wasn't in that position and it wasn't relevant to him. THE CHAIRMAN: What, when it was addressed to him? MR CHANEY: Yes. THE CHAIRMAN: Yes, that's right, because he didn't know - he thought the top had been - probably the land valuers - - - MR CHANEY: Yes, I think that he thought - he couldn't work out why his name was on it but it would have ended up going to land valuers. THE CHAIRMAN: But anyway, Mr Buchholz, you can't help us as to why a matter like that wasn't directed or brought to the attention of the Finance Brokers Board? ---Well, I mean, obviously if there were issues there that are potentially breaches of that act I would imagine that the matter should have proceeded through, but just looking at the files themselves, I would assume that the investigation had been completed before my time, or certainly very close to my time taking over, and what the outcomes were I'm not sure without being able to examine the files in question. Yes. It just seems so amazing when you read the third paragraph that nothing happened?---I do recall that there were some matters that went to the board around the end of 96, early 97, but I think they were matters, if I recall correctly, were the subject of appeal in relation to the board's decision to not hear matters because of a 3-year limitation period. Now, whether they are the matters, I'm not sure. MR CHANEY: Yes, the Gamel Ward matters?---Well, they might have been previous Gamel Ward matters, I'm not sure. In any event, Mr Buchholz, the point really of all of this, I think, from the committee's point of view, is the proposition that there seems to be a recognition from time to time from lots of sources of problems which exist which we now know to have seriously affected many people for large amounts of money and the real question is why wasn't this picked up in the system earlier than it seems to have been?---Well, it's a bit hard for me to answer that with a lot of these matters, I mean, in all honesty. 1/75/rmo 75 G.P. BUCHHOLZ XN 12/6/00

Yes, I think really what I'm asking is from your position as a former registrar, knowing the system and having seen it work - - -?---Well, my view is still that - - - - - - are there defects in it which might be remedied? ---In my view, I still say that the number of complaints that the ministry or the board received do not lead you to that conclusion. Accepting that's the case, it's not necessarily the number of complaints but what underlies them and what they may be indicative of that some would say was failed to be realised or recognised?---My view is that the judgment was that there wasn't that evidence to suggest that at that time. So in your view is there no improvement of the system which can be made which might avoid this sort of eventuality again?---I guess you have got to really look at what the issues are and whether the actual - whether it's the system or whether it's the legislation under which the system is established may be the question that needs to be looked at, and I think they're the issues that were considered by the reference group, looking at the types of potential risks there are. So again, your views in terms of the ultimate solution which in effect is a deregulated environment - - -?---Not in respect to private lenders. An alternative regulatory environment. Yes, and in what ways would that - that's a mandatory code of conduct under the Fair Trading Act - what ways would that provide, if it would at all, a superior regulatory regime?---Well, what it can provide for - and I'm not saying that necessarily the licensing system can't provide similarly in terms of some of these issues, but the crux that a lot of these problems go to is the lack of knowledge and understanding, I believe, of a lot of these private investors, and to some extent inaccurate information I think they were given. So one of the issues that the reference group had looked at is providing appropriate precontractual information for lenders so they can make an informed decision about whether that is a good investment to get into and the viability of the borrower and those types of things. Enforced through the mandatory code of conduct?---Yes. Mr Chairman, I think that's probably as far I wish to take things this evening. THE CHAIRMAN: Yes, just a moment. Yes, all right. Do you want to adjourn will 10.30 tomorrow morning? 1/76/rmo 76 G.P. BUCHHOLZ XN 12/6/00

MR CHANEY: Yes, thank you, sir. THE CHAIRMAN: We will adjourn.

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GUNNING COMMITTEE OF INQUIRY INTO FAIR TRADING BOARDS AND COMMITTEES MR I.R. GUNNING, Chairman DR D. NEWMAN, Member MR D. BLIGHT, Member TRANSCRIPT OF PROCEEDINGS AT PERTH ON TUESDAY, 13 JUNE 2000 Transcription by - SPARK AND CANNON PTY LTD 3rd Floor International House 26 St Georges Terrace PERTH WA 6000 Telephone: 9325-4577 3/1/rmo 1 13/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Mr Chairman, this morning I have been advised that Mr Quigley seeks to address the inquiry on behalf of Mrs Searle, the previous witness in the inquiry. THE CHAIRMAN: Thank you. Mr Quigley? MR ..........: Might I clarify one thing? THE CHAIRMAN: Yes, certainly. MR ..........: Sorry to interrupt Mr Quigley, but just to put on the record that the position as I put it in an objection late yesterday in relation to the effect of Ms Searle's evidence, I do not maintain that position. As I said at the time, it was based upon my flawed understanding of material which I have had the opportunity to review overnight, so that I just wanted to put on the record that clarification. THE CHAIRMAN: Thank you. Mr Quigley? MR QUIGLEY: Yes, Mr Chairman, good morning. I have received instructions and accepted instructions to appear here pro bono this morning from Mrs Searle. THE CHAIRMAN: Yes. Mr Quigley, before you proceed any further, I understand you're acting for Mr Grubb. MR QUIGLEY: I did give early advice at one stage in relation to Mr Grubb. I no longer act for Mr Grubb. It's not my intention to appear as an ongoing counsel in this matter. THE CHAIRMAN: Having represented Mr Grubb for some time, as I understand it, over a period of time, even though you're not ongoing counsel are you in any way going to be advising anybody who may appear? MR QUIGLEY: Here, sir? THE CHAIRMAN: Yes. MR QUIGLEY: No, sir. THE CHAIRMAN: I find it strange, Mr Quigley. MR QUIGLEY: Sir, the only purpose of my representation this morning - - - THE CHAIRMAN: Now appearing to just make a representation on behalf of an investor, having acted for Mr Grubb, I find difficult to comprehend, but still. 3/2/rmo 2 MR QUIGLEY 13/6/00

MR QUIGLEY: Certainly, sir. May I have the opportunity to explain that to you? THE CHAIRMAN: Yes. MR QUIGLEY: The only purpose of my appearance this morning - firstly, in relation to Mr Grubb, I had accepted instructions for him but have never appeared for him in any court proceeding. I accepted early instructions from him but there was a parting of the ways. That being so, the reason that I felt free to accept instructions on the limited basis this morning was Mrs Searle rang me up to see whether I could make an application on her behalf - not to appear to cross-examine any witness, to make an application on her behalf for her to appear through - - - THE CHAIRMAN: For her to appear? MR QUIGLEY: No, for her to appear through counsel at this inquiry, but that could not happen this morning. She couldn't contact any other lawyer who could appear for her this morning. I wasn't engaged in any other matter so I accepted her instructions to come down to seek leave to make the application that in respect of the present witness, the present witness's evidence not be concluded until she could - Mrs Searle, that is - could instruct counsel. There would be a - - - THE CHAIRMAN: What's the basis of - - - MR QUIGLEY: There will be a threshold question of her standing. THE CHAIRMAN: Yes, I was just thinking about that. MR QUIGLEY: There will be a threshold question of her standing, and in respect of the threshold question of her standing I have discussed with - - - THE CHAIRMAN: Because I would like to say this immediately: I can't see, having heard the evidence of Mrs Searle and any other evidence so far, that the question of her involvement in anything just does arise. There is no suggestion that this inquiry would make any finding with respect to Ms Searle. MR QUIGLEY: She apprehends that it may. THE CHAIRMAN: How? MR QUIGLEY: Because as presently instructed, on the very limited basis this morning, the purpose of appearing this morning was to see whether such sufficient time could be obtained to take proper instructions for the 3/3/rmo 3 MR QUIGLEY 13/6/00

purpose of making a more fulsome application either later at 2.15 today or first thing tomorrow morning on the basis of - on the question of standing. THE CHAIRMAN: Yes, well, obviously we would have to grant that. MR QUIGLEY: That's the limited basis upon which I appear. I felt that I was not compromising either the committee or myself in making that application. THE CHAIRMAN: Yes. MR QUIGLEY: And in relation to the present witness, that the present witness's evidence not be concluded until such time as that application had been determined. THE CHAIRMAN: I want the application determined as soon as possible. MR QUIGLEY: I appreciate that, Mr Chairman. THE CHAIRMAN: Just a moment, Mr Quigley. Let's work out a time frame. What are we doing then at 2.15? MR CHANEY: I think we may have completed the evidence for today by lunchtime and so therefore we're doing nothing at 2.15, but my concern about that is that I too would like to do a little more work than I have had the opportunity to do and I won't have the opportunity during the course of this morning to review the authorities and make submissions in relation to a question of standing, so in my submission it would be - well, later in the afternoon - I mean, I don't think it will take me terribly long. Perhaps 3 o'clock we could do it, or alternatively in the morning. THE CHAIRMAN: Mr Chaney, I think what we should endeavour to do is have this argument at 9.30 tomorrow morning. MR CHANEY: Yes, well, that would certainly be convenient from my point of view. THE CHAIRMAN: Mr Quigley? MR QUIGLEY: Well, I envisage, in view of the matters that I have spoken of earlier, that some other counsel will be appearing, but I would envisage that 9.30 in the morning would be a suitable time. THE CHAIRMAN: Yes, I sincerely hope so. MR CHANEY: Mr Chairman, as to the question of the way we proceed this morning, in my submission it would be 3/4/rmo 4 MR QUIGLEY 13/6/00

preferable if we continued - I'm not sure that Mr Quigley is contending against this proposition - continued with Mr Buchholz's examination. I propose in the course of that examination to take him to Mrs Searle's evidence and ask questions in relation to that and I see no reason why that process ought not continue. Whether or not that removes the need for any further representation of Mrs Searle is a matter for her, but rather than simply put Mr Buchholz off until we have had the argument, which would serve no purpose other than to inconvenience the timetable of the committee. THE CHAIRMAN: Thank you. Mr Quigley, if we rule, of course, that there be no cross-examination of Mr Buchholz before this issue is resolved, can you see anything wrong with that procedure? MR QUIGLEY: No, sir. I can't see that Mrs Searle will be in any way prejudiced. THE CHAIRMAN: Thank you very much. MR CHANEY: Well, indeed, Mr Chairman, if I may suggest, I would go further than saying there's any need to rule that there be no cross-examination of Mr Buchholz. All that, in my submission, would be necessary to accommodate Mrs Searle's requirements, assuming she were successful in her application in the morning, is the opportunity to ask some questions of Mr Buchholz. I don't, with respect, see any need to hold up cross-examination by other counsel. THE CHAIRMAN: I think procedurally you're probably perfectly correct, but I don't want any questions asked by other counsel to possibly complicate the issue. MR CHANEY: If it please you, Mr Chairman. THE CHAIRMAN: So it will be just - we will hear Mr Buchholz' evidence and that will be the end of it until we have had the opportunity to rule on Ms Searle's application. MR CHANEY: If it please you. MR QUIGLEY: Thank you, Mr Chairman. May I seek leave to withdraw? THE CHAIRMAN: Certainly, Mr Quigley. Thank you. MR CHANEY: Mr Chairman, I ask that Gary Buchholz return to the witness box. 3/5/rmo 5 MR CHANEY 13/6/00

GARY BUCHHOLZ: MR CHANEY: Mr Buchholz, yesterday I began to ask you some questions concerning the Searle complaints that came before the board. Have you had the opportunity overnight of reviewing the document which is part of Mrs Searle's submission? It's part B of her submission to the inquiry which consists of a chronology of her contacts with the board?---I have had an opportunity to have one read of it, yes. Right, and - - - THE CHAIRMAN: Excuse me, Mr Chaney, nobody on the bench has got Mrs Searle's exhibits, I don't think. MR CHANEY: Yes. THE CHAIRMAN: We will adjourn for just a couple of minutes and we will gather them. There are myriads of papers on our tables. MR CHANEY: Yes. THE CHAIRMAN: We will adjourn for a few minutes.

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MR CHANEY: If members of the committee look in volume 1 of the hearing papers, the submission by Mrs Searle was in three parts, parts A, B and C, and it's part B to which I'm directing the witness's attention. It's exhibit 1. THE CHAIRMAN: It's part B that we're referring to now, is it? MR CHANEY: Sorry? THE CHAIRMAN: Part B? MR CHANEY: Part B, yes, "Attempt to obtain a hearing, Global Finance Group Pty Ltd." THE CHAIRMAN: Yes, thank you. MR CHANEY: Mr Buchholz, yesterday I made reference to the meeting which is referred to at page 4 of the chronology, which was a meeting on 16 September 1998 between Mr Mitchell, Mr Rowe and Mr Buchholz. Do you remember that meeting?---I do remember attending that meeting, yes. Do you remember the circumstances that led to the meeting being called?---I believe it was concerns expressed by Ms Searle about the time taken to investigate her particular complaint. They were complaints that had been made to the minister's office and to the - - -?---No, I was referring to the actual complaint she made in respect to the investigation of her matters, yes. Yes, I'm sorry, but the question of the delay - - -? ---That was the result of a complaint she made to the minister's office. Yes, that is correct; yes. Yes. There is reference - perhaps can I ask you before we go to this document what your recollection of that meeting is and what transpired at it?---Well, I don't have any direct recollection of what the outcome was without referring to any file notes that I may have on the matters. In that case we will use those as prompts as we go through some correspondence?---Okay, fine, yes. Mrs Searle asserts that she reiterated her concerns raised in a document which is actually an appendix to this bundle, B3. Can I take you to what is actually the second-last page in the bundle?---Does that follow part B or before part - - - 3/7/rmo 7 G. BUCHHOLZ XN 13/6/00

Yes, it is a document which is entitled, "Attempts to formally submit our complaints to the Finance Brokers Board," continued?---Yes. At page 3 of that document, which is the second-last page in the bundle, there is a summary?---Yes. THE CHAIRMAN: What are we looking at? The summary? MR CHANEY: The summary. I will take you - I'm just waiting for members of the committee to have it in front of them. These documents are confusing. I think we had this confusion when Mrs Searle gave evidence. There's a summary in relation to the initial part of the document but then at the very end of what is the bundle of part B is another document which is four pages long and it has itself a summary. MR BLIGHT: That's headed list of matters lodged with the Finance Brokers Control Board? Is that the - - - MR CHANEY: No. Perhaps if I can show you my copy of it. THE CHAIRMAN: This is page 2 you're referring to, is it? For the record, Mr Chaney, what is the exhibit number of Mrs Searle's - - - MR CHANEY: It's part of exhibit 1, I think, but the whole of part A, B and C was tendered as a single exhibit. THE CHAIRMAN: Part of exhibit 1 under heading B, Complaints against a Finance Broker. Yes? MR CHANEY: For the record, Mrs Searle's evidence is found at pages 55 to 56 of the transcript at which she says that this was a document which was tabled at the meeting on 16 September with Mr Mitchell, Mr Rowe and Mr Buchholz. I'm sorry, that's not correct. 59 - yes, at the foot of page 59. It says:

You tabled at that meeting a document entitled, "Attempts to formally submit our complaints to the Finance Brokers Board?---Correct. And that comprises an annexure to part B of your submission, I think?---Yes.

So that, Mr Buchholz, do you recall this document being tabled at that meeting on 16 September?---No, I can't say I do. Do you remember any material being given to those at the meeting by Mrs Searle?---No, I don't. 3/8/rmo 8 G. BUCHHOLZ XN 13/6/00

THE CHAIRMAN: Who was at the meeting, Mr Buchholz? ---There was myself, as indicated in the evidence, Bill Mitchell, who was the Ministry of Fair Trading officer, and Peter Rowe, I think, who was his chief of staff. Mister who - Rowell?---Peter Rowe. Rowe. Thank you. MR CHANEY: Do you recall seeing this document at all before you reviewed these papers in the last week or so, or last night?---Well, I don't recall it, because I obviously I wouldn't have looked at these matters for over 18 months, so without having the opportunity to go back over the records, the ministry's records, I really can't say I do. Can I take you to the summary on page 3?---Yes. THE CHAIRMAN: Is this still the same document? MR CHANEY: It's the same document, yes. There's a complaint there that since 4 June Mrs Searle has been trying unsuccessfully to submit a formal and very serious complaint against a finance broker, and that was the complaint she was making. That was the reason for the meeting?---Sorry, are we looking at a different page now, are we? THE CHAIRMAN: Yes. MR CHANEY: Perhaps if I can look at your - - -?---Up the top. From the top. Sorry, it's okay. That's fine, yes. THE CHAIRMAN: Page 3?---That's fine. I was just reading the next paragraph, that's all. MR CHANEY: You have found it?---I'm right, yes. You are in the right place---I'm right, yes. Right. The next paragraph - - -?---Yes, which is what I was looking at. Yes. Well, let's go back to the first paragraph and I will ask you my question again?---Okay. The question of the delay since 4 June which Mrs Searle was concerned about was the very reason for the meeting. Is that right?---I think it was more to do with what's happened in terms of the investigation once that commenced. That may have been part of the concern, but I think it goes beyond that. 3/9/rmo 9 G. BUCHHOLZ XN 13/6/00

All right. So there were other concerns which were expressed?---Yes. Can I ask you what your recollection is of those other concerns?---I think they were just general concerns about what Ms Searle perceived as a lack of attention to her particular complaint. She was particularly concerned about Mr Willers' attitude?---I think there were some aspects of her dealings with Mr Willers that she was concerned about. Moving on to the second paragraph, she says:

We note an article published in The West Australian on 2 September written by Gay MacNamara entitled, "Elderly couple fights to get nest egg back," which concerns the same finance broker that we have been trying to lodge a complaint against.

Do you remember Mrs Searle making reference to that article?---I would say yes, but my recollection was that the matter she was referring to was another complaint that had been actually lodged with the ministry. Mrs Searle may not have been aware of that at that time, but there was another complaint lodged around the same time as hers. Was that the Lenz complaint?---That is correct, yes. So you knew what that article was about?---Yes. You were aware of the article having been written and the concern?---Yes. Was this one of a number of articles that were beginning to appear around this time about finance broking matters?---Yes, I do recall there were a number; yes. Yes?---In relation to that particular matter. Yes. As I say, there are a number of articles in relation to that particular matter, but not more widely - - -?---Well, I don't recall, but - - - The summary goes on to say:

On contacting the journalist and Denise Brailey, Real Estate Consumer Association president, we have established that there are many other investors who experienced the same or similar problems with the same finance broker that we have and still are experiencing.

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Do you remember Mrs Searle drawing your attention to that concern?---Well, again, I can only go from my reading of what's in this letter here, and my reading of that is that the number of investors is referring to the fact that there's one particular investment which involved a number of investors. Which investment was that?---That was the Lenz and others one. There's reference in the next paragraph to the fact that the broker concerned has approximately 60,000,000 in loans under management. Was that drawn to your attention at this meeting?---Well, I believe that was in the article concerned. THE CHAIRMAN: Which broker are we talking about, Mr Buchholz?---Global Finance. Global. MR CHANEY: That had been in the article?---I believe so, yes. So this wasn't news to you. You knew that Global had 60,000,000 under investment?---Well, no. Not before that appeared in the article, no. But it did appear in the article - - -?---I believe so, yes. - - - and Mrs Searle told you that again at this meeting, emphasised that?---Well, whether she did or not I'm not quite sure. I mean, I can't recall, but I wouldn't dispute it if she said so. THE CHAIRMAN: I'm sorry, Mr Buchholz, do you remember this document being submitted to the meeting?---No, I can't recall, sir. Well, see, when you read that last paragraph:

We are in receipt of a written claim by the finance broker concerned that he has approximately 60,000,000 in loans under management. This involves approximately 160 active accounts, the majority being large syndicated loans involving approximately 800 joint mortgagees -

you don't remember anything about that?---I remember the article, yes, sir, but that, I understood, was in the newspaper article. Well, what was the reaction inside such a meeting at the time about a thing like that?---Well, obviously the 3/11/rmo 11 G. BUCHHOLZ XN 13/6/00

ministry on behalf of the board responds to the complaints it receives and those particular matters as a result of concerns expressed by people like Ms Searle were given some - were given priority investigation. Right, but this is something concerning 800 joint mortgagees. What priority investigation was given about this that you can remember?---Well, as far as - I mean, we responded to the particular complaints we received at the time. We had only received, I believe, up until 1999 - still had only received complaints from two investors about the activities of Global Finance. Was Global referred to the Finance Brokers Supervisory Board at the time?---Not the Lenz matter. I mean, Ms Searle asked for her particular matter to be placed before the board and that was done. But didn't the investigators or yourselves from the ministry say, "Well, we have got a problem. Let's take it to the board immediately"?---Well, they were allegations, I guess, but the normal process is to investigate the complaints first to see whether they can be substantiated. DR NEWMAN Did the board members themselves, none of them, see the article, "Elderly couple fight to get nest egg back," and ask some questions in meetings as to what was happening - - -?---I cannot recall whether - - - - - - whether there was an inquiry?---Sorry, no, I cannot recall whether they did, no. THE CHAIRMAN: Did it occur to anybody at the time, just generally, Mr Buchholz, that there was a problem out there?---Not a widespread problem, no. MR CHANEY: This document is written in terms which suggest fairly clearly that there is a real concern that there's a widespread problem. Do you accept that's the tenor of the document?---Well, I guess you could infer that, yes. There is in bold print reference to $60,000,000 in loans under management?---Yes, that's true. 160 active accounts, the majority being loans involving 800 joint mortgagees?---Yes. It is spelling out that out there is a potential disaster, is it not?---Well, if we accept that the matters complained of that have been referred to the ministry were in fact accurate and indicative of a widespread problem, I would agree. 3/12/rmo 12 G. BUCHHOLZ XN 13/6/00

Yes, and so your response was, "Well, we need to investigate this through the ordinary channels, which takes if it goes quickly 6 months and otherwise up to 2 years"?---In this case it was given - no, in this case it was given more priority than other investigation matters. THE CHAIRMAN: Which was given more priority?---The two complaints that we had received against Global Finance. How long did they take to come to fruition, or had Global collapsed before they did?---No, they hadn't, but I believe they had actually collapsed before the - the board approved the inquiry early in January and before it actually got to inquiry I believe the problem occurred. When was this? What's the date of this meeting? ---September, I believe. MR CHANEY: 16 September?---Yes. DR NEWMAN The article in the paper was 2 September, so you're telling us that it was some 4 months later before the board actually dealt with it? THE CHAIRMAN: It got to the board?---It got to the board, yes. Not dealt with it?---Yes. That was at the conclusion of the investigations, yes. In the last paragraph, I suppose, finally Ms Searle - pleadingly to go before the board or get before the board to tell them, but I suppose the answer to that was it had to go through investigation first?---Well, the normal process was that the matters would be dealt with through the direction of the registrar if a complaint is lodged with the ministry, whether it be addressed to the board or the ministry. A person can make an application to the board directly for an inquiry if they choose to do so, but normally the matter would be investigated by the inspector for the board prior to going to the board. Whether the person knew or not, in that event was this summary forwarded straight to the board?---No, but Ms Searle herself did lodge a matter direct to the board, I believe, in August some time, if my recollection is correct. Yes, I think you're right?---And the board then directed that their inspector do a preliminary assessment of the complaint matters. DR NEWMAN The letter of 11 August 1998 which was sent to the chairman of the board, would that in fact have been given to the chairman or would it have been dealt 3/13/rmo 13 G. BUCHHOLZ XN 13/6/00

with by the registrar?---No, that certainly was tabled at the - whether it was given straight to the chairman? Mm?---I can't recall. It would be normal to be given straight to the chairman? ---It was tabled at the board meeting, I recollect. THE CHAIRMAN: What was the reaction to it?---The board directed the inspector to examine - it was quite a comprehensive submission. I believe it was some 80-odd pages and the board directed the inspector to do a preliminary examination of the complaint matters before determining whether it would proceed to a further or continuing investigation. That was my recollection of it. And it was during that time that Global collapsed?---No, no, that was the following year that that particular issue happened. The following year Global collapsed?---We're talking 98 here. Yes, and was there an auditor put in, etcetera, etcetera, to your knowledge during that time?---Was there audits? An auditor put into Global?---Well, audits are due - - - Independent auditor, I meant?---No. No. DR NEWMAN Was the reporting in that preliminary report submitted to the next board hearing after the chairman received a letter from - - -?---No, I believe - - - - - - Ms Searle that was referred to the inspector?---No, it was referred from the inspector - and again, I'm only going from memory, because I haven't had an opportunity to look at the file, but I believe it went from the inspector to our legal area for their assessment of the inspector's findings. MR BLIGHT: Could I just ask you to spend a little bit of time to explain the process that occurs in the ministry when complaints are received? First and foremost, are they normally addressed to the Finance Brokers Supervisory Board or are they normally addressed to the ministry?---I think you get a combination but - - - Okay, just explain what happens then. You're in charge of the division or branch or whatever it is?---I was the manager of that branch, yes. 3/14/rmo 14 G. BUCHHOLZ XN 13/6/00

Okay. You receive a complaint. What happens? Tell me what are the steps that are taken?---A file is created when a letter comes in involving a complaint. It's then assessed and allocated by a senior officer who is a supervisor for that area and then allocated to an inspector. Now, the inspector does a preliminary assessment of the matters and if there is a prima facie case to proceed to investigation, he will then seek a direction from the registrar to conduct an investigation. 3/15/rmo 15 G. BUCHHOLZ XN 13/6/00

The registrar being you?---Yes, although a lot of matters were also done under direction from the deputy registrar who was a supervisor for that area. Right; then what happens?---Well, then the inquiry or investigation is commenced after an assessment of the facts and witnesses' statements taken and then a brief prepared for consideration by a legal officer. And when you have received the advice from the legal officer - I'm interested to know at what stage does it get to the finance broker - - -?---Well, I guess it's after the legal officer has assessed the brief. If he's satisfied that the brief does cover the issues and there's sufficient evidence to warrant an inquiry before the board, then an application is put to the board for an inquiry. What do you mean an application is put to the board for an inquiry?---Well, exactly that. I mean, you apply to the board. Whether it's the ministry or inspector or any other person can apply to the board for an inquiry. DR NEWMAN: At what stage would someone look at the situation and say, "This has got problems attached to it and we should priorities it and put in procedures that will enable it to get an early hearing before a board"? ---Well, I mean, each case is really considered on its merits. In this case, as I have mentioned before, the ministry determined that the issues did warrant priority attention and Mr Willers, the inspector, was directed to investigate these matters. THE CHAIRMAN: What was the time of that?---The direction was done about August, I believe, and his report on this particular matter was completed in December and went to the board, I believe, in January of the following year. DR NEWMAN So that took 5 months even though it was prioritised?---In this case, yes. They were very complex issues and I think his report was some 70-odd pages. What happened in the interim in terms of a review of how this entity was operating? Whether or not the advertising was causing problems for the general community, what generally was done to ensure that there was some protection given to the investors?---There wasn't any. What action was taken was that - bearing in mind at this stage the matter still hadn't been determined, but obviously the issues themselves that were coming out of them raised the question about the information given to potential investors. So what we did determine at that time was to actually produce a booklet to give information to potential investors about the types of issues they needed to consider before they got 4/1/ces 16 G. BUCHHOLZ XN 13/6/00

involved in these investments and that at the time I left had reached a draft stage which was in early December. How was it publicised to the general community that that booklet was available? Was it advertised? THE CHAIRMAN: The first question is when was it available?---As I say, I can't recall when it was because at the time I left the area it had reached the first draft stage so I'm unable to confirm when it actually was finally published. You left early January, did you?---No, end of November, early December. Year?---1998. DR NEWMAN So once it was completed, how would it have been advertised so that the general public knew that it was available and they could read it and be warned? ---Well, I can't comment on how it was publicised because I wasn't involved. How would it normally be publicised?---I mean, I'm sure it would've been distributed to key areas like seniors groups and things like that. That I would have expected would have been done. Would there normally be a mailing list and it would be sent out on that mailing list?---An assessment would have been made of the appropriate outlets for that booklet, yes. Would there be any advertising in the media to the fact that the booklet was available?---It's possible, but I can't say whether it was. Would there normally be?---Not normally; depending on the circumstances of the issue, I guess, but we have a lot of general-type publications. THE CHAIRMAN: By the way, you don't know anything about it. Do you know whether the booklet actually went out? Was it published?---Yes, I'm sure it was; yes. When, do you know?---No, I can't say exactly when. MR CHANEY: I'm instructed it was May 1999. THE CHAIRMAN: May 1999. MR CHANEY: I have just been instructed, Mr Chairman. 4/2/ces 17 G. BUCHHOLZ XN 13/6/00

MR BLIGHT: Could I just pursue my original inquiry of what the process was following receipt of a complaint? As the manager in charge of that area, did you keep running statistics of incoming complaints broken down as to the nature of the complaint and to who the brokers were?---The complaints were allocated by, as I said, a senior officers so I didn't necessarily have direct knowledge of each individual matter that came before me, but I had set up a system whereby I had regular meetings with all staff in that area, weekly meetings, at which time I had an expectation that if there were issues arising of concern, those matters would be brought before me. But I'm not talking so much of individual matters now as a running global view of the nature of complaints, the brokers concerned, the amounts and number of complaints? ---There is a database of complaints received that the ministry uses for analysis purposes. And who in particular in the ministry received that data and was expected to - - -?---Well, the officer who allocates the files records the information - sorry, the records area records the information after allocation of the file so it's recorded against a particular person, what the practice is and the practice code is. So there is that information recorded from there. It's a central records system. Who deals with the information?---Each individual area - I mean, the codes are allocated against particular areas. But is there no-one that looks over the entire analysis of the incoming complaints to detect a trend or to see what was emerging? You're saying the newspaper article was indicating signs that there were problems but that the ministry only dealt with complaints as they came in. You mentioned two complaints that were with you for action in relation to Global?---Yes. But across the ministry as a whole with the Finance Brokers Supervisory Board or wherever it may have been, who looked at the overall trends of complaints that were coming in and what were they all about?---There were very few complaints that were received, as I mentioned before, in relation to finance broking matters. The annual report which I don't have readily available indicates quite a number of complaints that were received, you know, in the tens of?---Well, that's low compared to the - - - Are they dissected by nature of complaint and the finance broker concerned?---They do, yes. You can identify them from the codes, yes. 4/3/ces 18 G. BUCHHOLZ XN 13/6/00

Thank you. THE CHAIRMAN: Just for the record, I'm advised that Global went bottoms up in March?---March of 99. Yes, and the booklet came out in May. Thank you. MR CHANEY: Mr Buchholz, the problem with the solution of a booklet is, is it not, that Mrs Searle's complaint was a complaint in relation to the Wyalkatchem matter. Do you remember the Wyalkatchem issue?---I do vaguely, yes, because there were a number of investments, I believe, involved. There were a number of issues?---Yes. Did you read her submission before this meeting?---Yes. I'm sorry, that question was poorly put and I will withdraw it. You were aware before this meeting on 16 September about the nature of her complaint, I take it?---Yes, I would have been. One of them involved an investment in Wyalkatchem where a property, a house, was being built and money was advanced before the house was actually built or completed. It was overvalued for the purposes of obtaining the loan. Were you aware of those sorts of allegations?---Well, I would say I was t the time. I can't recall specifically now. They were allegations about the conduct of the brokers, the way the brokers had raised the money and handled the loan?---Yes. So the problem was, was it not, that what Mrs Searle was complaining about was these brokers are engaging in practices which are putting large numbers of people's money at risk?---Yes, that's a fair comment; potentially putting large - - - If the complaint was borne out - and I accept that you needed to verify or satisfy yourself that there was something in it, but if she was right, then the solution needed to be, did it not, get in and do something about these brokers?---That's fair comment. Stop them conducting the practices that are putting people at risk?---That's fair comment, yes. And the solution of sending a brochure out might make it harder for them to rely on these practices in the future? ---Well, I think you're looking at two different issues there. One is the issue of the conduct of the broker in terms of taking appropriate action against that broker and the other issue as far as the - the brochure's all 4/4/ces 19 G. BUCHHOLZ XN 13/6/00

about warning future potential lenders about the types of pitfalls that they might encounter in these types of investments. Yes, and there's a distinction, and sending the brochure out wasn't going to stop the brokers carrying on the conduct that was putting peope at risk?---That's fair comment, yes, I mean, other than the fact that we had hoped that potential investors may be alerted to the problems and not get involved in those types of activities or difficulties. So it's a two-pronged issue, isn't it? You want to educate the investors so they are not as easily tricked? ---Yes. But on the other hand you also want to stop the brokers tricking people?---That's fair comment. What was done about the latter, the getting to the activity - - -?---Well, again I think I have made the point that from my point of view allegations are fine but you have to be able to substantiate those and therefore to do that you have to be able to investigate the matters and that's how the process was followed and that's a fairly standard process. You accept that if that is the process and that's all you can do, that it leaves open the proposition that if, as in fact turned out to be the case, there was a widespread problem there and people were losing lots of money, the system simply could not cope with that in any way?---I accept that ideally in those sort of circumstances, subject to, of course, available resources, that a more proactive-type program may help prevent those sort of problems happening. There was capacity under the act to send in an auditor in the public interest?---A special audit, yes. A special audit?---Yes. To actually go straight in and do one?---That's in relation to matters obviously pertaining to the trust account, but that's only one of a number of the issues that were raised. I think my recollection of the time is that the primary concern was the issue of the information given to investors at the time that they were contemplating moving into or engaging in this type of investment scheme and the power - - - And the payment out of money?---Sorry? The way the money was paid out without proper - - -? ---Well, no; no, I mean, it's the information they give 4/5/ces 20 G. BUCHHOLZ XN 13/6/00

like, for example, about the financial position of the borrower at the time and those types of issues that go to the actual decision to actually invest in the first place. THE CHAIRMAN: On that point, Mr Buchholz, we have all seen them now, the brochures that were issued by the brokers which resulted in this calamity, people investing, and they were - I will try and use a neutral expression. They were very favourable to ask people to invest. Were they read by anybody in the ministry and/or, to your knowledge, Finance Brokers Board and assessed with people who have some knowledge of this in your ministry and the board and any comments made about them or anything done about them?---Well, obviously we only became aware of these issues when we received the complaints. But they were in every newspaper and flashy brochures were floating around the suburbs?---I'm not aware of brochures as such, but I do recall that there were regular advertisements placed in the newspaper about offering investments at certain returns. DR NEWMAN When you saw those newspaper articles, did it not occur that some of the things were perhaps getting into the grey area of the act and therefore a special audit to review whether or not everything was being dealt appropriately through the trust account would be a logical step?---Well, it certainly didn't occur at that time, no. THE CHAIRMAN: And this is in the face of this document which we know now was involved - Ms Searle's document that we have been referring to was before you and/or the board?---As I said, the matters were being investigated to substantiate these issues. In which it talks about 800 joint mortgagees, etcetera, and we now know that we did go bottom up. Yes, very well, thank you. MR CHANEY: Just to summarise the position, did you understand Mrs Searle to be saying to you at this meeting that there was potentially a widespread problem here that needed to be looked at?---Well, as I said before, I cannot recall unless I go back and check over the file, but reading from what's in this submission here, I took that to be referring to - when she refers to the matters relating to Denise Brailey, I took that to be referring to a number of investors involved in that one particular investment scheme. It's not a question of looking at files, I don't think. This is big news, isn't it? If what is suggested here is borne out by inquiry, then there was a major problem 4/6/ces 21 G. BUCHHOLZ XN 13/6/00

which needed to be addressed by the board. Do you agree with that proposition?---Well, certainly I think that now. I think that's a fair comment. And therefore one would have thought that you would be able to recall - I mean, now no doubt it's all been in the papers for years and we all know there's a major problem out there, but one would have expected you to be able to recall, "Yes, this allegation was made. I did appreciate that there may be a problem out there." You don't have any recollection of that at all?---Well, what I'm saying is that because of those concerns raised, then a priority was given to those investigations and that to me is a recognition of the fact that, you know, we look at those matters as quickly as possible. All right. I think we have got to the point where you accept that there were enough alarm bells ringing to put the thing onto a priority basis?---A priority, yes. But nothing more was seen to be needed to be done? ---Until such time as we could be satisfied that the matters complained of could be substantiated, it wasn't considered to be appropriate at that time. Even though on a priority basis the matter would take months to resolve, was it just a matter of crossing your fingers and hoping she wasn't borne out, she wasn't right?---The judgment made at the time was that we needed to investigate the matters concerned and then deal with the outcome. THE CHAIRMAN: Mr Buchholz, does it also come back to the fact that from what we have heard in this inquiry so far the Finance Brokers Supervisory Board was really at the bottom of the pile and only had one or two at the most investigators?---I can certainly confirm that I know it was a source of frustration for that - in fact they didn't even have one investigator prior to the matter being transferred to our branch. Yes, I know, so this priority matter went to one investigator?---That is true, yes. Now, was any thought given at the time, "Well, let's grab somebody from the real estate or somewhere else and put half a dozen of them on it"?---Again, as I said, we're talking about two particular complaints at that time so I would think if we had a significant increase in complaints, that may have been considered. Even in the face of your evidence that you knew there was a problem out there and you had this specific statement in front of you?---Well, I think if it was a question of, you know, there may be a potential for a problem rather than the fact that we knew there was a problem. 4/7/ces 22 G. BUCHHOLZ XN 13/6/00

DR NEWMAN There is a statement here that there were 60,000,000 in loans under management, there were 160 active accounts and there were 800 joint mortgagees. Even if there was only one complaint there was a problem, did you not feel that it was appropriate that there should be a major thrust to get that investigation done quickly because there was the potentially that a lot of people could have been put at risk?---Well, I mean, again it's a question of a judgment you make at that time. Given the magnitude of those types of activities, if we take the - if we assume that the problem was widespread at that time, I would have expected we would have received a lot more formal complaints about it. Coming back to the chairman's question to you a moment ago, most real estate transactions are probably going to involve something that's worth somewhere between perhaps $100,000 and maybe $500,000. We're talking about $60,000,000. There is a big difference in the sum and also in the type of transaction that is involved. At least with land and buildings there is guilty tangible there. There might be a loss but there is a tangible asset there. With a mortgage where there could be a potential for a big loss the tangibility is not so great, so would that not suggest that you maybe should have approached the ministry for some staff to be moved, as the chairman has suggested, from other areas such as real estate to expedite this matter?---Perhaps the only comment I will make is that at this time - because the ministry's view, of course, was that these types of investments which were not around at the time this act came in were primarily regulated under the Corporations Law so we did - and I can't remember the specific times, but there were a number of meetings with the Australian Securities and Investments Commission during this time to discuss what role they would or should play in investigating these matters. And what response did you get from the ASIC?---Well, they were aware of the matters and at the last meeting I attended there was discussion about the extent to which the two agencies would exchange information. I believe that was in about November, if I recall correctly. THE CHAIRMAN: 98?---Yes, 98. And what happened?---I can't recall the outcome from there, but I believe there were discussions between the agencies about those particular matters. DR NEWMAN Did anything come out of the exchange of information in the discussions?---Well, I mean, I understand ASIC did initiate their own investigation and inquiries into the matter which ultimately I think led to the winding up of the companies. 4/8/ces 23 G. BUCHHOLZ XN 13/6/00

Of Global, yes. MR CHANEY: Mr Buchholz, I was going to take you to exhibit 14 just really to trace through the events after this meeting. That's a letter from Penlass Pty Ltd to the minister which has been copied for him to its face to you, Mr Mitchell and Mr Rowe. Do you have a copy of that letter?---No, I don't believe I have. THE CHAIRMAN: Where do we find it, Mr Chaney? MR CHANEY: It's exhibit 14 so it should be in the files. They number from the back forward so it should be in volume 1 of your hearing papers, 16 September; same day as the meeting. THE CHAIRMAN: What is the date of this, Mr Chaney? MR CHANEY: 16 September 98, on Penlass letterhead. I don't want to dwell on it in great length. Perhaps if those who have found it can share it, we can move on. THE CHAIRMAN: Yes, certainly; go ahead. MR BLIGHT: Just before we do move on, I don't want to labour the point too much, but I did ask you whether you noticed any trends coming through the number of complaints received and whether they were dissected according to complainants and nature of the complaint and the broker. I have noticed that for the 12 months 1 July 97 to 30 June 98 there were 38 complaints. 1 July, which is the start of the period we're talking about, to 30 June 99 there were 86 complaints. It didn't strike anyone as being - - -?---Well, I can't comment on what happened after the end of November but up until - - - From November when?---98. It is still half that number?---Yes, but I think a lot of the complaints came in after the companies went into liquidation in early 1999. One of them went into liquidation in May 99?---One went earlier, I believe. But I would have thought that the trend of the numbers going up very steeply - and surely the finance brokers concerned would have been responsible for quite a few of those complaints?---My understanding - and again without going back and analysing it - is that between the first part of that financial year, say, from June to December 98, that's when the complaints came in in relation to the activities of Graham Grubb and I think they would account for the majority of those complaints and that was a different issue. 4/9/ces 24 G. BUCHHOLZ XN 13/6/00

Was there a concerted effort at that stage to move into Graham Grubb's establishment?---That particular matter was put to the board with a request and subsequently approved for a special audit of their trust account. MR CHANEY: Having now located it, Mr Buchholz, it confirms in paragraph 2 - I will go back a step. That was a letter which was sent immediately after the meeting relating and referring to the meeting. Do you remember receiving that?---I would recall getting a copy of it, yes. And again it makes the point in the second paragraph, "Penlass's ultimate aim is to have the hearing conducted by the board of it concerns in the interests of the public good"?---Yes. "Consider the practice of the finance broker concerned if allowed to continue unchecked could have a significant adverse effect on the funds of other investors." So the same point again?---Potentially, yes. So Mrs Searle again was reiterating that it is a broader question than simply her complaint?---I accept that, yes. All right. I think we probably don't need to - - -? ---But again I can only reiterate that the only other complaint received at that - Lenz was one and both matters were given priority in terms of investigation. And then on 9 October you wrote a letter. Perhaps you might have a look at this. This is exhibit 15 which should be the next document towards the top. It's a letter from Mr Buchholz to Mrs Searle of 9 October. Have you looked at that overnight, Mr Buchholz?---No, I haven't. Perhaps you might read it and refresh your memory?---Yes. That really was just bringing Mrs Searle up-to-date on what was being done as a result of the meeting?---I would say so, yes. On page 2 you have mentioned that there are some complex legal issues which have to be considered before determining of some of the alleged breaches of the requirement of the act can be sustained and this includes whether Global was in fact acting as a broker for the borrower or lender or whether all the transactions in question relate to finance-broking activities?---Mm. That's the client issue again raising its head, I take it?---I'm assuming so, yes, or one part of it would be the client issue. The other part I would guess would be 4/10/ces 25 G. BUCHHOLZ XN 13/6/00

in relation to whether the activity of managing an account subsequent to the investment is in fact a finance-broking transaction. Was that an issue that was exercising the mind of those on the board at that stage as to what the finance-broking activities were?---I don't believe so, no. Where did that reference come from? Is that your own knowledge?---No, that would have been based on advice from the legal officer. I think you mentioned earlier that a response was obtained from the legal officer on 7 October so you were recapping some of those issues?---Yes. Do you accept the consequence of those issues was there there may have been nothing which the board could do about the complaints that Mrs Searle had made?---If that was the final outcome, as we have heard before, a number of investigations were stalled because of that particular legal opinion, yes. It gives rise to the position where complaints are made - if in fact these impediments exist to a successful prosecution, was the consequence so far as you were concerned that the board simply could do nothing and had to stand by and watch the industry crumble?---The client issue was raised to the board earlier in the year and the ministry very strongly recommended that they need to address that issue. For their own reasons they chose not to. But I'm looking at the consequence and accepting that it may have been the board's decision not to proceed with that. It was the consequence of that position that, in effect, the board - I will withdraw that question. It is not fair to you, I don't think. Was it your understanding that if these impediments existed, then the reality was there was there was simply nothing that the board could do to move in and try and prevent this problem?---Not necessarily so. I mean, the board - well, they do have a general power with respect to assessing whether a broker is fit and proper to be a broker. So there is that general power which I'm not aware has been utilised, but these problems relate to a breach against the code or the act as opposed to the general assessment as to whether a particular licence holder is fit and proper to continue to hold a licence. There was that general power that would have been there. THE CHAIRMAN: Getting back to the client issue, what happened about that at that time?---My recollection was that the board, when it was first raised with them, determined that given that the act was currently under review, they chose not to amend their code. 4/11/ces 26 G. BUCHHOLZ XN 13/6/00

When you say the act was under review, this was to review - - -?---The regulation of the industry. Yes, and also to attend to the problem about was a client to encompass everything?---The actual review of the industry was an overall review of the regulation. That would incorporate any aspect of the regulation. We now know that that review - still hasn't been an amendment to the act?---Well, the review was completed in December of 1998. I'm not suggesting that you can do anything about that, but the fact of the matter is nothing has ever happened. MR CHANEY: At the risk of labouring the point, Mr Buchholz, there is a problem, is there not, that if all the board concentrates on is prosecutions on individual complaints, given that that process necessarily takes time and is subject to the sort of legal arguments that get thrown up by defendants from time to time but as a mechanism for controlling the industry or supervising the industry in an effective way, that route simply doesn't do the job?---I guess the board is obviously constrained by what the legislation empowers them to do, but in terms of these sort of issues we're talking about, particularly in relation to the client issue, that arose because of the wording of the board's code and the board determines its code itself is not subject to - - - But it only determines the code for the purpose of determining whether it can achieve a successful prosecution, does it not?---Well, assuming it's all part of their overall strategy to supervise the industry. I don't understand that?---Well, the code sets down the standards of rules by which the brokers have to abide by. Are you saying that the client issue went beyond simply whether or not we could successfully prosecute X in relation to the complaint of Y because Y wasn't a client?---The client issue obviously went to the heart of the board being able to hold an inquiry with a view to taking what appropriate action may be deemed against the brokers concerned. But it didn't have any effect on the board's other powers under the act such as to appoint a special auditor?---If you're talking about issues such as valuations - sorry, funds being misappropriated from trust accounts or late interest payments, that is correct, yes. And ultimately the power to appoint a supervisor if there are widespread problems with a particular broker?---Yes. 4/12/ces 27 G. BUCHHOLZ XN 13/6/00

That has got nothing to do with trust accounts matters necessarily, has it?---No. All of these conducts could be dealt with in that way and they ultimately were. You accept that?---Yes. So the client issue had no bearing on the exercise of those powers, did it?---Well, it wouldn't have, no. DR NEWMAN With the client issue, Mr Buccholz, was there any discussion of the board as to whether or not they should in fact have an inquiry and if that inquiry found that there had been a breach, leave the broker or a group of brokers to make an application to the court with a view whether or not that opinion was an enforceable opinion established by a court?---Certainly the board was independent. That was simply a legal opinion of the ministry and the board, if it had a different view, certainly could have taken that course of action. But it didn't?---But it didn't, no. MR CHANEY: Now, just moving through the chronology, there was a further meeting on 23 November. It is the chronology which is part B of Mrs Searle's submission. At page 8 of that document there is reference to a meeting on 23 November?---With Mr Patrick Walker. That's right. THE CHAIRMAN: Meeting of the? MR CHANEY: 23 November. THE CHAIRMAN: Thank you. MR CHANEY: That's a meeting with Mrs Searle and yourself and Mr Walker?---Yes. And a list of questions was tabled by Mrs Searle?---Yes. That, for the record, is exhibit 18. Can you tell the committee about what transpired at that meeting? Do you recall?---Not directly, but obviously the subsequent letter to Mrs Searle was a response to the issues she raised. Which subsequent letter are you referring to?---There was a response to that meeting. I'm not sure what the actual date of it is. It would have been within - - - By the ministry?---By the ministry, yes; by Mr Walker. 4/13/ces 28 G. BUCHHOLZ XN 13/6/00

THE CHAIRMAN: This is the letter of 24 November, is it?---No, it wouldn't have been that date. MR CHANEY: No, it's a letter which is exhibit 20, I think, which is actually undated except for the date on the fax stamp, 3 December 98. Is that the letter you're referring to?---Yes, that would be the one. THE CHAIRMAN: I have got it. MR CHANEY: That is the response to the various questions posed by Mrs Searle in the document which is exhibit 18, is it?---Exhibit 18? Exhibit 18 is the list of questions submitted to Mr Walker?---Well, I would take that to be the case, yes. Yes, I think it's self-evident really?---Yes. Was this letter drafted by you?---It would have been, yes. This was one of the last things you did, was it, before you left?---Yes, it would be about the last thing I did. And it was left on the basis on the first page:

The minister has stressed to me the importance of this investigation being given a high priority with a view to presenting a final report to the Finance Brokers Supervisory Board.

When had that occurred? When did the minister stress the importance of priority?---Well, I really can't say. That would have been probably information that I would have received through Mr Walker. You had had meetings with Mr Mitchell from the minister's office with Mrs Searle?---Previously, yes. Had you had any ongoing involvement with Mr Mitchell in relation to this?---Well, there may have been. In fact I think I probably would have copied a lot of the subsequent updates that were sent to Mrs Searle to Mr Mitchell, if I recall correctly. At that stage it was contemplated that the board would deal with the matter at its meeting in January 99?---Mm. THE CHAIRMAN: Excuse me, what is the date of this letter? MR CHANEY: It doesn't bear a date other than the foot of the first page has "Faxed 3 December 98". 4/14/ces 29 G. BUCHHOLZ XN 13/6/00

At page 4 of that letter you set out a history of the investigations that had taken place to that time?---Mm. That was information you obtained from Mr Willers?---That would be correct, yes. At that point of 3 December 98 Global had not been formally interviewed by the inspector. That's at page 5, paragraph (f)?---Mm. But it had been arranged for 8 December 98 so that was again information given to you by Mr Willers?---That is correct, yes. What the state of play was?---Yes. You weren't involved in the subsequent meeting on 8 December?---No, I don't believe so. When was that referred to? In (g) at page 5:

Any further inspection of the files of the trust account of Global in relation to the investments will be at the direction of the legal officer at Fair Trading. This will occur at the meeting arranged on 8 December 98?

---I can't recall that meeting, no. And then you went off to greener pastures?---It's a matter for judgment, I suppose. There are just a couple of other matters I want to ask you about as a result of you providing me with a copy of file of materials which you have maintained. The first is this compliance report in relation to finance brokers in October 1996. It may assist you, if you need it, to see where this lies within your file. Let me know if that's the case?---I will make that judgment when you ask the question. Yes. This is a document which was contained on this black level arch file that you have maintained and was a compliance report prepared around about the time you took over as - no, a little earlier than the time you took over as registrar of the board?---Well, I mean, if the date on the actual report is accurate, that would be true. It's on your file, so do we take it that it was obtained by you at some stage after you became involved in Finance Brokers?---Yes, I think that would be a fair comment, but there was that period where we were getting briefings, I suppose, from the officer involved about the industry and 4/15/ces 30 G. BUCHHOLZ XN 13/6/00

the issues, so I may not have been directly involved but I really can't comment. All right. Whose is the handwriting down the left-hand side?---That is definitely my handwriting, yes, or scribble. So at some stage it looks as though you have made that handwriting presumably while you were consulting with somebody about this document?---Yes, that's fair comment. Is this a report in the form of the reports which went monthly to the board?---That would be correct, yes. By way of a report of the current position of inquiries? ---Yes. There are a number there which are shown in the current position column as to commence inquiries?---Yes. Do you see those?---Mm. The first one on the first page about halfway down the file has got a number and a date 17 January 96?---Mm. Is that the date the file would have been opened?---That would be correct, yes. The date of the complaint. The next one is February 96; two entries down 21 February 96?---Mm. Over the page a number going later in time, May, July - several in July - - -?---I haven't got the second page. - - - then August and so on?---Mm. Most of those relate to section 26 matters, that is, unlicensed trading issues?---Section 26, that's righ, yes. The document indicates that there was a very substantial delay in actually getting inquiries under way?---That would be correct. There was at that point in time?---That would be correct, yes. Was that part of the problem which led to the arrangement whereby Mr Wallace was given the task of concentrating on three particular priorities?---That arose, as I recollect, out of a meeting with the then minister where it was determined that the priority activity, if you like, for the branch was going to be the review of the legislation. I wasn't in attendance at that meeting but that was my understanding of it, but as it turned out 4/16/ces 31 G. BUCHHOLZ XN 13/6/00

Mr Wallace continued to investigate all finance-broking matters. Yes. This document indicates something of a resourcing problem if one assumes that they're not being commenced because Mr Wallace didn't have the capacity. Is that a fair assumption?---I can't comment on obviously what the structure was or the issues were when finance brokers were attached to the real estate branch, but certainly when that responsibility was transferred to the Transport and Service Industries directorate, there were in excess of 50 files outstanding and quite clearly that was an issue of concern. Yes, and I think we have heard from Ms Brazier about steps that were taken to try and resolve that?---Yes. If one can encapsulate the position, at the time that that transfer took place, was it the case that for whatever reason, resources or whatever other reason, the Finance Brokers' inquiries were behind on where they should have been in terms of attention?---That's a fair comment, I think, yes. And behind to a significant degree as to cause concern? ---Certainly with some of the matters, as you have indicated. I tender the compliance report for Finance Brokers October 1996. THE CHAIRMAN: Exhibit 114. EXHIBIT 114 Compliance report for Finance Brokers of

October 1996 MR CHANEY: There is another document which emerges from your file I would like you to have a look at, Mr Buchholz, please. Perhaps you can tell me what the document is?---It just seems to be some notes as a result of a meeting with probably Jane Brazier and Will Morgan, I would suggest, given the date of the letter. 10 September 96, so that was about the time the hand-over was being organised?---Yes. You think it was probably a meeting with Jane Brazier? ---I would think so, yes. Anybody else?---Probably Will Morgan but I'm only guessing. There is a reference to priority being given to - - - 4/17/ces 32 G. BUCHHOLZ XN 13/6/00

THE CHAIRMAN: Just a minute. Decipher the second line. What is that?---"Three amendments Finance Brokers Board." So there were three members of he Finance Brokers Board at this meeting?---No, I think that would be a meeting that's referred to subsequently at the minister's office. I see. MR CHANEY: So "Meeting minister Tuesday, three members Finance Brokers Board" is all one entry?---Yes. Perhaps you might just read it. To assist the committee read it through?---It's a challenge, isn't it, "Meeting minister Tuesday, three members Finance Brokers Board," and then I have got another entry:

Board meeting; priority to be given to reference group for review of regulation of industry; compliance - no unlicensed broking investigations, that is, mortgage originators; two other compliance issues, Ken Polar, bona fide person in control; must be licensed as well as business; business failed but Polar still licensed; board wants to cancel licence. One other name unknown, new issue.

Now, I just wanted to ask you about the Polar issue. There's an entry there that the board wants to cancel the licence. That's something that somebody told you at the meeting, I take it?---Yes, all this would have been based on what I was told at the meeting; yes. Do you know the history of the Polar matter as to how long they would have been outstanding?---No, I can't say I do. I know briefly the issue and the fact that it was an inquiry that was delayed because of that board decision on another matter about its powers to hold inquiries within a 3-year period. DR NEWMAN Mr Buchholz, referring to the previous exhibit 114, on 24 January there's an action Registrar v Polar. Could that be the matter to which we are currently referring in this memo of 10 September 96?---I would suggest so, yes. MR CHANEY: I'm sorry, I missed that question when I was looking at something else. DR NEWMAN: On the compliance report of October 96 there is a list of actions there. On the first page about halfway down there is a matter Registrar v K. Polar on 24 January 96, "No renewal received; may be closed; contact now being made with all complainants for information that's required by the legal officer." 4/18/ces 33 G. BUCHHOLZ XN 13/6/00

MR CHANEY: Yes, thank you. THE CHAIRMAN: There are some notes alongside it too. Would you like to interpret your writing?---I will try. It appears to be yours?---It is mine, yes, "Briefing in case; what is still to be done; Will to request in writing." I can't work out what we're talking about there, "Number of files; bond distributed; briefing on case; what is still to be done there," that's if I can read my own writing correctly. MR CHANEY: What distracted me when Dr Newman was asking a question was that the dismissal of the charges on the Bowman complaint in relation to Gamel Ward which gave rise to the appeal to the District Court about the 3-year limitation period?---I think that's correct, yes. It was on 29 January 97 so after this meeting had occurred that issue, the 3-year issue, went off on appeal?---Yes, well, that actually talks about briefing the legal officer on obviously putting that to inquiry, I would suggest, that top note. Really without wishing a spend a long time on this, given that the board apparently wanted to cancel the licence, wanted to actually take some steps to deal with this man who I think had been convicted of some offence some prior to this - is that your understanding?---I can't recall. Are you able to say what it was that was preventing the board from actually achieving what it wanted to do? ---Well, I can recollect the specifics. My only recollection is that I think that probably appears in some of those reports later on, a comment that that decision impacts on this matter. Other than that, you're not aware of any impediment to them actually getting on with it and dealing with it? ---No. All right, thank you. I tender the note dated 10 September 1996. THE CHAIRMAN: Exhibit 115. EXHIBIT 115 Note dated 10/9/1996 MR CHANEY: Can I ask you to look at another copy of a document extracted from that file of the Finance Brokers matters which you maintained? What is this note about? ---That again would be one of the meetings we had during that period of discussing the transfer of the function. It actually records down the left-hand side who was present, Mike Johnson, Jane Brazier, Gary Buchholz?---Mm. 4/19/ces 34 G. BUCHHOLZ XN 13/6/00

"Re transfer of Finance Brokers"?---Yes. THE CHAIRMAN: Who was taking over from you at the time?---I was taking over from - it was transferred from the real estate area. Mike Johnson was the - I'm not sure whether his title there was director of manager - there was discussion about the title - but he was in charge of the real estate unit and Will Morgan was the manager. MR CHANEY: Now, the entry I want to ask you about - and perhaps again for the record I might just ask you to read through the document?---The whole lot? Yes, I think so?---Obviously the left-hand column talks about the attendance of the meeting with Mike Johnson, Jane Brazier, Gary Buchholz, re transfer of Finance Brokers. Next it has got facts, figures and refers to dot points, about files, complex ones, analysis of investigation. I'm not quite sure what that is. It refers to something "estate". "Real estate" perhaps?---Thank you. "20 complete per year", if I read that correctly, "formal, 70 with simple". I'm not sure what that means. DR NEWMAN: Could that "complete" be "complex"?---Yes, "complex" probably. I didn't expect these things to be presented at an inquiry at the time. "Review requirement of job, compliance policy; officer has option; 3-year licence, board, conservative board, subs" - which I take to be "substantial" - "substantially influenced by industry". MR CHANEY: I will stop you there. That is the entry of interest. "Conservative board" - is that information given to you by somebody else?---I can only take that being the observations of Mike Johnson at that meeting, but only because of the fact, you know, that that was part of us trying to get an understanding of the area. Yes, he was the one who would have known that?---Yes. And the other two of you were really there as recipients of information, I take it?---Yes, exactly. And then "substantial" - "substantially" perhaps - "influenced by industry"?---Yes. Can you remember what the context of that comment was about?---No. THE CHAIRMAN: Is that last word "industry"?---Yes. I thought it was one of the players on Sunday?---I really can't say. I guess it's just part of the overall 4/20/ces 35 G. BUCHHOLZ XN 13/6/00

assessment of the board and the industry and the issues. I can't recall anything specific. That's far too long ago. MR CHANEY: I just wonder whether there was a general perception which was conveyed to you that the board was, in effect, substantially controlled or influenced by the industry representatives?---That was probably a reasonable inference from that statement, but I cannot recall specifically the context of that being made. What was your experience in the 2 years that you held the position of registrar and manager in the area of the board's general - - -?---Well, I don't think I could say that the board was unduly influenced by industry. I think part of the problem that I see with that board is the fact that it doesn't have any representations from investors or consumers generally. They're either people with commercial experience, members of the board or legal people. In your experience some lay representation or consumer representation would be a desirable addition? ---Absolutely, yes. Is that a sentiment now - there's nothing wrong if it is - which you have come to as a result of everything that has happened or is it a feeling that you had at the time? ---No, I mean, to me it just seemed unusual that you would have a board with a role of supervising an industry that you're not having representations from all key stakeholders. What about the notion of it being a conservative board? Was that your experience as well, whatever that may mean?---I'm not sure what it means. I mean, the only observation I would make is that I do recall thinking that the board - there was a problem relating to these number of matters that were transferred from, you know, outstanding matters of in excess of some 50 files. I was surprised that the board was not perhaps more demanding in terms of getting attention to those matters but, to be fair to them, I think that they had been frustrated over a number of years by what they perceived to be a lack of resources to enable them to carry out their functions. Did you find when you started attending - admittedly only portions - board meetings in relation to various things that you continued to find them surprisingly undemanding? ---Yes, I mean, that's probably a fair general comment without looking at specific issues. THE CHAIRMAN: What is the next bit about "approved investigators"?---"Arrange investments." 4/21/ces 36 G. BUCHHOLZ XN 13/6/00

"Arrange investments working with mortgage originators"? ---Mm. "Do not - - -"?---That's probably just saying that mortgage originators do not handle clients' funds or moneys. "Do not handle money"?---Yes. "Exception - - -" MR CHANEY: "Exemption under act", is it? Perhaps you might read the balance of it?---"Exception/exemption under act; minister grants with recommendation from ministry; does not involve board." I think that was one of the issues at the time that the board was concerned about, the number of exceptions, yes. THE CHAIRMAN: Yes, it has got the question mark there? ---Yes. "Grounds for exceptions" - I'm afraid I can't read that? ---"Agent of mortgage originators do not handle money from prime lender to borrower; parent body indemnifies borrower." That refers to some of the standard conditions that were attached to exceptions. I see?---Yes. MR CHANEY: Then just read on?---"Compliance number of mortgage originators operating without licence and/or exceptions arranging loans or prime lender." That was one of the concerns with that transfer, the increased number of accepted applications and how they were to be dealt with. Then there's "Level 5" something "officer"?---"Level 5 senior office, compliance licensing policy." Mr Chairman, I tender the undated handwritten note of a meeting with Mr Johnson, Ms Brazier and Mr Buchholz. THE CHAIRMAN: Exhibit 116. EXHIBIT 116 Undated handwritten note of meeting with

Johnson, Brazier and Buchholz MR CHANEY: That completes my examination of Mr Buchholz, Mr Chairman. THE CHAIRMAN: Yes, very well. In view of the undertaking given to Mr Quigley that completes his evidence so far.

(THE WITNESS WITHDREW) 4/22/ces 37 G. BUCHHOLZ XN 13/6/00

MR CHANEY: Yes. THE CHAIRMAN: What is the program for the rest of the day? MR CHANEY: We have Mr Rossi to follow. THE CHAIRMAN: All right, 2 o'clock? MR CHANEY: Yes, that would be convenient with me, Mr Chairman. Thank you, ladies and gentlemen. We will adjourn.

____________________ 4/23/ces 38 13/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. I call Robert Peter Rossi. ROBERT PETER ROSSI sworn: THE CHAIRMAN: Yes? MR CHANEY: Mr Rossi, whereabouts do you live? ---15 Koorda Street, Coolbinia. And your present occupation?---I'm the registrar of the Real Estate and Business Agent Supervisory Board. That's a position you have held for some time?---Since 1991. I think you were also the registrar of the Finance Brokers Supervisory Board from about 1991 - - -?---To about 96, yes. You left that position when there was a bit of a restructure at the ministry resulting in the transfer of the finance brokers to a different directorate?---Yes, the finance brokers section and the Land Valuers Board went to the ministry. Up until that time, that is, up until late 1996, how many boards were you the registrar of?---Four boards; the Real Estate Board, the Settlement Agents Board, the Finance Brokers Board and the Land Valuers Board. Can you indicate to the committee your employment background and qualifications leading up to your assuming the position of registrar of those boards in 1991?---My public service career has been mainly involved in real estate. I spent a number of years in the property and valuation office of the Public Works. I had been a conveyancing clerk in crown law in the very early days. I'm a qualified valuer and licensed real estate agent and I have tried to specialise within the real estate industry sector. I came to the board in May of 1979. MR BLIGHT: Which board?---The Real Estate Board. MR CHANEY: In May of 1979 in what capacity?---Yes, the Real Estate Board was created as at December of 79. Yes?---I went to the board as an investigator in May of 79. I'm guilty of not having listened carefully to your answer. You were then an investigator with the board through to 1991?---I was initially appointed as an 1/1/ces 1 R.P. ROSSI XN 13/6/00

investigator; never assumed any of the duties of investigator. I assumed the duties immediately in 1980 when the board came into being as the assistant registrar. So I was the assistant registrar from 1 December 1979 to 91. Was it within that period that the Ministry for Consumer Affairs assumed responsibility in relation to the board? Is that correct?---When we were created in December of 79, we were part of the former Chief Secretary Department and in 82 - there was an election in 83. We became a branch of the Consumer Affairs. Thank you. When you commenced as investigator, did you have any training in investigation techniques?---At the time there were two investigators appointed; one who had investigation experience and knowledge and I was supposed to have been his assistant in that I had the real estate background and knowledge so we were supposed to tee up together. So I had no formal investigation experience, although I had the real estate background. You had the industry background?---Exactly, yes. In terms of your period as an investigator, was it a matter of having learnt on the job, as it were, from the investigator you worked with or did you undertake any courses?---When they created the board, they didn't contemplate the duties of an assistant registrar so I never at all commenced an investigation. So it was a position I was appointed to but never filled formally. What did you actually do?---I became the assistant registrar mainly involved the licensing functions of the board way back in 1980. Did that remain the focus of your activities through till 1991?---Yes, it did. The licensing side of things?---Yes, that's right. So in terms of the sort of investigatory function you never performed that?---Never performed that at all. I'm sorry, yes, I misunderstood. Can you indicate to the committee what you see from your experience as the function performed by a registrar of one of these statutory boards? Where do you fit into the scheme of things?---The registrar's position is a statutory role. I'm there to advise the board on policy matters, procedural matters and to give some guidance to staff. So there is some guidance on policy matters for the board?---Operational matters. 1/2/ces 2 R.P. ROSSI XN 13/6/00

Yes?---But certainly I'm responsible directly to the board in respect of setting of policy, being a conduit between industry and the board to gather as much information as I can as to the operations of the industry and certainly pass them on to the board. DR NEWMAN: Mr Rossi, when did you become a licensed real estate agent?---I became a licensed real estate agent in 1986. When did become a licensed valuer?---I have never practised as a licensed valuer. I'm a qualified valuer. Right?---In those days in the public service you didn't have to be licensed if you were doing valuations for the public service. Right?---So I did all the studies and everything and practised in the property and valuation office. Right, but you have had a real estate agent's capacity to act as bona fide in control since 1986?---Yes. At the time I applied to the board for a licence I had all the qualifications for a licence. I believed I had the experience for a licence, although my application was based on the premise that I simply wanted to hold the qualification as a licensed agent. I didn't want to trade as an agent so I immediately surrendered my practice certificate and I have never held a practice certificate since but I hold a licence. But you would have had a conflict of interest if you had gone into business obviously because of your position? ---Certainly, yes. By carrying out your duties your training and the knowledge you have gained obviously you see as having been a benefit in carrying out your duties?---Certainly, yes. MR BLIGHT: But you are a valuer in the old PWD?---Yes, Public Works property and valuation. Land resumption office?---Land resumption office formed a part of Public Works. What sort of valuations did you carry out in this capacity?---I was mainly concerned in the property management side of things of the Public Works portfolio setting leases, having a look at leases, setting terms, property inspections, that type of thing mainly in respect of the property management side of things. And valuing property for resumptions and that sort of thing?---Not a lot. I was mainly in the training section 1/3/ces 3 R.P. ROSSI XN 13/6/00

and then I practised in the property management portfolio of the Public Works and then I applied for the position of investigator in May of 79. I qualified in 1976. As a valuer?---Yes. MR CHANEY: Yes, I think I was getting a little confused there. I think you earlier said 86. It was 76 you obtained your qualifications as a valuer, was it?---Yes. THE CHAIRMAN: Excuse me, I have missed this. What happened to you after 91?---I'm at the board. Still there at the Real Estate - - -?---Real Estate Board. MR CHANEY: And Settlement Agents?---Yes, we serve both Settlement Agents Board and the Real Estate Board. Just to go back on your qualifications for a moment, the formal qualification in relation to valuing was what? Was it some sort of diploma---In 1976 from WAIT. From WAIT?---Yes. What is it called?---The associate diploma in valuation. In terms of your real estate qualifications, that was 1986, was it? Is that what I'm getting confused about? ---That's when I became a licensed agent, yes. Yes, and what formal qualification, if any, was there involved in gaining that?---Yes, it was a diploma from Perth Technical College which I completed in 1979 and it wasn't until some years later that I believe that qualification would assist me in my duties. Did you have any other formal qualifications?---No. Coming back to what you were saying a little earlier that you see the function of registrar as being the conduit between the industry and the board, in particular providing policy input to the board on matters concerning the industry, I take it that your background and qualifications in real estate and valuation were helpful in enabling you to fulfil that function and that it is important in fulfilling the role of a registrar that you do have a working knowledge of the industry?---Yes. Is it the case that the boards, in your experience, look to you to provide them with guidance on policy issues? They actually call on you to have input?---Certainly I would have knowledge of trends in the industry, practices which are creeping in and complaints from agents as to what they believe should be happening, things of that 1/4/ces 4 R.P. ROSSI XN 13/6/00

nature, so I would certainly filter a lot of that information to the board, yes. Keep a finger on the pulse, as it were?---I try to, yes. What is the mechanics of that? How does it actually work? How do you manage to find out what is creeping into the industry, for instance?---Well, I have been a lecturer at real estate courses since 1980. 70,000 people have gone through those courses. There are 10,000 people currently registered as real estate sales reps at the moment. I have been the common denominator all those years. So wrongfully or rightfully they contact me. That level of personal contact is a valuable thing?---I certainly regard it as valuable, yes. At the time that you came to take on the Finance Brokers Board in 1991, what exposure had you had to the finance-broking industry?---Not a lot. Did you over the years that you held that position develop an understanding of the industry and the practices within the industry along the same lines as you had in real estate?---Not to the extent as I was involved in real estate but I certainly knew what the functions of a finance broker was traditionally. THE CHAIRMAN: Were you in any way the sounding board for them like you obviously are with the real estate? ---Only in respect of possibly real estates having dual licences. I see, yes?---In those days there were certainly a fair number of them who held the dual licences and in those situations possibly, yes, but the sole professional finance broker I would have had very little contact with. DR NEWMAN: Those with dual licences though you would have known from your contacts - the fact that you have stated that you tried to keep in contact generally with the industry, you would have known those where there were concerns within the industry as to their practices and the way they were acting?---Yes. MR CHANEY: In respect to that period of 1991 to 1996, what was the relative level of activity that you undertook as registrar of those boards as between the different boards? Was there an imbalance between the amount of work associated with one board over the other? ---I would have stated that a fair split would have been possibly 80 per cent real estate, 10 or 12 per cent settlement agents, 5 per cent finance brokers and 2 or 3 per cent land valuers. The Finance Brokers Board would have only met once a month. 1/5/ces 5 R.P. ROSSI XN 13/6/00

How often did the Real Estate Board meet in those days? ---In those days every week. So is it fair to say that finance-broking really was not a focus of people within the department because of the relative smallness of the workload?---Yes, numericalwise there would have been 12,000 people involved in real estate and 100 licensed finance brokers. Did that translate into the relative enthusiasm within the department for getting involved in activities of the different boards?---It was certainly of lesser concern. Really the point of my question was - I'm putting it rather poorly, I think - was finance-broking the poor relation, as it were, of the industry?---It seemed to carry on without the minimum of interference, yes. Now, you had during the period as registrar of the boards responsibility in relation to compliance matters as well?---Yes. So what was your role in relation to investigations and compliance issues generally?---The complaint would come in. We would receive it. The complaint would be allocated to an investigator. That investigator would make preliminary inquiries as to whether it was going to be fast-tracked, whether it could be conciliated, whether they could resolve it with a telephone call - - - Perhaps complete the picture and I will come back? --- - - - and if the investigator believed after making the most of preliminary inquiries he or she needed an authority to take it to the next step of investigation, they would come to me and I would issue a direction under section 13 of the act. Would you have any involvement thereafter in the process?---No, I would not have. Where did the responsibility lie for taking an overview of those complaints on how they were going and so on? ---The management of, the ongoing investigation? Yes?---Yes, there would be the supervisor of the investigators at the time. That was at manager level within the - - -?---It would have been a branch within the ministry which would have had a number of investigators under its branch and that branch manager or director would have supervised all the investigators. So as registrar you simply dropped out of the picture having issued the direction under section 13?---Yes. 1/6/ces 6 R.P. ROSSI XN 13/6/00

What was the basis of a decision to issue a direction under section 13? What criteria did you apply?---The investigator either formally by memo set down the matters he thought were in breach of the act or the code and he would give me that and put it on my desk and I would read it and then sign an authority or he would, if possibly on an urgent basis, come and give me a verbal explanation of what he was intending to do, what the allegations were, and if I believed that that was in order, I would give a direction under section 13. Was it any more than a rubber-stamping exercise? I mean, did you actually exercise an independent review of the investigator's work?---I don't ever recall refusing an investigator's request for a section 13. You mentioned as well in that process that - I'm going back a step - when the complaint first came in, it would be assigned to an investigator?---Yes. You would actually receive it and assign it, would you? ---Well, I would allocate it to the manager and he would allocate it on a work basis as to whom. Yes?---So having read the investigation or having read the complaint, within a short period thereafter the investigator would come and see me and ask for a direction if that was his intention. I would still have some recollection of the complaint because it would still be relatively fresh in my mind. I would have read it within the last 2 or 3 weeks so I would certainly have some retention of the nature of the complaint. You mentioned that when it got allocated, it might go off for preliminary investigation or fast-track?---Fast-track or whatever, yes. Now, the fast-track process we have heard some evidence about. Are you aware of the broad nature of that evidence?---Yes, I am. Are you aware of Mr Wallace's evidence about the fast-track system?---I certainly am aware that he was an important player in the creation of the fast-track system. Yes, and when was it created?---About 93-94, I think. Were you involved in its creation?---I didn't formally participate in it, although I was aware of it. Did you know how Mr Wallace described it as a way of effectively trying to find a loophole or some reason to close the file, to deal with it quickly and close it, paraphrasing his evidence?---It may have been certainly a 1/7/ces 7 R.P. ROSSI XN 13/6/00

speedy way of resolving or dealing with the matter, that is, it was closed. There was very little preliminary investigation made. If there was some investigation made, they formed a quick decision that there wasn't any justification in proceeding. Was it a system that was of concern to you?---Obviously in dismissing or writing to the complainant that the investigation wasn't going to proceed because of lack of whatever, a number of people did come back to the board and say, "Hang on; I think you have dismissed it very lightly. This is what I'm saying," and in a number of those they were revisited and reopened. When you say "the board", are you talking Real Estate Board or Finance Brokers Board or both?---Mainly real estate, although there would have been the other boards involved. Coming back to the question I asked you, given that in some cases where people did come back something was reopened, was it of concern to you that the fast-track system may have been missing more serious issues that might have been apparent on the face of the initial complaint?---I don't believe a serious issue went through the system without it being brought to some attention because in reading the complaints initially I would have made some summary of it in respect of, "This was a serious issue. This was not a serious issue," and certainly I would have endorsed the written complaint to some form of, "This is a serious matter. It needs to be looked at," or something of that nature. So the more serious ones I don't believe got through without having been properly investigated. What do you say to the proposition that something may appear relatively insignificant on the fact of a complaint but when investigation occurs, something deeper is found to exist?---I always regarded the safeguard as informing the complainant that there was no basis to it and if the complainant came back to us in respect of they believed there wasn't adequate investigation of it, I regarded that as a relatively reasonable, considering the resources at the time, backstop to a further look at it, that is, removing it from that person who made that decision to someone else. Did you accept the proposition that that backstop, as it were, relies entirely on the perceptiveness, if you like, or perhaps the persistence of the complainant so that if the complainant just says, "Oh, well, there's no point dealing with this board. I won't bother to go back even though I think there's something more serious," or if the complainant alternatively doesn't realise him or herself the seriousness of it, then it gets missed?---Yes, I 1/8/ces 8 R.P. ROSSI XN 13/6/00

wouldn't be able to categorically state 100 per cent that that is not the case, that is, everything was looked at. How long did the fast-track system actually operate?---To about 96-97. That is in relation to - - -?---About 96, yes. Is that in relation to all boards? Was it while you were still on the board?---Yes, it was until the board went - the other two went their own way and the Real Estate Board and the Settlement Agents Board were able to access its own funding and put more investigators on board. So essentially the fast-track system was driven by a lack of resources, was it?---I would say that would be a reasonable assumption. What was the reason for scrapping it?---Obviously with the Real Estate Board and the Settlement Agents Board becoming self-funding there was an immediate need and there were resources allocated to investigations and I think today - - - THE CHAIRMAN: To investigations of the real estate? ---Yes, of the real estate. Yes?---And obviously in the real estate side at the moment I think we have all told, financial and ordinary investigations, about 12 people. So the resources have been increased significantly. And the Finance Brokers Board?---That's a ministry matter. I have no involvement in that any more, since 96. But you know how many investigators they have got?---I think one. DR NEWMAN: There was never any request or any negotiation for some of your investigators to assist with finance brokers' matters when they were under pressure? ---I'm not aware of any formal request for assistance of staff from our area to the other area. MR CHANEY: Your operation now is still housed within the ministry offices?---Yes. And all the investigators are based within the ministry office?---The boards have a contract relationship with the ministry for the provision of staff which are totally funded from board resources. Yes, but housed within the ministry?---Yes. 1/9/ces 9 R.P. ROSSI XN 13/6/00

So they're around the place?---That's right, yes. MR BLIGHT: Mr Rossi, how many staff were involved when you were registrar of the four different boards?---I think the maximum number at any one time being a total unit would have been 19. When the split-up occurred, the real estate and settlement agents received 12 funded from a different source?---Yes. What happened to the other seven? Do you know?---The Real Estate Board and the Settlement Agents Board at the moment have a staff complement of about 40. Now, when the split occurred in 96, a number of staff went from the old unit to the ministry with the Finance Brokers Board and the Land Valuers Board. I think there were about three or four staff at the most. MR CHANEY: Do I take it that when the Real Estate Board became financially independent, as it were, it scrapped the fast-track system because the fast-track system was in fact something which was essentially undesirable and once you had more resources so you didn't have to have a fast-track system, the logical thing was to do away with it?---Well, obviously the Real Estate Board didn't become self-sufficient until 1 July 96. However, the mechanism had already commenced in respect of the staffing, the administration, almost 9 months before, a year before. Yes?---So although we didn't formally become self-funding until 1 July 96, it started to happen in 95. So at that stage the decision was made to not proceed with the fast-track system. But is that because really they didn't have to have a fast-track system any more? They had the luxury, as it were, of being able to afford not to have it?---Yes. THE CHAIRMAN: Did it cease the Finance Brokers Board, the fast-track system?---Yes, it ceased for all - well, whilst the personnel were still located within the real estate environment, it apply to them also but once they went to the ministry in about October of 96, I'm not aware of how they handled the complaints thereafter, but certainly until they left our environment in about October of 96 there was a shift from the fast-track to the ordinary investigations. MR CHANEY: So it follows, does it, that really the fast-track system came into being simply because there weren't enough resources to copy without it and it was a way of getting through the workload, albeit an undesirable option?---It was a tool possibly used for those purposes, yes. 1/10/ces 10 R.P. ROSSI XN 13/6/00

Yes, and it would have been better off without it?---I'm not too sure how we would have managed if we had devoted full attention to an investigation of all those matters. I want to ask you about the audit function. Perhaps first the process when the annual audit certificates came in in respect of finance broker, who handled them and what process did they go through?---The finance brokers' audit would have been for the calendar year ending 31 December each year. Yes?---Those audits also coincided with the real estate. In respect of the finance brokers' audits they would have been received from the period 1 January that year to 31 March that year. There would have been a maximum in my day of about 100 audits - well, 100 returns. Whether those 100 returns were in the form of an audit, that is, the broker actually held funds, or whether the broker gave us a statutory declaration of non-receipt of funds, irrespective there would have been about 100 returns. All up?---All up. Have you got any idea of the percentage that actually handled money?---I would have said any more than 30 to 40 per cent I would have been surprised. In any event, who received them when they came in?---The administrative staff involved in the financial services area. What did they do with them?---Would have checked them off our data, would have recorded the receipt of the audit, would have read the audit and if the auditor's statement, the agent's statement, the balance of the trust account was all in order, the audit report would have been ticked and sent to file. When you say they read the audit - I know it is difficult when we don't have an example here, but did you see audits come in in respect to finance brokers?---Well, I would have seen audits per se and I'm absolutely sure I would have seen a finance broker's audit also, yes. And that consists generally of a statement by the auditor of the statutory tests?---Yes, the audit reports are a standard report. The auditor makes the statement that the books were in order, he has audited them, they complied with the regulations and - - -' They were available for inspection?---Yes, ready for inspection and all those. And then any other matter that the auditor considers - - -?---Well, normally, yes, on D of the 1/11/ces 11 R.P. ROSSI XN 13/6/00

auditor's report he would report any matter which he thought needed to be reported which was at best a qualification. Attached to finance brokers' audits there were also some declarations as to balances?---There's certainly a declaration by the nominee or what may be referred to as the person in bona fide control of the business and he or she would also declare as to the balance of the audit, that is, a numerical amount of what was standing in the trust account at the time. When you said earlier that the administrative staff would read the audit, would they read through the whole series of documents?---Yes, I would have expected them to read the whole lot; yes. What sort of qualifications do those people have?---Both of them at the time - I'm talking from about 94 to 96 - certainly had accounting qualifications. Are you able to identify those people?---Frank Bull and Joe Bonfiglio. You said administrative staff. Mr Bull was in fact a sort of financial investigator as well, was he not? ---Yes, he was the person who was n charge of the audit provisions. Certainly if the audit report were qualified, he would take control of that file and seek to satisfy himself as to the nature of the qualification. And he was the person who would receive the report or one of the people who would receive the reports in the ordinary course and attend to their filing if they were all clear?---One would have to accept the fact that from the period 1 January to 31 December we're also in receipt of 900 real estate audit reports. So during the period the finance brokers' audits were due 900 real estate audits were due also. So we had the situation of 1000 audits coming into our office during that 3-month period. Yes?---It wasn't possible for Mr Bull to read every one of those audit reports. We have heard from Mr Buchholz who took over from you when the Finance Brokers Board left your patch that when the audit letters are initially received, they're received by a secretary in the sense of somebody who is an administrative person only rather than somebody with an accounting background check to see if they're clear. If they're not clear, then referred on to an appropriate investigator. Was that not the case when you were there?---Our financial people certainly all had an accounting qualification. All support staff were certainly aware of the matters to look out for in determining or processing the audit reports. 1/12/ces 12 R.P. ROSSI XN 13/6/00

What were those matters?---Well, certainly the audit report had to be ticked in each one of those declarations. A, B, C, D?---Yes, A, B, C, D; they were all ticked. They were all read over the page. So there had to be a physical marking of the audit report in that they had been read, processed and certainly the ones which were qualified were put aside and referred to the appropriate more senior officer. DR NEWMAN: Mr Rossi, did any of those qualified audit reports in fact get tabled at board meetings, particular the Finance Brokers Board, so that the actual board members were aware that there were qualified audit reports coming in from particular brokers?---I should imagine some were along the line. The financial services person would have requested an explanation of the qualification of the audit and in due course put that to the board as an explanation of either (a) not proceeding any further because they believed that the actions had been taken to make sure that that didn't happen again or - - - THE CHAIRMAN: Mr Rossi, you said you believed that would happen. Did that happen?---I haven't got actual proof in front of me now but I believed it did happen. Yes, I was certainly at board meetings where qualified audits were discussed. Thank you. DR NEWMAN: So the board members would be aware that XYZ had had a qualified audit, that there were inquiries being made and that they should in due course expect to have a further report from the person investigating as to the outcome of the inquiry?---Yes, they would have first of all been informed of the qualification and ongoing correspondence between our office and the auditor as to seeking an explanation. If the explanation was all in order, it would have been accepted and no further action or otherwise an application before the board in respect of the qualification for an inquiry. Was there a working sheet or a running sheet of the audit reports being qualified, the fact that inquiries were being made and then when they had been dealt with, they were removed from that running sheet so the board members were always aware what was unresolved and what had been resoled?---Certainly the minutes referred to matters previously brought up at the previous meeting so if the minute itself didn't formularise a conclusion of that action, it was brought up as ongoing board business in respect of subsequent agendas and subsequent minutes. 1/13/ces 13 R.P. ROSSI XN 13/6/00

So business arising included an update of what was happening on those reports?---Yes, that's right. MR CHANEY: Just going on to a different topic but in a sense going back to matters you have dealt with in part already, in terms of exercising some sort of strategic overview of an industry in order to fulfil supervisory obligations, who did you see as having the responsibility of actually gaining that overview? Was it the board? Was it management in the ministry? Was it the registrar? Was it a combination of all?---Certainly I tried to pass on to the board the daily occurrences within the industry. As to the long term future of the industry and policy in respect of that matter, those matters were normally by the peak industry associations lobbying the government through the ministry to bring those areas to amendment to the act or whatever. So you didn't see some obligation of the board as an entity to fulfil that role?---Certainly I may have been in any working party policywise within the ministry as to formulate those proposed policy matters. I was certainly part of it in any working group. What about the board itself, the members?---Yes, certainly invitations were issued to members, and I am aware that, you know, certain chairs of the boards attended policy matters when we were discussing administration or policy work which involved the four boards. So I take it because they attended by invitation the impetus for the policy direction was coming from the ministry, not from the board itself?---Yes, it was mainly coming from - - - And in your long experience with various boards, that is the way you see them operate?---Up to 96 that was the way it operated, yes. Then in respect of real estate it changed after 96? ---That's right. Are you able to say anything about the finance brokers regime after 96?---I have had very little activity or involvement in it. Mr Rossi, there are two other matters of a more specific nature that bring you here today. The first is that Mr Wallace in his evidence as part of exhibit 89 produced a memorandum in 1987 concerning Mr Grubb. Have you seen that memo?---I have seen a memo from Mr Wallace summarising matters of which pertained to complaints which were filed against Mr Grubb. 1/14/ces 14 R.P. ROSSI XN 13/6/00

In that memo there is reference to the fact:

The registrar of the Real Estate and Business Agents Supervisory Board has recently expressed a written concern that something is drastically wrong with Grubb Real Estate and Finance due to the number of complaints being received at this department.

It is dated 20 October 87. In his evidence Mr Wallace identified you as the registrar. I take your point you have said you weren't the registrar in 1987?---No. Your position then was?---The assistant registrar. Were you aware of concerns about Mr Grubb in 1987 that were reflected in this memorandum?---In 1987 my primary duties were certainly involved in the licensing of those four occupational boards. I don't believe I would have seen many complaints that came into the ministry in 1987 so, no, I would not have been aware of those complaints against that agent. Were you aware of concern about this particular agent just generally without knowing specific - - -?---At what time? In 1987?---No. Did you attend board meetings in 1987 of the real estate - - -?---Only in respect of the licensing meeting which was once a month. So, in short, you know nothing about this memo?---I don't recall - - - You have seen the memo, I take it?---Yes, I have seen the memo; yes. Sorry, I interrupted you?---I don't recall having any involvement in any of those matters which were summarised in that memo. There are, you will agree, an extraordinary number of complaints referred to in the memorandum. Do you agree with that as a proposition?---I don't want to disagree with Mr Wallace, but of a cursory reading of those complaints a fair portion of them were tenancy matters, bond matters, and I don't believe there's any striking complaint or summary in that report which gives me concern today. You don't feel concerned at the repetitive nature of people having problems getting their money back from bonds and so on?---In tenancy matters the tenant always adopts a very biased view in that they haven't done any 1/15/ces 15 R.P. ROSSI XN 13/6/00

damage to the property, they have left the property in sparkling condition and they were objecting to any withdrawal of moneys from those bond accounts. So in situations of that nature it's very difficult to prosecute an agent for being very diligent on behalf of his landlord in respect of the property he's managing on behalf of the landlord. The account of the various complaints being made show that there are a number unresolved, admittedly a number that were resolved or dismissed or came to an end some other way, but does not the sheer number suggest that perhaps there is some systemic problem with this agent beyond near zealous preservation of the landlords' interests?---I would have to be presented with further information in respect of the wrongdoing of the agent involved. certainly one would assume that the larger the business, the more complaints you're going to get. I am aware that Mr Grubb had quite a sizeable property management portfolio. What the memo refers to is 48 complaints over the period of Mr Grubb's licences which seemed to have been granted in about 1981-82 in relation to the settlement agent matters. This is now 1987, about 6 years later, so roughly eight a year. Is that unusual?---As I say, I think one would have to take it in the contents. I don't believe at the time there was a Residential Tenancies Act. Tenants' rights weren't set down in those days. Obviously they did have rights and they had a legitimate cause to lodge a complaint if they believed they weren't getting the service. I was certainly aware that a number of complaints against Grubb were against his personal demeanour, that is, the nature of the man himself. So you were aware of that back in 87?---Well, I can't say 87, but I'm certainly aware of it subsequent years. I just can't put a date on it, but I was certainly aware that a lot of those matters were personal matters. Can I ask you again: if we say the average is six a year - and I accept that is rounding some figures off that might be slightly inaccurate, but is that - I'm sorry, eight a year is more likely the rounding off?---Mm. Is that unusual?---Yes, as I say, within the contents of the nature of the complaints themselves it does seem to have a reasonably high number of complaints against a particular agent. Yes, and accepting that at the time this was not your particular responsibility, but now looking at it, if you looked at this complaint history on the part of an agent, would it cause you to think, "We better do something about this"?---That's a very general question. 1/16/ces 16 R.P. ROSSI XN 13/6/00

Yes?---I would rather it specified into the specific areas. If it's in respect of property management, I have some real concerns whether any action or an inquiry by the board dictating to Mr Grubb how he treats his tenants would be beyond the board's capacity. However - - - Capacity in what sense?---Well, I don't believe it would have been able to give him directions certainly in respect of the administration of his trust account, certainly in respect of documentation, certainly in respect of authorities and all the other legitimate processes the board has control of. I have got no doubt it may have given some directions in respect of those matters, but how he conducted his personal business and his mannerisms I don't believe was within the scope of the board. You have had a look at this memo, I take it?---Very quickly. Yes?---I haven't given it a lot of - - - Having read the nature of those complaints, if the evidence which emerges - and we're a long way away from pursuing that because in the end it's a matter for the Real Estate Board, but if the evidence is that nothing happened as a result of this memo, as Mr Wallace effectively said, would that surprise you in the light of what you read in this memo?---Well, I should imagine the person whom that memo was directed to should have at least satisfied themselves as to Mr Wallace's concerns. I have got no doubt there should have been some follow-up action in respect of that memo to see if there are legitimate concerns or there are shortcomings within that agency. Possibly it should have been brought to the board's attention as to what action is possible under the act to bring a resolution to those matters. So something should have been done about it, if only to - - -?---Yes, I'm not dismissing that report at all. I'm simply saying that there should have been some verification of Mr Wallace's concerns, "Let's have a look at the nature of those complaints, what they involve, and see whether there's any action the board may take to remedy those particular matters." THE CHAIRMAN: Would it ever have been discussed at the time with respect to this memo that we're looking at to send in an independent auditor to have a look at his books? I mean, this matter involved an application for a loan for 180,000 and 105,000. It was found by the inquiry officer of the commercial agent squad that Grubb had been negligent in a loan application for 54,000, failing to advise the complainant, etcetera. I mean, was it ever mentioned, "Okay, let's go in and have a look"? 1/17/ces 17 R.P. ROSSI XN 13/6/00

---There should have been some follow-up action, I have got no doubt, in respect of the issues covered in Mr Wallace's memo. But nothing did happen?---I'm not aware of it. No, I think we have been fairly advised that nothing did happen. DR NEWMAN: But no-one thought to put into place a checking mechanism to review the following year what the audit report said, what number of complaints there had been and to reconsider whether or not further action should be taken such as an independent audit of the trust account?---I take it - and I haven't got the files in front of me - audits which were unqualified simply were placed on file. Qualified audits were taken aside and separately dealt with. In dealing with a qualified audit this year the person would have looked at the audit last year and obviously if they were both qualified, then that would have rung, you know, alarm bells. Where the audit report wasn't qualified last year, it was a clean audit, however, it is qualified this year, then the follow-up action and the explanations of that qualification would have been sought. Certainly two qualified audits the year following would have been certainly a serious alarm bells ringing. MR CHANEY: I think the thrust of Dr Newman's question is as a response to this sort of report where there are financial complaints being made about money not being paid and so on, was there any scope for putting him on notice, as it were, to do regular reviews of his situation perhaps beyond audit certificates?---Obviously our database at the time wasn't the best database and where you have got a licensing file independent to the inquiry file, the two aren't merged. So the people dealing with the licensing matters may not be aware of the investigation and unless there is an inquiry before the board or a warning issued to the agent doing certain matters, the licensing file wouldn't have that data on it. Whoever deals with the renewal of the triennial certificate - was it triennial certificates in those days?---Yes, triennial. Whoever deals with that - - -?---For real estate it was triennial. For finance brokers it was annual. Annual at that point?---Yes. So whoever is dealing with the application for the renewal of the triennial certificate would not know in those days what else might have been happening in respect 1/18/ces 18 R.P. ROSSI XN 13/6/00

to that particular person?---No, they would not know that. There was no facility for - - -?---Cross-checking. - - - cross-checking at all?---No. THE CHAIRMAN: This memo which is, for the record, exhibit 87 - did that ever get to the Finance Brokers Board itself?---I'm not aware of that memo being presented to any of those boards approximately that time. Any reason why not?---I'm not aware whom he addressed it to as to the subsequent action of that person. "Manager of investigations and enforcement re Graeme Clifford Grubb"?---I am not aware of whom that person was in 97. 87?---87. He certainly would have been an officer of the ministry. MR CHANEY: I think Mr Wallace offered - - - THE CHAIRMAN: What is his evidence page? MR CHANEY: I haven't got that readily on hand, but I can say that what he said was it was either Michael Coghlan or Adrian Reddy. Does that sound right? ---Possibly more than likely Michael Coghlan, if that name rings a bell. Page 15. THE CHAIRMAN: It starts well before that, but, yes. MR CHANEY: Yes, it is the point where he identifies the manager at page 15. MR BLIGHT: I would just like to talk about the renewal of licences, if I could. You said the files were kept separately and they were not merged. I notice the act has some conditions relating to renewal of licences? ---This is for finance brokers? Yes, and that the registrar may object to a renewal? ---Yes. What checks would the registrar carry out when applications came in for renewal of a licence?---For finance brokers all the renewals were - there was no delegated authority. All the renewals were dealt with by the board or board members prior to a formal meeting. So two or three board members would present themselves before the board meeting started. There would be 1/19/ces 19 R.P. ROSSI XN 13/6/00

10 renewal files on the boardroom desk. They would deal with two or three each and they would check the file in respect of the renewal, the documentation, the fees, the bond and those matters. They would check the renewal file, the licensing file? ---Yes. But would they not ask the registrar whether he had any objection to the renewal?---Not normally. The licensing staff would fill out a check sheet and on that check sheet would have all the matters the board member or board would need to satisfy themselves with. But would it not one of the checks be that there was an investigation file, you know, in train for that particular licensee at the time?---The licensing staff in processing that renewal would not be aware of an investigation or a complaint lodged against that agent. I suppose what I'm saying is that there is a specific section in the act for the objection by the registrar to renewals and what I'm asking is what steps the registrar would take in order to inform the board whether or not he had any objection to that renewal?---If the registrar were aware of criminal proceedings against a particular broker for whatever matters they may be, if the registrar believed that there may have been a lending of a licence, he wasn't actually involved, there may be a number of matters which if the registrar were informed of and took that opportunity to lodge an objection, he may have. What steps would you take then to find out whether there was a criminal charge or criminal proceedings in train? ---Part of that renewal would be a criminal check of the directors of the company or the person themselves. And part would be whether there had been any lending of the business and so forth?---If there were some allegation of that. But part of it would not be to check within your own ministry whether there was an investigation file?---No. I'm not aware during my time as registrar of the Finance Brokers Board that I ever lodged an objection to the renewal of an annual certificate. Did you ever check to see whether there was an investigation file?---I can honestly say that I wasn't part of the process in dealing with that renewal. It was purely administrative delegated to licensing staff. Even though it's the registrar who may object to a renewal?---Obviously the registrar as the statutory person appointed under the act has certain powers, but it 1/20/ces 20 R.P. ROSSI XN 13/6/00

wasn't possible for the registrar to be involved in licensing at that level to do those matters. Is this sort of obligation or requirement listed on the JDF, job description form, for the registrar?---The job description form was to perform statutory functions of the registrar as per the requirements under the act. Thank you. DR NEWMAN: When you were passing from one registrar to another, as you have given evidence has happened, would it be normal for the outgoing registrar to make a list of duties and recommendations to assist the incoming registrar?---The ministry had control of administrative functions all along. I certainly wasn't asked to participate in any handing over discussions in respect of the finance brokers and land valuers when the ministry took them out of the real estate section into another section so I certainly wasn't part of any transitional or any handing over arrangements. Or any training procedure?---Or any training procedure. So the person who came in, came in cold and they had to find their own way around and find their own parameters as to what their duties were and what matters were outstanding that they had to deal with?---I certainly wasn't asked to be part of any handing over or briefing or anything of that nature. So you left one day and someone took over the next day and never the twain did meet. THE CHAIRMAN: If I may go back to this exhibit 87, 20 October 87, to be fair to you, where were you in 87? ---I was primarily involved with the Real Estate Board. This memo mainly concerning Grubb - and this is October 1987 - was to the manager investigations and enforcements and of that date, reading that memo of October 87, you say, "Should have been gone somewhere"?---Well, in 1987 the investigation functions of the ministry were all grouped into the one section so they did motor vehicle dealers; they did everything. Now, complaints would have gone directly to that section so I'm not aware of any filtering process of matters which related to real estate, finance brokers and land valuers and settlement agents being first passed to us and then to the investigation section. Mr Wallace in his evidence categorically says, "It went nowhere. I got nowhere," full stop. That is the tenor of his evidence about that memo which is surprising? 1/21/ces 21 R.P. ROSSI XN 13/6/00

---I'm not aware of any subsequent follow-up action as to those concerns expressed in that memo. Does that surprise you today?---In hindsight we're all - - - All very clever?---Yes. I would have certainly expected some review or revisiting of those particular files he has mentioned. Pick out the more serious ones which may allege some trust account mismanagement or some money mismanagement and revisit those matters quite quickly. Yes, very well, thank you. MR CHANEY: Mr Rossi, I want to move on to deal with an issue concerning A1 Real Estate being the subject of evidence from Mrs Bunbury yesterday. Members of the committee may wish to have exhibit 110 which is the bundle of papers in the A1 Real Estate file handy. Mr Rossi, there is a bundle of papers here which I would like you to have in front of you. This is a matter where you had some involvement as registrar of the Real Estate Board?---Yes. That was the capacity in which you had this involvement? ---Yes. Have you had the opportunity to revisit this file and the events which occurred in recent times?---Yes, I have certainly read the licensing file which I was familiar with and I also read the investigations file for the first time. When?---Within the last week. There are only a few matters. I don't want to take you through the whole history which we went through in some detail yesterday, but there are a number of questions I want to ask you. Before I do that, can you explain in general terms the role which you played in relation to this particular complaint?---Chronologically? Was there a general role which you played?---In summary, it was a role of which I sought to address an issue which I believed was a pure administrative licensing matter to bring it to fruition as far as our licensing data and their perceived trading status. The issue essentially was that there appeared to be trading in partnership but the licence related only to one of the partners?---A sole trader. Can I ask you what potential problems does that create from the point of view of the board?---It's a technical 1/22/ces 22 R.P. ROSSI XN 13/6/00

breach. Now, obviously if they are trading in a partnership under section 28 or a corporate body under section 29, that entity needs to be licensed in its own right. And the repercussions if it's not in terms of consumers? ---As a consumer, depending on the nature of their action, if they are a vendor, then that may nullify their authority to pay fees. If they were a consumer where they may transact moneys and those moneys may be misappropriated, there may be some difficulty in admitting that claim against the fidelity guarantee fund. Go to the bundle and about five pages in you will see a direction under section 13 of the Real Estate and Business Agents Act?---Yes. 1/23/ces 23 R.P. ROSSI XN 13/6/00

Mr Rossi, that's your signature on the thing and this is a direction in accordance with the procedure that you indicated to us a little earlier in standard form. It's dated 25 November 1993. It is clear from the file that activity had been occurring earlier than that date and indeed the letter from A1 complaining about the activities of Mr Wallace, the initial letter, appears to be dated perhaps 20 or 23 November but in any event prior to 25 November. How does it come to be that Mr Wallace would have been actually carrying out investigatory activities such as calling on the office and doing the things which gave rise to the complaint prior to receipt of a direction under section 13?---In reading this documentation I asked myself the same question. I'm subsequently aware that although I signed my authority on 25 November, Mr Wallace had in fact attended the premises on 18 November. I don't believe at the time I signed the authority on 25 November I was aware that Mr Wallace had already attended the premises on 18 November. Do I take it that therefore what he did on 18 November, at least so the letter records, was something which he wasn't authorised to be doing?---I certainly wasn't aware of it. You mentioned that the procedure of dealing with complaints in response to Mr Blight's questions was that a complaint would initially be received and allocated for some preliminary review before a direction was then given. Is the sort of conduct referred to in the letter from Mr Gough - there was a visit to the premises and inquiries made - part of that preliminary review process? ---I believe that Mr Wallace attended the premises on 18 November after the office had received a fax from R. and K. Brown on 17 November. The office having received the fax being the ministry's office?---The ministry, yes. I would have thought that may not be regarded as a formal complaint but a simple licensing inquiry. It may have been more appropriate for that matter to be addressed by the licensing staff instead of a formal investigation at that stage, on the 17th. Do you have any explanation as to how it comes to be that Mr Wallace has gone to the premises and carried on an investigation prior to receiving the direction?---The only explanation I can offer is that Mr Wallace somehow came in possession of that fax of the 17th and took it upon himself to undertake the course of action he did. Mr Morgan, it seems the following day - if one goes back a page from the section 13 direction - became involved in the process on 24 November by speaking to Mr Gough, advising that he would get back to him, and then on the 2/24/df 24 R.P. ROSSI XN 13/6/00

25th advising Mr Gough that the investigation was continuing. Do you know at the time of that conversation whether you had yet issued your direction under section 13?---I'm not aware of when Mr Wallace put his request to me for a direction to issue to him whether he had discussed it with Will Morgan or not. I wasn't aware at the time. At the time you signed the section 13 notice you didn't know at all that Mr Wallace had been to - - -?---I don't believe I was aware of the formal dialogue of the previous 2 or 3 days between Mr Gough and Mr Morgan or other parties. So was your direction issued on the strength of the fax from Brown?---No. Mr Wallace put a memo to me requesting a direction and I issued it on the strength of his request. I want to take you through a number of pages, to a page which has the number 120 in the top right-hand corner. In fact it has 119 crossed out and then 120 written next to it. It's a letter of 21 February 94 from the ministry to A1 Real Estate which records the fact that you are now seeking legal advice as a result of a meeting. Are you familiar with that letter?---Yes. Do you recall the meeting that led to the need to seek legal advice?---There were a number of meetings I sought to hold with Mr Gough and Mr Avey in December which didn't eventuate and I didn't meet them until mid-February and in mid-February at that meeting, I sought clarification as to the way they operated and at that meeting I expressed some concern that they seemed to be trading as a partnership and they should licence their business as a partnership. At the same meeting they didn't agree with my viewpoint and they believed they had obtained legal advice that the way they were trading was not a partnership. There seemed to be a conflict of views and to resolve that conflict of views I said to them that I would request a legal opinion as to the way I believed they operated, as to whether that constituted a partnership. At the meetings you had in December, was there any suggestion - I'm sorry; you didn't have meetings?---No. They didn't eventuate. You endeavoured to have meetings; I'm sorry. In December though were there any steps taken to put the investigation on hold at all?---Not that I'm aware, no. As far as you were concerned, the investigation was continuing?---As far as I'm aware Avey and Gough made telephone contact with me a number of times seeking a 2/25/df 25 R.P. ROSSI XN 13/6/00

resolution of it until I said, "Listen, it's no good discussing it. We've got to meet in person. Come in and see me and I'm prepared to assist you the best I can." As far as I am concerned, there was no break in those discussions or that action. On 21 February this letter was sent which says that until the registrar receives advice on the matters which have been raised, the ministry will not be processing its best investigation of the matter. The next document in the pile is a memorandum to the senior legal officer from you. That's undated?---Undated. Are you able to say when that was sent?---It would have been about the time of the previous memo, 21 February. About the time of my meeting with them would have been mid-February to the time I received the actual legal advice which was dated 8 March - so it would have been in February. Some time in February?---Yes. Then you did receive the advice. When did you receive it - on 8 March?---8 March. If you go through a few pages, there's a page numbered 123 which is an instruction to Mr Wallace from Mrs Bunbury of 11 March that no action be taken as a result of some inquiries carried out on 1 March and no other action be taken on the inquiry without written permission. Were you aware of that memo being sent? ---No, I'm not or I wasn't at the time. The first time I saw that memo was within the last week reading the investigation file. Were you aware at all at any stage that there had been an agreement to hold any further action on the matter pending legal advice?---I certainly would not have had any discussions with Mr Wallace concerning this issue. I take it that Mrs Bunbury may have informed me of her action because she was certainly aware that I had received or I had requested legal advice. Whether she advised me during those discussions of the action she had taken, I can't say at this stage. The letter which I took you to of 21 February to A1 Real Estate records the fact that the ministry wouldn't be progressing the investigation until you had received your advice?---Yes. Did you understand that to be the position?---Well, I certainly had control of the licensing and my own file. I had no control over the investigation or the investigation file. I have no direct recollection of that being the case. 2/26/df 26 R.P. ROSSI XN 13/6/00

At the time Mrs Bunbury wrote that memo of 11 March, her evidence was to the effect that she wasn't aware that the legal advice had then been obtained. Can you explain why that would have been?---The legal advice is dated 8 March. As to when it actually progressed its way onto my desk - I should imagine it would have been about the same time as 11 March. Is that its first port of call? The advice comes back to you initially?---If I requested it, I imagine it would have come back to me directly. You then wrote a fax which is two pages through the bundle on the page numbered 130 to Mr Avey. You make reference in that fax to a telephone conversation?---Yes. I will give you a bundle of documents. The top document there, a file note, bears the same date as the facsimile, 16 March. Is that the note of the conversation that you are referring to?---Yes. That's my handwriting, yes. It makes reference to statements like - you say Mr Avey made statements like, "Your scummy mate has ruined our business. We can thank your mate for this." Do we take it that the conversation was somewhat acrimonious?---It was. I tender the file note of 16 March 1996 by Mr Rossi. THE CHAIRMAN: 117. EXHIBIT 117 File note made by R.P. Rossi dated 16 March

1996 THE CHAIRMAN: Mr Rossi, yesterday I asked a question about this which excited everybody. All I wanted to know was: this was an argument that got pretty heated all over the place, with people threatening to go to lawyers and God knows what, but it was in essence that somebody - a real estate agency - was not licensed. Is that correct?---There was a presumption that they weren't correctly licensed as per the act. The simple question I asked yesterday which excited everybody was: at any stage did this ever get to the Real Estate Licensing Board?---Not directly by me. And if not, why not because it was a licensing matter? ---It was a licensing matter in two ways. One, if they were a sole trader I could have done that administratively, which I sought to do. On the other hand of it, if they were a partnership, then they had to formally lodge an application for a partnership and formally be dealt with by the board. It became a discussion between myself and themselves as to what form 2/27/df 27 R.P. ROSSI XN 13/6/00

they were trading as. If they were trading as a partnership, I could have resolved that immediately administratively. However, if they were a partnership, which they maintained they weren't - however, certain people maintained they were - then they had to go through the formalities of applying for a partnership licence. Why wouldn't all this be before the board so that they could know this was going on, or somebody on the board might have their own ideas about it? I mean, there is a board and there is the ministry?---Yes. We are finding as the evidence progresses that sometimes never the twain shall meet?---I believe the board would have said, "What are they? Don't tell me what you're saying. What are they? Are they a sole trader? If they are, fix it If they aren't and they are a partnership, then get them to lodge an application"; or, to the contrary, if they maintained that they were a sole trader and we believed they were a partnership, then that prosecution for an unlicensed activity under section 28 would have been before the courts. The board had no involvement in respect of the licensing matter, other than formally handing them a licence. So as far as you were concerned in the ministry, the board didn't need to know anything about this until you had resolved it? That's the point I am getting at?---I'm pretty confident that they were always a sole trader. I'm not concerned with the argument. I'm concerned with whether the board should ever be told about these things?---I think there was a note by Mr Wallace on one of his memos that in appearing before the board and giving the board a summary of the matters he was looking at, he did allude to this investigation at board level. I see. Thank you. DR NEWMAN: Was it possible for Gough who was a real estate agent and Avey who was, as I understand it, a salesperson to enter into a partnership under the Real Estate Act?---Yes. That's what we were seeking for them to do. So there was no legal barrier to them being a partnership if they had chosen to go through those procedures?---That was one of the options we were hoping they would have taken.

The fact that Avey according to one of the memos from Gary Wallace had a criminal conviction didn't mean that he would have potentially been a person who was not a fit and proper person to be registered as a member of a partnership?---The board would have already considered 2/28/df 28 R.P. ROSSI XN 13/6/00

his capacity to hold registration, as to character, and would have already considered that conviction in respect of granting him a certificate. So in terms of his sales representative ticket being current, he and Gough had no barriers other than the formal application to the board to register a partnership and to trade as partners?---Precisely. Thank you. MR CHANEY: So you sent this facsimile on 16 March and the use of the capital letters and so on I take it is designed for emphasis. Is that - - -?---I was starting to get a bit frustrated with the whole arrangement in respect of their insistence on the way they saw things and my advice to them as to the way I sought to rectify those matters. So as far as you were concerned, you were looking to bring the thing to a head as at 16 March?---As far as the licensing side of it, yes. Were you aware at that point that there had been communications from the member for Melville Mr Shave in relation to this issue?---I was aware that there had been what is referred to as ministerial correspondence but none of that ministerial correspondence was directed at me, or that I took part in any of it. Did it in any way affect the way you went about the task of endeavouring to resolve this matter?---Not whatsoever. The next document in the pile, 135 at the top, is a letter dated 22 March 1994 from you to Mr Gough. That relates to a meeting. Was that a meeting which followed your facsimile of 16 March?---Yes. It suggests at the top of the second page that once the matters dealt with on the first page are concluded, the matter is now finalised?---Yes. At that stage it looked like it was all over, I take it? ---I was hoping - - - In April 95, the next document on page 140 deals with the question of the issue of a triennial certificate and the following page is a memo from Mr Wallace pointing out in relation to that issue that his investigation wasn't yet complete. What was the situation with the triennial certificate? When was it due for renewal?---The triennial certificate was issued in 93. It would have been renewed in 96 and it would have been quite current at the time. The problem is that there had been no amendment to the triennial certificate to reflect the 2/29/df 29 R.P. ROSSI XN 13/6/00

business of A1 Realty on that triennial certificate, so technically they still had the condition endorsed that they weren't trading but they were trading. I see?---And I sought to put that triennial certificate in order with the endorsement of the business name. However, I couldn't endorse the business name if I was not absolutely sure that they were a sole trader. Where were you at as at April? You had reached the point where - - -?---As at 22 March I was quite specific in what I wanted them to do to be a sole trader. They wrote back to me on 28 March saying, "We've already done what you've asked us to do." I wrote back to them on 6 April saying, "You haven't done what I have asked you to do." They wrote back on 12 April saying, "We have done what you've asked us to do" so in the spirit of cooperation and seeking to resolve this issue, I wrote a memo on 18 April to say that I was going to resolve this issue by the endorsement of the business name of A1 Realty on the triennial certificate, even though I didn't have 100 per cent proof that Mr Gough was a sole signatory to the trust account, although he told me he was. Would you just have a look at these two documents? They are the letters - tell me the dates again?---One is dated 28 March in response to my letter dated 22 March and one is dated 6 April from me back to A1 Realty in response to their letter dated 28 March. For the sake of completeness, Mr Chairman, I would tender those letters. I don't have copies of them at the moment. THE CHAIRMAN: That bundle of letters is exhibit 118. EXHIBIT 118 Two letters dated 28 March and 6 April MR CHANEY: Just go back to the bundle that I gave you. Under the file note, there's a letter of 21 June 1994. Perhaps I could take you on - sorry. Go back to the bundle and work through to beyond the memo of 18 April, two memos. There's then a fax cover sheet with a memo to the principal private secretary from Jenny Bunbury of 7 July 94. Do you have that document?---Yes. That indicates, "Unfortunately it has proved impossible to resolve this matter by negotiation and the investigation is now to be reopened." Do you see that? ---Yes. What were the circumstances which gave rise to the need to reopen the inquiry?---I had no idea that the inquiry was continuing or hadn't been concluded after I had dealt with what I believed was a resolution of the licensing 2/30/df 30 R.P. ROSSI XN 13/6/00

situation. I was satisfied at that stage that they traded as a sole trader and as far as the Real Estate Board was concerned, their licensing situation was in order. So it's consistent with that, is it, that although you were happy with the current situation and the way things had been put in place for their ongoing trading, there may have been some breach of the act in the past which was the subject of investigation but you weren't concerned with that?---If the investigation believed that notwithstanding Gough's intention to trade as a sole trader they were in actual fact a partnership, that was what the investigation was all about - to ascertain whether they were a partnership, so the investigation was totally independent of the licensing function. There are two letters which I have handed to you in that bundle that I refer to at the moment under the file note. They are letters of 21 June 1994 to Dr Whittaker from A1 Real Estate, Mr Avey, and then a letter in reply by Dr Whittaker of 5 July 94. Are you familiar with those letters? Have you seen those before?---I hadn't seen them until recently, within the last week. Were those letters which were written in the context of an investigation independent of your licensing issues? ---Totally, yes. They show, do they not, that inconsistent advice was coming through from A1 Realty, Mr Gough and Mr Avey respectively, as to what their arrangements were?---Yes. Again simply to complete the picture, Mr Chairman, I would tender the two letters from A1 Realty to Dr Whittaker of 21 June 94 and Dr Whittaker's reply of 5 July 1994. THE CHAIRMAN: Is this extra to exhibit 118? MR CHANEY: Yes. They are really separate documents, separate to 117 - yes - which it is attached to. The memo I tendered as a memo separately, which is 117. We then had two other different letters, of which you don't have copies, which are 118, and I tender these. DR NEWMAN: These are part of 117. MR CHANEY: No. They should be separately marked I think as 119. They have been handed to you as part of that bundle. THE CHAIRMAN: What are these now? MR CHANEY: The memo at the top is 117. 2/31/df 31 R.P. ROSSI XN 13/6/00

THE CHAIRMAN: That's the file note. MR CHANEY: Yes, and it's a single page. The exhibit consists of a single page. THE CHAIRMAN: Yes. That is 117. MR CHANEY: 117, yes. DR NEWMAN: And this is 119. THE CHAIRMAN: Very well. MR CHANEY: Then there were two letters which were handed up to you at the same time. THE CHAIRMAN: Yes. What are they? MR CHANEY: They should be 119. THE CHAIRMAN: Where has 118 gone? MR CHANEY: There are copies of 118. THE CHAIRMAN: These two letters are 119. MR CHANEY: The bundle you have in front of you - that is - - - THE CHAIRMAN: Just a minute. I had better mark them - 21 June 94 and the other one is 5 July. They are 119. EXHIBIT 119 Two letters from A1 Realty to Dr Whittaker

of 21 June 1994 and Dr Whittaker's reply of 5 July 1994

THE CHAIRMAN: Now, where is 118? That hasn't come yet. MR CHANEY: Mr Beech, I must say, yesterday gave me a manila file which had more copies of 118 but in my inimitable way I have lost it. We will see if we can find it. Just taking it through to its completion, Mr Rossi, your involvement really dropped out after you had satisfactorily resolved the licensing issue, I take it? ---Yes. I put a memo back to the manager dated 26 May 94 concluding my involvement in that matter. Have a look at this document please? That's the memo you have just referred to?---Yes, 26 May. That really concluded your involvement?---My involvement with A1 Realty. 2/32/df 32 R.P. ROSSI XN 13/6/00

Mr Chairman, again without being able to provide you with copies I tender the memorandum of 26 May 1994 from Mr Rossi to the manager, real estate and housing. MR BEECH: Mr Chairman, could I just have a look at the document? THE CHAIRMAN: Yes, certainly. MR BEECH: Thank you. MR CHANEY: I have nothing further for Mr Rossi, Mr Chairman. THE CHAIRMAN: Just a moment. Mr Beech, is this going in? MR BEECH: I thought it was. THE CHAIRMAN: I thought you said you wished to have a look at it before it went in. MR BEECH: Yes. Sorry - I have looked at it, yes. I only wanted to read something. I certainly don't object to it going in. THE CHAIRMAN: Very well. That's 120. EXHIBIT 120 Memorandum of 26 May 1994 from Mr Rossi to

the manager, real estate and housing MR CHANEY: As I say, Mr Chairman, that's as much as I wish to ask Mr Rossi about. I apprehend that I will have more to ask him when we are looking at the Real Estate Board in due course but for today that completes my examination. THE CHAIRMAN: Yes, Mr McKerracher? McKERRACHER, MR: May it please you, Mr Chairman. Mr Rossi, just a couple of questions about the A1 transactions and involvement. You have seen and familiarised yourself I think with the two letters from Mr Shave of 14 December 93 and 10 February 94 which were in exhibit 110?---Yes. You are a career public servant of some 20 years. Would that be approximately right?---Closer to 30. Closer to 30. Sorry - you look much younger. Would you agree that those letters are perfectly normal, run of the course communications that are frequently received on files of this nature?---Yes, as part of our duties as public servants. 2/33/df 33 R.P. ROSSI XN 13/6/00 XXN

To be answerable to members of parliament who in turn are answerable to their constituents in their electorate? ---Yes. You have looked at those letters, have you?---I have seen them, yes. Would you agree that they are totally appropriate, totally normal and responsible communications?---Normal correspondence between a member of parliament's offices and government offices. You will recall no doubt that the second of the letters concluded with a paragraph saying, "Your help and assistance in bringing this matter to a satisfactory conclusion as soon as possible would be greatly appreciated." Do you recall seeing that paragraph? ---Yes. I think you have said effectively in your evidence that those letters clearly played no part in any delay in relation to this matter. Would that be fair comment?---I didn't see them until recently, so they took no part in my actions in dealing with A1 Realty at all. But on reviewing the file now, would it be fair to say in your opinion that these communications quite clearly played absolutely no part in any delay?---Absolutely no part at all. To suggest that they were some form of meddling or interfering would be really quite absurd, wouldn't it? ---Totally wrong. Could I just seek one point of clarification? I think you described the two letters from Mr Shave as being ministerials. When you gave that description, were you conscious of the fact that Mr Shave was not actually the minister at the time that he sent them?---Yes. I didn't refer to him as the minister at the time. We referred to correspondence from members of parliament as ministerials. So whether it comes from a minister or from a member - - -?---It's still a ministerial. Right. Of course you would also get, would you not, as a public servant of 30 years' experience not irregular ministerials from the minister in charge of the particular department inquiring as to the progress of a matter?---I think that's quite a legitimate course of correspondence from a minister's office to his department. Indeed it's a central part of the democratic process, is 2/34/df 34 R.P. ROSSI XXN 13/6/00

it not?---That's the system we operate under. In your time, in 30 years, and more latterly in your involvement particularly in relation to Mr Shave, can you identify any instance at all where he has interfered in or meddled in any form of inquiry whatsoever?---I'm not aware of any instance. Thank you very much, Mr Rossi. That's all I have, may it please the board. THE CHAIRMAN: Thank you. Mr Beech, any questions? MR BEECH: I have no questions, Mr Chairman. THE CHAIRMAN: Yes, Mr Hooker? MR HOOKER: Thank you, Mr Chairman. Mr Rossi, when you commenced as registrar of the four boards that you mentioned in 1991, did you hold any dual role as a manager or other kind of public servant within the ministry?---No. So your full-time job in that period, 91 to 96, was simply as registrar of those four boards?---I filled the statutory functions of registrar of those four boards, yes. To the exclusion of anything else?---That's right. You mentioned certain functions that you regarded yourself as having as registrar, including assistance in the setting of policy?---Yes. And the gathering of information about the workings of the applicable industries?---Yes. And acting as a conduit between the relevant industry and the applicable board. Were those functions as you perceive them referable to each of the registrar positions that you held or just some of them?---No - totally to the four of them. Each to the four of them. What did you understand to be the source of those functions? Were they listed on your job description form or were they somewhere else?---The job description form or list of duties simply has "to perform the statutory functions of registrar". You know, it's a pretty wide term. However, I performed those statutory functions - you know, issuing authorities, signing licences and all of that - but in the bigger picture there were those functions which you have described. 2/35/df 35 R.P. ROSSI XXN 13/6/00

Did you regard those three that I just listed a minute ago as being part of your statutory functions or having a different source?---It's all part of the statutory functions, although over time those functions may come in and take a greater role. It wasn't that great a role in those days but certainly of modern times it has become - - - Did you say "in modern times it has become greater"? ---Yes - of recent times, I should say. And in particular since you ceased to be registrar in 1996 of those four boards?---Yes. Do you know whether those three functions are actually in express terms?---No, they are not. You understand they are in fact not in express terms? ---Exactly. It was just your understanding of a broader role the registrar ought to have performed?---Of the registrar's role, yes. I see. THE CHAIRMAN: Did you ever receive any objection from any of the boards?---No. MR HOOKER: The function that Mr Chaney asked you about of issuing formal directives to inspectors to conduct investigations - that was a function you had as a registrar?---Yes. At the risk of repetition, we're talking about a direction to an inspector to conduct an investigation. That's right, isn't it?---Yes. If that investigation revealed a prima facie case worthy of taking to the board in the exercise of its disciplinary function, that would result in an inquiry as opposed to an investigation. Is that right?---Yes. The inquiry will always be the culmination of the investigation. The culmination, you are saying?---Yes. To the extent that some work was done by the inspector before he would come to you seeking a direction, that's what we might call at least loosely a preliminary investigation?---Yes - well, not all complaints received would result in a section 13 investigation. That's because there had to be some sort of filtering process undertaken before you were called upon to 2/36/df 36 R.P. ROSSI XXN 13/6/00

exercise your role in directing an investigation per se? ---That's right. At any stage during the investigation, if an investigator was challenged by the person he was investigating - "Where's your authority?" - at that stage the investigator should produce the authority. That would be why normally you wouldn't have expected the inspector to interview the person or the entity the subject of the complaint at that preliminary stage? ---Precisely. Even though on your recollection you couldn't recall ever refusing a request to issue a directive, you still nonetheless had that power, didn't you?---Yes. The act says I may or I shall at the direction of the board, so the board may direct me to issue an investigation and I may myself. Did you ever get such a direction from the Finance Brokers Supervisory Board during your period as registrar?---I don't recall. Did you understand that absence of getting directions from the board in that respect to be because the board regarded it as inappropriate to get into the detail of the matter, the complaint, at the investigation stage when it might be conducting an inquiry in due course? ---It was always a fine line where we were treading as to what information or background one would supply to the board to make sure that they weren't prejudiced or had prior knowledge of the matters we were seeking to bring before them, so there was a very fine line. There's always that risk of the board knowing too much before the inquiry stage when it might not be able to bring an unprejudiced mind to exercising its disciplinary function?---We always sought to separate the two. Just backtracking very slightly on this function of yours, it's the case, isn't it, that there's a degree of responsibility in the registrar's task in this respect because to issue a formal directive can impact on the affairs and businesses of people?---Yes. I don't use those powers willy-nilly. As I'm saying, there have been the odd occasions where I have refused but that's where a consumer has requested that I commence an investigation, so I have declined a consumer's request but I don't believe I have declined an investigator's request to commence one. Even to the extent that one might call that task a rubber-stamping, and I appreciate that's not your label, it nonetheless wouldn't be appropriate for it to be exercised by, say, a level 1 clerk because of the degree of responsibility that is involved in issuing a 2/37/df 37 R.P. ROSSI XXN 13/6/00

directive. Is that a fair comment?---With respect, that power is given to the registrar who is the executive officer of the board. It is within that power. And it makes sense for a person of the seniority of the registrar to be exercising that function, rather than a junior member of the public service?---I would say so, yes. The act contemplates that. You said, Mr Rossi, during your period as registrar of, among other boards, the Finance Brokers Board that there was a meeting once a month?---Yes. Would it be every month, from your recollection?---One would normally say yes, monthly. Was there any pattern as to its duration when it did meet? Was it a matter of hours?---It would normally be half a day meeting - 9 o'clock to 12 o'clock; 9 o'clock to 1 o'clock. An agenda would be prepared for that meeting?---Yes, always. Would you prepare that or would someone less senior? ---The secretary of the board would prepare the agenda. And annexed to the agenda presumably would be a set of board papers for perusal by the board members?---All the papers relative to those items which were being discussed. Just to clarify this point about the extent to which audit reports would be put before the board, it was only if there was a qualification to an audit report that they would be placed in the board papers for consideration by the board?---Yes - I take it not the audit report itself but certainly preliminary correspondence between our office and the auditor seeking explanations in respect of those audits, because the board only met once a month, so there may have been considerable correspondence that occurred prior to the actual board meeting after receipt of the audit report, depending on the timing of the meeting. But there wouldn't even be that amount of information with respect to an unqualified audit report because nothing would go to the board. It would simply go straight to the licensing file?---It would be purely an administrative function. From your perspective as registrar and given the amount of activity in the finance broking industry during 1991 to 1996, did it seem to you that a meeting for half a day a month was about right - was about what was required? 2/38/df 38 R.P. ROSSI XXN 13/6/00

---The industry was performing pretty well during that period. Although the financial industry was changing with the new providers coming in, the mortgage originators, the exceptions and things of that nature, there seemed to be a change in the industry but the board was functioning certainly pretty well and there was no need for the board to have extra meetings or extraordinary meetings to discuss matters which may have been of an urgent nature during that period. In summary the workload of the board could be managed with that frequency and duration of meetings?---Yes. It didn't pose a problem. Thanks, Mr Rossi. I have nothing further. THE CHAIRMAN: Anything, gentlemen, in reply? MR CHANEY: Mr Chairman, I have now located what was lost. I just for your records hand up first of all copies of exhibit 118 which consists of two letters forming part of one exhibit and similarly 120 which is the memo of 26 May. THE CHAIRMAN: The memo is 120. MR CHANEY: Yes. That completes the evidence for today. THE CHAIRMAN: And the evidence of Mr Rossi. MR CHANEY: Yes. THE CHAIRMAN: Thank you very much indeed, Mr Rossi. You are excused.

(THE WITNESS WITHDREW) THE CHAIRMAN: 9.30 in the morning? MR CHANEY: 9.30 in the morning, yes. MR HOOKER: Can I just raise a matter, Mr Chairman? I won't be in attendance tomorrow by reason of a pre-existing commitment that I had before I was engaged on this matter. I endeavoured to get some instructions - at least some preliminary instructions over lunch - regarding my client's attitude to the application to be made on Ms Searle's behalf. I wasn't able to get those. I will try and get them overnight or first thing. It sometimes is a little difficult with a corporate client. I don't know to what extent my client will wish to be heard. If it doesn't wish to be heard, I would propose sending a message to Mr Chaney through his instructors and that application can be heard and 2/39/df 39 R.P. ROSSI XXN 13/6/00

determined happily in my absence. If my client wishes to be heard, I may seek to put in some short written submissions on the subject. I just foreshadow that as a possibility. I simply don't know at this stage. THE CHAIRMAN: Thank you. Mr Beech, are you going to be heard tomorrow on that? MR BEECH: I will be in attendance but whether I have anything to say is another matter, sir. THE CHAIRMAN: Mr McKerracher? McKERRACHER, MR: Mr Chairman, I am very much the same as Mr Beech but then that would conclude anything I would want to stay for this week, so I would seek leave to disappear, if that is in order. THE CHAIRMAN: I see, so you may not be here tomorrow morning. McKERRACHER, MR: I will come at 9.30 definitely but that's about it. THE CHAIRMAN: Half your luck. We will adjourn until 9.30.

____________________ 2/40/df 40 13/6/00

GUNNING COMMITTEE OF INQUIRY INTO FAIR TRADING BOARDS AND COMMITTEES MR I.R. GUNNING, Chairman DR D. NEWMAN, Member MR D. BLIGHT, Member TRANSCRIPT OF PROCEEDINGS AT PERTH ON WEDNESDAY, 14 JUNE 2000 Transcription by - SPARK AND CANNON PTY LTD 3rd Floor International House 26 St Georges Terrace PERTH WA 6000 Telephone: 9325-4577 1/1/rmo 1 14/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Chairman, this morning Mr Tsaknis appears instructed by Mrs Searle to make an application. THE CHAIRMAN: Thank you very much. Yes, Mr Tsaknis? MR TSAKNIS: May it please you, Mr Chairman. The application which I make this morning is an application for Mrs Searle to have leave to appear at this inquiry through counsel. I must say, it's phrased in those general terms at this stage rather than more specifically or trying to define the role and limiting whether Mrs Searle can call witnesses or such like, but that can be, in my submission, dealt with if and when that arises. At this stage the application is simply that Mrs Searle have leave to appear through her counsel. The bases for that application are twofold, firstly, that Mrs Searle has a special interest in this matter beyond that which may be possessed by members of the general public and, on the facts of this case, beyond any interest which may be even possessed by certain other investors, and secondly, that it's important, given the nature of the inquiry, that there be an effective contradictor to the allegations or the inquiries which may arise during the course of the inquiry. I'm mindful of the fact, of course, that the inquiry itself can and no doubt does ask questions, but in my submission it's important that there be at least one effective contradictor who may also take that role, rather than perhaps expecting the inquiry to enter the fray, so to speak, more than is necessary or perhaps even desirable. The background to Mrs Searle's involvement in this matter is that at the time that this inquiry was called she had six complaints lodged with the Ministry of Fair Trading and those complaints are still outstanding. They have been adjourned pending the determination of this inquiry. Of course, Mrs Searle has given evidence before this inquiry and findings of fact in relation to those allegations will, I expect, in due course need to be made The applicant has had no opportunity at this juncture to cross-examine or in any way test the evidence which has been put before the inquiry, though I understand from counsel that in effect to date there has been no effective contradiction of what Mrs Searle has said. THE CHAIRMAN: None that this committee is aware of. MR TSAKNIS: Yes, and that may be, perhaps, a reason why there ought to be representation. If that representation was available it may very well be that some lines of inquiry may or may not be pursued as the inquiry progresses. I'm not able to say that. I have sufficient information. 1/2/rmo 2 MR TSAKNIS 14/6/00

THE CHAIRMAN: No, I was only making the point that none of her evidence has been contradicted. MR TSAKNIS: Yes. THE CHAIRMAN: In fact, it has been used very successfully. MR TSAKNIS: Yes, but in my submission that's not to say much wouldn't be gained by Mrs Searle having leave to be represented and to have an opportunity to question witnesses or a particular witness if and when the need arises. If I might turn to the first question, whether Mrs Searle has a special interest beyond that of the general public. Mr Chairman, you will be aware there is quite a long line of authority - and I don't propose to take you, Mr Chairman, through them or to hand up any authorities - commencing with Kioa v West, whereby when an administrative body proposes to make a decision which may affect rights, interests or legitimate expectations of any sort there is generally an obligation to accord natural justice unless that requirement is excluded plainly or by some necessary intendment or perusal of the relevant legislation or provision which is being considered. THE CHAIRMAN: Doesn't that only apply where the likelihood is to be an adverse finding? MR TSAKNIS: In my respectful submission, no, Mr Chairman. That proposition has been considered on a number of occasions and the High Court has made it clear that rights or interests are not restricted to legal rights in any sense, and perhaps the best example I can give of that is the decision of the High Court in Annetts v McCann. Mr Chairman, you might recall that was a case of an investigation into the death of a young Aboriginal boy, an inquest. It was a coronial inquest and the court held that the parents ought to have been given leave to appear at that inquiry concerning how it was that that boy died. Again in Howcher v Minister for Immigration and Ethnic Affairs in (1990) 169 CLR 648, an immigration case, the High Court affirmed that the principles of natural justice applied to interests which weren't necessarily rights in the strict sense, because the applicant for refugee status in that case didn't have any rights, so to speak, but nevertheless when considering the application it was important that the principles of natural justice applied, so the court held in that case. Finally, Mr Chairman, one might think - they are, of course, all judicial decisions. The Privy Council in the case of Mahon v Air New Zealand, (1984) AC 808 at page 820 to 821 - that was a decision concerning the 1/3/rmo 3 MR TSAKNIS 14/6/00

Erebus air crash in New Zealand - held that in the context of that inquiry the principles of natural justice did apply so that parties were entitled to representation in that case, which leads to the question, or an answer is required to the question, whether Mrs Searle does have any particular or special interest beyond that of the general public. Of course, that has been considered in a number of decisions of the High Court. Back in 1980 it was considered in Onus v Alcoa of Australia Ltd, a (1981) 149 CLR decision at page 27 and the High Court laid down the test which has since been followed in a number of cases, whereby the test is whether or not an individual has an interest not only which is beyond that of the general public but which is something which exceeds some merely emotional or intellectual concern - in effect, a very wide test and in my submission it has been adopted since that decision and it has been on that basis and the basis of that decision that, for example, a priest has been given standing to challenge a film classification board decision as to whether or not it's blasphemous or not. In my submission, that sort of parallel is in effect wider than the parallel we are seeking to draw here. Mrs Searle has applications before the board which have been adjourned. What this committee may or may not decide could very well impact on how those applications are dealt with and may make findings in relation to those applications - indeed may make findings which may affect any future rights which Mrs Searle may or may not seek to enforce in relation to the way her complaints are or were being dealt with. So in my submission Mrs Searle does have at least an interest which is wider than the general public and it's not an interest which can be classified as a mere emotional concern. I might add that Mrs Searle did have a considerable amount of money - $500,000, I understand is the figure, the loss that we're dealing with - 516,000 is the amount we're concerned about with Mrs Searle, although all but 500,000 of that has in effect been returned to her, or at least to her company, which brings us to, in my submission, the next and important point, that there be an effective contradictor. Mr Chairman, in my submission with the best will in the world it's often necessary for a party to be able to put forward contradictory evidence or test evidence without necessarily expecting or requiring the tribunal itself to enter the fray, so to speak, and run the risk of perhaps getting too close to the mark. Of course, in this case the Ministry of Fair Trading and the board itself have been represented throughout by counsel, and, I would expect, ably by counsel, being able to put their views forcefully and to test the evidence and to elicit 1/4/rmo 4 MR TSAKNIS 14/6/00

what evidence they may seek to want to elicit, and in my submission, the most effective means of eliciting any evidence which might be required all round would be achieved by giving Mrs Searle leave to appear through her counsel and, to the extent necessary, undertake that same process. Mr Chairman, that's all I think I need to say at this juncture. Perhaps any further comments might await any submissions my learned friends may have to make. THE CHAIRMAN: Thank you very much. Mr Beech? MR BEECH: The ministry doesn't make any submission, if it please you, Mr Chairman. THE CHAIRMAN: Thank you. Mr McKerracher? MR McKERRACHER: Mr Chairman, the minister would have absolutely no objection to Mrs Searle being represented on the same terms and basis as he is, as a citizen who, if the board is of the view there is a capacity for an adverse finding to be made, would have an entitlement to be heard. That is entirely a matter for the board and upon which we make no submission. There are a couple of areas my learned friend has not commented on, one of which is costs, and again we would see an importance in equality in this regard. The minister for his part is paying his own costs entirely and at some point in time, if it is appropriate, will make an application for reimbursement of those costs which will lie entirely in the hands of others as to whether any portion will be reimbursed. I make that point, which is left open-ended, and the other area that is open-ended really is the duration and extent of involvement Mrs Searle would wish to have in the proceedings, and that in itself creates a difficulty. My appearance, Mr Chairman and members, will be exceedingly brief - 2 days in total this week and perhaps 2 or 3 days maximum next week and then the committee won't be troubled with me any longer. Indeed, my two cross-examinations have been briefer than the news articles on the television about the whole issue of representation and fees. THE CHAIRMAN: Yes, well, that will be decided by us. MR McKERRACHER: Entirely. I would simply say in terms of the law it is ultimately a matter for the inquiry to determine as to whether there is any capacity for Mrs Searle to be affected in a way in which there might be some adverse finding in relation to her evidence. I have heard nothing, but as I say, I have been here for only a short time and wish to make no comment in relation 1/5/rmo 5 MR McKERRACHER QC 14/6/00

to that. Really the thrust of my learned friend's application is that it needs to be a level playing field, but for it to be a level playing field depends entirely on who the players in the game are, and to be a player in this game it is necessary for someone to want to score goals against the player. There is no indication of that at all so far. That's all I wish to say. THE CHAIRMAN: Thank you, Mr McKerracher. Mr Chaney? MR CHANEY: Mr Chairman, before I indicate my own position may I convey to the committee Mr Hooker's position on behalf of the board? He contacted me this morning. He announced last night he was unable to be here, but he has this morning had the opportunity of taking instructions from the board and he instructs me that the board's position is that it considers that it is within the discretion of this committee to allow representation on the basis that there is some limit to the representation to those matters in which Mrs Searle may be found to have a particular interest rather than representation at large for the duration of the hearing. If it were to be representation at large, then there would be concerns which the board may wish to be heard about which arise from the consequence that the time taken in the inquiry and the multiplicity of issues may increase and that has an impact on all of those involved in this inquiry. So that is the board's position. In essence, it really, I think, in summary, leaves it as a matter for the committee within its discretion. For my part, Mr Chairman, the starting point - perhaps I should say where I'm heading before I start, and that is that in my submission neither because - I will put that a different way. In my submission Mrs Searle does not satisfy the test of having a sufficient interest to be represented and in any event the propositions put as to the need for an effective contradictor are not borne out in the facts of this case, nor in principle in relation to the way inquiries of this nature are conducted. The starting point is to look at section 13(1) of the Public Sector Management Act which determines the procedure to be followed by the board, and it provides:

An individual public sector body or other body may be represented at a special inquiry by a legal practitioner or other agent.

There is no provision in that section which conditions the exercise of discretion by reference to any particular criteria. Subsection (3) provides:

1/6/rmo 6 MR CHANEY 14/6/00

A special inquirer shall act on any matter in issue that the special inquiry are concerned according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms, is not bound by the rules of evidence and may be informed on any matter in such manner as the special inquirer considers appropriate.

So that too leaves at large the approach which the committee should take, in my submission, to an application of this nature. It's clear in essence that the committee has the power to regulate its own procedure and without being bound by technical legal rules to determine the most efficient way of disposing of the business before it and fulfilling its terms of reference in the most effective way. I said in opening - perhaps so that I don't misquote myself, it's at page 7 of the transcript - the following:

Any person with an interest in the inquiry is entitled to be represented at the inquiry by a legal practitioner or an agent. To date the inquiry has, up until this morning, not received any advice from any person or organisation to indicate they propose to be represented, although immediately prior to the proceedings this morning I have been advised that both the ministry and the Finance Brokers Supervisory Board intend shortly to instruct counsel.

In making that opening remark, from which I don't resile, I made the point that people who had an entitlement to appear are people with an interest, and as Mr Tsaknis has, in my submission, correctly identified, that interest must be something beyond the interest of an ordinary member of the public or some interested bystander, as it were. That becomes the first critical question. I think the test was encapsulated - I'm handing to you a passage from a text, "Royal Commissions and Boards of Inquiry" by Hallett, which I think is, it might be said, the leading authoritative - or the only authoritative text in relation to this area. At page 197, which is the fourth page in the bundle, there is an extract which encapsulates what in my submission has been generally adopted as the practice, as this text reveals, in many inquiries analogous to this inquiry throughout Australia. There is a passage quoting Sir Gregory Gowans QC, a former justice of the Supreme Court in Victoria, where he said in the area in quotations about a third of the way down:

The question of whether leave to appear should be granted is a discretionary matter for this board, not to be accorded to everybody who merely feels interest in the subject matter. Representation should be confined to those who have a peculiar and

1/7/rmo 7 MR CHANEY 14/6/00

material interest to protect or advance. I use the word "peculiar" in the sense of an interest attaching to the individual and not merely shared by him or with a substantial section of the public. I use the word "material" in the sense of describing something more than a self-inspired or merely temporary or passing interest.

That, in my submission, encapsulates the proper test which should be applied. If one then asks is there such an interest on Mrs Searle's part in this case - before dealing with that - well, perhaps in the context of dealing with that, but the way it's put is in effect that there needs to be an effective contradictor, and that is, I accept, put as a different part of the interest she puts forward, or a different category of the basis upon which she should be allowed to appear, but in that respect it - or the submission, in my respect, ignores the role of counsel assisting. That role is one of assembling the evidence to be adduced before the inquiry, exploring the issues that are considered by counsel assisting to be relevant to the inquiry and, where appropriate, testing, in effect by cross-examination, witnesses on issues where there is a conflict on the evidence. In that sense counsel assisting plays - and it has been recognised in many cases and the authorities referred to in the text I have taken you to - plays a role of pursuing the public interest and to a large extent the role which I apprehend Mrs Searle would wish to take is a role which properly falls to me. In this case, going more particularly to the question of Mrs Searle's interest, the position is, as you have indicated, Chairman, and Mr Tsaknis has accepted, there is no issue on anything Mrs Searle has said to date. Mr Buchholz, who is really the only evidence called so far who has a direct relationship to any of the evidence given by Mrs Searle, when all matters asserted by Mrs Searle were put to him, accepted that if he didn't independently recollect it, he didn't contradict it. So there is no issue. In any event, even if there were, there is no scope for this inquiry to make any adverse finding which can have any effect on Mrs Searle's interests. I accept that the evidence reflects the figures Mr Tsaknis gave us as to Mrs Searle's loss, which my recollection is related to one investment in which she lost a portion of an investment, of her funds, or will lose it - far less than the amount of $500,000, but I don't think the figures actually matter. But she in that sense is one of - we're told varying figures - 800 - several thousand people who have a similar interest. They are members of the public who have invested with 1/8/rmo 8 MR CHANEY 14/6/00

investors and it is simply not feasible or practical, obviously, to hear from all of them, all of whom have the same sort of interest, although it will vary because of the different natures of their investments and their complaints about brokers and their different experiences with the board. Many witnesses - for instance, investor witnesses who had dealings with the board - had brief dealings and were actually quite happy with the treatment they received. So there is a whole range of people involved and Mrs Searle cannot be said to be representative of any group in any sensible sense and doesn't purport to be representative of a group beyond the fact that she is merely one of the investors who has lost money. With respect to the issue of the need for an effective contradictor, if one looks at the actualities of this case, the position is this: at the end of her evidence Mrs Searle, with my agreement, produced a list of questions which became exhibit 26, which are questions which she wanted answered in the context of this inquiry. That list of questions was accepted in evidence and is, as I say, is exhibit 26. It was accepted on the basis, certainly outside the hearing, that it assisted me in the process that I had to undertake of asking those very questions or similar questions, and in due course those questions where appropriate - and I have reviewed them and they are appropriate - will be asked of the appropriate witnesses. Now, I can say, having reviewed them, that none of them related to Mr Buchholz. As it happened, when Mr Buchholz gave his evidence he was asked about Mrs Searle's evidence, because beyond the questions which Mrs Searle wished to ask, I had identified, as is my appropriate role, that Mr Buchholz should be asked to comment on these matters. He did, and he, as I said, accepted most of what was said by Mrs Searle, but was subjected to extensive examination - not by me, although when I started members of the committee, you will recall, took over and asked a large number of questions concerning why things hadn't happened, why particular options had not been pursued, etcetera. I'm not sure that Mrs Searle was present for all of that evidence yesterday morning, but in any event it occurred, and it illustrates precisely the role of testing of evidence, which is appropriate for counsel assisting and was undertaken and exceeded anything any request which the witness had in fact made at the conclusion of her own evidence. So in that sense, in my submission, the establishment of the inquiry with counsel assisting facilitates where appropriate the public interest being preserved by the investigation being thorough and 1/9/rmo 9 MR CHANEY 14/6/00

methodical in trying to address the issues which squarely fall within the terms of reference. I accept that it is always helpful to have competent counsel at the bar table bringing to an inquiry a different perspective and nobody pretends and I certainly don't pretend to be perfect or to be expected to address every conceivable angle of inquiry that every investor may perceive is appropriate, and in that sense, to have another person at the bar table might provide some assistance. The problem, in my submission, with taking the view, "Well, the more the merrier. We can address more issues," is it becomes unmanageable. The terms of reference require the committee to report by 1 September. Whether that deadline is met is a matter to be addressed in due course, but the reality is if this application is batted on behalf of an individual who has the interest of an investor, then it is very difficult to close the gate, as it were, if further applications are made - and I can inform the committee that at least one other approach has been made seeking representation in relation to a future witness as a result of - obviously over the last couple of days. So that there is a floodgates problem and there is a risk that the conduct of the inquiry becomes unmanageable and in my submission, in terms of achieving the ultimate goal in an orderly, comprehensive and sensible but timely way, on balance it would not assist the inquiry to grant this application. Apart from the danger of becoming unwieldy and apart from the fact that the applicant does not represent in any formal sense any wider interest, there is a danger if there is to be a series of applications made for representation of these proceedings being used for purposes beyond what the inquiry is set up to do. I'm not suggesting for a moment that this is Mrs Searle's motivation, but there are a number of various interests and agendas which people have in relation to losses. There is nothing wrong with that and it's appropriate to be expected in the plethora of issues which have arisen, but there is a danger, in my submission, that the compulsory powers which exist in relation to this inquiry - and every time a question is asked of this inquiry it is a question asked in a context of a compulsion on the part of the witness to answer that question. So compulsory powers are being used daily, notwithstanding that summonses aren't being issued, because people are coming in voluntarily, but there is a danger that those compulsory powers can be used by people who wish to, in effect, have the opportunity of examining witnesses for purposes which go beyond the purposes of the terms of inquiry of this committee. For all those reasons - or perhaps before I close if I can address one matter Mr Tsaknis raised, and that is, 1/10/rmo 10 MR CHANEY 14/6/00

in the context of Mrs Searle's special interest in the proceedings he asserted that there were potential findings of disciplinary hearing proceedings, or outcomes of disciplinary proceedings, which might impact upon ultimate rights she may have to pursue remedies in relation to those proceedings, as I understand his submission. In that respect it ought be noted that the proceedings before the Finance Brokers Supervisory Board which are currently on foot and which have been brought on the complaint of Mrs Searle are not inter partes proceedings in which she is involved. She is a complainant, a member of the public, who brings the matter to the statutory body which then itself prosecutes a complaint, and so the outcome of those proceedings or her involvement in those proceedings is as a witness and she has no personal interest as a matter of law in the outcome of them and it is not an interest which gives rise, in my submission, to an entitlement to appearance at this inquiry. Having said all of those things, it's clear my position is that it would not - my submission is that it would not assist the committee to grant the application today. I accept, however, that that is ultimately a matter for the committee and that subject to it being satisfied of the existence of a special interest, it's a matter that's open to the committee. THE CHAIRMAN: Thank you, Mr Chaney. Mr Tsaknis? MR TSAKNIS: Yes, I ought to just make some brief comments, Mr Chairman. THE CHAIRMAN: Just a moment, before you go any further and perhaps to help you, it has been obvious to you, of course, that the committee has not been able to confer about the application so far, but may I just say a few words that may be of assistance to you in your reply? First of all, it's patently obvious so far to the committee that Mrs Searle - and I have already stated this. There is no suggestion whatsoever at this stage, nor can be seen in the foreseeable future of this inquiry, of any adverse finding against her. I think you accept that. Secondly, and these are just my thoughts at the moment for your assistance, actually - secondly, the interest with respect to money is exactly the same as, I don't know, hundreds of others. Thirdly, with respect to that aspect, you know that an inquiry of this nature - and I have said this before - a royal commission or any other type of judicial inquiry cannot of itself hand money back and I can't see at this stage, perhaps, but this is no final finding, of course; we're still open to 1/11/rmo 11 MR CHANEY 14/6/00

persuasion, that Mrs Searle is any different to any other of those investors that we have had before us and we know of because of the evidence before us. If it is suggested that she has a special interest because of some other proceedings with respect to claiming or hopefully claiming money, then she is again no different to many others who we know have actually taken action in the courts to recover their money. We also know that the interests of the investors, those many, many investors who have lost money and potentially look like losing money, some of them are before the courts and where the court itself at the moment has to determine the question of their varying interests in those matters, varying among the investors, so that, of course, we have to be very careful in a committee of this nature that we don't allow in the investors who may have different interests. Now, having said that, I invite your reply. Thank you. MR TSAKNIS: I welcome your comments, Mr Chairman. Perhaps they enable me to clarify the role which I might have put forward as one perhaps higher than is envisaged. THE CHAIRMAN: Yes, I would also like clarification of what parameters you think you are operating on, because we - I might make the other suggestion: in no way would this committee allow a fishing expedition to start with respect to a particular or peculiar interest. MR TSAKNIS: Yes, I certainly understand and accept that, Mr Chairman. My reference to effective contradictor was in terms of matters in which Mrs Searle had some real interest. I wasn't intending that somehow by dent of getting leave to appear that someone could sit in this chair and have open slather at every witness and say, "I represent the investors against the Ministry of Fair Trading in Western Australia." That certainly wasn't my intention and I must say I'm grateful for counsel assisting making the point. It certainly wasn't intended. The aim or the intent is that by enabling Mrs Searle to have liberty to appear on matters in which she has an interest is that it would enable her to instruct her solicitors at least with some degree of confidence in relation to matters which might be directly applicable or relevant to her, that at the end of the day that would serve a purpose and she would get an opportunity to put forward or, in appropriate circumstances, to have witnesses questioned on a particular line. It may very well be, given that liberty, that her own counsel may not need to be instructed, as I understand in many cases counsel assisting can put forward with equal vigour and, I'm sure, better than equal vigour the sorts of questions which need to be put. 1/12/rmo 12 MR TSAKNIS 14/6/00

So that was the context in which an effect contradictor was put, that at the end of the day there is at least something more than a faint hope that when one is consulting legal advisers when one wants to put forward material, that there is more than simply perhaps a hope that someone will run with something which is material to your particular interest. That's the context in which I intended that to be used. In terms of having a particular interest, it may very well be, as, Mr Chairman, you note, there are perhaps 800 or so investors and she has no interest greater than that. In my submission, if the position were, for example, that there were - and I don't resile from this position - any one of the 800 investors had something which was of direct material relevance to them - for example, they dealt with a Mr Smith and Mr Smith said X, and Mr Smith was to give evidence they never met this particular witness or never discussed it, that particular investor ought to have the right, at least on that particular issue, to put forward material questions on that point. So in our submission, we don't resile from the fact that the fact that there are 800 investors automatically means that in no case can any or all of those have at least some matter which is of direct material interest which would entitle them to ask or question a particular witness, which brings us, I think, to a difficult question - what is an adverse interest? It has been put there is no adverse interest because Mrs Searle - or there is no proposal that an adverse finding be made in relation to Mrs Searle. That certainly may or may not be the case, but we would submit that the test of whether Mrs Searle herself has an adverse finding made against her is a very narrow one and one which ought not to be adopted. There are certainly many instances in cases where someone suffers an adverse interest or suffers some damage or loss without necessarily an adverse finding being made against them (indistinct) adverse finding against Mrs Searle. I'm not sure whether it was intended to encompass findings which may materially adversely affect her interests. Adverse finding against Mrs Searle, I take it, if it's meant to be something which reflects upon Mrs Searle's conduct or behaviour or anything like that, is too narrow a test. If adverse finding against Mrs Searle is meant to encompass all matters which might be detrimental to her, then that test has been too widely expressed, in my view, and it may very well be that an adverse finding may be made which affects Mrs Searle but doesn't directly have anything to do with her in terms of how she conducted her business or the nature of the process in which her 1/13/rmo 13 MR TSAKNIS 14/6/00

complaints were made and such like. So that's the distinction I ought to make when one is dealing with adverse findings against Mrs Searle. We would seek to say that's too narrow a test. The other point which was made was the costs. We don't seek to make any submissions in relation t costs. That's a matter - - - THE CHAIRMAN: This commission, of course, has nothing much whatever to do with costs. MR TSAKNIS: Yes, that's a matter for another day and we would submit that will operate as a salutary disincentive to have someone doing more than is indeed absolutely necessary. In the case of floodgates, having 800 investors wanting to be legally represented, that is, in my submission, unlikely - extremely unlikely to happen. The commission has ample powers to deal with that sort of application. THE CHAIRMAN: Yes. Certain bodies who have said they are representing investors before we even started said that they didn't require to have anything to do with us, so perhaps you're right, there mightn't be any floodgates. MR TSAKNIS: So what essentially Mrs Searle is seeking is the right to appear by counsel in any matter in which she may have a direct - certainly an interest, a direct material interest, and that would give Mrs Searle the comfort in consulting with her legal advisers and counsel assisting that she can do so in the knowledge that at least there may be some purpose for pursuing that course. Of course, any counsel on this side of the bar table, including counsel assisting, at any time can exercise their right to consider it's inappropriate that Mrs Searle or her legal representatives either take part, or if they are taking part, pursue a particular line of questioning if that were to occur. What I envisage in reality will occur will simply be there will be consultation between counsel assisting, simply to find out what witnesses are going to be called and perhaps any information that Mrs Searle can provide, as she has been doing, on what sort of material she would like or like not to be put to them. That's, I envisage, in practical terms how it would work. Mrs Searle has already provided, I understand, lists of questions in another context. I would expect that that - - - THE CHAIRMAN: Mrs Searle's evidence and her observations have been of great help to the committee so far. MR TSAKNIS: Yes, and I haven't been a party to those, but the committee itself is the only one who can judge as to whether or not her involvement to date and her likely 1/14/rmo 14 MR TSAKNIS 14/6/00

involvement in the future is likely to be one whereby the committee's time and effort is being, to use a word, vexatiously utilised, and if the committee were to take the view at any stage that it was not appropriate for Mrs Searle to be given at least the leave in the narrow terms which I have proposed on matters in which she has a material interest, then in those circumstances, of course, it is always open to the committee to revoke any right of Mrs Searle to appear, whether or not indeed any submissions have been made. Having said that to the committee, in my submission if the committee are minded not to grant Mrs Searle leave in the limited terms that I have proposed, that at this particular juncture the committee simply give - whilst not allowing leave at this juncture, reserve to Mrs Searle the right to make application at any future time on a matter which is of material interest to her, to make application in respect of that particular matter or interest for a right to be heard on that particular matter or that particular time. Those are my submissions, Mr Chairman. THE CHAIRMAN: Thank you very much, Mr Chairman. MR CHANEY: Mr Chairman, I know it's unusual to reply to the reply, but can I say that the proposition Mr Tsaknis has just concluded with is one with which I would have no difficulty at all, and in fact I think states the legal position, that if there is a particular matter - - - THE CHAIRMAN: Well, it just did occur to me - as I say, I haven't had a chance to confer with my committee members, but it occurred to me as Mr Tsaknis was concluding, that all the propositions he put, Mrs Searle could put to you quite adequately and they would be well received. MR CHANEY: That's absolutely correct, Mr Chairman, but going beyond that, if there were concerns about a particular matter - and Mr Tsaknis understandably has not been in a position to identify an issue - - - THE CHAIRMAN: Mr Tsaknis's last proposition would apply to any witness and we would consider it at any time. MR CHANEY: Yes. Thank you, Mr Chairman. THE CHAIRMAN: Thank you, gentlemen for your contributions. We will reserve on that, but only for a very short time. Now, the situation is that the committee, or at least counsel assisting the committee and his staff, have asked us to again give them a breathing space, because they are completely and absolutely utterly snowed under at the moment, to catch up, because as everybody is aware, we're now dealing with 1/15/rmo 15 MR CHANEY 14/6/00

the witnesses from the ministry and then the minister will be called during those proceedings, then we have the board and they have a submission and of course there will be members of the board called before us. To that stage, counsel assisting and his staff need some time - like days - to get ready for all that, and I repeat, remembering that they were given some nearly 400 files from the boards and ministry and which they are still, with respect to those boards and ministries, having to deal with each one to make sure that everything is canvassed at the open hearing. So we are adjourning now until next Monday. Now, In the meantime I sincerely hope, and I'm sure we will, be able to give our decision with respect to the application this morning. Thank you once again, gentlemen, for your assistance and we will adjourn.

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GUNNING COMMITTEE OF INQUIRY INTO FAIR TRADING BOARDS AND COMMITTEES MR I.R. GUNNING, Chairman DR D. NEWMAN, Member MR D. BLIGHT, Member TRANSCRIPT OF PROCEEDINGS AT PERTH ON THURSDAY, 15 JUNE 2000 Transcription by - SPARK AND CANNON PTY LTD 3rd Floor International House 26 St Georges Terrace PERTH WA 6000 Telephone: 9325-4577 1/1/ces 1 15/6/00

THE CHAIRMAN: Yes? MR CHANEY: Mr Chairman, just before you proceed, both counsel for the ministry and counsel for the board are unavailable today, having not expected that we would have been sitting today, and both of them, I think, are engaged in other matters so they have asked me to convey to the committee their apologies that they are not here. THE CHAIRMAN: Thank you. As in most of these cases, whenever you think you are fully prepared, of course, you are not. The machine I dictated to and everything else all broke down at the eleventh hour so here we go. This is an application brought by Miss Searle, a previous witness before this inquiry - in fact she was the first witness before us - pursuant to section 13(1) of the Public Sector Management Act that section reads as follows:

Procedure and evidence at special inquiries and individual public sector body or any other body may be represented at a special inquiry by a legal practitioner or other agent.

The other part of section 13, namely, section 13, subsection (3) is also to be considered in such application and that reads as follows:

A special inquirer shall act on any matter in issue at the special inquiry concerned according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal form and is not bound by the Rules of Evidence but may be informed on any such matter in such manner as the special inquirer considers appropriate.

The application by Mr Tsaknis, counsel on behalf of Miss Searle, must be considered on that basis only and emphasise that it is an application by Miss Searle only. It is not an application for any representation beyond that. Mr Tsaknis went on to say that he put his case on two bases. In fact I will quote Mr Tsaknis in that regard:

The bases for the application are twofold; firstly, that Miss Searle has a special interest in this matter beyond that which may be possessed by members of the general public and on the facts of this case beyond any interest which may be even possessed by certain other investors and, secondly, that it's important, given the nature of the inquiry, that there be an effective contradictate to the allegations or the inquiries which may arise during the course of the inquiry.

1/2/ces 2 15/6/00

He went on to say: I'm mindful of the fact, of course, that the inquiry itself can and no doubt does ask questions -

I think it can be fairly said that has been a bit of an understatement so far -

but, in my submission, it's important that there be at least one effective contradictor who may also take the role rather than perhaps expecting the inquiry to enter into the fray, so to speak, more than is necessary or perhaps even desirable.

The special interest, he submitted, was different to the general public and I will deal with that in a moment. It must be pointed out, of course, right at this part of the finding with respect to this application - and has been agreed by all parties, as far as I'm aware - that no adverse finding would be possible against Miss Searle or this committee, of course, can't envisage that any could or would arise. Mr Tsaknis then went on to say that with respect to her special interest the findings for this committee should not confine itself to that simple matter. If there is no adverse finding, then, of course, the person has no right for separate representation, and he quoted many cases which are not necessary for us to go into in any detail in this finding by the committee, but none of those, in the view of this committee, were relevant to such an inquiry of this nature. He then went on and pointed out that Miss Searle has applications before the board, that is, the Finance Brokers Supervisory Board, but there, of course, Miss Searle is merely a complainant and this committee can't see that that has any relevance with any special interest that she might have before this inquiry and any questions that she could or perhaps would like to put to this inquiry may be prejudicial and perhaps not relevant. Again Mr Tsaknis continued that Miss Searle indeed had some - it was his opinion that Miss Searle had considerable money either through herself or her company involved in dealings with finance brokers and he quoted certain figures which I think do not match those mentioned by Miss Searle in her evidence but, be that as it may, it is quite beside the point. The committee cannot see that this makes any difference from any other investors who have money involved no matter how small or large. Then Mr Beech on behalf of the ministry stated that he had no substantials to make. Mr McKerracher on behalf 1/3/ces 3 15/6/00

of Minister Shave stated he had no objection to Miss Searle or any other witness being represented by counsel if it was likely or possible that there could be an adverse finding with respect to that witness. Mr Chaney then made submissions to the committee and stated that Mr Hooker, who represents the Finance Brokers Supervisory Board, had contacted him and advised that the board wished to no submission but if there was to be any representation by Miss Searle, then there should be a limit to that representation which applied to her only. Mr Chaney then went on to canvass the act and sections that have already been referred to and made various submissions on the law which again I don't think need be detailed in the finding by this committee, but Mr Chaney quoted from the Royal Commission Boards of Inquiry, a publication by Hallett, which is indeed the leading authority on questions such as this has raised for all types of royal commissions and this type of inquiry and read out the following passage that I think bears repeating because it does encapsulate the proper test that should be applied. It reads as follows:

The question of whether leave to appear should be granted is a discretionary matter for this board not to be accorded to everybody who merely feels interested in the subject matter. Representations should be confined to those who have a peculiar and material interest to protect or advance. I use the word "peculiar" in the sense of an interest attaching to the individual and not merely shared by him or with a substantial section of the public. I use the word "material" in the sense of describing something more than a self-interest or merely temporary or passing interest.

Mr Chaney continued to point out that submissions made by Mr Tsaknis with respect to a contradictor was one that was and should be carried out by counsel assisting and indeed has been so carried out during this inquiry. The committee is of the opinion that Miss Searle's interest in the inquiry is no different to that of other investors and again it has been mentioned by the committee during the application with respect to Miss Searle there can be no suggestion, as far as the committee is concerned, with respect to any adverse finding about her. Miss Searle has put forward in her evidence before the committee and her submissions and detailed questions which have been of great assistance and will continue to be of great assistance as the ministry and Finance Brokers Board and others and the questions with respect to them are investigated. Finally, as stated by her counsel, any questions that Miss Searle thinks could be 1/4/ces 4 15/6/00

asked, can be adequately addressed to counsel assisting and as indeed she has already done. Finally, Mr Tsaknis submitted that if Miss Searle's application were to be refused by the committee at this stage, then she could reserve the right to be heard on similar applications if the necessity so arose. The committee agrees completely with Mr Tsaknis on this point and the committee at this stage are of the opinion that Miss Searle's application for the reasons advanced has no peculiar interest different or be most likely different to a substantial section of the public and the application is refused. However, this committee agrees that indeed at any stage Miss Searle thinks that her interests are being affected, the application can be renewed and, of course, this applies to anybody who has been a witness or intends to be a witness at this inquiry. Thank you. MR QUIGLEY: May it please you, Mr Chairman. THE CHAIRMAN: Yes. MR QUIGLEY: I appear for Miss Searle this afternoon who instructed me that if the decision fell in the manner that you have announced, Mr Chairman, to make an application on her behalf that the committee refrain from taking evidence until Monday week to enable her to promptly prosecute an appeal to the Supreme Court against the decision. That would just preserve the status quo for 10 days giving her that opportunity to prosecute an appeal. It's Thursday today. We would have to get moving on it tomorrow and it would have to be on promptly in the Supreme Court because this matter would be then on Monday week, but if the evidence was to recommence on Monday, there would be no reasonable opportunity of her appealing the matter and preserving the situation other than by seeking interlocutory relief which was unlikely to obtain at such short notice before Monday, bearing in mind she's relying on - including she thanks Mr Tsaknis for acting pro bono yesterday, but at this stage he's acting on donated services and given that and given that she wishes to prosecute an appeal next week, she has instructed me to make that application, that the committee refrain from taking evidence just to preserve the status quo until Monday week. THE CHAIRMAN: Just a moment, Mr Quigley. We granted that application with respect to one witness's evidence in order that this application could be made. MR QUIGLEY: That's right, sir. 1/5/ces 5 MR QUIGLEY 15/6/00

THE CHAIRMAN: There was no suggestion that it was with respect to any evidence that might follow or that we had intended to proceed with and it would - I don't know what counsel assisting's view on this is, but it would be of great inconvenience to us and to the proper prosecution of this inquiry because of the limited time frame which we have at this moment. Whether or not that will be changed I don't know at this time, but any interlocutory application surely can be granted tomorrow. You are asking us to put off all next off. MR QUIGLEY: That's right, sir. THE CHAIRMAN: No way; no, thank you, subject to what counsel will - - - MR QUIGLEY: Is there any shorter time that the committee would consider? THE CHAIRMAN: I will have to hear what counsel says. MR QUIGLEY: May it please you, sir. THE CHAIRMAN: Before I hear from you, Mr Chaney, Mr McKerracher, do you wish to say anything in respect - - - MR McKERRACHER: Mr Chairman, I must say an adjournment of that nature would at least on the present timetable very greatly inconvenience us. The minister has been slotted in for next week by counsel assisting, Mr Chaney, who has adjusted his considerably detailed arrangements accordingly. I will be out of the jurisdiction and involved in other matters from Monday week onwards. Subject to any other arrangements which might be made, on the present indications it would cause very great inconvenience. The minister's involvement in this matter, at least on indications from Mr Chaney, to date was really confined to some short matters this week and some short matters next week. THE CHAIRMAN: Yes, thank you, Mr McKerracher. Mr Chaney? MR CHANEY: Mr Chairman, for my part I would love a week to get ready, but I think the timetable is such that simply isn't practicable. I might say that I think, putting aside questions of convenience, the reality is Mrs Searle's application is to have the right to cross-examine people. The solution, if an appeal is ultimately successful, is that people can be recalled. Nothing is lost. It's not as though not having counsel here during the evidence in examination and in the cross-examination by others in any way would affect the right which ultimately she would seek to obtain by the 1/6/ces 6 15/6/00

appeal. So it simply isn't justified in order to preserve her position in the event that the appeal is successful. That is entirely preserved by the ability to recall witnesses and so, in my submission, we should proceed on Monday as planned. MR QUIGLEY: Mrs Searle instructs me it's with the knowledge that the minister was scheduled to give evidence next Tuesday that she was anxious to prosecute an appeal forthwith so that she could, if successful, instruct someone to cross-examine the minister on her concerns and it's for the very reason of wishing to instruct counsel to cross-examine the minister, amongst other witnesses, that she sought leave to appear and on balance, if the appeal is successful, the minister is going to have to be recalled. If that's the way that decision fell, it could be of greater inconvenience to the minister rather than just preserving it for 1 week. THE CHAIRMAN: Mr Quigley, with our knowledge of proceedings, you can't give any undertaking, and I wouldn't expect it from you, that the matter will be disposed of in the Supreme Court within a week. It might be a lot, lot longer and you are asking the whole process of this committee to be stayed and it could be indefinitely, as far as the committee is concerned. MR QUIGLEY: Well, it's a very important right that she seeks to prosecute and protect and that is her right to cross-examine the minister and other witnesses. THE CHAIRMAN: Yes, but it can be done by recall. It has been done here before this committee before with other witnesses. MR QUIGLEY: I'm asking you in the weighing of matters - and I appreciate once again it's a discretion - of convenience to bear in mind her position, the important right that she now seeks to protect by way of appeal - - - THE CHAIRMAN: What about the minister's counsel? MR QUIGLEY: Sorry, sir? THE CHAIRMAN: What about the minister's counsel? Is there any consideration to be given for him? He won't be here. MR QUIGLEY: I'm sure that he can come on another day. I'm sure he can come on another day and if the appeal is successful - - - THE CHAIRMAN: Who can come on another day? 1/7/ces 7 MR QUIGLEY 15/6/00

MR QUIGLEY: The minister's counsel and the minister. It's not that next week is the only time that these people can appear. That's one matter that you weigh in the balance of convenience. THE CHAIRMAN: Is it only the minister that your client is concerned with? MR QUIGLEY: No, I don't have, nor does she have the full - I don't have the full list of witnesses. There's Mr Bogdanovich at the moment. THE CHAIRMAN: Who? MR QUIGLEY: The former registrar. DR NEWMAN: It is Mr Buchholz. MR QUIGLEY: Buchholz, I'm sorry. I'm sorry, Mr Buchholz. I wasn't here for his evidence, Mr Buchholz, the witness that you took the evidence-in-chief of yesterday. There is him and the minister. I don't have the full list of witnesses. THE CHAIRMAN: It has already been canvassed, Mr Quigley, that Mr Buchholz's evidence doesn't affect Mrs Searle or her evidence in any way. MR QUIGLEY: This is the application that I have made. THE CHAIRMAN: Yes, there was some concern by Miss Searle which I think prompted this whole application with respect to Mr Buchholz's evidence. That was withdrawn and this committee has not drawn, as we repeat and continue repeating, any adverse conclusions, nor could we on Mr Buchholz's evidence about Mrs Searle. MR QUIGLEY: I have advanced the instructions that I have been instructed on this afternoon. THE CHAIRMAN: Yes. We will adjourn for a few minutes.

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THE CHAIRMAN: Mr Quigley, the application is refused. MR QUIGLEY: May it please you, sir. THE CHAIRMAN: Would you kindly, if you are to seek an injunction, advise counsel assisting of the application? MR QUIGLEY: Absolutely, sir. THE CHAIRMAN: Thank you very much. MR QUIGLEY: Yes, thank you, sir. THE CHAIRMAN: We will adjourn.

____________________ 1/9/ces 9 MR QUIGLEY 15/6/00

GUNNING COMMITTEE OF INQUIRY INTO FAIR TRADING BOARDS AND COMMITTEES MR I.R. GUNNING, Chairman DR D. NEWMAN, Member MR D. BLIGHT, Member TRANSCRIPT OF PROCEEDINGS AT PERTH ON MONDAY, 19 JUNE 2000 Transcription by - SPARK AND CANNON PTY LTD 3rd Floor International House 26 St Georges Terrace PERTH WA 6000 Telephone: 9325-4577 1/1/rmo 1 19/6/00

THE CHAIRMAN: Before we commence this morning I will just make a brief announcement that the committee some time ago did put out a statement that we were giving consideration to calling various witnesses. Apparently there has been some discussion with various bodies whether or not we were going to do that. The committee is now, as you know, examining the ministry. We're then going on to examine the board itself - in other words, call witnesses with respect to that. We have been examining these bodies every since we started in one way or another, but we will then go on to call the brokers, borrowers, valuers and auditors to the best of our ability. Why I say that is that I repeat again what we said when we first started, that all of that will be subject, of course, to the police fraud squad's cooperation, and I might say we are still cooperating and in contact with them constantly, and subject to that caveat we will follow that procedure. There is no doubt in the committee's mind that those witnesses can be called and eventually, of course, findings made with respect to them, if necessary. That all comes under the terms of reference and we have no trouble with that whatsoever, especially with respect to our recommendations as to the governance of the industry in due course. Thank you. Mr Chaney? MR CHANEY: Thank you, Mr Chairman. I call Stuart Dowling. STUART THOMAS DOWLING sworn: THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. Mr Dowling, what is your present occupation?---I am the coordinator of the finance industry branch of the Ministry of Fair Trading. What functions are involved in fulfilling that position? ---I supervise the finance industry branch, allocate files to officers, carry out conciliation matters with regards to complaints by consumers, carry out investigations and assist with investigations. In respect of finance brokers matters what proportion of your time is engaged in that?---Up until recently I would suggest the majority of my time since July 1 last year has been devoted to investigation of finance brokers. THE CHAIRMAN: I'm sorry, I didn't get that? What proportion?---The majority of my time. Thank you. 1/2/rmo 2 S.T. DOWLING XN 19/6/00

MR CHANEY: Can you tell the committee your background? You have been with the ministry for some time now?---Yes, I have. I joined the ministry in December 1991. I will go into what I do with the ministry. Prior to that I was with the Australian Securities Commission, now called the Australian Securities and Investment Commission, and prior to that the Corporate Affairs Department for 7 years. I have been with the ministry since December 1991. Since July 1, 1999 I was the supervisor, coordinator of the finance industry branch. Prior to that I was working in the travel and service industries branch and for about 9 months prior to that - in that time I was carrying out a conciliation and investigation role into a particular company and just prior to that I was the coordinator, supervisor of the travel and service industries branch. Did that involve investigations?---Yes, it did; yes. Can we go right back to the time with the ASC, as it then was, and the Corporate Affairs Office before that? What role did you play with those organisations?---I was in the corporate regulations division of both the Australian Securities Commission and Corporate Affairs Department, where I was dealing with capital market participants, being the investment industry, being stockbrokers, security dealers and investment advisers, investigating those areas and also in charge of the licensing area of those areas. What formal qualifications do you have?---I have a bachelor of business degree majoring in accounting and I'm a certified practising accountant. How long have you held those qualifications?---Since 1983. Apart from those formal qualifications, what ongoing training, if any, have you had since 1983?---I completed three units out of eight in the Securities Institute diploma course and I have done several other courses not connected to those areas. Management courses and things like that?---Management courses, yes. What about in the investigations area? Have you done any particular training relating to investigation skills? ---In 1991 I was in an investigations course through the Australian Securities Commission at the Bond University in Queensland on the Gold Coast, where it was a live-in course from a Sunday night through to a Friday night. I have also undertaken an investigations course through the ministry in 1995, 96, somewhere around there. 1/3/rmo 3 S.T. DOWLING XN 19/6/00

Where was that course conducted?---At the (indistinct) centre in Mount Lawley. Who was it run by?---I forget the name of the person who ran the course, but he was an investigator with the Australian - looks after complaints into the aircraft industry. Sorry, I forget his name and position. It was just a privately run course, was it, or through the ministry?---Through the ministry, yes. Yes, several officers and myself attended. I think part of the maintenance of your CPA qualification involves ongoing annual training, or am I mistaken about that?---You are correct with that. It requires 60 hours every 3 years. That's in general accounting areas, is it?---Not only in general accounting, also in the industry that you are employed in. I see, and you have maintained that training?---Yes, I have. You mentioned that from 1 July last year you have been substantially involved in finance-broking matters. Can you outline for the committee the nature and extent of the work you have done in relation to finance brokers since that time?---I have actually been connected with finance brokers prior to that, towards the end of 98, when I was in another branch, in the travel and service industries branch. I assisted the investigation officer, Jack Willers, in carrying out a number of investigations into the finance industry branch. So I have actually been involved in the industry since towards the latter half of 1998, but to answer your question, I have undertaken a number of investigations and conciliation matters with regards to the finance industry - finance brokers. You speak of conciliation matters. Are they conciliations done pursuant to the Finance Brokers Control Act or consumer - - -?---Technically they're not, because if an investor complains to the ministry that they haven't received either their principal or their interest back from a borrower arranged through a finance broker, it is my understanding that that is not a breach of the Finance Brokers Control Act, it would be caught under the Consumer Affairs Act, because there's no breach of the act. So what are you saying, that you carry out conciliations using authority under the Consumer Affairs Act?---Yes, that's correct. 1/4/rmo 4 S.T. DOWLING XN 19/6/00

In mid 1999 I think you became involved in the follow-up to the special audit of Blackburne and Dixon. Is that correct?---That is correct. That was a special audit carried out by Dr Newman?---That is correct. Can you outline how you became involved in that matter and what you did about it?---In about February 1999 I received a rather large complaint regarding alleged breaches of the act by Blackburne and Dixon Pty Ltd. I was assigned the task of investigating that. That and several other files that I investigated with regards to Blackburne and Dixon - and I had previously handled matters with regard to them - I became concerned with the number of complaints being received by Blackburne and Dixon, and bearing in mind that Global - - - Received about Blackburne and Dixon?---Yes, about Blackburne and Dixon Pty Ltd, that's correct, and bearing in mind that Global and Grubb had been placed into liquidation in the beginning of the year, I became concerned with that particular company, and as such I recommended to the Finance Brokers Supervisory Board that a special audit be undertaken of the affairs of Blackburne and Dixon - I recommended 10 to 20 of their largest developments that they handled. So that was when?---I think my memo was dated 22 June 1999 - actually, that's prior to coming into the area. I was still with the travel and service industries branch at that stage. The special audit was then conducted?---It was approved, from memory, on 14 July 1999, and, yes, then the special audit was conducted towards the latter half of that year. As a result of that audit, in summary, it was that the number of files reviewed, a substantial number were in default?---That is correct. Of the 20 files that were reviewed, 12 of those were deemed to be in default. As a result of that report having been made, what further involvement did you have?---I was assigned the task of investigating the reasons behind those files being in default. As two of the 20 files had previously been investigated I did not look into those matters, I purely used the previous investigations and put the copy of the reports on file. I then looked into the reasons behind the remaining 10 investments being in default. What work did you undertake in relation to those 10?---I, with a fellow investigator, Jack Willers, attended the offices of Blackburne and Dixon on quite a number of occasions, and also, because some of the files had been seized by the Australian Securities and Investment 1/5/rmo 5 S.T. DOWLING XN 19/6/00

Commission, I had to go to their offices to inspect the files that they had. What was the outcome of those investigations?---Having a look at each individual of the 10, I found, I believe, that Blackburne and Dixon didn't fully comply with clause 16 of the Finance Brokers Control Act code of conduct - clause 16, which is a requirement for the broker to obtain written confirmation from an investor of certain matters, and also I recommended that these be looked into and I was uncertain of several areas of possible breaches of the Fair Trading Act because of possible misrepresentations in Blackburne and Dixon's proposal letter to the investors. As a result of those conclusions what happened?---There was a meeting between the acting principal legal officer and the registrar manager of the finance industry branch and it was agreed that an inquiry should be held into those alleged breaches of the code of conduct, being clause 16. When did that meeting take place?---About the middle of May - sorry, middle of May 2000. So the investigation - well, perhaps going back a bit, when was it that you commenced your work on the 10 files?---I can't recall the exact date, I'm sorry. Shortly after the Finance Brokers Control Board directed that I commence - - - In the latter part of 99 some time?---Latter part of 99, beginning of 2000, yes. So that was complete by May and there was a recommendation that it go forward to inquiry?---Yes. What has happened since then?---To date nothing has been done with that, because at the same time I was also carrying out another investigation into another investment arranged by Blackburne and Dixon, into an Eton Developments, which has been in the newspaper, which alleges that Owen Blackburne extorted $1,000,000 out of the developers of Eton Developments. I was investigating that and just shortly after the recommendation that the original matter with the audit be put before the board, I completed my investigation into this other matter and my recommendation is there that there is a breach of clause 5 of the Finance Brokers Control Act code of conduct and I thought it would be better to put both lots of breaches together into an inquiry so that it would save the board's time and also you have more charges against the broker. 1/6/rmo 6 S.T. DOWLING XN 19/6/00

So the position is that the decision to proceed on - I will withdraw that. In respect of that last matter has there been a decision made in conjunction with the legal officer and others concerned within the ministry to proceed to inquiry?---It's my understanding there's a meeting tomorrow at 12 o'clock to decide that matter. THE CHAIRMAN: Between who?---Between the registrar manager of the branch and the acting principal legal officer and myself. DR NEWMAN: Mr Dowling, were Blackburne and Dixon not involved in an agreement with the ASIC on cessation of trading on a voluntary basis prior to May 1999?---That is correct. Sorry, May 2000?---2000. Yes, that is correct, Dr Newman. MR CHANEY: So the position is that the next step, as it were, is to take all the matters to the board with a recommendation for an inquiry?---That is correct, yes. And for an inquiry date to be - the matter then goes to the board, or becomes the province of the board, to arrange a hearing and deal with those matters?---That is correct, yes. I want to ask you about a particular matter that you were involved in with Blackburne and Dixon which may overlap with those that - may have been one of those two that were already the subject of investigation. Can you have a look at the copy of this file please? Do you recognise that particular file?---Yes, I do. Was that one of the ones which was the subject of the special audit?---No, it was not. So this is a separate one?---That's correct. It involved a complaint made in February 1999. If you go to page 33 of the bundle - members of the committee will see that these pages I have had numbered at the top right-hand corner for ease of reference. That was the originating complaint, or at least a correction of the originating complaint, I think?---Yes. That appears to be that, yes. It concerned Mr and Mrs Hackling who have given evidence in this inquiry and the complaint was that the clients have no registered interest in the mortgage - this is at the foot of page 33 - have no registered interest in the mortgage although they were told in the letter of 7 August 98 that they had such an interest. That was in essence the complaint you were investigating?---One of the matters, yes. 1/7/rmo 7 S.T. DOWLING XN 19/6/00

What else was there?---One of the other issues raised by Mr Solomon was that Blackburne and Dixon's proposal letter dated 7 August 1998 stated that this was a new mortgage. He took exception to that. Yes, and I think if one looks at page 34, the second page of that letter notes, "The lender and borrower speak of a new mortgage with anticipated date of advance and list of mortgagees is misleading." That's that point?---Yes, that's correct. Thank you. Now, when did you become involved in this particular complaint?---It appears to be sent to me on 14 April 1999 or thereabouts. 14 April, I would suggest. It appears as if from the front cover it was then reallocated to myself. Yes. Do you know what had happened between 26 February and 14 April when it was allocated to you?---No, I don't, I'm sorry. At the point where you received it had there been any investigation carried out?---There are several letters from the Finance Brokers Supervisory Board to Mrs Kay Blackburne of Blackburne and Dixon, so there were obviously some matters being looked into and it appears that Mr Willers, one of our investigators, inspectors, had looked at the file and had taken certain actions up until the end of March of that year. So, yes, there had been action prior to that time. Now, there's a summary dated 17 May 1999 that's found at page 2 of the bundle. That's a summary prepared by you in relation to your investigation on this matter and the conclusions you have reached?---That's correct. I would just like to take you through a couple of passages in that and ask you some questions about it. On the first page, that's page 2 of the memo - do you have that in front of you?---Yes, I have. You refer to the fact that on 14 May you attended at the premises of Blackburne and Dixon, spoke to Kay Blackburne and Ken O'Brien in relation to the Hackling investment, and the first dot point is that the Hacklings had been clients of Blackburne and Dixon for some years. Where was that information gleaned from?---Talking to Blackburne and Dixon directly when I attended their offices. That's what they told you, is it?---That is correct. Sorry, when I say "they", what, Mr O'Brien or Mrs Blackburne or - - -?---It appeared from my notes that I made at the time that it was Ken O'Brien who did most of the talking. 1/8/rmo 8 S.T. DOWLING XN 19/6/00

Yes, in fact page 13 - is that the notes you're referring to?---Well, that's possibly my handwritten note, but I'm looking - what I did was when I got back to the office I typed up my file notes so that they were more readable and presentable. I'm just looking at page 8 of those documents. It said, "I asked if H" - being Hacklings - "were new clients. KO" - which is Ken O'Brien - "advised that they have been their clients for some years." Yes. Mr O'Brien has said that?---Yes. Now, going back to page 2, the next point I want to ask you about, you set out a chronology. Presumably this is what you were told by O'Brien and Blackburne at this meeting of the events that had transpired?---Yes, and having a look at several documents. Yes, and the second-last dot point on page 2 says:

The Halls Head unit was to be sold for $160,000 leaving a balance of only $20,000. Blackburne and Dixon claim they would have paid the investors out after the sale.

Do I take it the mortgage we're involved in here was $180,000?---For the two - there were two mortgages involved. Yes?---Yes, there was a Halls Head property and there was also a property down at Dunsborough. From memory I think it is a block - yes, and the total was $180,000 and I quizzed them about that and they said, "Well, it only leaves a balance of $20,000. It would be ridiculous to leave a mortgage on there for just $20,000." So they say they would have paid the investors out?---Mm. What did you understand them to be telling you, that they from their own funds would have discharged the investors' loans, or what?---I can't recall what I was thinking then, I'm sorry. Possibly along those lines, but I can't honestly recall. Would you have thought that a strange thing, if the brokers themselves were going to discharge a borrower's debt?---Well, bearing in mind I at that stage only had a little bit of exposure to the finance area so I never really thought about it. That's was a question I intended to ask you and forgot. In fact, when you came into - in late 1998 you first started getting involved with finance brokers, that's the first exposure you had had to the industry at all, was it?---That is correct. 1/9/rmo 9 S.T. DOWLING XN 19/6/00

Would it be fair to say that you really didn't know anything about how brokers operated at that time?---That is correct, because at the beginning I was just assisting the inspector. Mr Willers?---Mr Willers, yes. I was just attending his investigations. And picking things up as you went along?---That is correct. So as at May 1999, is it that because you really didn't understand how brokers worked that you really didn't think twice about the proposition that the brokers apparently might be putting a hand in their pocket to pay out a lender's debt - or a borrower's debt?---Well, I did honestly think about that proposition and I could understand why they wouldn't want to have just $20,000 of a mortgage hanging around. Why?---Out of $180,000 over two mortgages, it just seemed to illogical to have such a small amount on a mortgage that originally was 180,000, to my way of thinking. From whose point of view was it illogical?---Mine, and I was accepting their statement that they intended to pay it out. DOWNIE, MR: Mr Dowling, is there any evidence in the files that you saw where there were any memos or any other documentary evidence to say that either they did in fact intend to pay it out or that they had paid it out? ---No, Dr Newman, there is nothing on there, because this subsequently fell through and the properties were not sold - or the main property was not sold, so therefore it didn't raise its head again, because as the property was not sold I didn't pursue the matter after that. But don't you think it's something that in normal circumstances a director would minute in a file so that all the staff knew that when this settlement went through there was a 20,000 shortfall and there needed to be then action to honour what Blackburne and Dixon said they intended to do, which was to pay out the investors? ---Probably that would be ideal. I remember going through the file, but I don't recall seeing anything on the file that struck my attention that that had taken place. So all you have is their word that they were going to do it without any backup?---There may have been something on file. These files that we're looking at can be very, very thick. There could be many hundreds of documents on a file. I have seen some files that actually occupy on one investment a complete document box. So in those 1/10/rmo 10 S.T. DOWLING XN 19/6/00

cases there are literally thousands and thousands of documents on file. So you're going through it and it is possible to miss a document. THE CHAIRMAN: I take it at the time you were working under Mr Willers. Is that right?---No, I was not. No, I'm actually a more senior officer than Mr Willers. It's just that when you read it, "The Halls Head unit was to be sold for 160,000, leaving a balance of only 20,000. B and D claim that they would have paid the investors out after the sale," it means absolutely nothing, doesn't it? There's no sale?---No. It's all "to be, to be, to be," so it just means nothing, in effect?---Well, I was just trying to build up a chronology of events that took place. Thank you. MR CHANEY: The next dot point, the final one on that page, is:

Due to Hacklings' investment and notification of sale being received so close together Blackburne and Dixon did not lodge a new mortgage -

and just so we can understand the chronology, the actual investment, the payment of the loan on behalf of the Hacklings took place on 7 August. Do I read that correctly?---No, that I think you will find is the proposal letter that Blackburne and Dixon sent to Mr and Mrs Hackling. So do you know when the money was actually advanced? Just going back a bit, Blackburne and Dixon, looking at your note, had the money from July 28, is that right, in their trust account?---That I'm not certain. I will have to see if I can find something in here for you. All right?---Going through page 7 of those pages I have got, "Ken O'Brien then advised that the discharge of mortgage was on 8 October." Mr and Mrs Hackling were actually taking the place of a previous investor and as such the money - once the previous investors were discharged from the mortgage they were then supposed to have been entered on the mortgage, which was 8 October, and then it goes on to say that on 10 October they were advised that the Halls Head property had been sold, which was only some 2 days later, but I will see if I can actually find when the money was received. At page 2 you actually record in a second dot point that the Hacklings invested 111,000 with the B and D trust account. Presumably the 40 came out of that account on 8 October?---That may be the case but I can't recall. 1/11/rmo 11 S.T. DOWLING XN 19/6/00

In any event, the position was that the Hacklings were unsecured. They had no registered mortgage as at the time of the advance of their money but you understood the decision on Blackburne and Dixon's part to be, "Well, the place is going to be sold anyway so there's no need for us to bother registering a mortgage." Is that how it happened?---That is correct, because they would have sent their investment back to Mr and Mrs Hackling. Sorry, they sent their investment - - -?---No, they would have sent their - - - They would have, yes?---Sent it back, because there is no mortgage for their investment to be placed against, because the previous mortgagees were not discharged from that mortgage until - was it 8 October? I think it was - and the new mortgage - they were told on 10 October that the property had been sold. If they had have put them on the title they would have incurred expenses for putting them on the title to have to take them off a very short time later. Was the money ever advanced? Did you work out whether the whole deal was simply cancelled and the Hacklings' $40,000 never went to the borrower, or did it actually go but it was going to be repaid shortly? Do you understand the question?---I understand your question, yes. Yes, I do. My understanding was that what would happen is that because one borrower - sorry, one investor is being paid out, they then get a new investor into a deal and the money generally that is invested in the new deal is paid to the lender who is being paid out. Yes. So in effect the Hacklings were stepping into the shoes of the lender who had been paid out?---Was getting paid out, yes. Yes, and getting paid out using the Hacklings' money? ---That is correct. That would be my understanding. Yes. So at that stage, in effect, the net effect of all of that is that the Hacklings have lent money to the borrower, albeit that the borrower has used that money to repay the debt to the earlier lender?---That is correct. You understand that took place, that transaction of the substitution of the Hacklings for the previous borrower, took place on 8 October?---That's correct, yes. Blackburne and Dixon then were told on 10 October, according to your note at page 2, "The unit has been sold so don't bother" - you know, so they decided not to bother registering the Hacklings' interest on the title? ---Yes, and I did see a letter on file to confirm, according to that letter, that the property had been sold. 1/12/rmo 12 S.T. DOWLING XN 19/6/00

Did you understand when that letter, which I don't think we have - it's referred to as the letter of 1 September 98. That's again on page 2?---I think you will find the letter in question is on page 11. Thank you?---It's a very poor copy. DR NEWMAN: Mr Dowling, was there any reason given to you when you were talking to Blackburne and Dixon as to why the mortgage for the Halls was being discharged and a fresh mortgage was being registered to the Hacklings, rather than a mortgage for the Halls being assigned to the Hacklings?---No, I didn't consider that point, Dr Newman. Because that would, I would have thought, and counsel assisting may clarify this for me, have meant that the Hacklings would have been fully protected, because there was an existing mortgage that would have been assigned to them from the Halls in exchange for the Halls getting the money, so that there would have been a continuous security and the Hacklings would have been better protected than they were under the system that is being outlined as having been advised to you as to what they were intending to do; that is, Blackburne and Dixon were intending to do. I would have thought it would have been a simpler matter to assign a mortgage than it would have been to discharge an existing mortgage and register a fresh one. MR CHANEY: Do you know which alternative it was?---No, I don't, but I thought it was going to be registered as a new mortgage - but I may be wrong there.

DR NEWMAN: Because it would make a difference to the Hacklings as to whether it was an assigned mortgage or whether they loaned their money and then their mortgage was registered later, because they would have been protected simultaneously on the assignment of the mortgage on handing over their money. MR CHANEY: You don't know the answer to that question, or the proposition which Dr Newman puts?---No, I don't, no. Would it be fair to say, Mr Dowling, that given your newness to the industry, those sorts of conceptual issues are not something that you really were alive to at that point in time?---Well, I didn't consider them, because I was looking at the points that had been raised in the original complaint that they weren't recorded on there and I was trying to find a particular reason why they weren't recorded on there, and also the other aspect of the complaint. 1/13/rmo 13 S.T. DOWLING XN 19/6/00

Did you understand that the significance of their not being recorded on there may be affected by whether or not the arrangement was to discharge the mortgage and grant a fresh mortgage or simply assign the interest in the mortgage? Do you understand that?---Yes, I do, because I think I actually addressed that issue, whether it could put them at risk if the borrower defaulted at that particular point. Yes, and in addressing that issue what conclusion did you reach?---For a short period of time Mr and Mrs Hackling were at risk, but as they were eventually put on the title that risk didn't eventuate. They were at risk for a particular period, yes, I will agree with that. You conclude at page 3 of the bundle, page 2 of your memo, you had no evidence to suggest that was deliberate and can only conclude it was due to inadvertence or incompetence?---That is correct, yes. All right. Now, you then did an analysis in this memo of 17 May as to potential breaches of the act or code and you refer to clause 4 - this is at page 3 of the bundle:

Brokers shall at all times act in the interests of their clients and shall not place the lender or borrower to disadvantage for the broker's own benefit.

In respect to that you looked at the elements of potential offences against that clause and you relied on Mr Castiglione's opinion of 25 March 98, which I think is in the bundle at pages 18 and 19, to conclude that the Hacklings were not a client of Blackburne and Dixon? ---That was one of the elements I considered, yes. THE CHAIRMAN: But, I mean, let's go into that in a little bit more detail:

Brokers shall at all times act in the interests of their clients.

That's the heading you have here at page 3 of this document. Is that right?---That is correct. Yes, and then it goes underneath - well, now, Hacklings were told by Blackburne and Dixon they were going to registered mortgages on the mortgage, weren't they? ---That is correct. Then it goes on:

While the Hacklings were not recorded on the mortgage -

1/14/rmo 14 S.T. DOWLING XN 19/6/00

they have handed over their money, by the way, at this stage - while they're not recorded on the mortgage -

Robert Castiglione's legal opinion dated March 98 states that the client of the broker is the borrower, not the lender, therefore the Hacklings are not a client of B and D. The element is not satisfied because they weren't put on the mortgage.

They didn't satisfy - did you refer that back to the legal officer?---No, I didn't, because the legal opinion is that in an instance like this Mr and Mrs Hackling would not be considered as a client of the broker.

Yes, but the broker took the money. It was supposed to put them on the mortgage and because they're not on it they're not the client of the broker - because then you go on, "Shall not place a lender or borrower to disadvantage," and that's again repeating clause 4 of the statute, "but the Hacklings not being recorded on the mortgage are being placed at a disadvantage if the borrower does not honour its obligation pursuant to loan agreement." I don't know about the borrower, but what about the broker? "The Hacklings are not recorded as having an interest in the property. This element is satisfied." This wasn't referred back to the legal officer at the time, it's just based on his opinion?---I believe it was referred to the legal but I am - - - MR CHANEY: If you look at page 1 that might assist you - page 1 of the bundle?---Sorry, yes. Yes, it was. Sorry, I forgot about it. There's a legal opinion from Mr Castiglione to the registrar with regards to my report. Yes, if you look at that, it says, "It's not the case in every situation that the borrower is the client." See the third sentence in the second line?---Yes. "That will generally be the case, but I stress, not always. I cannot find any information on the file as to the circumstances in which the loan was made" - and so on. "This matter should be ascertained with more certainty. In particular it should be paid who paid the commission." Now, that's the last document on the file. Was any more work done to ascertain any more information about this client issue?---I don't know what happened to the file after this particular date, which is 15 September 1999. Why is that? Did it not come back to you?---I have got it - closed the file on 22 November 1999. Is that - - -?---That's my writing. 1/15/rmo 15 S.T. DOWLING XN 19/6/00

That's your writing?---Yes, it is. "22 November, file"?---Yes, and I'm not sure what happened between those two points. It's a peculiar conclusion in the light of the statement to you by Mr O'Brien that these had been clients for some years. Did you appreciate that?---There is a distinction between the two "clients". What's that distinction?---Well, there is a client with regards to Blackburne and Dixon. They refer to, I would suggest, lenders and borrowers being clients, whereas the Finance Brokers Control Act and the code of conduct refers to clients and the legal opinion that we have with regards to clients is generally who approached the finance broker first and (2) who paid the commission for those investments. Right, and in terms of applying that test, how did it apply to the Hacklings, who had been "clients", in the brokers' words, for some years? Did you actually analyse the transaction from that point of view?---No, because the investment had already been there. This had been set up previously and Mr and Mrs Hackling had only replaced an existing investor in this particular development. So in essence what my understanding of the definition of client is under that ruling is who approached the broker in the first instance. If it is the investor who says to a finance broker, "I have some money to invest. Would you please find a development for me to invest in?" the broker then goes out and finds an investment for them and then the lender pays the commission on that, they would then be the client. Yes. Well, I don't want to - I mean, I think it's not helpful for us to try and debate the merits of the particular case, but I'm really trying to understand the process that has been gone through in applying this opinion, because in this case, if you look at your memo of 17 May, the Hacklings had some money there which they had invested which presumably they were looking to invest or to find places to lend it out on first mortgage. Was that your understanding?---That or they had a mortgage with another investment and Blackburne and Dixon contacted them to say that that investment was maturing and would they like to invest in another proposal. Yes, but the money was sitting in Blackburne and Dixon trust account for that purpose, for Blackburne and Dixon to find them an investment, was it not?---That or it was waiting for them to say whether they wanted the repayment of their principal or for the money to be reinvested. 1/16/rmo 16 S.T. DOWLING XN 19/6/00

So in applying Mr Castiglione's earlier opinion was the determinative issue that there was already a mortgage in place and therefore the borrower had grabbed the hat of being the client, as it were, and that meant the Hacklings couldn't be the client?---That and the fact that the borrower would have paid the commission. DR NEWMAN: By that you mean the commission to Blackburne and Dixon?---That's correct, for the initial investment. What about any payment that would have been made by the Hacklings out of any interest collected by Blackburne and Dixon and passed on to the Hacklings? Would that not then have made the Hacklings a client, even if they in your estimation were not clients prior to that time?---I don't see that they would be. Even though they had paid commission to Blackburne and Dixon on the interest that was collected for them?---No, they don't - what they do is they may invest say a sum of $40,000. What the brokers may do, they may hold some of that money to pay them back interest after their first 12 months, but their complete investment is $40,000, so on the maturity of that investment they would get their $40,000 back. That's what is supposed to happen. But what about the interest that's paid on a monthly basis from the borrower to the lender via Blackburne and Dixon?---Well, that's just part of the role of a finance broker, that they can either instruct the borrower to forward their interest directly to the lender or they can forward it to the finance broker, in which case the finance broker would charge the lender a fee for administering those funds. Does that not fit within the criteria of making someone a client of the broker, in view of the fact that he's receiving a payment? Now, whether it's commission or any other term, it is essentially a payment of a commission nature and that's what the legal opinion is, whoever pays the commission is the client. So would that not then make Hacklings or any other lender a client of the broker?---Not being a lawyer, I don't believe so, because it is just commission on moneys lent, it is not commission for raising the funds, whereas the Finance Brokers Control Act sets out the commissions that can be charged by a finance broker to a lender to raise funds for a particular development, and I believe that is the commission they are talking about, not interest that is being paid to a particular investor. I believe that is just purely interest for moneys that is invested. The fact that the broker happens to get a commission or a charge out of that money is coincidental?---According to 1/17/rmo 17 S.T. DOWLING XN 19/6/00

that legal opinion again, if it's the broker who charges the borrower for the raising of those moneys I believe then the client would be the borrower. Your view on what you have been told is that it would continue to be the borrower and the lender would never become a client even though interest was being collected on his or her behalf and the broker was receiving a commission or payment out of that interest for his services in passing the money on to the lender?---In that particular development that would be the case. THE CHAIRMAN: So it all depends on who is paying the piper?---That is correct, yes. And yet the act says:

Brokers shall at all times act in the interests of their clients and shall not place a lender or borrower to disadvantage for the broker's own benefit.

Don't you think that just creates in itself a legal liability on the broker to act at all times in the interests of a lender or borrower and there's an obligation on the broker, notwithstanding any commissions. Forget about it?---Well, if you were just to look at it at face value, yes, I would suggest that may be the case. Thank you. MR BLIGHT: The key, I notice, in your report on that was that there may have been a disadvantage to the lender or the borrower, but if it didn't advantage the broker you didn't take it any further?---Well, there were the elements there, yes, because ultimately if something had have happened to their investment while they were not on the mortgage, yes, they would have definitely been at a disadvantage that would have materialised, but while they were at a disadvantage, nothing actually materialised. Yes, I'm not so much interested in this particular case, incidentally, but it does seem that it's a bit - you know, very ambiguous, to say the least, that every borrower would assume they were a client of the broker. If you had gone into a broker and said, "Here's some money to invest on my behalf," or if you had been sent a glossy - which I have been through with previous people before - outlining an investment that was as safe as a house, in one case, and that you had a guarantee that your money was pretty safe, and then you decided that you would invest $100,000 in that particular project, you're really saying that - and which had been initiated, of course, by a lender wanting a lot of money - you're saying that then the lender would not be a client of the 1/18/rmo 18 S.T. DOWLING XN 19/6/00

broker?---Each individual case has to be taken - the circumstances have to be looked at individually. But at what stage does the lender become aware that he or she is not a client of the broker? I would have thought the broker was there to look after the lender's investment to the best of their ability irrespective of who they were lending the money to and what the act might have said in very legalistic terms and what the actual code of conduct says. The code of conduct, to me, I read also:

A broker shall at all times act in the interests of the clients and shall not place a lender or borrower to disadvantage for the broker's own benefit.

I repeat, your summation concluded:

The omission of Hackling from the mortgage does not in my opinion satisfy all the elements of a breach of clause 4.

In other words, the brokers hadn't obtained any advantage from that. That seems a very narrow way to perhaps avoid pursuing the matter further?---Well, that was my opinion that I had concluded. Any matter further, not this particular one?---No, each individual investment is considered - sorry, each individual investigation is considered on its own merits. Do you go along - once you have worked out the pros and cons of what the investment is all about do you go and see the legal officer on each occasion to work out whether the lender is a client or not?---No, that's never an issue prior to doing an investigation. We would receive a complaint with regards to a particular broker. We would then - when I say "we", Jack Willers and myself would go out and do an investigation into that particular matter to gather all the facts and then we would compile a report, and that's when the issue of client would be looked at. Never before. We would always gather the facts to see what they are because only then it is put up to a legal officer in conjunction with the manager of the branch to determine whether there is sufficient evidence to pursue the matter. And from just the office administration point of view, if you concluded from this that the lender was not a client would you fast-track it for file or say, "We can't do much more for that - - -"?---Not at all. I have never fast-tracked a finance industry file. To me a fast-track file deals with other areas that we get with regards to say schemes and things like that. They're allocated to a fast-track - we can't actually look at because they are overseas, interstate or we then forward them to the 1/19/rmo 19 S.T. DOWLING XN 19/6/00

relevant authorities, but irrespective of what the complaint says, if it's a breach of legislation in Western Australia we will look at it. Particularly with finance brokers, not one complaint, I would suggest, has been fast-tracked. Every one has been investigated. At what stage would an investigation, I guess - well, no, it may not be an investigation at this stage, but at what stage would they get to the Finance Brokers Control Board, matters of this nature where you had concluded that the lender was not the client?---What would happen, after the investigation a report is put up, like my report. It is then considered with a legal officer and the manager registrar of the board. A decision is made one way or the other with regards to that report. It is then submitted to the Finance Brokers Control Board to tell them the result of the inquiry and the recommendation. It is then up to the board to determine whether they are going to accept that or not or pursue the matter through other means. Thank you. MR CHANEY: If we can just get back to the process again without delving into the merits in this particular case, you say at page 3 of the bundle when you're dealing with this issue:

The legal opinion dated 25 March 98 states the client of the broker is the borrower not the lender, therefore the Hacklings are not a client of Blackburne and Dixon.

Was that as you understood the opinion, that it was cut and dried? If you were the lender you weren't a client and that's what the opinion said?---No, not at all. As I said previously, my understanding of that is the lender depends on who approached the broker first and who paid the brokerage for that particular investment. If the lender approaches the broker and says, "I have a sum of money to invest. Go and find me a development that I can invest in," and they pay a brokerage fee for that, that probably would be that they are the client in that instance, but in every instance that I have seen to date it has been the other way around, generally, where the borrower has approached the finance broker to raise funds for a particular development and has paid the brokerage fee for that. In terms of the opinion which you applied, you have made specific reference to one which is in the bundle, the copy that we took you to earlier. Is that the only legal opinion on that issue that you have actually seen and considered, or are you aware - or have you seen others? ---I believe I had read Bronwyn Davies-Taylor's original 1/20/rmo 20 S.T. DOWLING XN 19/6/00

legal opinion on that but I only got a copy of Robert Castiglione's legal opinion on it. Right, and you didn't see any other opinions from independent counsel?---No, but I was made aware that they did exist. They did exist. Thank you. I tender the Ministry of Fair Trading complaint file 8525899 entitled Hackling v Blackburne and Dixon. THE CHAIRMAN: Exhibit 121. EXHIBIT 121 Ministry of Fair Trading complaint file

8525899, Hackling v Blackburne and Dixon MR CHANEY: Perhaps so you don't get cluttered up with papers you might give that to the associate for marking. I will get you to look at another file please. Again, I should say, more accurately a photocopy of extracted documents from a file. It's not the complete file. It's much bulkier than this. Do you recognise that file? ---Yes, I do. That's a file which originated the day before - or by letter dated the day before the Hackling file, again from Solomon Bros, again concerning Blackburne and Dixon, in relation to a particular mortgage in Parmelia. Do you recall that?---Yes, I do. The letter of complaint starts at page 19 of the bundle and finishes at page 25, a fulsome account of the complaint. Just a couple of passages that I want to track through. Again, I don't want to analyse this rather detailed matter in all its detail, but I want to track through a couple of things. If you go to page 22, which is the fourth page of the Solomon Bros letter, and you go to paragraph numbered 14, you will see in the paragraph numbered 14 there is reference to, Copies of a statement of claim and defence and counterclaim and reply and defence to counterclaim in the recovery proceedings commenced in the name of Solomon Bros' clients are enclosed." They don't form part of the bundle. I have not bothered to copy those for present purposes, although they are on the file and you had them. I think they're marked 14.1, 14.2. That's the reference to the annexures. Paragraphs 18 and 19 of the defence allege misappropriation by Blackburne and Dixon of amounts of $105,000 and $200,000, totalling $305,000, in February 94 from moneys which were to be advanced under the earlier mortgage of the entire property before strata titling referred to in point 3 above. You say you saw that allegation had been made in the context of an action between the investors and the borrower?---That is correct. 1/21/rmo 21 S.T. DOWLING XN 19/6/00

Then that was elaborated over at page 23, the third paragraph:

Whether or not the allegations made in the defence in the recovery proceedings concerning BD is correct or not is obviously a matter of grave concern requiring investigation.

Further down the paragraph: No legal practitioner can ethically sign a pleading making such allegations without having evidence in respect of those allegations placed before him or her.

So there was a call to investigate that matter and you appreciated that when you took it on?---Well, I got allocated the file without actually seeing the file, so I had to then sit down and do an analysis of the some 200 pages of that complaint. The 200 pages being this letter and all the annexures to it?---That is correct, yes.

Yes, and in that process were you conscious of that allegation, that in civil proceedings there had been an allegation made of misappropriation of $300,000?---Well, I noted that. I believe that was subject to civil litigation between the parties and I don't believe the ministry had a role in that civil litigation. In fact that really takes me to my question about it, I think. Page 1 of the bundle, that's your final report in relation to this matter?---No, actually, that's not strictly correct. That's just a report I did on the application by Blackburne Finance Ltd and which was never submitted. Never submitted to whom?---To the manager or the board. I believe that my final report is at page 5. Okay. They're very similar documents, aren't they? ---That is correct, yes, because the first document that you were referring to was an objection to the licence of Blackburne Finance Ltd by Mr Solomon and so I was just bringing matters to the board's attention which I never actually submitted. Yes. Well, in fact if you go to page 7, that, I think, is the more fulsome final report?---Yes, you are correct. 1/22/rmo 22 S.T. DOWLING XN 19/6/00

It's that document that is largely repeated in the subsequent documents I took you to first. The question of the litigation and that misappropriation of $300,000, is that tied up in point 3 of the outline of the complaint?---Yes, it is. "In litigation between the investors and the borrower Blackburne and Dixon's reply and defence to counterclaim is misleading." That doesn't seem to encapsulate this question of misappropriation of $305,000? Is that a different issue?---That was the same issue. It's the same issue?---Yes. All right. Your conclusion is in the next paragraph. With regards to points 2 and 3, the valuation issue, which is point 2, has been dealt with. That was being investigated by Mr Willers, and on the latter point, that's the litigation point:

Being litigation action this doesn't come within the jurisdiction of the ministry.

What had been referred to you was, was it not, though, not the subject matter of the dispute but the need to investigate an allegation made in the context of those 1/23/rmo 23 S.T. DOWLING XN 19/6/00

proceedings, namely misappropriation of $305,000?---I just interpreted that as being part of the litigation being raised between the parties and if it had have been referred to me in a different context, possibly that not in litigation they had said, "This is what has happened," I would have looked at it, but because it was part of civil litigation I didn't address that issue and it was noted at the time when I submitted my report. If the allegation which had been made in the proceedings was true, namely there had been a misappropriation of $300,000, that would have been a matter which was clearly within your jurisdiction, would it not?---Yes, but this is ongoing civil litigation that hadn't been completed as yet. Wasn't that though just the form in which the complaint was being made? It was illustrating the genesis of the information which it was asking you to review. Why does the fact that it happens to have arisen in litigation mean you can't touch it?---As I said, because it's in the court situation the ministry really can't become involved in the courts, which have a higher authority than the ministry. So once a matter is referred to a courtroom situation we cannot become involved in it. That's just a blanket rule, is it, that you apply in the way you approach - - -?---That is the ministry's policy. If a person may have lodged a complaint with the ministry and then goes off and takes civil litigation, then the ministry has no further part in that action. If at the end of the litigation the allegation was found to be true by a judge, what follow-up would there be on this file, to take this example?---If it was found to be true and it was referred back to the ministry, the ministry would investigate it. If it wasn't actually expressly referred back to the ministry, given that you had been given notice of it here, would you have followed up on that as a matter of course or just relied on somebody to bring it to your attention at the end of the trial?---Relied on someone to bring it to our attention at the end of the trial, because chances are we would not have known when the trial ended or what the outcome was. Why didn't you invite the solicitors to say, "Look, we don't want to get involved in this issue which is being considered by a court but tell us what happens at the end of the day"?---I didn't consider that. Is there any reason for that?---Just getting back to the fact that it was subject to civil litigation. That is purely the reason. 1/24/rmo 24 S.T. DOWLING XN 19/6/00

Again, the point that emerges from your summary found at pages 7 through to 9, is that you have again applied the legal opinion in relation to "clients" in your analysis of the elements of an offence against clause 4. Did you do any more in this case than simply apply a rule that these are borrowers who are complaining, therefore they're not clients, as the opinion says, or did you carry out some analysis of the individual transaction? ---I looked at the individual transaction to see whether the borrowers were put at a disadvantage and in my opinion they weren't put at a disadvantage, albeit that it's not a successful investment, so I don't believe it complied with both elements. Is it your view that - and this may be an unfair question, but how many potential offences are there in clause 4?---I believe one. Just one?---Mm. So you have to satisfy all three elements?---That would be correct, yes. So if you don't act in the client's interests - clause 4 reads:

Brokers shall at all times act in the interests of their clients and shall not place a lender or borrower to disadvantage for the broker's own benefit.

Is it your view that you need to establish all three of those elements before a complaint under clause 4 can succeed?---I believe you should read it in totality, yes, but bearing in mind that it's not my decision, because it's ultimately up to the manager and a legal officer to determine whether they agree with my summation of the situation. Yes, and that's why I suggested it might be an unfair question for you, because that ultimately is a legal question?---That's correct, because we have no say with regards to closure of a complaint file. It is always up to the manager and a legal officer to determine the outcome. They may completely disagree with our opinion on the file and they will overrule us, or they will turn around and say, yes, they do agree with that. Before you commence an inquiry as a matter of course do you sit down with the legal officer and discuss what it is you're going to go looking for, what elements you need to satisfy to - - -?---No, we don't. So you present them at the end of the day with the results of your work and if they think more needs to be 1/25/rmo 25 S.T. DOWLING XN 19/6/00

done they will tell you to go back and do some more? ---That is correct, yes. THE CHAIRMAN: Who was your supervisor at this time?---I believe it was Mr Greg Harvey. Thank you. MR CHANEY: Yes, I don't want to ask any more about that file, thanks, Mr Dowling. I tender the Ministry of Fair Trading complaint file 8578299 in the name of Solomon Bros and Blackburne and Dixon. THE CHAIRMAN: Exhibit 122. EXHIBIT 122 Ministry of Fair Trading complaint file

8578299, Solomon Bros, Blackburne and Dixon MR CHANEY: Mr Dowling, we have seen a couple of examples in this those files of a system of recording the events which you have undertaken, and in particular I'm - have you still got that exhibit?---No, I haven't, but I can see from here quite clearly. Too efficient. Yes, that's all right. Page 10 of exhibit 122 is an example of it, I think. That's basically a sort of running account of your work on the file, is it not?---That's correct. I always commence my files by doing an analysis of what the complaint pertains to so that I can make sure that I address all the points raised. I then go on and record in a running total form my conversations, meetings, with whichever party it is. Yes, and you just do that - how do you actually handle the hard copy? You do that presumably on a computer and as events occur you add a new entry to the computer? ---That's correct, yes. All my documents are stored on computer and as I make a phone call or receive a phone call or make a visit to a particular person, I always record on there the time - sorry, not always the time - generally the time. If something has cropped up I will always put generally the day, the date and who I phoned, generally their telephone number and the name of the person I have spoken to and the reason why I have spoken to them. How often do you print those out?---I print those out - if I'm going to say carry out an investigation into a broker I will print that out so I have got all the details in front of me and when I get to the broker's I can refer to them, or if someone has requested a copy of my file notes or at the end of my file notes I will then print it out there and place that on file. So it generally stays just on the computer unless there is some reason to print it out?---That is correct. 1/26/rmo 26 S.T. DOWLING XN 19/6/00

And you always print it out at the end as the permanent record to go on the file?---Yes. I want to ask you about two other matters in which you had an involvement in the latter part of last year. I will give you copies of two further files. Mr Chairman, these files again have come not through - or don't relate to anybody who has given evidence so far in relation to matters the subject of evidence. I think in the interests I outlined earlier of maintaining to the extent possible some confidentiality I propose to refer to the complainants in each case as G and T, being the first letter of their surname, rather than use the names, and I ask you to do the same, if you can do that?---I will endeavour to remember that. I'm going to ask you first about a complaint in relation to G. How did this particular matter first come to your attention?---It appears that Mr G forwarded in a complaint to the ministry with regards to an investment they had through Blackburne and Dixon, the non-payment of their principal after it had matured. That form of complaint is found at pages 45 through to 48 and then the attachments are the balance of the document?---That is correct. That particular form which starts at page 45, that's a standard Ministry of Fair Trading complaint form?---That is correct. How do people come by those?---They would have either at that stage telephoned our telephone advice line when we were in Parval House at 251 Hay Street and a person on the telephone advice line would have forwarded out that complaint form, or they would have telephoned the finance industry branch and asked for a complaint form to be sent out to them. 1/27/rmo 27 S.T. DOWLING XN 19/6/00

There's reference to a compliance meeting on 9 August 99, so that's shortly after the complaint form was lodged, and the last entry at page 44 in relation to that matter actually has a different name but the same file number? ---Yes, it is. That is the same matter, I take it?---Yes, it is the same matter, yes. The annotation is, "Visit B and D re complaint"?---That is correct, yes. That was a meeting between you, Mr Milford, Mr Castiglione and Mr Willers?---That is correct. What's the purpose of that meeting generally? Can you tell the committee?---Right. The purpose of that meeting was to review the complaints that the ministry has received and to direct what certain investigation or action should take place with regards to that complaint. In respect of this particular matter, G, who was to visit B and D?---I was. You were assigned the matter generally?---That's correct, yes. It was my file. If you have a look at the front cover of those pages, you will see that it's dated 6 August 1999, "215, S. Dowling". 215 is my number within the ministry, so it was already allocated to myself. There's reference on that front cover to an acknowledgment card being sent?---That's correct, yes, just to confirm to Mr G that we had received their complaint, giving them the officer, being myself's, name, my telephone number and the file number if they had any reason to contact me with regards to it. We then go back a page to 43. There's a telephone message. It's for Bell from, it appears, Mr G. Do you know anything about that telephone message?---I would suggest it's a message that Bill Mitchell from the minister's office telephone me with regards to Mr G and - - - That's "Bill", is it, not "Bell"?---Bill; yes, it's Bill. I would suggest it is Bill. Is it in your handwriting?---No, it is not, so I would suggest that I was out of the office and someone has taken that message. So it's actually from Bill rather than for Bill, as it seems to suggest?---That would be correct, I would suggest. 2/1/ems 28 S.T. DOWLING XN 19/6/00

If I take you back to page 31, that's again a printout of your computer analysis of the complaint and account of what steps are taken on the file, I gather?---That is correct. The analysis occupies the first three - four, I should say, numbered paragraphs. Is that right?---That is correct, yes. That's information you have just gleaned by looking through the documents on the file?---That is correct, yes. Then there's reference to p.m. Friday, August 13. What is that entry about?---It's just the telephone call that Bill Mitchell phoned to Greg Harvey of our office and asked me to contact him. I presume that is the message that you referred to previously. I think it's the same telephone number?---Yes, it is. Is that a message you received, is it, that Mr Mitchell had rung?---That is correct, yes. What did you do as a result?---I telephoned him, returned his telephone call, and left a message on his voice-mail that I had returned his call. At that stage did you know what it was concerning other than what was on that telephone message which was a reference to Mr G?---I thought that because obviously the minister was aware of this particular complaint, he just wanted to know what the current situation was with regards to Mr G's complaint. You left a message. What happened next?---Bill Mitchell phoned me and asked about this complaint and also referred to another complaint that their office had received with regards to another investment through Blackburne and Dixon and we discussed both matters. The other one was Mr T?---That is correct, yes. Can you recall the contents of that conversation, what Mr Mitchell said to you?---Yes, I can. We talked about the complaints and Bill Mitchell advised me that they were both constituents of the minister and I could understand that the minister was concerned that he had a couple of constituents who had problems with their investments through Blackburne and Dixon and I said that I would arrange a meeting to attend Blackburne and Dixon's office the following week and see what I could do to try and resolve these matters, because in my opinion these were conciliation matters and not breaches of the Finance Brokers Control Act. 2/2/ems 29 S.T. DOWLING XN 19/6/00

Is that what you said to Mr Mitchell?---No, it was not. All right, so you told him you would arrange a meeting. Can you remember precisely what he said to you?---That he wanted to attend the meeting with me to see how things progressed with regards to their complaint. Your note records that, "BM," that's Mr Mitchell, "advised that G is a constituent." It then says, "The minister wanted someone to lean on Blackburne and Dixon." "T" stands for Blackburne and Dixon in this note, I take it - trader?---Trader; yes, trader. Yes, that is the case, but I interpreted that is that the minister had an interest because it was his constituents that were involved and he wanted me to try harder to try and get the money back for his constituents. Was the expression "lean on" used?---Yes, it was. By whom?---Mr Mitchell. The note then goes on to say, "Even advising that the minister is looking at this complaint." Was that said by Mr Mitchell?---Yes, it was. I know it's difficult now, beyond what's in your note, to paraphrase it, but can you put that in a context? What was he saying?---My interpretation of that was that the minister is concerned that he has got two constituents, Mr T and Mr G, and they're both having problems getting their money back from - their principal back from Blackburne and Dixon and he wanted to see what the ministry can do to try and get their money back and he was interested, being constituents. The expression, "Even advising that the minster is looking at this complaint" - advising who?---That was just Bill Mitchell telling me that the minister was looking at it, but I'm sure he was aware of it. I'm not suggesting that he was looking microscopically at the particular matter. It's just as a constituent - one of his constituents. The sense of it suggests that what he's saying is that you should even tell Blackburne and Dixon that the minister is looking at this complaint. Is that a correct sense from this note?---I would suggest it is because it goes on that Bill Mitchell said that he wanted to attend the offices with myself to see what was happening, and on my interpretation of that, he was interested in the complaints because they were the minister's constituent and also he wanted to see what actually took place with regards to matters like this. Is that something he said to you or is that your assumption?---That was my assumption. 2/3/ems 30 S.T. DOWLING XN 19/6/00

At that stage what did you know about this complaint in relation to T?---He said that he was going to fax through a complaint that they had received, and I hadn't received anything at that stage so what I did was I just recorded the general conversation, and when I had received the complaint in from Mr T I just copied that part of my file notes and put it into the document for Mr T, because the discussion concerned both parties. Can we just look at the other file in relation to T, 88450/99? That has a similar file note at page 6. In fact in respect to the entries on 13 August, they're identical I think?---That is correct, yes. Because I hadn't received the complaint at that stage but I knew it was coming in, Bill Mitchell had told me he was going to fax it through to me, and our conversation concerned equally both Mr T and Mr G, I just copied my notes from Mr G and just pasted them straight into the file on Mr T. You mentioned that he was going to fax through the complaint?---Yes. If you look at page 9, is that the facsimile you received?---That is correct; those two pages, 9 and 10, from memory. It isn't in the form of a complaint, is it? It's a letter from Blackburne and Dixon to a company associated with Mr T. Is that all you received?---That is all I received, yes. Do you know whose handwriting - no, I withdraw that. By the time you received that letter, what did you know about Mr T's complaint?---Nothing at that stage except that he had invested money through Blackburne and Dixon and he hadn't received his principal back. What did you do when you received this facsimile?---By the looks of this I received that on the Monday, which would have been the 16th. When the fax was referred to me, we set up a complaint file. We sent it through at that stage to our records area to be made into a formal complaint. It then comes back to me, and in the meantime I think I was in the process of phoning Kaye Blackburne from Blackburne and Dixon to arrange a meeting with her for the following Friday to discuss both matters. Is it unusual for you to open a complaint file without any sort of formal complaint having been received, such as Mr G's complaint form to open this file? ---Occasionally it does happen. It's not common. I can't specify how many instances something like that may happen but someone may send something through to the minister's office and the minister's office deems that it's more appropriate for the ministry to handle it so they will forward it on to us. We will then create a 2/4/ems 31 S.T. DOWLING XN 19/6/00

file, so it has actually come from the minister's office. That's not uncommon?---It's not common but it has been done. I didn't think anything of it. Going back for a moment to your conversation with Mr Mitchell, you said he used the expression "lean on". Was that - - - THE CHAIRMAN: Which document are we looking at now, Mr Chaney? MR CHANEY: Either page 6 of the T file, which is the - - - THE CHAIRMAN: All right, yes. You say that was a copy, was it, from the T file?---That is correct, Mr Chairman. The original is in the G file at page 31. MR CHANEY: No, I think, Mr Chairman, they are all copies. THE CHAIRMAN: I know these are photostats. MR CHANEY: No, but he has copied it in the sense of transferring a computer entry from one file to the other so they become two originals, as it were, rather than retyping into the - is this correct, Mr Dowling?---That's correct. Rather than retype this material into your record in relation to the T file, you have simply cut and pasted it through the computer?---That's right, because the discussion that took place was - - - THE CHAIRMAN: All I want to know is - I don't know anything about computers, paste or - I can't understand that but, anyway, page 31 is the one he transferred it from?---Yes, that is correct, yes. MR CHANEY: You originally typed it into the G record? ---That's correct, because I had already set up the G complaint on my database so I recorded all that together and I put no different emphasis on Mr G or Mr T after my discussion with Mr Mitchell. THE CHAIRMAN: Let's get back to page 31 on the G file so that we all understand what we're talking about. "Friday, August 13 99, Bill Mitchell phoned and asked what was happening with C complaint." We all know now what we're referring to?---That's correct. He was talking about Mr G and the fact he was lodging a complaint for Mr T. 2/5/ems 32 S.T. DOWLING XN 19/6/00

About Blackburne and Dixon?---That's correct. "I advised that I had received it this week and that I was going to contact T" - who is "T"?---Trader, which is Blackburne and Dixon. Blackburne and Dixon, "early next week to arrange to call at their premises to discuss this. BM advised" - and that is in the same conversation?---Yes, it is. "That as C" - that is the complainant?---That's correct, yes. "Is a constituent, the minister wanted someone to lean on T, even advising that the minister is looking at this complaint." That was said by Mitchell to you?---That is correct. "BM asked - BM then advised that the minister wanted him to also attend this meeting," and that's the meeting we're now discussing. Is that right?---That is correct. Thank you. MR CHANEY: Can we go back? You seem to have stopped mid-sentence there, "BM asked". Were you typing this as you spoke?---No, no, no. I just make notes as I'm discussing with a person and so after I had finished that discussion, I typed it. Are you able to fill in what appears to be missing, what BM asked?---No, sorry. Whatever it was, obviously I changed my mind or didn't think it was relevant and I forgot to take out that "BM asked", and I don't believe it was any relevance. Was it unusual for somebody from the minister's office to ask to attend a meeting on an operational matter that you were conducting?---Yes, it was, but I viewed it that the minister is aware that two consumers had lodged complaints with the ministry and therefore he was interested in the outcome of that and also wanted to see what were the procedures that took place with regards to trying to resolve an issue like this. While it's unusual, I was not concerned about it. Were you uncomfortable about it at all?---Not really. You then contacted Mrs Blackburne to arrange a meeting, I think you have told us?---That's correct, yes. Just looking at your note again in relation to that, you left a message initially at 2.55 pm on 13 August? ---That's correct. 2/6/ems 33 S.T. DOWLING XN 19/6/00

That meeting - you say, "I left a message re a meeting for 10 o'clock next Friday, 20 August 99"?---Yes. Can you remember the terms of that message? Did you tell her what it was about or who would be there?---Yes, I would have advised that I have received two complaints from the consumers, Mr T and Mr G, and I would like to attend their offices to discuss these complaints. Would you have said any more than that?---Unlikely because I just generally give the brief outline of why I phone because if you're leaving a message, you can't leave copious notes because all they generally do is take down who has phoned, so I just leave the message that I have phoned and who I was phoning concerning. You then rang again on 18 August, some 5 days later. That would have been on the Wednesday. You then spoke to Mrs Blackburne?---That's correct, yes. Confirmed the meeting for 10 o'clock Friday?---Yes. Advised details of the complaint?---Mm. Was that both complaints?---Yes, it was both complaints. Do you recall what you told Mrs Blackburne about the complaints and about the proposed meeting?---I would have suggested that we have two complaints from Mr T and Mr G and the fact is - - - THE CHAIRMAN: Excuse me. I don't like the expression "I would have". As far as possible would you tell us what you did do or what you remember doing, but if you don't remember it, say so?---Okay, certainly. Thank you?---Sir, this - - - I know it's difficult?---Yes, I know. I'm just trying to remember my exact words because - - - You may look at your notes, of course, to help?---I can look at the notes, I know. I would have - sorry, I will rephrase that. I telephoned Mrs Blackburne and said that the ministry has received two complaints from Mr T and Mr G and I would like to attend - because I had already left a message for 10 o'clock that Friday, is it still convenient for me to attend the meeting at 10 o'clock on the Friday, and that Bill Mitchell from the minister's office would be attending with me. MR CHANEY: Did you say why Mr Mitchell would be attending?---I don't recall that I did. Did Mrs Blackburne respond at all about that proposition?---Not that I can recall. 2/7/ems 34 S.T. DOWLING XN 19/6/00

Was there anything else discussed in the telephone call? ---Not that I can recall, no. Not about the merits or the situation in relation to the two complaints?---No, because it's pointless trying to discuss something with her with regards to some complaints when she hasn't got the relevant facts before her and it was more appropriate to actually attend their office and be able to go through their development files. What happened next? Just to assist the committee, page 31 finishes your record of events at that point. I think there's a later version of it which is found at page - it starts at 24 and then goes over to 25. DR NEWMAN: This is the G file, is it? MR CHANEY: The G file, yes?---I telephoned Bill Mitchell on Wednesday, 18 August and confirmed the appointment. He advised me that he was unable to attend the meeting and that Harry Skepper would attend on behalf of the minister and I arranged to pick him up at 9.30 in the morning. Just to complete the picture, the file, in the way of these files, doesn't always follow in a strict chronological sequence, but at page 42 you will see the entries in relation to the phone call you have just referred to. It appears to be the second page of what is otherwise found at page 31?---That's correct, yes. Just so that we can understand it, would it have been the case that because you had this meeting you printed off a copy of what you had on your computer to take to the meeting?---That's correct. That seems to be the entries up to the meeting consistently with the process you have outlined earlier in relation to these memos?---That's correct, yes. So can we take it that page 31 and page 42 are in fact two pages of a single document?---Yes. What happened at the meeting?---We arrived at Blackburne and Dixon's office as arranged. When we got there we went into their boardroom and we were discussing - when we got there we spoke to Mrs Kaye Blackburne and Mr Ken O'Brien. We were advised from the outset that the matter with regards to Mr T had been resolved and there was a cheque waiting for Mr T. I asked for a copy of the cheque, which they promptly gave me, and we were sitting down going through the file for Mr G and during the discussion of that particular file I was advised that Mr T had come in and picked up his cheque and had left and as far as I was concerned, that was the end of Mr T's complaint because it had been resolved successfully and I 2/8/ems 35 S.T. DOWLING XN 19/6/00

didn't broach with them any further on that matter. I started looking through the file with regards to Mr G to try and get the details of that investment. In respect of Mr Skepper's presence at the meeting, what if anything was said to Mrs Blackburne?---Just that he was an interested party from the minister's office to see how - to observe; an interested observer. That is all. Was there any discussion about having an observer there from the minister's office?---I believe I said to Mrs Blackburne what I said previously, that Bill Mitchell was going to attend, and she accepted that and there was no further discussion, from my recollection. You discussed the G complaint and went through the file in relation to that?---That's correct. Your note at page 25 deals with what you were told in relation to that particular matter?---Yes. Perhaps you might just take us through that note and supplement it with any recollection you have of anything else that might have transpired or been said at the meeting?---Do you want me to read it out? Yes?---Okay:

9.55 am, Friday, August 20, 1999. As arranged, Harry Skepper and myself visited T's -

being Blackburne and Dixon's - office. Present were Kaye Blackburne and Ken O'Brien. Blackburne and Dixon advised that Vince Rossi is down in Bunbury working and they have been unable to contact him.

Vince Rossi was the borrower in this particular instance: Trader -

being Blackburne and Dixon - also advised that VR -

Vince Rossi - was trying to refinance through the National Bank but they wanted more collateral, so the bank knocked him back. They heard through another accountant that VR is trying to refinance through another finance broker. They only found this out this week. I asked for and was shown the valuation of the property. This was done by C.R. Marr and Associates and values the tavern at 2,200,000 walk in, walk

2/9/ems 36 S.T. DOWLING XN 19/6/00

out. Trader advised that they have a debenture over the property for 510,000 and if VR does not refinance, trader will sell the property. According to trader, VR is supposed to be coming into their office early next week. I asked to be kept informed in this regard. I asked how long would it be before trader would consider selling the property. Trader advised if he only wanted a few weeks, they would hold off until then. I advised I did not have a problem with this. I asked for VR and his accountant's phone number, VR's phone number and a mobile number and Kevin Lloyd's phone number -

he would be his accountant: I asked trader to keep me informed as to the outcome of their meeting with VR.

Are you able to recall anything more that was said during the course of that meeting by you, first of all, to Mrs Blackburne about any of these matters?---We just discussed the situation generally, that's all, and I can't recall anything further that was said. Did Mr Skepper say anything at the meeting?---Not that I recall. He was just sitting there as an interested party. You say that in the conversation on 13 August on the telephone with Mr Mitchell he had suggested that you should - I will just rephrase that. He had suggested the minister wanted someone to lean on the trader. Was there any reference to the minister at this meeting with Mr O'Brien and Mrs Blackburne?---Not that I can recall. Did you in any sense seek to use the minister's name to influence the way that the matter was being conducted? ---Not that I recall. I find it unlikely that I would have. That would be something you would remember, wouldn't it, Mr Dowling? It's not the sort of thing - - -?---Yes, well, let me say that then. No, to the best of my recollection I would not have said that. Have you ever been asked to - sorry, I withdraw that. In any of your other investigations in relation to finance broking matters or indeed other investigations you have been involved in, have you ever had representatives of the minister's office attend?---No, I have not, but I have attended the minister's office. Yes, but in terms of an operational matter, you have never had somebody from the minister's office attend? ---No, that is correct. 2/10/ems 37 S.T. DOWLING XN 19/6/00

So in that sense at least this was an unusual request? ---Yes, it was unusual. But you simply didn't think any more of it?---No, because as far as I was concerned it was two constituents who had a problem with a finance broker, being Blackburne and Dixon, and he was interested in getting the best for his constituents. Did you know anything of any relationship between Mr Shave and these complainants other than that they were constituents?---At the time, no. Since?---When I got back to the office or later, I did hear unofficially that they thought that Mr T was Mr Shave's ex-father-in-law. Do you know where you heard that from?---I can't recall. Did you know that at the time that you had the meeting at Blackburne and Dixon's office on 20 August?---No, I didn't. I'm sure it was after I got back to the office. Did Mr Mitchell at any stage tell you that?---No. Mr Skepper?---No. Who else would have known about the fact you were involved in this investigation at that time, around that time?---Very few people, but I have racked my brain and honestly I can't recall where I heard that, and because it was an unsubstantiated claim I didn't record it and I didn't think anything more of it. Did you take the call from Mr Mitchell as comprising some sort of direction to you as to what you should be doing in relation to this complaint?---The only direction I took from Mr Mitchell was the fact that these are the minister's constituents and could I try a bit harder to try and reconcile their complaints. There is a protocol, is there not, in relation to communications between the office of the minister and the Ministry of Fair Trading?---Yes. Are you aware of those?---Yes. That's a requirement - and perhaps you don't know this, or do you, that it's a requirement under the Public Sector Management Act to have such a protocol in place? ---No, I don't. You don't know that. Are you aware of the terms of the guidelines or the protocol in relation to situations where ministerial staff wish to give direction to officers of the minister?---No, I don't. 2/11/ems 38 S.T. DOWLING XN 19/6/00

You don't know what the regime is?---No. Did you think there was anything at all irregular or improper about the approach made by Mr Mitchell to have somebody attend the meeting?---I thought it was just showing concern for constituents. What subsequently happened in relation to the G complaint?---That one unfortunately got dragged on for quite a number of months. They tried to sell the property in question in January. It was unsuccessful, and then eventually Blackburne and Dixon gave an undertaking to Australian Securities and Investment Commission not to pursue any further investments and they advised all their investors where the principal was not being repaid there is nothing they can do to further assist them. I contacted, from memory, Mr G and advised him that there's nothing further the ministry can do with regards to his complaint. You were treating this right through as a conciliation matter, effectively, not a complaint in respect of some potential offence against the code of conduct or the act?---That is correct, because the complaint said that Mr G had invested a sum of money in a particular investment and the borrower was in default with regards to the repayment of that principal and as such there was no hint that Blackburne and Dixon had breached any of the act or the code of conduct. Going back a step to the events between 13 August 1999 and the completion of your involvement on the G matter, did the intervention - if that's the right word - of the minister's office play any part in the way you conducted your tasks in relation to - - - GUNNING, MR: That name is still suppressed. MR CHANEY: - - - either the T or the G matter?---Not at all. Not at all. You had a subsequent meeting in relation to Mr G on 29 February 2000 at the minister's office?---That is correct, yes What was that meeting about?---Mr G had arranged a meeting with the minister at his office, electoral office, to go over his complaint with regards to the non-refund of his principal and I was just asked to attend the minister's office to answer any questions that the minister was uncertain of. Is that something you have done before?---No, it is not. Did you think that in any way irregular or - - -?---No, I didn't and I don't. 2/12/ems 39 S.T. DOWLING XN 19/6/00

What part did you play in the meeting?---I sat there as an interested observer and I said about two words when Mr G was asking for a copy of his title and mortgage and I advised that I thought he had it, which he looked through his documents and he found a copy of those, and they were the only words I said until I was leaving when the minister said that I could go back to the office and I said to Mr G that I would keep him informed of the outcome. They're the only words I ever spoke. The other people present at that meeting were?---Were Mr G and the minister. Mr Chairman, I tender the Ministry of Fair Trading complaint file 88198/99. THE CHAIRMAN: That's exhibit 123. EXHIBIT 123 Ministry of Fair Trading complaint file

88198/99 MR CHANEY: Similarly I tender the Ministry of Fair Trading complaint file 88450/99, or a photocopy thereof. THE CHAIRMAN: Exhibit 124. EXHIBIT 124 Ministry of Fair Trading complaint file

88450/99 MR CHANEY: Mr Dowling, I just want to ask you a couple of other questions of a more general nature. You have now been an inspector with the Ministry of Fair Trading, in particular an inspector appointed by the Finance Brokers Supervisory Board, for a period of over a year. What view do you have, if any, of the adequacy of the powers given to investigators in relation to finance broking matters?---They are inadequate insomuch that under section 15 of the Finance Brokers Control Act you can require a person to answer your questions, but in the case of obtaining documents you have a problem because if you go through a document and you ask for a copy of it, the broker can say, "Yes, you can have a copy of it." You can say, "Would you please copy it?" They can legally say, "No," and you say, "Well, can I take it away and get a copy?" They can also say, "No." You can make a copy or take an abstract, I think it is, from - that's what the wording in the code is, so in other words you're either going to write it out by hand, you take in a portable photocopier with its own power pack because they can refuse you to use their power, or you take in a laptop and scan the documents. Are those sort of facilities available to you, a laptop and scanner?---No, they are not. Laptops are but not scanners. 2/13/ems 40 S.T. DOWLING XN 19/6/00

What has been your experience in relation to pursuing investigations with brokers over the last 12 months in terms of what you have been able to do?---Two of them have been very, very cooperative, I will say, and they were Global and Blackburne and Dixon. Other people that we have dealt with, Mr Fermanis and Mr Oliver, have been less so, but generally the two main ones that I have been involved in, which is Global and Blackburne and Dixon, they have been very, very cooperative. In the absence of cooperation, would that have hindered your ability to investigate?---Very much so. Are you able to identify any additional powers - you have just identified one, I think, the obligation to make copies. Are there other powers that you think inspectors ought to have?---This is across the board with the ministry's legislation, so it's not only indicative of the finance industry area, it's indicative of most of the powers of the ministry to investigate. Ultimately to answer your question would be that you could be able to take the documents away to photocopy them and return it to the particular broker or the persons you're investigating, because it does put the person that you're investigating to an expense to have to devote time and resources to actually photocopy them with your assistance, so it's tying up their staff and using their equipment and photocopy paper. You have had some involvement in relation to dealing with audits as well in relation to finance brokers matters? ---That is correct. What has that involvement been?---Going back quite a number of years when I was back in the motor vehicle section - that's going back to 95 or 96, I think; I'm not 100 per cent certain of those dates - I was asked to inspect the audits of the finance brokers' annual audits, which I did, and I am currently also in control of inspecting the finance audits at the moment and when I discover there is a qualified audit report, in other words there is a problem with regards to an audit, then I refer the matter to the Finance Brokers Control Board for their decision of what they want done with that matter. Do you actually review each audit letter that comes in or only those that have a qualification to them?---I review every audit that comes in. How long has that been the case?---Twice. As I said, back in about 95, 96, possibly 97, I was doing it for a short period of time when I was in the motor vehicles section, and then again from the beginning of this year. I'm sorry, I might have been a little bit distracted. When you were with the motor vehicles section, which 2/14/ems 41 S.T. DOWLING XN 19/6/00

audits were you looking at?---Finance industry, finance brokers. I was asked to carry out audits of the finance brokers, to do the inspection of their audits. I want to show you a series of audits. Sorry, there are actually four of these and perhaps if I can ask that they all be - three, I think; 29 March 96, 27 September 96 and 21 March 97. Do you have those three?---Yes, I do. Starting with the earliest one, March 96 - - - THE CHAIRMAN: I think we had better set out whose it is. MR CHANEY: Yes. This is a letter from Marsden Partners to the Finance Brokers Supervisory Board in relation to the statutory audit of Global Finance Pty Ltd, and that's the standard form of audit that's received from finance brokers' auditors each year?---That's correct, yes. Was March 96 a period when you were reviewing finance brokers' audit certificates?---I can't recall, I'm sorry, but I can't recall ever receiving any of these documents. Looking at that 29 March 96 letter, the second-last page contains a statement of funds held in the trust account as at 31 December 95. That's a list of balances of accounts within the trust account of Global. Do you see the entry which is - I won't mention the name of the particular client but it's the ninth entry down and it's in brackets?---Yes, I do. Do you see that?---Yes. What significance do you place on that entry?---That that account within the trust account has been overdrawn. Is that a problem from your perspective as a person who reviews audits for the board?---Yes, it is. If I was to see something like that, I would refer the matter to the Finance Brokers Control Board for their decision what they want to do with that. You will see, if you go back to the front page of that bundle, the letter itself of 29 March 96, that there is a qualification in paragraph (d) to the audit but it's a qualification which relates to a different issue. Have you ever had any involvement with that particular issue, this question of differential interest rates so far as Global is concerned?---No, I haven't, no. That's not something you were involved in at the ministry when they were reviewing that qualification?---Not that I can recall, no. 2/15/ems 42 S.T. DOWLING XN 19/6/00

Do you accept though that what's written in paragraph (d) - and you may need to look at it and consider it - does not raise the issue of that overdrawn balance in the trust account?---That's correct, but I think the issue should still be looked at. If you were now - - - THE CHAIRMAN: Excuse me, Mr Chaney. Mr Dowling, at the time you said - I think your evidence is with respect to this audit report we're looking at, 29 March 96, you don't recall ever seeing this?---That's correct, yes. Were you at the time reviewing these audits?---I was at one period but, Mr Chairman, I really can't recall what year that was because there was quite a gap between doing that and the next time, which I started at the beginning of this year. Very well. Next question is: would you have any idea who the officer would be who was reviewing the audits in March 96?---No, I don't know, I'm sorry. Thank you. MR BLIGHT: You have a copy?---Yes, I do. The writing at the bottom wouldn't give you any indication, the initials, "Please place on file and return early"? Would that be the - - -?---It could be Mr Bull, who is no longer with the ministry, but I'm not - - - THE CHAIRMAN: What is the first name on that note? MR BLIGHT: Alice, is it? THE CHAIRMAN: Alice? MR BLIGHT: I think it's to records, is it, to put it on the file and bring it back?---It could be that or it could have been one of the licensing officers in the ministry who was handling finance brokers at the time. This, at that stage I believe, possibly was part of the real estate branch but I'm not certain of that, I'm sorry. So that could have been a licensing officer within that area and it could be Mr Frank Bull has written on there to send it back to him. THE CHAIRMAN: We have heard evidence that Mr Bull was doing this work of reviewing audits at some stage?---I can't really say. I can only surmise that because I was on the sixth floor of the ministry and they were on the fourth floor and we really did not know what they were - 2/16/ems 43 S.T. DOWLING XN 19/6/00

apart from being in the real estate area, that's about as far as - - - MR BLIGHT: That's okay. THE CHAIRMAN: Thank you. MR CHANEY: In any event, Mr Dowling, if you were now to come across this audit certificate, would you look right through at all these balances? Is that the process you undertake? Do you go through the whole document or do you just read the first page?---No, I read the total document to see what it is saying and in an instance like that I would refer to the board for a board decision. They may turn around and say they don't believe further investigation is warranted or further investigation is warranted. Also what can happen is that an auditor may say they haven't complied with the requirements of the act but the act also allows, where there are sufficient safeguards in place and the auditor can substantiate the records, that the board can agree to a deviation to what would normally be the practice. In any event, it would ring alarm bells for you and you would refer it to the board?---That is correct, yes. That would be true even if the covering letter appeared to be a clear audit but that entry of the overdrawn balance was demonstrated?---Yes. I tender the letter Marsden Partners to Finance Brokers Supervisory Board of 29 March 1996. THE CHAIRMAN: Yes, thank you. That will be exhibit 125. EXHIBIT 125 Letter from Marsden Partners to Finance

Brokers Supervisory Board dated 29/3/1996 MR CHANEY: The next document that I handed to you, Mr Dowling, is an interim audit certificate of 27 September 96, again from Marsden Partners in relation to Global, and it contains in effect the same qualification in paragraph (d). Do you agree with that? ---Yes, I'm just trying to work out what they're saying. I don't think it's very clear. THE CHAIRMAN: I take it you don't recall seeing this document?---No, I don't, Mr Chairman. DR NEWMAN: If you had seen it, Mr Dowling, would this not ring alarm bells?---There appears to be quite a number of accounts in the trust account that are overdrawn. Yes, it would ring alarm bells. 2/17/ems 44 S.T. DOWLING XN 19/6/00

MR CHANEY: So even more so than the earlier one which had the one?---Yes. This has something like 15 overdrawn balances?---Yes, because I have recently referred to the board a case of an overdrawn account within a trust account and it turns out that they rectified the matter almost immediately it came to their attention because someone had a periodic payment that was made and they made a payment in error, so, yes, in a situation like that, that was referred to the board and a situation like this would be referred to the board, but very much so this report here. Would you have an additional concern that this being an interim report, not in relation to the normal period of auditing, that the number of overdrawn balances has dramatically increased in the 6 months after the period to which the earlier report related?---Yes, alarm bells would be ringing. I tender the letter Marsden Partners to the Finance Brokers Supervisory Board of 27 September 96. THE CHAIRMAN: That's exhibit 126. EXHIBIT 126 Letter from Marsden Partners to Finance

Brokers Supervisory Board dated 27/9/1996 THE CHAIRMAN: Mr Dowling, who would this go to? There are 14 - I count 14 and Mr Chaney might be right, 5, but there are 14 overdrawn trust account balances. Who would it go to? It goes to the inspector, whoever it was at the time. All I can see is ink notes on it that it was the number, Finance Board 656. Is that a file number, by the way?---Yes, "FB" would be "finance broker". That would be Global Finance Group Pty Ltd's licence number and that would be a corresponding file number with that on the top right-hand corner as well. I see. Who would it go to?---I would suggest that the initial report would go to the licensing officer. The licensing officer should then refer the matter to the person who is examining - - - No, no, no. If nothing was done about it, who does it go to? Does it ever get to the Finance Brokers Board, this document?---If there is a qualified audit report or something on there of concern, it would be referred to the board. If it's an unqualified report, then it would not be referred to the board. So this would definitely be referred to the board, a qualified report?---I would refer it to the board if it came to me, and should be referred to the board. Thank you. 2/18/ems 45 S.T. DOWLING XN 19/6/00

MR CHANEY: The third document, Mr Dowling - Mr Chairman, might I concede 14 and not 15 too? THE CHAIRMAN: Right for once. MR CHANEY: It's the annual audit letter dated 21 March 97, again from Marsden Partners to the Finance Brokers Supervisory Board and it shows I think four overdrawn balances. Similarly I take it that would - first of all, is this a document you have ever seen before?---Not that I can recall, no. That wasn't a period that you were involved in reviewing audits?---As I said, it's a number of years ago I started looking and I can't recall seeing this. It may have been shortly after this but I'm not 100 per cent certain, but I cannot recall seeing this document. THE CHAIRMAN: Who was doing the audit inspections at the time? Do you know? In 97, this is?---97. If it was part of our real estate branch, maybe Mr Bull, but that's pure speculation. I don't know for certain, I'm sorry. Thank you. MR CHANEY: Similarly it would, it follows, have rung alarm bells as well?---Yes, there are a number of overdrawn accounts in the trust account. THE CHAIRMAN: And the same qualification is on there about the interest. We must point this out here: with respect to page 1 of this document, the final thing before signed by the auditor:

However, request to the Finance Brokers Supervisory Board for clarification and direction have not been forthcoming to date and accordingly the matter remains unresolved.

Have you noted that sort of thing before on these reports?---No, I have never seen anything like that. It being 1 year later, the first type of report. Thank you. That will be exhibit 127. EXHIBIT 127 Letter from Marsden Partners to Finance

Brokers Supervisory Board dated 21/3/1997 MR CHANEY: Nothing further, thank you, Mr Chairman. THE CHAIRMAN: Yes, Mr McKerracher? MR McKERRACHER: May it please you, Mr Chairman. 2/19/ems 46 S.T. DOWLING XN 19/6/00

Mr Dowling, just a couple of questions about your phone call with Mr Mitchell on the 13th. May we take it from what you have said that you took the thrust of his communication to be, "Look, now the minister has had two complaints about Blackburne and Dixon in a short period of time from constituents who have come to visit him. Can you look at this matter closely"?---I don't know if I would say that strongly. I would suggest that it was a concern from the minister that he had had two constituents who were having problems with the same broker at the same time and he was concerned as obviously the member for that area. You would appreciate that he would have a dual role in relation to his own constituents to be answerable to them on a face-to-face basis over a desk?---Yes. Over and above any ministerial role?---That is correct. Would it also be fair to say you have known Bill Mitchell for a reasonable period of time?---That is correct. You know that he has been in the public service for almost 25 years?---I didn't know that length of time but I have worked with him at the ministry. You would regard him as a straight shooter, would you not?---That is correct. You didn't see anything untoward in his communication? ---No, I did not. Thank you. Can I just clarify something on a technical level? It doesn't really affect the substance of it, but you have explained, I think, that you copied a portion of the G file across to the T file. Is that so? ---That is correct, yes. Effectively did you do that by running a cursor up the screen and selecting a portion of the text and - - - THE CHAIRMAN: Mr McKerracher - - - MR BLIGHT: Well done. You have saved me the embarrassment of potentially doing the same thing. DR NEWMAN: If it's any help, I understand what you're saying. MR McKERRACHER: I have no doubt at all, Dr Newman. THE CHAIRMAN: The names are still restricted. MR McKERRACHER: Thank you, Mr Chairman. 2/20/ems 47 S.T. DOWLING XXN 19/6/00

THE CHAIRMAN: No, I wasn't trying to buy into that technical business. MR McKERRACHER: I will just touch on the technical side just to try to shortcut that, and thankyou, Mr Chairman. Is it right to say that you would simply, with your mouse, run the cursor up the screen of the G file and select a portion of the material from the G file on your screen and copy that and then paste it with your mouse into the T file?---That is correct. I did that after the file had been created for Mr T. I think you did it a few days later, in fact, did you not?---That's correct. I did it on the 18th when I had the file because when I received the complaint file, I would put the consumer's name and their file number next to it, just to make sure there's not a similar complaint from a person with the same name. Thank you. As a result of doing that, is it correct to say that some of the material that you had copied from the G file into the T file was not directly relevant to the T file?---The general gist of the conversation was dealing with both persons. There is a possibility but definitely what was said pertained to both. Yes. If we go back to the telephone message you got earlier in that day, that of course only indicated that it was in relation to the G file, did it not?---It appears to be that way, yes. But then you eventually had the discussion with Mr Mitchell wherein he was clearly, according to your memorandum which appears on both files, making inquiries with you in relation to the G complaint and in the course of that he raised the T matter as well?---That's correct, yes. In relation to the G complaint, he asked you what was happening with the complaint. Correct?---That would be, yes. At that stage you actually didn't have a T complaint, did you?---No, we hadn't, but we had discussed the fact that he had a complaint and was in the process of faxing it to me. That took place in that telephone discussion at that point, didn't it?---That's correct, yes. He faxed to you a letter from Blackburne and Dixon dated 21 July 1999 on which there was some handwritten notes. Is that right?---To the best of my recollection, yes. 2/21/ems 48 S.T. DOWLING XXN 19/6/00

On the left-hand corner it's recorded, "S. Dowling, as discussed," with Bill Mitchell's signature. Is that so? ---That's correct, yes. At some point was there ever actually a formal complaint incepted as such in the same way that there had been on the G file?---No, there was no formal complaint at that stage, only the fact that Bill Mitchell had told me that he had received an inquiry from one of the minister's constituents and he was going to fax that through to me and could I look at it at the same time as I looked at Mr G's file. Obviously in the ordinary course of events if the matter in relation to the T issue hadn't resolved, you would expect that a complaint would be filed in the same fashion as many other matters?---That is correct. I put no different importance on Mr T's as Mr G's. I suppose it would be fair to say, would it not though, that as history evolved the G matter became substantially more complex in terms of its resolution?---That is correct, yes. It wasn't as though the minister just made this one-off inquiry in relation to G. He actually stayed relatively closely involved with that complaint over a period of 12 months, did he not?---That is correct. He had meetings with Mr G and he advised him in relation to steps which should be taken and you were, in broad terms, apprised of some of those matters. Would that be correct?---I'm only aware of one meeting, which I did attend. At that meeting was the minister in attendance and also Mr G and also Bill Mitchell?---No, it was only the minister and Mr G and myself. All right. Mr Dowling, Mr Skepper, who picked up the ball, so to speak, in relation to the meeting on the 20th, will say that he, who hadn't made the call to you, understood this to be a meeting about G and that the T matter was raised out of the blue in the course of that meeting at the commencement of the meeting?---I can't comment on that because I have no knowledge. He will say, for example, that prior to the meeting, although you and he discussed a number of matters, the matter of T was never discussed at all?---I can't recall whether it was discussed or not. So you have no basis to disagree with that account? ---That is correct, yes. 2/22/ems 49 S.T. DOWLING XXN 19/6/00

Am I right in understanding that in relation to this matter you didn't actually record any handwritten notes, or if you did, you haven't kept them?---No, I didn't record any handwritten notes because as far as I was concerned, we got to Blackburne and Dixons and Mrs Blackburne or Ken O'Brien told me that they had a cheque waiting for Mr T and as far as I was concerned, once I asked for a copy of that, that was the end of the matter. I had no further thought about it. No, but you knew from your history of the matter that that cheque had fallen due on several previous occasions?---Yes, basically on the information from Blackburne and Dixon on whatever date it was. That's the only history I was aware of and all I was interested in is trying to resolve the matter so that Mr T could get his principal back. THE CHAIRMAN: I'm sorry, I'm lost. What is the question? You were asked that that cheque had fallen due on several previous occasions. What do you understand that to mean?---That the investment itself had matured previously and probably Blackburne and Dixon had given them an indication that that was going to be paid out. That's my understanding of the question, and it just never eventuated, whereas when I got there they said they had the cheque waiting for Mr T. I asked for a copy of the cheque and also any covering material, which they gave me, and as far as I was concerned that was the end of the matter. That was a successful conciliation. Had the cheque been due - how long before?---I can't recall, I'm sorry. It's on the file. There's a copy of the cheque on file. I think it was only written out that day or the day before. How long before that had it been due, if that's how I understood your answer to the question?---Yes. I think it specifies a date in one of the correspondence but I can't recall, I'm sorry. MR McKERRACHER: You might just like to have a look at exhibit 124, which is the T file, Mr Dowling. Do you have that with you?---No, I don't, I'm sorry. Sorry, I do. My apologies. If you look at either of pages 7 or 9 to the writing on the right-hand side, the evidence will be that that is Mr Shave's writing and he was informed by Mr T who made an appointment to come and see him in the electoral office - that Mr Shave had been informed that the principal had been due in November and agreed to a February payout, and then it had been deferred again to 10 August in the 21 July letter. Do you recall being told about those matters in the discussion or were you simply embarking upon a fresh sheet, so to speak, just to 2/23/ems 50 S.T. DOWLING XXN 19/6/00

gather some information at the course of the meeting? ---I was just relying on the two pages that I had received, being the Blackburne and Dixon letters of 21 July 1999 and a copy of the interest payment, and the fact is that the principal was outstanding and I didn't know over what period to myself. All I knew is that the principal should have been repaid and that's all I was interested in, to see if I could endeavour to get the principal back for Mr T. Thank you. May I take it that that would be something you would try to do on behalf of anyone?---That is perfectly correct, yes. I put no emphasis on Mr T over any other consumer I handled. You certainly hadn't been informed by anybody about any relationship between the minister and Mr T, or former relationship between the minister and Mr T at the time you received the request or the communication from Mr Mitchell, had you?---No, I hadn't, and it wouldn't have made any difference because to me it was just a consumer. Yes. You mentioned that Mr Skepper was really just an observer at the meeting. Do you recall him saying anything at all?---Not that I can recall. Presumably you introduced him, obviously, to those in attendance and explained his role or his office, did you?---That's correct, yes. From memory, I introduced him and just said he was along as an interested observer and I left it at that. Thank you. Of course, Mr Dowling, you never raised any complaint of any description in relation to the communication that Bill Mitchell had made to you, did you?---No, I didn't. Presumably if you thought there was any impropriety in it or he was trying to place you in an invidious position, you would have done so?---Yes, that's correct. Thank you. That completes the cross-examination, may it please, Mr Chairman. THE CHAIRMAN: Thank you, Mr McKerracher. Mr Beech? MR BEECH: I have no questions, thank you, Mr Chairman. THE CHAIRMAN: Thank you. Mr Hooker? MR HOOKER: I don't cross-examine, sir. THE CHAIRMAN: Thank you very much. 2/24/ems 51 S.T. DOWLING XXN 19/6/00

Thank you very much indeed, Mr Dowling. You're excused? ---Thank you very much.

(THE WITNESS WITHDREW) THE CHAIRMAN: I think we will excuse ourselves. 2.15.

____________________ 2/25/ems 52 S.T. DOWLING XXN 19/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. I call Kaye Blackburne. KAYE CHRISTINE BLACKBURNE sworn: MR CHANEY: Your full name is Kaye - do you have a middle name?---Kaye Christine Blackburne. Christine Blackburne. THE CHAIRMAN: Just before you proceed, Mr Chaney, is Mrs Blackburne giving evidence generally today? MR CHANEY: No, Mr Chairman. Thank you for reminding me. I had intended to announce: Mrs Blackburne is here under a summons, although she has, I should say, been entirely cooperative in liaising with the committee in preparation for today, but the evidence which I propose to adduce from her today is confined simply to the issues surrounding the meeting of which you heard evidence this morning in relation to the T and G matters. It may be, as I have informed Mrs Blackburne, that we will require her back, or at least invite her back at some later time to give evidence on wider matters, but for today's purposes it is proposed that her evidence is confined only to that issue. THE CHAIRMAN: Yes. Mrs Blackburne, as far as the committee is concerned, that summons will run after today?---Okay. Thank you. MR CHANEY: Mrs Blackburne, whereabouts do you live? ---24A Ventnor Avenue, Mount Pleasant. DR NEWMAN: Mrs Blackburne, could you speak up a little? I can barely hear you?---Okay. MR CHANEY: You were previously a licensed finance broker?---That's correct. I think your tri-annual certificate was not renewed last year?---That's right. So you're not currently conducting business as a finance broker?---No. Were you present this morning during Mr Dowling's evidence concerning some investments in respect of which he had a meeting with you on 20 August last year?---Yes, I was. 3/1/ems 53 K.C. BLACKBURNE XN 19/6/00

So you're familiar with that area of inquiry?---Yes, I am. I want to ask you about your recollection of how you first became aware of Mr Dowling's desire to investigate those matters and the arrangements put in place for the meeting. Do you remember how you were first contacted? ---Mr Dowling phoned me and said that they had had a complaint and could he make arrangements for a meeting at our office. Do you remember when that was relative to the meeting? ---A week or so before the meeting. Did you actually speak to Mr Dowling?---Yes, I did. You told us he wanted to arrange a meeting. Did he discuss with you the nature of the complaints at all? ---No, he just said of the two people, Mr T and Mr G, and the specific files that he wanted to go over. That was the first you had heard about a meeting in relation to either of those matters?---That's correct. There were no previous arrangements in relation to a meeting about one or the other; it all came together? ---That's right. Did Mr Dowling tell you who was going to be present at the meeting?---No, I don't recall that. Have you had other meetings - perhaps I will ask that in different way. Prior to the middle of August 1999, had you had other meetings with Mr Dowling in relation to finance-broking matters?---Yes, I had. So you knew him at that stage?---Yes, I did. Over what period? Can you say how many meetings you had with him?---I really couldn't recall off the top of my head. Are we talking two or three or 10?---10, 15. So he was a frequent visitor to your premises?---Yes, he was. Going back to what I asked you, he didn't tell you who else would be at the meeting?---I don't recall him saying anyone was coming. In the previous meetings that you had had with him, had he come alone or with somebody else?---Usually Jack Willers. 3/2/ces 54 K.C. BLACKBURNE XN 19/6/00

What was the position at the time that you spoke to Mr Dowling over the phone in relation to the investment by Mr T?---The borrower was presently trying to get refinancing and this was being delayed and that was the problem. The interest had always been paid up on time but the mortgage had expired. And in respect to Mr G?---Mr G was currently being paid his interest payments and the mortgage had expired and it had gone on for some time. Are you able to say whether in that conversation when the meeting was organised Mr Dowling mentioned the minister the minister's office to you?---I don't recall, no. Do you agree that there was a meeting on 20 August? ---Yes, I do. Who was present for that meeting?---There was myself, Ken O'Brien, Stuart Dowling and Mr Skipper. Mr Skepper?---Skepper, sorry. Had you met Mr Skepper before?---No, I hadn't. Who introduced you to Mr Skepper?---Mr Dowling came in. He introduced him. Do you remember what he said?---He said, "He's from Doug Shave's office just here as an observer." Had you had any observer present at any of the previous meetings that you had had - other than Mr Willers, that is, an observer from the minister's office at any of the other meetings you had had?---No. Or any other ministry personnel?---No. THE CHAIRMAN: Mr Willers wasn't at this meeting, was he?---No, not this particular one. MR CHANEY: Did you think it strange that somebody from the minister's office was present at the meeting?---When he came in, they always were in twos and I didn't sort of question it and accepted it. Did you see it as some sort of attempt to bring some weight to the meeting with a view to influencing the way you were handling things?---No, I didn't feel threatened at all. Mr Skepper was introduced to you on those terms?---That's right. 3/3/ces 55 K.C. BLACKBURNE XN 19/6/00

What then happened at the meeting?---Mr Dowling did all the talking and asked on specific files the problems and that was it. Can you remember the order in which they were dealt with?---No, I can't, I'm sorry. With respect to Mr T, can you recall any of the conversation which took place in relation to that investment?---When they came in, they said that they had to look at Mr T getting his interest payment back and I said then that the mortgage had been discharged 2 days prior and that Mr T was coming in that morning to collect his cheque and we gave Mr Dowling a copy of that cheque. So had that arrangement for Mr T to come and collect his cheque been made in advance of the meeting?---Yes. Was it influenced in any way by the fact that this meeting was about to take place with the minister?---No, because it had settled 2 days prior and Mr T wanted to come in personally and pick up the cheque instead of having it electronically banked. So was there any discussion about Mr T's investment beyond the fact - presumably that was told to Mr Dowling, was it, that the matter had settled?---Yes. Was there any other discussion about that?---No. Did you understand Mr T to have any particular relationship with Minister Shave?---No. Did you know he was a constituent of Mr Shave's?---No. I think you said that investigation had settled 2 days earlier. Was this a pooled mortgage - - -?---Yes, it was. - - - that Mr T was involved in?---Yes. What was the position in relation to the other investors in that mortgage?---At that stage most of them were happy to sit until they refinanced because they were getting their interest payments. As at settlement of 18 September - - -?---August. Sorry, August, thank you. Was Mr T the only one who was paid out or were others paid out?---No, the others were paid out. Have a look at this bundle of documents, please. Just have a look at this bundle of documents. The top document in that bundle is a letter to Mr T or to a 3/4/ces 56 K.C. BLACKBURNE XN 19/6/00

company with which he's associated with an attached statement. Is that right?---That's right. That was a document removed from your file?---That's correct. And there's a copy of the cheque as well?---Mm'hm. Mr Chairman, they are all documents which Mr Dowling said he was given copies of and they form part of exhibit 124. THE CHAIRMAN: These documents are all part of 124, are they? MR CHANEY: No, the initial letter of 20 August 1999 from Blackburne and Dixon to Mr T with the attachments which are the statement and a copy of the cheque. THE CHAIRMAN: Yes. MR CHANEY: The next document is a letter also dated 20 August 1999 to - - - THE CHAIRMAN: This is to other investors, is it? MR CHANEY: To another investor, yes. That's the same mortgage - another investor being paid out?---That's right. And so on in that bundle. Is that the case?---Yes, that's correct. THE CHAIRMAN: That disposed of the mortgage for all those that wanted their money back?---That's correct, yes. Thank you. MR CHANEY: I tender the bundle of correspondence from Blackburne and Dixon all dated 20 August 1999 to various investors in Baltimore Parade, Merriwa investment. THE CHAIRMAN: 129. DR NEWMAN: Mrs Blackburne, did all the investors of this particular mortgage ultimately get their money back?---Yes, they did, but then lot 6 was a new - they wanted a new mortgage on that and some of the investors from that agreed to go into the lot 6 which was a new file. It then became a new file. That was a separate investment?---That's right. Yes, thank you. 3/5/ces 57 K.C. BLACKBURNE XN 19/6/00

MR CHANEY: I think, Mr Chairman, that exhibit number might be 128. THE CHAIRMAN: Yes, you are right, thank you. I had even written down "128". EXHIBIT 129 Bundle of correspondence from Blackburne

and Dixon dated 20/8/99 MR BLIGHT: You are one step ahead of yourself. MR CHANEY: Now, Ms Blackburne, in relation to the other matter, Mr G's investment, do you recall what took place at the meeting, who said what about that particular issue?---The mortgage had expired and the borrower, Apollo Vale, were having difficulty refinancing. This had gone on for a few months and so then they decided that they were going to auction it and the borrower had organised an auction to be done in January some time. Mr Dowling - his record of the meeting which is found at page 25 of exhibit 123 - perhaps the witness might have that, please. Just, if you would, have a look at the entry in relation to 9.55 am Friday, August 20. Do you see that? It's the third paragraph down on page 25 at the top?---Yes. Now, Mr Dowling read that out in his evidence. You may have heard it already, but just have a look it again. Just read it to yourself?---Yes. How does that correlate with your recollection of what was discussed at the meeting?---Yes, that's virtually correct. Are you able to identify anything else that was said at the meeting?---No, the other thing was that we gave the phone number of Vince Rossi to Mr Dowling so that he could contact him as well. I think that's in fact recorded there at the end, isn't it, "I asked for VR and his accountant's phone numbers"? ---Yes, that's right. You recall handing over those phone numbers for him to make further inquiries?---That's right. How long did the meeting last?---20 minutes, half an hour. At that time was anyone looking at the files in relation to either of these - - -?---Well, we had the files there and Stuart Dowling was going through them and any photocopies that he wanted we were photocopying for him. 3/6/ces 58 K.C. BLACKBURNE XN 19/6/00

What did Mr Skepper do during the meeting?---Nothing. Did he say anything that you recall?---No. Was there any suggestion that the minister was taking particular interest in these matters made to you by anybody?---No, he just sat there and observed actually. Did you interpret his mere presence as being some sort of indication that the minister was particularly interested in these two matters?---No. Did the way that you conducted the files - in particular the T one had finished, but in respect of Mr G, was there anything which affected the way you handled recovery action on that file as a result of there having been a person from the minister's office present at that meeting?---No. THE CHAIRMAN: You said you were used to two people there. I know he was a different person, but did you regard him as any different to Mr Willers who had been there before?---No, not really; no. MR CHANEY: And nothing was said to make you feel that there was a difference from the ordinary run-of-the-mill meeting that you had had with Mr Dowling in the past? ---No. I have no further questions, Mr Chairman. THE CHAIRMAN: Thank you. Have you got any questions before we go? MR BLIGHT: No. THE CHAIRMAN: Yes, Mr McKerracher? MR McKERRACHER: Thank you, Mr Chairman. Ms Blackburne, just to recap in short, no-one ever mentioned anything to you about any involvement of the minister whatsoever prior to the meeting. Is that right?---No, not that I can recall. It was indeed 2 days prior to the meeting that Mr T and all the other investors who wanted their money back got their money back at least by cheques being drawn as a result of the settlement. Is that right?---That's right, yes. And that was following the ordinary course of events which - - -?---That was going to happen anyway. Yes?---Regardless, yes. 3/7/ces 59 K.C. BLACKBURNE XN 19/6/00 XXN

So it would be impossible for Mr Skepper to have influenced anything at the meeting because it had already happened?---That's right, yes. The payouts for those people had already been organised. The cheques had been drawn, the statements prepared and the correspondence was in situ?---That's right, yes. Thank you, sir. THE CHAIRMAN: Thank you. MR HOOKER: I have no questions. MR CHANEY: Not for me, sir. THE CHAIRMAN: Thank you very much indeed, Mrs Blackburne, you are excused. Might I say for the moment perhaps?---Okay.

(THE WITNESS WITHDREW) MR CHANEY: Mr Chairman, I call Charles William Mitchell. CHARLES WILLIAM MITCHELL sworn: THE CHAIRMAN: Yes? MR CHANEY: Your full name is Charles William Mitchell? ---That's correct. And you live at 129 Sixth Avenue, Inglewood?---That's correct. You're a policy adviser that's attached to the Ministry of Fair Trading?---To the minister for Fair Trading. The minister for Fair Trading, I'm sorry, yes. How long have you held that position?---I have been there for 3 years. What is your particular role as the policy adviser?---I provide support to the minister in relation to policy advice, I deal with administrative matters particularly in relation to supporting him concerning parliamentary matters and dealing with inquiries that come to his ministerial office. Has that been the role you have played for the whole 3 years that you have been in his office?---It has been. Prior to that, what is your background?---I was in the Ministry of Fair Trading as a policy adviser and that was in the retail branch of the ministry and prior to that I 3/8/ces 60 K.C. BLACKBURNE XXN 19/6/00 C.W. MITCHELL XN

had been with the Tourism Commission for 17 years - sorry, it was probably 15 and a half with the Tourism Commission and then sort of 18 months with the Medical Department and Health Department before that. Then how long within the ministry?---Within the ministry 3 years. In the course of 1999 to what extent were you aware of the problems which we now hear about daily in relation to the finance-broking industry?---Well, I was certainly aware that there were problems there because, of course, Global Finance and Grubb Finance had had supervisors appointed and there were certainly, I think, a thousand people that had investments with those two particular companies. THE CHAIRMAN: This was when you went there, Mr Mitchell?---This is 1999. How long had you been there before this?---I started in May 1997. I see, thank you. MR CHANEY: What about Blackburne and Dixon?---Yes, there were some concerns raised about Blackburne and Dixon. There had been a couple of notes that had come across the minister's desk in relation to Blackburne and Dixon and I suspect I probably had a couple of phone calls from people as well concerned about that. Yes, and that had been looming throughout 1999?---Well, yes, it really started in 1999 with the provisional liquidator. In respect of?---Global and - - - Global and Grubb?---I'm talking finance brokers in general. Yes?---In 1998 there were a couple of matters raised in parliament but it was in 1999 once the provisional liquidators were appointed. You mentioned some briefing notes that had come across the desk of the minister. Do they come through you? ---Yes. I will show you this document. That's a briefing note dated 29 July 1999?---Yes. Was that a document you recall seeing round about that time?---No, I don't recall it. I have seen it in the last week or so but I don't recall it before that. 3/9/ces 61 C.W. MITCHELL XN 19/6/00

It recites in its final page some current issues, one being under that heading on the final page on 27 July:

The ministry was informed by ASIC it seized a number of documents held by Blackburne and Dixon. Examination of these revealed some concerns in relation to information which was given or not given to investors.

It talks about action by ASIC there in the second paragraph, but were you aware at that time of those events occurring?---In general terms, yes. I can't specifically remember this document but I was obviously aware of the special audit and discussions that were going on with that. Yes?---With some of the discussions anyway. Yes, so you're aware that a special audit had been decided upon by the board, the Finance Brokers Supervisory Board?---I believe so, yes. And you're aware that that had been put on hold for a period because of the ASIC's involvement with a particular broker?---Yes. Negotiations were under way then to try to obtain some enforceable undertakings from Blackburne and Dixon by the ASIC?---Yes, that's what's in the minute. Yes, but I'm really interested - perhaps I will go back a step. You say you have seen this document recently? ---Yes. Was that in a review of some files?---Yes. In preparing for coming here?---In preparing for this, yes. Were they your own files?---No. What files were you looking at?---Ministry files. Can we assume that this document would have passed across your desk in or about late July 1999, as the date suggests?---Probably, yes. And would have been passed on then to the minister to inform him of the current situation?---Yes. Blackburne and Dixon had been the subject of some publicity earlier in the year in relation to some - - -? ---Sorry, just in terms of the dates on this, this says 29 July. So if it was written by an officer at Fair Trading, it may well take a day or two or three before it 3/10/ces 62 C.W. MITCHELL XN 19/6/00

will come through to the minister's office. So while I accept that it was dated the end of July and you talked about the end of July, it could have been very early August. Yes, all right. So something inside a week you would expect a document like this to find its way across the table?---I would expect so, yes. Were you aware as well of some publicity in early 1999 concerning problem loans with Blackburne and Dixon that had appeared in the newspaper?---Not specifically, no. Now, you were present, I think, this morning through Mr Dowling's evidence and Mrs Blackburne's evidence this afternoon?---That's correct. Could the witness have exhibits 124 and 123? THE CHAIRMAN: Excuse me, Mr Mitchell, before we get on to these and while I think of it, when did you personally become aware of the fact - before Global and others were put into liquidation, when did you become aware that there was a - or did you become aware there was a problem out there? You were there from 97 onwards?---Yes, probably the middle of 1998 there were two complaints and the two people concerned were quite active in raising those matters so I was aware of some concerns about Global but beyond those two complaints I wasn't aware of anything. What investigations were brought to your attention about those complaints?---I recall one of the people sent a fax to me on 7 September or to the ministry on 7 September wanting a meeting with the minister. Did that take place?---I met with the person, which I think is probably something Mr Chaney wants to talk about. That's Mrs Searle. That's a name we're able to use. I'm sorry, Mr Chairman. THE CHAIRMAN: Yes, very well. MR CHANEY: Can we talk first about the - sorry, I will go back a step now that you have been given those documents. You have got exhibits 123 and 124?---Yes. And they're copies of files that you have been able to have a look at in preparation for - - -?---I haven't seen the G file before. I have only seen the file note. I think there are seven pages of file notes. I see; you have seen the file notes off those files?---I have seen four pages from - - - 3/11/ces 63 C.W. MITCHELL XN 19/6/00

MR BLIGHT: Mr G. MR CHANEY: Mr G, yes?---Sorry. Can you avoid using that name?---Mr T I was given - when I first saw Pat Walker, he provided me with four pages, the front cover sheet, the one page of file notes and two pages of letters from Mr T, and in relation to Mr G I had only ever received the file note. Can I ask you about Mr G first?---Yes. Tell the committee how your involvement in relation to that particular person arose in the first place?---I had a meeting with the minister on 30 July. It was with the minister and Mr G and myself and Mr G had some concerns about his investments with Blackburne and Dixon and the minister referred his complaint or his concerns to me to address. What does that mean, to address in what way?---Well, he gives me the discretion to deal with that, if you like, in the best way possible in terms of trying to resolve his complaint. Because the particular investment related to a tavern and obviously the minister has some experience with that particular industry, he gave me two names of people that I should contact to see if I could find out some information, which I did for over a couple of days, and then I asked Mr G to provide or complete a complaint form which I sent out to him. The complaint form was returned and then I took it down to the ministry for them to deal with. I think that was about 4 or 5 August. If we look at exhibit 123, you will see the pages are numbered on the top right-hand corner, page 45 and following. That's the complaint form you're referring to?---I would assume so, yes. So you asked Mr G to complete that document for you? ---Correct. He did and you took it to the ministry?---That's right. At that stage, was the, in effect, the extent of the help that you thought you would be in a position to give? ---No, we had a couple of conversations and I helped him draft a letter to Blackburne and Dixon just asking for his money back effectively. When was that; before or after the complaint was handed on to the ministry?---I suspect it was after. Because I had been dealing with him - I guess I'm only surmising this, but I would assume because I was dealing with him, there may well have been some discussion about writing a letter, so I helped him draft the letter. 3/12/ces 64 C.W. MITCHELL XN 19/6/00

What was the next thing that occurred in relation to Mr G's complaint so far as you were concerned?---I think he phoned me on 12 August and wanted to know what was going on with his complaint. What did you tell him?---Judging by my file note the following day, I assume I said I would get back to him. What did you do the following day?---I phoned Greg Harvey and asked him what was happening with regard to Mr G's complaint. You made a file note in relation to that?---Yes. Have a look at this copy, please. That's a file that you made in relation to what?---The first word up there is obviously G and I can see there that it says, "G, Harvey, audit, progress with complaint," so I assume that I phoned Greg Harvey and checked up on that. I do have another file note which I kept, an electronic version, which is perhaps a bit more expansive than that. What does that tell us?---It says that I chased Greg Harvey and there was some discussion about a meeting on 20 August at 10 am. Where is that? That's on a file you have, is it?---It's that one page. The witness might see if they can locate that. THE CHAIRMAN: While they are doing that, Mr Mitchell, at any stage while all this was going on, was the Finance Brokers Supervisory Board advised of any of these problems? There was obviously a problem?---Yes, they were because it was in the media and there were regular letters coming through so they would have been fully aware. No, no, no, I mean officially from the ministry to the Finance Brokers Supervisory Board?---From the minister or from the ministry? Ministry?---From the ministry. Or anybody; I don't care who?---Yes. There were so many letters and those sorts of things going round I can't see how they could possibly have not known. Can you produce a letter which did go to them listing a complaint or complaints?---Any of the letters that came through to the minister's office complaining about these matters would have been referred down to the ministry - not would have been, were referred down to the Ministry of Fair Trading for investigation, then that would have gone to the finance-broking section. 3/13/ces 65 C.W. MITCHELL XN 19/6/00

Yes, we have heard a lot about that, but from that section to the actual Finance Brokers Supervisory Board itself or registrar or somebody over there?---I can't recall any particular documents. Thank you?---But once again I would assume it would have been just routine that there would have been some discussion because they would have had to report on the complaints that they had received. DR NEWMAN: Did Mr G himself, to your knowledge, put in a complaint directly to the ministry or to the Finance Brokers Supervisory Board?---Well, the complaint form that was provided to me would have effectively done that because that went down to the ministry. So you actually had that sent on to the ministry so that they were aware of it?---I actually took it down to the ministry the following day. Right, and you gave it to Stuart Dowling, I think you said?---No, my notes indicate to Greg Harvey. And it was then passed from Greg Harvey, to the best of your knowledge, to Stuart Dowling who dealt with the matter?---That's correct. Did he, to your knowledge, report that to the board?---I would expect there would have been some update on the progress because it was an official complaint. Thank you. THE CHAIRMAN: You would expect, but was there any mechanism for it to go to the board or the registrar of the board when you got a complaint like that?---I don't know what the mechanism is but I would take it as a given that that would have happened because it went down to the finance-broking branch and they would have created a complaint file and they would have investigated it. So I don't know what the mechanisms were reporting between the Ministry of Fair Trading as such and the board because, of course, the registrar is the manager of the finance branch as well as the registrar. Yes, we have heard all that but I wouldn't take it as read?---Yes. Yes, Mr Chaney? MR CHANEY: Thank you. We have located the electronically recorded note. Can I just ask you how this recording system works. You have got a handwritten note. That's contained on a file?---On a binder pad. 3/14/ces 66 C.W. MITCHELL XN 19/6/00

Which is just a miscellany of activities you do and you just note it?---Yes. As you go along?---That's correct. The other document, the electronic record, that relates to a particular matter, does it?---It does, yes. And is a running sheet of activities in relation to that matter?---That's correct, yes. So is the sequence of events that you will first note something in handwriting and then maybe carry out an activity and record it some time later, or what's the timing?---I don't often do that. It depends upon the situation; for example, I had had a few discussions with Mr G so I suspected that I may need to keep an idea about what I was doing in relation to his file, if you like. But in terms of making the entry on the computer, is it done at the end of the day or as you go along?---A combination of both. It might help you if you have this in front of you. We will arrange some copies in due course. Just looking at the handwritten note first, the first is an entry in relation to Mr G?---Yes. It says "Harvey". That's a reference to Greg Harvey? ---Presumably so. "Audit" - what's that a reference to?---I don't know. It may in fact have related to the audit of Blackburne and Dixon. A special audit?---Could be, yes. "Progress with complaint" - what is all that recording? ---Well, I suspect that in relation to - in terms of the audit I don't know what that means. I could guess but I don't know. I would assume "Progress with complaint" - I assume that means I'm trying to find out what Mr G's circumstances are or how far the complaint has progressed. There is then a line and then - does it say "minister"? ---It does. Reference to Mr T?---Correct. What is that entry recording?---I would assume that after my conversation with regard to Mr G the minister phoned me about Mr T. 3/15/ces 67 C.W. MITCHELL XN 19/6/00

What did you do about that phone call?---Well, the minister faxed the details to me and I assumed that I phoned Fair Trading in relation to that matter. You have no independent recollection of making that phone call?---No. If you look at the file, sticking with 123, at page 24 - sorry, before we do that turn it up and I will ask you some questions in a moment about it. You say that you got a call from the minister about Mr T? ---Correct. What did the minister tell you?---That Mr T lived in Myaree. He gave me his phone number, a note about the value of properties and a message which said, "The local member getting concerned and the elderly gentleman is becoming distressed." Did he tell you anything else about Mr T?---I don't think so. Presumably there must have been some context to those points you have raised. What was the broad purpose of the call?---Well, I would expect that the purpose was to say that he had a constituent who had some concerns with his investment, obviously with Blackburne and Dixon, and said he was going to fax some papers to me and I should do what I could to help the man. Did he fax those papers to you?---Yes. Have a look at exhibit 124?---1214? No, 124?---I have only got - yes, I beg your pardon. The T file?---Yes. Go to page 9. Are they the documents that were faxed to you?---Yes. That is recorded at the bottom of the page "To Bill Mitchell from Minister Shave." That was the subject of the fax?---Yes. At the top there's a date stamp, a receipt stamp. Who would have applied that stamp?---We have agonised over those two times for some time, but what I believe has happened is that at 9.09 the fax was sent from the minister's office and it was received at 9.28 at the ministerial office. Now, I suspect that what has happened is that the fax was sent at 9.09 and for one reason or another it wasn't printed out at that time. It may well have been because the minister's ministerial office was engaged and it had a redial on it. So there are two times, 9.09 and 9.28. 3/16/ces 68 C.W. MITCHELL XN 19/6/00

Where is the minister's office that it has come from? Where physically are they located?---Down in Melville. Right, and he has sent it to you in the city somewhere? ---To my house. On the file there is a "Received minister's office" stamp. Do you see that?---Yes. Where is that stamp applied, at Dumas House?---Yes. So that's applied to the fax when it comes into your office?---Yes. And the posted fax note which appears as a copy - that's fixed in the Melville office, is it, at the point of transmission?---Yes. The handwriting "Principal due November; agreed to February payout" - whose handwriting is that?---That's the minister's. So at that point you received that fax from the minister, having spoken to him on the phone first?---Yes. And what did he ask you to do, in short, about this? ---Try and resolve the matter. Was he more specific than that as to how you might go about resolving it?---No, not that I can recall. THE CHAIRMAN: When you say "resolve the matter", do you mean get the money?---Well, I guess, yes, but he didn't tell me how to do it. No?---We probably wouldn't be here if that was the case. MR CHANEY: So as a result of receiving those documents, what did you then do?---I assume that I phoned Fair Trading and after some discussion faxed them down to Fair Trading for their attention. You have heard Mr Dowling's evidence this morning that he received a phone call in which - sorry, he eventually returned a call to you?---Yes. He had a discussion with you on the phone in which both matters were discussed?---Yes. Do you agree with that?---Yes. So by the time you spoke to Mr Dowling, you were dealing with both matters?---Yes, I believe so; yes. 3/17/ces 69 C.W. MITCHELL XN 19/6/00

Had the minister said to you anything about any relationship which he had with Mr T other than as a constituent?---No. Did you know of any relationship other than as a constituent?---Not at that time, no. Do you now know of another relationship?---I do. He's his ex-father-in-law. You can see from that file note that he's got, "Local member getting concerned and the elderly gentleman is becoming distressed," but he has made no mention to me that he is his father-in-law there or ex-father-in-law. Now, as a result of your discussion with Mr Dowling on the telephone, what happened then?---I assume that because I was aware that there was some discussion in relation to Mr G, I would have expedited it because the two matters could have been rolled in together into the one visit to the finance broker. Sorry, I'm not sure that I follow that. You were aware - - -?---The Mr G matter had already been raised with the ministry a week or so beforehand. Yes?---I had had a telephone call from Mr G that morning saying, "What was going on?" and I suspect I was aware there may have been some proposal that there would be a meeting between Fair Trading and Blackburne and Dixon in relation to the Mr G matter, so it seems logical to me that I would have sent the T matter down so that it could have been done at the same time, particularly in view of the conversation with Mr Dowling. According to Mr Dowling's evidence - and that takes us back to page 24 of exhibit 123 - - - DR NEWMAN: I only have 10 pages with 124. MR CHANEY: Sorry, 123?---Sorry; I beg your pardon, it's the writing. What page on 123? 24?---24, yes. This is a printout of Mr Dowling's file note, computer record?---Yes. He says that there was a call. Admittedly it doesn't say it in the note but this is what he said in evidence: on 13 August he phoned and asked about what was happening with the complaint - and logically I think he accepted that meant the G complaint - and that he had received it this week and he was going to contact Blackburne and Dixon early next week to arrange a call at their premises. So that was the first you were told of the 3/18/ces 70 C.W. MITCHELL XN 19/6/00

prospect of a meeting. Do you accept that's the case? ---I suspect I probably knew before that. How would that be?---You have a look at that printout there. Your printout, yes?---Yes. Under 13 August you have got "Chase Greg Harvey" and in brackets "Stuart will call me back to confirm a meeting with Blackburne and Dixon on Friday, 20 August at 10 am." That's the same day as - - -?---As me talking to Mr Harvey. Yes, although Mr Dowling's evidence was to the effect that the meeting was actually arranged. He said, "I'm going to meet him," but there was no time yet identified?---Yes, I can't account for that. You can't explain that?---No. All right?---I appreciate the inconsistencies. Yes. In any event, it was your idea to combine the two into one meeting for convenience?---I expect so, yes. Mr Dowling says that you said that the minister wanted someone to lean on Blackburne and Dixon?---Mm'hm. Did you say that?---No. What did you say the minister wanted in relation to this matter?---The matter was raised with me 8 months after that time and we're now 10 months and I can't recall the conversation. Mr Dowling was clear and has recorded those words?---Mm. May it be that you used those words or words to that effect?---He has "Bill Mitchell advised that the minister wanted him to attend this" - sorry, where are we, "The minister wanted someone to lean on a trader." I wouldn't have said that. I would never have said that the minister said that he wanted someone to lean on him. I have no reason to do that because that - you know, I guess I understand what the implications for that would be and the minister gave me no such instruction to do that. THE CHAIRMAN: Mr Mitchell it goes on, "Even advising that the minister is looking at this complaint"?---Mm'hm. Would you have told him that, the minister was looking at this complaint?---In relation to Mr G I suspect I have told him that he's a constituent and he has acknowledged 3/19/ces 71 C.W. MITCHELL XN 19/6/00

that. I can't imagine using that turn of phrase, but I could have explained to him that he was a constituent. Also his address is within the minister's electorate as well, but I would see no reason for me not to say to an officer at Fair Trading that a particular person was a constituent. No, I think everybody knew G and T were constituents by this stage. There was no point in advising them about that. It is the words "Even advising that the minister is looking at this complaint" - where would he get that from?---I don't know. Once again I assume it's because I explained to him that it was a constituent and he has inferred that, but I don't know. Thank you. MR CHANEY: Why did you suggest that you be present at the meeting on the 20th?---I can't recall the reason behind that. Do you accept that's an unusual thing to do?---I haven't done a lot of that, but I have attended meetings with people who have had particular concerns. Have you attended with a ministry office engaged in an operational matter, that is, the investigation or attempted conciliation of a complaint?---I have been with - the Builders Registration Board we have visited, some people who had some particular concerns, and I have also been to see both supervisors with people who had particular concerns. Were they particular concerns - taking those respectively, in relation to a Builders Registration matter, was it a concern by a constituent about the way the Builders Registration Board was handling the matter? ---No. What was the nature of that visit or the complaint. Without going into great detail, broadly what was the complaint?---They had some concerns about the way their home was built and they didn't believe that the board were doing their best to resolve the matter. So there was a concern about the performance of the board in that case?---Yes. So you attended and saw those people?---I did, yes. The complainant; the people who were unhappy?---Yes. What was the other one?---There were two other matters that I went to see both supervisors with people. 3/20/ces 72 C.W. MITCHELL XN 19/6/00

Yes, and they were because the people were concerned about the way the supervisors were. You're talking about the supervisors of Grubb and Global, are you?---Yes. There was obviously lots of letters flying backwards and forwards and it seemed to me that one way to help the people was to at least get them to talk to the supervisors rather than letters and those sorts of things. There is a distinction, is there not, in those roles where there's a concern about the government agency, whether the board or the supervisors as appointees of the board, to this situation where you have a complaint by a member of the public against a trader?---Mm'hm. A trader being deregulated?---Yes. Do you see that distinction?---I do indeed, yes. Have you ever attended or sought to attend a meeting in these circumstances?---Apart from that one, no. What was the reason on this occasion for wanting to attend?---I can't recall. I don't know. Mr Dowling has got a note there that the minister asked me to do that. He may well have done that but I don't recall. As a general rule people within a minister's office do not interfere with or get involved in, to put it more neutrally, operative matters of investigation by the ministry?---I didn't think - I guess looking back in hindsight, I can't think why I would have worried too much about it. It wasn't as if it was with a view to - sorry, it was a conciliation matter rather than an investigation matter where there would have been witness statements. One explanation which comes to mind is that it's consistent with a desire to bring some pressure to bear on the trader, isn't it?---Yes. You see that as a consequence?---I do accept that, yes. You accept that the mere presence of somebody from the minister's office at the meeting might give the appearance of putting the weights on a trader, as it were?---Yes. And from that point of view it's an undesirable thing to have occurred?---With the advantage of hindsight I can see that perception, particularly with the circumstances that I'm in now, but I don't believe that that would have been the intention at that time because I don't do that sort of thing. 3/21/ces 73 C.W. MITCHELL XN 19/6/00

But you're unable to attribute any other intention? ---Well, apart from perhaps helping these people I don't know. As I said, as you can see from here, I had a number of conversations with Mr G. Perhaps it was a case of me trying to help him. THE CHAIRMAN: But it did occur, didn't it, you personally couldn't go along? Who did you send?---No, I arranged and confirmed for me to attend but - - - So you were going?---I was going, yes, but there had been an oversight that I was going to attend a ministerial conference. Yes, something else happened?---On the 20th, but that was an oversight on my part. Who was sent?---Mr Skepper. And he was at the time?---At the time policy officer. He may have been the acting chief of staff. Of the minister?---Of the minister, yes. Thank you. MR CHANEY: You were the one who asked Mr Skepper to go along?---Yes. What did you ask him to do?---I can't remember the conversation. If we go back a step, you say one of the reasons that you may have wanted to go to this meeting was that you could somehow help?---Mm'hm. Did you address your mind as to how you might help?---No, I didn't; no. I can't recall. I can't recall the particular decision that was made for me to go or the reasons behind it. Can you now with the benefit of looking back on it think of any reason how you might have been able to assist Mr G by being present at the meeting with the trader?---Well, I suspect there may have been some continuity between me dealing with Mr G and, if you like, Fair Trading dealing with the matter. So that I understand that - - -?---There would have been, if you like, a relationship between the two of us because he was a person with a problem and I was trying to sort it out. You're aware of the communication arrangements made under section 74 of the Public Sector Management Act between 3/22/ces 74 C.W. MITCHELL XN 19/6/00

the minister of Fair Trading and the ministry of Fair Trading?---Mm. That is something you work with?---Yes. Over a period you have been working with it on a daily basis, presumably?---Yes. Can I just ask you to have a look at a copy of it? THE CHAIRMAN: Mr Chaney, are we going to get a copy of the other memo of the witness? MR CHANEY: Yes, I might arrange that to be copied now. This was the operative communications arrangement document as at August last year?---Mm'hm. Has it been changed since?---Possibly, but I doubt it. I think that's probably it. Paragraph 10 on the third page of the document which is the last page of the document I just handed up deals with directions by ministerial staff to Ministry of Fair Trading employees on the manner in which they perform their functions. That requires the agreement of the chief executive officer of the ministry?---Mm'hm. You're familiar with that provision?---Yes. Did you consider whether or not this provision may apply to communications about Mr G and Mr T?---Having come from the Ministry of Fair Trading, I knew most of the people down at the ministry and I would have regarded it as a fairly routine matter in terms of trying to resolve a component. Is that some sort of exception to the application of this protocol that it's a routine matter?---I haven't given any directions to the ministry about how they should conduct their inquiry or their conciliation. The mere fact that you requested to be present doesn't constitute giving a direction about an aspect of the performance of their task?---At the time I don't believe it was intended that way and certainly when - I guess when I went back on it, it wasn't something that I would have considered inappropriate because it was a routine matter, trying to resolve a complaint, and, as I say, I assume it's possible because I had some sort of relationship with Mr G. That relationship was simply that he was a constituent who had complained or there something more to it?---No, it's the first and only time - well, not the only time 3/23/ces 75 C.W. MITCHELL XN 19/6/00

but that was my first contact with Mr G. I believe that I actually try - I do try and help people. I can't necessarily get them the answer that they want but I don't sit up there and I'm not concerned when people come to me with complaints. Yes, accepting that, it's a question of whether or not there was a requirement through this document brought into being after - a requirement of the act to follow a certain procedure in going about helping that person. What do you say about that?---At the time I wouldn't have regarded it as a direction and I wouldn't have perceived it as being issuing a direction to how they should conduct their business. What has happened now, of course, is we're looking back on it on hindsight with the background that someone has said that I asked the minister to lean on somebody and those sorts of things follow, but if you look at it from my perspective, there wasn't anything inappropriate. As far as I was concerned, I was just trying to resolve these matters for these people or assist in the resolution. Getting back to you engaging Mr Skepper to go to the meeting, you don't recall the substance of that conversation?---I don't recall the conversation at all. You can't recall whether Mr Skepper said, "What do you want me to do at this meeting"?---No. Do you think it likely that he would have asked that question?---Probably, yes. Are you able to say what answer might have been given? ---No, I can't recall a conversation with Mr Skepper at all. It may have been that I had given a commitment to Mr G that I was going to go and because I wasn't able to go, I asked someone else to attend in my place, but I can't recall that conversation at all. Just bear with me for a moment. What ongoing involvement did you have with Mr G after this meeting?---I phoned him the following week just to say that I had been advised of the outcome of the meeting and I think in October he called me again asking what was happening. Was that the limit of the contact?---I think so, yes. In fact I have got my note here. It says "5 October Mrs G called me to say cheque had not been received," and I called Mr Dowling who confirmed he would chase it up. Then that was your last involvement in the matter?

---On 6 October Stuart advised that he had contacted Rossi who indicated he was trying to refinance. Blackburne and Dixon confirmed this. However,

3/24/ces 76 C.W. MITCHELL XN 19/6/00

no-one wants to sell up, as they will lose. Stuart will contact Mrs G to ask her to get Mr G to call Stuart.

Are you reading there from that file note?---Yes. You have got no other recollection of subsequent events? ---Until I looked at the file - I mean, I still can't remember that conversation but obviously that there is my note. Mr Chairman, perhaps I should tender the handwritten file note dated 13 August prepared by Mr Mitchell. THE CHAIRMAN: Just a minute. Before me at the moment I have the Fair Trading document of 14 September 98. That is not an exhibit yet, is it? MR CHANEY: No, but I propose to tender it. THE CHAIRMAN: Also I have the rough file note of the witness and I have the typed one. MR CHANEY: I hadn't realised you had the typed one yet, Mr Chairman. THE CHAIRMAN: At least the staff is efficient. MR CHANEY: They are a step ahead of me, as usual. I tender all of those, Mr Chairman. THE CHAIRMAN: Thank you. MR CHANEY: I think the logical sequence in accordance with the evidence - I'm sorry, I should have done these as I went through, but the first is the handwritten note. I think they should be separate exhibits. The handwritten - - - THE CHAIRMAN: It has "13/8" up the top. MR CHANEY: Yes. THE CHAIRMAN: What year are we talking about? MR CHANEY: 99. THE CHAIRMAN: 99. That handwritten note of the witness is exhibit 129. EXHIBIT 129 Handwritten not of Bill Mitchell. MR CHANEY: Secondly, I tender the typed file notes headed "Minister's Global Finance Contacts". 3/25/ces 77 C.W. MITCHELL XN 19/6/00

THE CHAIRMAN: Yes, that will be exhibit 130. EXHIBIT 130 Type file notes headed "Minister's Global

Finance Contacts" THE CHAIRMAN: Finally, the document "Communications arrangements", officer of the minister of Fair Trading and the Ministry of Fair Trading under cover of the memo of 14 September 1998, chief executive officer to all directors of Fair Trading. THE CHAIRMAN: That is exhibit 131. EXHIBIT 131 Document "Communications arrangements",

Fair Trading THE CHAIRMAN: Right. MR CHANEY: Mr Mitchell, just going back for a second to exhibit 130, I see that's page 5 of 12. Do you have the balance of this document somewhere?---I think - - - It's available?---Yes. I might ask if you could before you leave today make the whole of that document available. THE CHAIRMAN: Have we discussed this date there, 21 August, halfway down, "Stuart Dowling and Harry Skepper met with Kaye Blackburne regarding G and T." It doesn't correspond. MR CHANEY: No; thank you, Mr Chairman. Do you see that entry?---Yes, I looked at that before and I suspect - Saturday the 21st is - sorry, the 21st is obviously a Saturday so I assume that's the 20th. So that's an error on the date?---It should be the 20th, yes. DR NEWMAN: Mr Chaney, before you go on, what about the briefing note that we have dated 29 July? Is that to be an exhibit now or later? MR CHANEY: Thank you, Dr Newman. Yes, I tender the briefing note. THE CHAIRMAN: 29 July 99. That is exhibit 132. EXHIBIT 132 Briefing note dated 29/7/99 MR CHANEY: Mr Mitchell, I want to ask you some questions about the complaint by Mrs Searle that was referred to the minister in September of 1998. Do you 3/26/ces 78 C.W. MITCHELL XN 19/6/00

recall events surrounding Mrs Searle's complaint?---I have obviously refreshed my memory on notes that I have. When I look back, obviously I have seen some of those documents which I didn't recall in the first - sorry, when it was originally proposed that I would be talking on this matter, but generally speaking I'm aware of the complaint. Do you actually independently, having reviewed documents, remember the meeting with Mrs Searle?---I remember meeting with Mrs Searle, yes. Do you remember any of the contents of the meeting which took place?---She was basically concerned about her investments and she was concerned that the ministry hadn't acted on her complaints. Do you remember her expressing a concern to you that there was a widespread problem that many people stood to lose money if there wasn't some intervention?---I don't recall that particular meeting but I do remember that she did raise that in the conversations I had with her. Do you recall she handed to you a document headed "Complaints against a finance broker; attempts for formally submit our complaints to the Finance Brokers Board"?---I received a fax from her on 7 September and then there was another fax on 9 September and I suspect it was the same document. Have a look at that document. I'm showing the witness the annexure to part B of Mrs Searle's submission which is exhibit 1. Do you remember seeing that document at the time of the meeting?---I don't remember that being given to me at the meeting. Without checking it against the other notes, I suspect that's the one that I received on 9 September. All right. Have a look at the summary at the end of the document. THE CHAIRMAN: Excuse me, Mr Chaney, which document? MR CHANEY: This is the document we struggled to locate the other day. It is part B of the submission to the Gunning inquiry in Mrs Searle's exhibit which is immediately under the big bound volume. I think I took Mr Buchholz to this document. Part B is the chronology which goes for 14 pages which are marked "2 of 14" through to - - - THE CHAIRMAN: Is it part B we are dealing with, "Attempt to obtain a hearing"? 3/27/ces 79 C.W. MITCHELL XN 19/6/00

MR CHANEY: Yes. THE CHAIRMAN: April 98. MR CHANEY: Yes. THE CHAIRMAN: "Had telephone conference with Mr Willers." MR CHANEY: That is the start of part B. Now, there is a separate document which is - if you look at the document you have just identified, Mr Chairman, that consists of 14 pages and at the top of each page there is a number. DR NEWMAN: Is it "4 of 14", is it? MR CHANEY: 14. The one the witness has has got "4", I think. THE CHAIRMAN: I have got "8 of 14". MR CHANEY: If you go through to "14 of 14", in other words, the end of that document, there is another document which is also headed "Attempts to obtaining a hearing" or "Complaints about a finance broker; attempts to obtain a hearing." THE CHAIRMAN: That is "14 of 14", "Attempts to obtain a hearing, Global Finance Group." 3/28/ces 80 C.W. MITCHELL XN 19/6/00

MR CHANEY: No, it should be the next page. THE CHAIRMAN: So that's a letter from her solicitors. MR CHANEY: If you go past the letter - perhaps if we - - - MS..........: It starts late April 1998. THE CHAIRMAN: That's where I started. MR CHANEY: I'm sorry, Mr Chairman. THE CHAIRMAN: Anyway, I have found a pen that was missing. MR CHANEY: There are two documents that start the same way, that's the confusion. THE CHAIRMAN: I have found my pen that was missing for a week. MR CHANEY: Well, it's nice to know that I'm productive. DR NEWMAN: Is it one just ahead of C? MR CHANEY: Now, that document has at the end of it a summary. THE CHAIRMAN: Then we go to the end of it. MR CHANEY: Could I have a look at it please? THE CHAIRMAN: It has got the word "summary", not a summary. MR CHANEY: There's reference in the second paragraph to:

We note an article published in The West Australian on 2 September concerning "Elderly couple fights to get nest egg back" -

etcetera, and reference to that publicity, and you're aware as of this time back in September 1998 of that general publicity that was around in relation to Global? ---Yes. I know there were some problems but I couldn't say whether it was Global or what it was. Yes, problems within the industry were starting to emerge?---I think probably later into the year is when I would have become aware that there were some problems. I think there was a debate in parliament. There may have been one or two questions beforehand. 4/1/rmo 81 C.W. MITCHELL XN 19/6/00

So you were aware of some problems starting to emerge. THE CHAIRMAN: Look, I'm sorry, I'm just not with it. Did you see this document then?---The one that Mr Chaney has? Well, I don't know. The one that we have been referred to, complaints against a finance broker?---I can't recall getting that at the meeting. I have a note that I sent to the minister in closing, a fax that looks just like that, but until I see the two of them I can't tell you that they're the same. But from what I understand, they appear to be the same. MR CHANEY: Mrs Searle's evidence is to the effect that she tabled this document at a meeting with you?---Yes. Did you read it at the time that you received it, whether at the meeting or - - -?---I would assume I have but I can't recall it. It says:

We're in receipt of a written claim by the finance broker concerned that he has approximately $60,000,000 in loans under management. This involves approximately 160 active accounts, the majority being large syndicated loans involving approximately 800 joint mortgagees. If the alleged and now growing number of complaints against this finance broker continue to be ignored by the Finance Brokers Supervisory Board/Ministry of Fair Trading, many Western Australians could be at risk of losing their investment, superannuation funds.

Do you remember that being the tenor of what Mrs Searle was saying to you?---At that meeting, no. Does that mean you didn't read this and understand what she had been saying?---No, it doesn't. It's 2 and a half years ago and I have 30, 40 phone calls, I have goodness knows how many briefing notes, how many letters come across my desk, and at that time there was no knowledge to the degree that has now come to light in terms of finance brokers. I think there were two complaints at that time in relation to Global, so for me to recall that 2 and a half years later I don't think is reasonable. Well, it's a serious allegation. I mean, the passage I have just read to you is that somebody is asserting there is a very widespread and serious concern involving potentially lots of investors and $60,000,000 and that is something, I suggest to you, that you would recall being said, that Mrs Searle's complaint wasn't just about her $16,000 loss?---No, that's right, she had other concerns 4/2/rmo 82 C.W. MITCHELL XN 19/6/00

as well, but in terms of seeing that particular document or recalling that particular document, I don't. I'm not asking you about the particular document, I'm asking you about the sentiment expressed in it, whether that was borne out by the meeting you had with her?---I can't recall. THE CHAIRMAN: Do you think it would have - not recall the exact figures, but 60,000,000, 800 joint investors. Do you think that would have reacted some way or other if you had read the document?---I suspect that I did react, because Ms Searle sent her fax to the minister's office on 7 September. I don't have any file notes as such, but I assume that she faxed on 9 September a copy of that document to me and I phoned the Ministry of Fair Trading and then on - I think it's 16 September there is a meeting between the Ministry of Fair Trading, Ms Searle and myself. So in terms of a reaction, it wasn't as if it was allocated the usual treatment of a letter, and that is for it to come to me, they get a draft reply - sorry, an acknowledgment letter from the minister's office and then it goes down to the minister's office generally for a 2-week turn around, is the request. So Ms Searle had a meeting organised within 2 days of sending her fax to the minister's office. What happened as a result of it?---The matter was referred down to the Ministry of Fair Trading. We had the Ministry of Fair Trading registrar up at that meeting. She asked for the matter to be sent to the Finance Brokers Supervisory Board. Was it, to your knowledge? ---As I understand, it was, yes. This memo?---I don't know whether it was that particular memo, but certainly her concerns were. Were?---Yes, that's my understanding. Why do you understand?---Because I can't recall the particular conversation. Why do you understand it went to the registrar or the chairman of the Finance Brokers Supervisory Board at that time?---Because the officer from the Ministry of Fair Trading who attended that meeting was the registrar. His name?---Buchholz. MR CHANEY: Subsequent to the meeting you received a letter and perhaps if I can perhaps show it to you. It's exhibit 14?---Sorry, Mr Chaney? 4/3/rmo 83 C.W. MITCHELL XN 19/6/00

Yes?---Can I ask, the documents that I have sent to the minister in terms of summarising these matters, perhaps if I can have a copy of that and I can check what I have against what has happened here. Certainly. Yes, we can produce - - -?---There were the two memos I think dated 20 September and there was one in October as well. THE CHAIRMAN: Mr Mitchell, if you think it a bit difficult, to use an expression, for you to examine these documents now you're in the witness box and would like to do it with a bit more time, please say so?---Thank you. MR CHANEY: Yes, I'm sorry. In fact I can show you your - there are the two memos. I will give you a copy of those for a start. They're the memos you're referring to, are they?---Mm. But you have attachments to them?---Correct. There's only one - sorry, there's four copies of the same documents and I suspect that's - - - Sorry?---I have got four copies of the same one. Right, have you now got one of each of 20 October and 21 September?---Yes. Counsel for the minister has just provided me with a bundle which might assist you, I think. That is a bundle under cover of the memo of 20 October and the letter which is exhibit 14 is part of that bundle. That's the letter of 16 September 1998?---Correct. Can you identify this as being a bundle of papers given to the minister by you in relation to the Searle matter? Is that right?---In a memo? Yes?---Yes. So what went to the minister, the memo with the attachments?---Yes. In this form, what you have in front of you?---In relation to 20 October or 21 September? 21 September he would have received a copy of the 7 September request, the 9 September fax that I referred to earlier, which I assume is the same one that was given to me at that meeting, and the 16 September letter Yes?---Attachment A, attachment B refer to those. Yes, so that includes those two documents, or at least the document I took you to earlier with the summary attached to it and the letter of 16 September 1998? ---Correct. 4/4/rmo 84 C.W. MITCHELL XN 19/6/00

So they all went to the minister. Is that right? ---Correct. Then in October there's a subsequent memo, 20 October, and what then went to the minister?---The whole kit again. So everything in this bundle?---Yes. Including what had previously been sent on 21 September? ---I believe so, yes. That's my practice, so they're all enclosed there, yes. I want to ask you about the letter of 16 September. That too if you look at paragraph number 2 - see that?---Mm. It says exhibit 14?---Yes. THE CHAIRMAN: 14. Thank you. MR CHANEY: Paragraph number 2, there's reference to:

Penlass's ultimate aim to have a hearing conducted by the board. Its concerns are in the interests of the public good as Penlass considers that the practices of the finance broker concerned if allowed to continue unchecked could have a significant adverse effect on the funds of other investors.

So again there's an expression in that letter of the wider concern about the extent of the problem?---Yes. You received and read that letter as at 16 September or shortly after in 1998?---Yes. So at that point you were at least aware of concerns at least in Mrs Searle's quarter of a widespread problem? ---Correct. Was that fortified by - or were there other sources of concern coming to you at that stage about Global's situation?---I think that the ministry had two complaints in 1998 about Global. Yes. Was this one of them?---Yes. And Lenz was the other?---I think the other one, yes. But what you were being told her was, "This is the tip of the iceberg"?---Yes. Did you appreciate that that may be the position?---It may have been. 4/5/rmo 85 C.W. MITCHELL XN 19/6/00

THE CHAIRMAN: No, no, did you appreciate that may have been the situation?---I would have referred it to the ministry for advice. We get complaints from people and people often make all sorts of claims, etcetera, and Fair Trading were dealing with the matter. We had the registrar in the room with us when they were raising these matters. Can you remember what happened as a result of this? Does it spring to mind? Here you get complaints about 60,000,000, 800 people, another one. Anything happen? ---Well, I can remember probably half a dozen phone calls with Penny Searle during that time. She had concerns and Fair Trading or the board advised me that they were being dealt with. Ms Searle wanted things to happen faster than they were, I appreciate that, but Fair Trading indicated they were investigating those matters. DR NEWMAN: Did you have any concerns that Ms Searle had been trying for so long to get a hearing and yet still nothing was being expedited?---Ms Searle talks about April, making complaints. Fair Trading had no record of that matter, so it's quite possible she phoned at that time, but Fair Trading indicated - during that meeting Fair Trading discussed Ms Searle's concerns with her. I think it would be fair to say that she certainly wanted things to happen faster but they indicated they were in the process of doing what was required. She has provided us with a very substantial, well-presented and well-documented file which shows that she tried for nearly 2 years to get hearings of some of these matters, which is a long time when you're expressing concerns?---Starting when? Around about 1997?---I'm not aware of her matters - I'm aware of - - - MR CHANEY: I think the chronology suggests April 98 was the first contact. DR NEWMAN: 98, is it? I beg your pardon?---I do recall that discussion and Fair Trading had indicated to me that they didn't have a complaint. They suspect there may have been a phone conversation. Mr Chaney is correct. The document here says that from April 1998 she had been trying to get her complaints dealt with by the Finance Brokers Supervisory Board, and in particular to get a hearing directly with the board. It's quite a lengthy period of time?---Well, my recollection, my understanding, is that it was only after - it wasn't April, I think it was June when her complaint was lodged with the ministry - that Fair Trading have any record of her. 4/6/rmo 86 C.W. MITCHELL XN 19/6/00

MR CHANEY: One of the issues, Mr Mitchell, is this, I think, that if one accepts the proposition that if somebody wanders in off the street and makes a complaint, you can't immediately go out and shut down a business, and it needs to be investigated and properly dealt with - procedurally fair. The problem with the situation which existed and Mrs Searle encountered was that at least 5 months after she had made initial contact progress appeared to have been - well, the complaint was still a fair way off being dealt with and we have heard lots of evidence that in fact 6 months is very quick to get something dealt with and 6 months to 2 years is a more realistic estimate of following this process. The problem with that is, is it not, that if there is an urgent issue that needs to be addressed, that system can't cope with it. Do you accept that proposition?---I think so, yes. It's self-evident really?---That's right, yes. Was that a matter which occurred to you in the context of reviewing the complaint by Mrs Searle where she's saying there are more problems and the ministry on the other hand are saying, "Well, we're working on it and in time it will all be dealt with"?---Just going back, the minister's office can't actually interfere in an investigation. This was clearly an investigation. Yes?---We had arranged for the ministry and Mrs Searle to be brought together, if you like, to discuss the matter at the minister's office and it was up to them to investigate it. She highlighted her concerns. Now, what they do with that investigation is up to them. The minister has the ultimate responsibility, does he not, of overseeing the general regulation, although not interfering with investigations? If the system is inadequate or the law is inadequate, the legislation is inadequate, then responsibility rests in the minister's office, doesn't it, as a matter of policy?---At that time there were two complaints and Fair Trading were telling me that they were dealing with it. Yes. Well, trying to put aside this - I withdraw that. My question was did you address this issue, that maybe the remedies available simply couldn't cope with an urgent problem?---I wasn't aware at the time that there was an urgent problem as such, but, no, I didn't go out following that meeting and say, "This is what has to be done," no. You didn't discuss that with the minister at any point? ---Not directly, no. MR McKERRACHER: Sorry, discuss what? 4/7/rmo 87 C.W. MITCHELL XN 19/6/00

MR CHANEY: Discuss the prospect of or the proposition that the wheels turning slowly as they perhaps must in bringing a prosecution wasn't an adequate way of dealing with what might have been a serious problem in the community?---Fair Trading hadn't advised - hadn't confirmed otherwise that information. At this stage it was one complaint. Yes. So the answer is no?---Well - - - For that reason. THE CHAIRMAN: Did you know at this stage how many investigators were attached to the finance brokers section?---I can't recall the numbers. I suspect there may have been one or two. Did it occur to you that that mightn't be sufficient and that something ought to be done?---Well, no-one had raised that issue with the minister's office. Did it need to be raised in view of the time it's taking, obviously, in front of you?---But there were no concerns at that time about the delays, if you like. Nothing had been raised with the minister's office. Well, certainly Mrs Searle was raising concerns?---But there were two complaints in relation to Global at that time. I can't recall the number for Grubb, but they started to come in later in the year. Yes, very well. Thank you. MR CHANEY: Mr Chairman, I tender - and again, you don't have copies of this but I think it's a convenient bundle - the bundle of papers under cover of a memo dated 20 October 1998 from Mr Mitchell to the Ministry of Fair Trading. THE CHAIRMAN: Does this include these two memos? MR CHANEY: Yes, it does, they form part of that. The minister. If I said Ministry of Fair Trading, I was wrong. It's from Mr Mitchell to the minister of fair trading. THE CHAIRMAN: Yes. So these are included in this bundle? MR CHANEY: Those two you have, yes. THE CHAIRMAN: Now, what do we head this bundle? MR CHANEY: What do we head it? It's under cover of the memo of 20 October 1998 from Mr Mitchell to the minister of fair trading. It's a bundle of documents. 4/8/rmo 88 C.W. MITCHELL XN 19/6/00

THE CHAIRMAN: 20 what? MR CHANEY: October 98. THE CHAIRMAN: 20 October 98, Mr Mitchell to? MR CHANEY: The minister for fair trading, concerning Searle. THE CHAIRMAN: Exhibit number 133. EXHIBIT 133 Bundle of documents under cover of memo

20/10/98, Mitchell to minister for fair trading

MR CHANEY: I have no further questions, Mr Chairman. THE CHAIRMAN: Thank you. Yes, Mr McKerracher? MR McKERRACHER: Thank you, Mr Chairman. Mr Mitchell, how long have you been in the public service?---Nearly 25 years. Can I take you back to these complaint files of G and T, as we have been describing them. When did you first hear about the contents of those files for the first time? ---In relation to G it was 30 July and in relation to T it was 13 August. Thank you. THE CHAIRMAN: Year?---1999. Thank you. MR McKERRACHER: When was the first occasion that you heard about the content of the file note prepared by Mr Dowling on those two complaint files?---On 19 April and it was only in relation to the T matter - 19 April 2000. That's the first occasion you have had to turn your mind to the contents of a telephone conversation back on 13 August 1999?---That's correct. Was it a long conversation or a short one?---13 August? Yes?---Short, I would imagine. Is there anything in particular about that conversation that stands in your mind as being significant at all? ---No, I can't recall the conversation at all. 4/9/rmo 89 C.W. MITCHELL XN 19/6/00 XXN

Do you consider that you gave a direction of any description on that day to Mr Dowling?---No. Is an inquiry about the progress of a file a direction, in your opinion?---I don't believe so, no. Is a suggestion or request that you attend a forthcoming meeting a direction, in your opinion?---No, it's not. At that stage did you know anything of any relationship between Mr T and the minister?---No. You knew Mr Dowling reasonably well, did you?---I would regard him as a work colleague. I had had a few social conversations with him over the 3 years that I had - well, by then it was 3 years at the ministry and probably 18 months at the minister's office by that time. Knowing him as you do and as you did at that time, what sort of reaction would you have expected if you had asked him to do anything improper?---I would have expected him to have said no or asked for clarification about what the conversation was about. There's a formal grievance procedure, I think, is there not, in the public service if you feel you have been asked to do anything improper?---That's correct. I say the public service, but I use that term for the public sector and I take it it's all the same for the purposes of our discussion?---Yes. Well, initially I would have expected that if Stuart had any concerns about anything that I had done that he would have spoken to me, and that's on a personal basis, but if he had any other concerns he should have raised those with the appropriate people. Is there any possibility at all that the minister at some time asked you to lean on or apply pressure to Blackburne and Dixon in relation to any entity?---No. Can you say whether or not that's the sort of thing which would have remained in your mind had he done so?---It would have, yes. If he had asked me to do something like that I certainly would have taken steps, whether to - they would have been to speak to him directly about it or I probably would have reported to my chief of staff. Presumably you would have exercised your obligations and rights under the grievance procedure?---Exactly, at the time. You have been asked a number of questions about whether it was unusual for you to go along to this meeting in relation to Mr G, and can I just clarify that one more time? Did you find anything unusual in the suggestion 4/10/rmo 90 C.W. MITCHELL XXN 19/6/00

that you should go along to the proposed meeting concerning Mr G or Mr T?---No, it seemed like a reasonable request. From time to time have you indeed gone to visit people at the request of the minister to ascertain further information and to find out the state of affairs concerning complaints made to the minister?---Yes, I have visited a number of people. He also asks me to attend meetings on his behalf as well when people specifically request that he meet with them. Have you recently prepared a list of the sorts of contacts you have made of that general nature in the late period of 1999, early 2000?---Yes. Would you have a look at this document please? I will show it to you first so that I can be certain that that does comprise such a list. If you would just have a look at that document. Can you tell me and tell the inquiry please what that document records?---I have recorded a number of occasions where I have been to visit people where the minister may have referred them to me. In fact, the T and G matters are listed under contacts with brokers, contacts by the minister either I dealt with or referred to the Ministry of Fair Trading, meetings I have had with regard to finance broker, contacts with Centrelink. THE CHAIRMAN: Have you got the dates on those, Mr Mitchell? MR McKERRACHER: Perhaps, Mr Chairman, I could provide you with the list. I wanted to be certain first that I was - - - THE CHAIRMAN: Had the right piece of paper. MR McKERRACHER: Yes. Thank you?---Lots of those people won't want it known that they have got complaints - - - Well, Mr Chairman, what Mr Mitchell is stressing is that there is an element of confidentiality regarding this. THE CHAIRMAN: Yes, certainly. Have you discussed this with Mr Chaney, the question of confidentiality of this document? MR McKERRACHER: No, I haven't, Mr Chairman. MR CHANEY: I can say, Mr Chairman, I have got no difficulty with it, if my friend proposes tendering it, to have it tendered on a confidential basis. While I'm on my feet, on that topic we have fairly unsuccessfully today sought to avoid the use of two names, and I was the first to sin. It seems to me that it highlights a 4/11/rmo 91 C.W. MITCHELL XXN 19/6/00

difficulty which we have because of the need, in my submission, to preserve the privacy of individuals whose affairs may incidentally and without any action by them come into view in these proceedings. The only way we can avoid the problem of names slipping out - because as we have seen today, it's impossible to ask witnesses and counsel and everybody to not make an error. It just happens. If this results, Mr Chairman, in publicity of those names being made, then the only solution which will then be open to this inquiry is to go in camera where such evidence is to be dealt with, and that would be my submission, but it's a matter really, I think, of seeing the extent to which we can successfully proceed as we have done. I'm certainly mindful of the committee's desire to remain in public as much as possible, but if we were to find that the confidence which we have sought to preserve today is defeated, then other methods of dealing with it may have to be considered. THE CHAIRMAN: Because of the slips I have advised the press, of course, that the names are to remain confidential. MR CHANEY: Yes. THE CHAIRMAN: I suppose the answer will be tomorrow morning as to what we decide to do. MR CHANEY: Precisely, Mr Chairman, but anyway, as to this document, I think the objective of maintaining people's privacy I don't have any difficulty with. THE CHAIRMAN: Yes, very well. Well, we're examining this document and it will be in confidence when it goes in. MR McKERRACHER: Thank you, Mr Chairman. I think, Mr Mitchell, without necessarily referring to the specific names, can I just ask you to outline, if you're able to do so, in broad compass, the sorts of queries you were dealing with under each of the topics, the broad topics, not each individual item?---"Direct contact with supervisors," well, I think that's probably fairly self-explanatory. Yes, I think you have given some evidence about that? ---Yes. The brokers you have already described?---Yes. These are people who would have contacted the minister. The second one is people who would have contacted the minister and I would have referred them to Fair Trading, or 4/12/rmo 92 C.W. MITCHELL XXN 19/6/00

alternatively I would have answered their inquiry as best I could. THE CHAIRMAN: What's, "On site"?---I might have gone to their house or I might have gone to an office. I see. Personal attendance. Thank you. MR McKERRACHER: Thank you. Then at the foot of the page there's another heading, Meetings with Finance Brokers, and there's a substantial number of entries for that heading. Presumably this is just following up on complaints and concerns expressed to the minister at that stage and you followed them up? ---That's correct, yes. A variety of other visits at the end of the document as well, and again, do they all relate to matters being followed on a personal basis by you at the request of the minister?---No, I get lots of telephone calls from people where I actually try and resolve it without referring it to the minister. Right. So you're the man to fix the problems, effectively?---I do my best, but I suspect some people would say that I have been unsuccessful. All right. Thank you. Mr Chairman, could I tender the document entitled "Bill's contacts, 1 July 1999"? THE CHAIRMAN: Yes, this document will be number 134 and it's confidential. EXHIBIT 134 Confidential - document entitled Bill's

contacts, 1 July 1999 MR McKERRACHER: Thank you, sir. Can I show you another document please, Mr Mitchell, on this topic of your personal involvement, with copies for the members? Could you just explain please, Mr Mitchell, what this document details, again without going to personal details, if possible?---The people in this list are people who may have contacted the minister and the minister has referred them to me directly. For example, he might say, "Ring Mr and Mrs Smith," or alternatively I get a telephone call from a Mr or Mrs Smith and they will say, "We are friends of the minister. We know the minister. He has said for us to call you and you will sort it out for us." So that's a list of those types of contacts. It's not comprehensive. One of the difficulties I have is that I don't actually note down every time someone calls me whether they have been referred to me from the minister or whether he has necessarily referred them to me, but that's a just a list 4/13/rmo 93 C.W. MITCHELL XXN 19/6/00

of them, and I have actually taken many of them off the first list that I have provided. So that's a more presentable format. The people on this list fit into the category described by the title, namely referrals from - well, I'm not sure that that reads very well, the title - "Referrals from the minister for fair trading and requests for meetings attended by Bill Mitchell on the minister's behalf"? ---That's correct. THE CHAIRMAN: They're not all finance brokers, of course?---No. I mean finance brokers matters. MR McKERRACHER: Now, this a broader range of personal queries, I take it, Mr Mitchell, is it, that you have been asked to look after?---That's exactly right. There's 47 acts in the Ministry of Fair Trading and while I appreciate what's going on with the finance brokers, the other inquiries, if you like, or the other matters, carry on regardless. Mr Chairman, can I tender the document which I should describe as being referrals from the minister for fair trading and requests for meetings attended by Bill Mitchell on the minister's behalf between 10 June 1999 and 9 June 2000. THE CHAIRMAN: Yes, that's 135, again confidential. EXHIBIT 135 Confidential - document, referrals and

requests by minister to Bill Mitchell between 10/6/99 and 9/6/00

MR McKERRACHER: Thank you, Mr Chairman. Can I take you to the G matter in August 1999? Would it usually be the case that complaint forms are sent straight to the ministry in the ordinary course of events by people who lodge complaints direct?---Yes. Of course, in the G situation you assisted by helping out the Gs complete the form and you actually arranged personally for its delivery?---Yes. The Gs completed the form themselves. I can't remember, but I assume I either gave it to them or posted it to them. They delivered it to me and I took it down to the ministry. Thank you. Just taking this a step further forward, insofar as fixing a meeting time for Blackburne and Dixon, is it possible that you nominated the meeting date yourself?---I can't recall. It's a possibility, but I think that more than likely there was some discussion within the ministry about a day or a date. 4/14/rmo 94 C.W. MITCHELL XXN 19/6/00

Again I'm speaking of 13 August, can I just clarify one matter about what happened earlier that morning? The minister's electoral office is situated in Melville, I think, is it not?---That's correct. The facsimile which you received with the minister's notes on about the progress in terms of the T repayment was faxed from that electoral office in Melville to you at the ministerial office in West Perth. Is that the position?---Correct. That was faxed at 9.09 and because of a hold-up in the faxes or because it was pre-stored in the fax machine or something, it came out at your end at 9.28. Is that the case?---That would seem to be the case, yes. Was there any dire urgency about this issue? Did you immediately ring up Fair Trading and suggest that it required instant attention or did you deal with it at a more leisurely pace?---It certainly didn't become a dire matter at all, but I would assume the way - the reason that I handled the matter was because I was aware of the G visit to Blackburne - sorry, G visit to Blackburne and Dixon. So did you immediately ring up Fair Trading or did you leave it till later in the day?---I can't recall. I don't have a particular time. If the file entry of Mr Dowling shows that it was in the afternoon would you have any reason to disagree with that?---No. There's nothing you can recall to suggest to you that this particular matter was highlighted as something of special urgency by the minister?---No. In any event, you subsequently realised that you would have to attend a ministerial conference in Tasmania on the 20th with the minister. Is that so?---That's correct. So you asked Harry Skepper to attend that meeting on your behalf?---I believe so, yes. I think Mr Skepper is the senior policy adviser for the minister?---That's correct. Was there any particular significance in choosing him or was that just a matter of convenience?---A matter of convenience. There's three policy officers up there, Fair Trading, DOLA and the Electoral Commission, so obviously the other two officers would have no reason to be involved. I assume that's why I asked Mr Skepper. 4/15/rmo 95 C.W. MITCHELL XXN 19/6/00

So Mr Skepper was really the only logical choice to attend the meeting if you couldn't?---That's right. Did you receive a report back at all from Mr Skepper after the meeting?---Well, I have got a note that I called Mr and Mrs G. I don't recall who told me what the outcome was, but I presume because I couldn't attend the meeting that I would have phoned them just to see how they were going and reconfirm the advice that I had been given. I think your note speaks for itself, but it shows as having been made on 25 August, indicating that you had told Mr G that what had been reported to you following the meeting was that it was expected that it would take about a month to recover the moneys loaned by Mr G to Blackburne and Dixon. Is that right?---If those are my notes I can only assume that's the advice. Have you at any time ever received any expression of concern by Mr Dowling about any communication on this topic with him?---None at all. I have gone through my notes and it appears that I have spoken to him three or four times that I have identified and when this matter came up I was shocked, because there had been no indication that he had any concerns about anything I may have said. I think you have been in the hearing today while he has given evidence?---Mm. I think you have heard his evidence that he didn't regard the communication as being untoward in any way. Did you hear that evidence?---That's right. Nevertheless, do you remain shocked at the suggestion that you would have used "leaning on" terminology?---Are you indicating the minister - I certainly do, yes. Is that an expression you ever use?---No. So there might have been a misunderstanding about the terminology in that conversation?---That's the only answer I can put it down to. Did you consider there was anything unusual at all about the minister's request that you give some assistance to Mr T and Mr and Mrs G?---No. It's fairly - - - From what you have shown us in the exhibits, is that a commonplace request made by the minister?---Yes. Can I take you back in time to about a year before in relation to Mrs Searle? I think we have now heard that she first wrote a letter to the minister on 7 September 1998 requesting a meeting to discuss the ministry's 4/16/rmo 96 C.W. MITCHELL XXN 19/6/00

handling of her complaint against Global. Is that right?---Yes. Is the usual procedure when a letter is sent to the minister for it to be recorded and forwarded to you to consider the required action?---That's correct. Do you usually ask for an acknowledgment letter to be sent by someone in the department or someone at the minister's office confirming that the correspondence has been received?---And the minister will reply as soon as possible, yes. Thank you. Is the letter to the minister then usually forwarded to the Ministry of Fair Trading for advice and for a draft reply?---Correct. Is the draft reply then sent back to you for your consideration and review?---That's right. Do you then send the draft reply back to the ministry for amendment or forward it on to the minister for his consideration and approval?---Correct. In this particular instance Mrs Searle has actually requested a meeting with the minister and I think you sent a letter of acknowledgment of 8 September to her. Is that right?---Yes, there's a letter on the file. Did you speak to the minister about the matter on 9 September and tell him that you had been advised by Mr Gary Buchholz that her matter was already under investigation by the board?---I can't remember the conversation but I would assume that's what happened. If someone wants to meet with the minister, that advice goes to the minister for him to make a decision. At that stage was your office - or you, in particular, and the minister, so far as you are aware, aware of events which have now come to light in regards to the finance-broking industry generally?---No. In particular, at the time that Mrs Searle had sought a meeting with the minister did you consider it was regular or otherwise for her to do so, given the fact that her matter was under investigation by the Finance Brokers Supervisory Board?---I would have recommended to the minister that at this stage it be an officer of Fair Trading and myself. Why would you have made that recommendation to the minister?---Because we didn't know what was going on with the finance brokers back in 1998. There were two complaints in relation to Global. 4/17/rmo 97 C.W. MITCHELL XXN 19/6/00

In your opinion would it have been regular or irregular for the minister to meet with Mrs Searle at that stage while the matter was the subject of investigation by the board?---I would have considered it unusual, yes. Do you actually recall now whether you expressed that view to the minister or not?---No, but my notes indicate that. Do you have any different view about the matter now or do you adhere to that view?---With what was known at the time, certainly. Obviously the minister must have approved your recommendation and Mr Rowe, Mr Buchholz and you met with Mrs Searle and Mr Hellens on 16 September 1998, according to your diary note. Is that so?---Correct. We have seen also that on 21 September that year you forwarded the memo to the minister confirming that the meeting had taken place as arranged and there were subsequent further letters from Mrs Searle that have been seen as well?---Yes. You sent a further memo to the minister on 20 October indicating that on 9 October you had telephoned Mrs Searle to discuss the progress of the board's investigation into her complaint?---That's correct. Did you also update the minister concerning developments for her matter in an earlier memo from you dated 21 September which we have seen in evidence?---That's right. Looking at the matter now in the light of the knowledge that you had then, do you think you should have treated the matter any differently from now?---I don't believe so, no. Does the minister receive many requests for meetings by members of the public?---Yes. How often would he receive such requests?---Weekly. Sometimes there's more than others. I would say once, twice a week there would be a request in there for him - that I would see, anyway. The other issue with this is that he actually has an appointments secretary where many people go to him requesting requests directly. So these are ones that I would see. Yes, thank you, Mr Chairman. That's all the questions I have, thank you. THE CHAIRMAN: Thank you. MR BEECH: No cross-examination, sir. 4/18/rmo 98 C.W. MITCHELL XXN 19/6/00

THE CHAIRMAN: Mr Hooker? MR HOOKER: Mr Mitchell, I think you said you regarded the visit that was arranged to Blackburne and Dixon on 20 August as something headed towards conciliation? ---That's correct. It certainly wasn't part of any investigation of the G or T matters?---No. You're aware, aren't you, that normally where a formal complaint is made, whether it's registered either with the ministry or with the board, there will be an investigation of sorts?---That's correct, yes. That's to see if there's any substance or merit behind the complaint?---I would assume so, yes. I don't know whether necessarily that would take - when you get something in writing, obviously there's more information in some letters than others, so I would imagine some of those things are easier to determine than others. So it might take a greater or lesser time depending on certain variables, but you're aware that there was a standard process of investigation that generally took place?---Yes. So to the extent that Mr G's complaint was communicated to the board - and as I understand it, that was something you assumed happened. Was that the case?---Yes. To the extent that that complaint was communicated to the board there was still, as far as you understood, going to be some process of investigation that took place if the conciliation didn't lead to a result?---Correct. That's so that before the board exercises any disciplinary function or not, it is known whether or not there is any substance or basis to the complaint?---Well, that would seem reasonable to me, yes. Also so a view might be formed by someone as to whether any relevant conduct falls within the Finance Brokers Control Act or possibly any other legislation?---Yes. Sorry, can you just rephrase that question for me again please? An additional reason why there needs to be an investigation before a matter is dealt with by the board is so that someone within the ministry might form a view as to whether the conduct complained of fits within any act or code of conduct?---Yes. I think you said in about September of 1998 when you were dealing with Mrs Searle you were advised by Mr Buchholz that Mrs Searle's matters was already under investigation 4/19/rmo 99 C.W. MITCHELL XXN 19/6/00

by the board. That was some evidence you gave earlier? ---Yes. I'm not sure whether it was the board or the ministry but there was certainly an investigation. That's the point I was going to address with you. The burden of the point you were making is that you understood there was an investigation in progress? ---That's correct. You weren't particularly paying attention as to whether Mr Buchholz said it was the ministry doing the investigating or the board doing the investigating? ---That's right. Any distinction or subtlety in that regard wasn't something you were particularly concerned with?---No. What was important to you was that there was a matter under investigation by 9 September 1998 when you spoke to Mr Buchholz?---That's correct. Thank you, Mr Mitchell. I have nothing further. THE CHAIRMAN: Mr Mitchell, on that point, are all investigations - with all the boards, I'm talking about - the investigators investigate then report as to whether there's a case to go before the board? I'm talking about particularly real estate, settlement agencies, etcetera? ---My background is not as an investigator or prosecution officer or anything like that, so I'm not sure of that process. I see. Thank you. Mr Chaney? MR CHANEY: Yes, just a couple of matters, Mr Chairman. Do I understand your evidence correctly, Mr Mitchell, that when a member of the public requests a meeting with the minister specifically, personally with the minister, that request is conveyed to the minister and he makes a decision?---Yes. Mrs Searle in her evidence gave evidence that on 15 November she wrote to the minister requesting an urgent meeting to discuss the status of the complaint, so that was after your memo, exhibit 133, of 20 October, and that she telephoned you the next day on 16 November. Do you remember that?---No, not at all. I haven't even seen that letter in recent time. I can't recall it at all. Right. What she said in her evidence was that she telephoned you, strongly voicing concerns regarding information gleaned by Alannah MacTiernan in the House and reiterating her urgent request for a meeting with the 4/20/rmo 100 C.W. MITCHELL XXN 19/6/00 REXN

minister. Do you remember Ms MacTiernan having asked questions in the House about these matters?---Yes. Do you remember speaking to Mrs Searle about Ms MacTiernan's - - -?---No. If someone was to say to me there were half a dozen phone calls between myself and Mrs Searle in that 6 months I would say, "Well, that sounds about right to me." All right, but if there was a telephone call where she said, "Look, I really want to see the minister," that would have been a request conveyed to the minister?---I would assume so, yes. And any decision as to whether or not - well, just to complete the evidence, just so that you're in the picture, the next day, on 17 November, she received a letter from the minister stating it would be inappropriate for him to interfere in a board operational issue and that the minister had asked Patrick Walker to meet with her. Do you remember that communication?---I do have a vague recollection of that. But in any event that would have been a decision of the minister, given the nature of the request?---Did he sign it? I'm just really going back to the question of the nature of the request for a meeting with the minister. Would it inevitably be the case that that would have been referred to the minister?---I believe so, yes. Just as an aside, I have had one person who wanted to speak to the minister and he's made repeated phone calls to me and I have spoken to him and I have spoken to the minister and the minister has said that he won't meet with that particular person, so I don't need to go back and say to him every time this fellow rings up, "Will you meet with him?" because the minister has made it quite clear that he won't. Yes. Well, I will just show you exhibit 17 which is the letter referred to. It bears the signature of Mr Shave. It's a copy of it. It's the letter from the minister to Mrs Searle of 17 November 98. Are you able to say looking at that is that - - -?---That's Doug's signature - the minister's signature. Yes, he signed that, so therefore the decision clearly is a decision made by him?---Correct. Yes, thank you. If I could have that back. In relation to those two documents, exhibits 134 and 135 - - -? ---Sorry, which ones were they? They were the lists of contacts you have had with other people?---Yes. 4/21/rmo 101 C.W. MITCHELL REXN 19/6/00

Firstly, looking at 135, which is referrals from the minister and requests for meetings attended by you, on 13 August 99 in relation to Mr T there is reference to a visit. Can you explain what that reference is?---No, I can't. I did this quickly and I can only put that down to being a typographical error. It was in fact a telephone request?---Yes. Now, in respect of all of these; that is, all the contacts referred to in both of these documents, apart from Mr T and Mr G are there any of these meetings or contacts you have had which have involved meeting with an investigator from the Ministry of Fair Trading in relation to a matter the subject of investigation or conciliation with any of these people?---No, I don't think so. I can't recall any, anyway. I have nothing further, thank you, Mr Chairman. MR BLIGHT: Mr Chaney, I realise the hour is long and the witness has had a very heavy day in the stand, but I feel that it would be fair and reasonable, particularly to the witness, if we were to obtain perhaps tomorrow and maybe through Mr Skepper what the normal workings of a minister's office are - who does what, where Mr Mitchell fitted into the structure and, you know, what's normal, what's not normal to be done in a minister's office, how busy ministers are, whether - I mean, I'm not sure whether Mr Mitchell is confined to Fair Trading matters. I know the minister is also minister for lands, I know he handles the Electoral Commission. I don't know which departments, votes, statutes, authorities, are handled within the ministry. I know they are very, very busy sections of the public sector and I think that should be brought out in evidence one way or another. I know that we're here to obtain information, but I can sympathise with someone who is trying to remember, you know, even 12 months ago who said what and who did what and it's quite unreasonable, I think, to throw matters at any witness. I think we maybe can get it through other sources, but I would certainly like the committee to know the manner in which ministers' offices operate and that it's not - you know, I know from many years' experience the operations of a minister's office, but I don't think it has come out quite as vividly and as dramatically as it should. MR CHANEY: Yes. That may be a matter that we can take up with Mr Skepper tomorrow. MR BLIGHT: I think even if you sort of pre-warn him if we could have an organisational structure of a minister's office and how they do fit in with the bureaucracy, if 4/22/rmo 102 C.W. MITCHELL REXN 19/6/00

you like, and who does what in this particular minister's office. That would be extremely useful. THE CHAIRMAN: It's not, of course, necessary to have it tomorrow morning. MR BLIGHT: No, but - - - MR CHANEY: Well, I'm sure Mr Mitchell and Mr Skepper have heard that. THE CHAIRMAN: I think they will take it on board now. MR CHANEY: Yes, but I take it - if I can ask you, Mr Mitchell, I note from your respective titles that Mr Skepper describes himself as a senior policy officer and you as the fair trading policy adviser. In the hierarchy about which we will learn in due course is Mr Skepper more senior than you?---He has been acting chief of staff. I don't report to Mr Skepper, I report to the chief of staff. I think we're probably on the same level, if you like, within the public service. Well, perhaps we can discuss it after the hearing concludes as to the best method of adducing that evidence. THE CHAIRMAN: Yes, and obviously we have all had enough tonight and the earliest we can start tomorrow is 10 o'clock. Is that convenient or inconvenient for you? MR CHANEY: No, that's convenient, Mr Chairman. MR McKERRACHER: Thank you, sir. THE CHAIRMAN: Thank you. We will adjourn - by the way, thank you very much for your attendance?---Thank you. It's a pleasure.

(THE WITNESS WITHDREW)

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4/23/rmo 103 C.W. MITCHELL REXN 19/6/00

GUNNING COMMITTEE OF INQUIRY INTO FAIR TRADING BOARDS AND COMMITTEES MR I.R. GUNNING, Chairman DR D. NEWMAN, Member MR D. BLIGHT, Member TRANSCRIPT OF PROCEEDINGS AT PERTH ON TUESDAY, 20 JUNE 2000 Transcription by - SPARK AND CANNON PTY LTD 3rd Floor International House 26 St Georges Terrace PERTH WA 6000 Telephone: 9325-4577 1/1/df 1 20/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. Before I call today's first witness I would like to mention a matter relating to the publicity which followed yesterday's evidence. Late in the day yesterday following a number of directions by you, Mr Chairman, to the effect that the names of various investors whose affairs were dealt with yesterday be suppressed and to remain confidential to the inquiry, I'm instructed that in a number of electronic media outlets names of those investors were used. That gives rise to the concern which I raised late in the day yesterday as to how, given the difficulty which all of those in the course of discussing matters at length have in not allowing names to emerge, it can be adequately dealt with by the inquiry. What I suggested was that if the effect of dealing with these matters in open hearing - notwithstanding directions by you, Mr Chairman, that matters remain confidential - is that there is widespread publicity, then the only course of action open to the inquiry is to proceed to hear those aspects of the evidence dealing with individuals who have not themselves brought their affairs before this inquiry in public to be dealt with in camera. The evidence today does not involve any additional people whose affairs may be inspected, although evidence to come over the next couple of weeks will, but in my submission unless it is demonstrated by those in the media where responsibility in this area lies that necessary confidences can be maintained, then we will have no alternative in my submission but to go in camera. THE CHAIRMAN: Thank you, Mr Chaney. If you ever so move as a result of digressions by the print or television media with one of my directions, we will go immediately in camera for the whole thing, but I note with pleasure that the print media yesterday observed the requests, despite the names being bandied about in this room. MR CHANEY: Yes. THE CHAIRMAN: I didn't see any television, although I must say that I did see Channel 2 at 7 o'clock and I didn't notice any transgression then but I don't know about the others but if they did, then that's the last time. MR CHANEY: Thank you, Mr Chairman. I call Harold Ralph Skepper. 1/2/df 2 20/6/00

HAROLD RALPH SKEPPER sworn: MR CHANEY: Mr Skepper, you live at 50 Clayton Street in East Fremantle?---I do. You are a senior policy officer attached to the ministerial office of the minister for fair trading, Mr Doug Shave?---That's correct. How long have you been in that position?---Approximately 9 months. Before that what were you doing?---I was the chief of staff for a period of about 9 months also. So you have worked for Mr Shave for how long altogether? ---Getting close to 2 years. What is your particular function as the senior policy officer for Mr Shave?---I guess I oversee all the policy office in actual fact but that's right across the spectrum of his portfolios and also of course when he gets involved with issues in other portfolios controlled by other ministers. Which portfolios does Mr Shave have?---He has fair trading; he has lands or DOLA, if you like; LandCorp and he has the electoral commission and parliamentary affairs. I think overnight in response to some observations by Mr Blight, there has been prepared a flow chart showing the hierarchy of the office. Is that a representation of the totality of the staff in the ministerial office? Is that what it represents?---It is, apart from the support staff which probably number about four. You fit into what is the second tier below the minister? ---Yes, subordinate to the chief of staff - yes. Your responsibility transcends all of the portfolios the minister holds?---Yes. Can you outline something of the process which exists in relation to dealing with correspondence with members of the public which comes into the minister's office? What happens to it?---It comes in in various ways of course. The post is generally channelled through the chief of staff in the first instance. It's allocated to the various areas where the responsibility or the issue lies. The policy officers in turn refer it to the ministry and/or the department. It's generally given a time frame for turnaround - something like 2 weeks. It comes back into the office generally in a prepared form, like a letter or response. It makes its way back to the minister for signature through the chief of staff. 1/3/df 3 H.R. SKEPPER XN 20/6/00

How many pieces of correspondence come in from the public in the course of a week on average?---We didn't really have time to do any stats last night but a lot, an awful lot, particularly since the finance brokers scandal emerged. Of course the workload has increased dramatically. You have been in the minister's office for something approaching 2 years which takes you back to, what, mid-1998 when you commenced?---Yes. In the first 6 months what was your position initially? ---Initially I came in as the executive officer which supported the role of the chief of staff in running the office. That position doesn't feature on this chart?---It's in the support staff group. I see. In the initial 6 months are you able - and I appreciate putting a number on it makes it very difficult, but if you can give us some sort of ballpark indication of what we're looking at in terms of numbers of items of correspondence - say in that first 6 months before the finance brokers issue really - - -?---I would only be guessing but, you know, we would get at least a couple of hundred letters a week. Since the finance brokers issues have blown up?---Since then, it has probably doubled. We will be happy to provide some stats at a later date. Thank you for that. Do the responses invariably find their way back to the minister for signature or on occasions are some responses signed off by subordinate officers?---Very few are signed off. The minister handles the workload himself. When a member of the public makes a particular request to have a meeting with the minister, what is the process which deals with those requests?---Primarily the chief of staff would handle that sort of issue and the minister is more than happy on most occasions to meet with people. There are reasons at times when he shouldn't and can't but it's not generally down to the pressure of work. I'm sorry?---It's not generally down to the pressure of work but other reasons. How is the request conveyed to the minister?---Generally through the chief of staff and/or on occasions through the involved policy officer. What factors may make it inappropriate for somebody to meet with the minister?---I think it was alluded to 1/4/df 4 H.R. SKEPPER XN 20/6/00

yesterday in Ms Searle's case. The matter was under investigation and it would have been not proper for the minister to meet with her. That's because it's not proper for the minister or his staff to become involved in operational matters within the ministry?---Exactly. How many requests again - and I appreciate that proper statistics may be able to be provided later, but just to give us a feel for the situation, how many requests does the minister receive for meetings with members of the public in the course of a week? Again I appreciate that you may need to divide the time between before and after the finance brokers fiasco?---10 wouldn't be an exaggeration. 10?---Wouldn't be an exaggeration. Are you talking over the last year or so or prior to that, the first year that you were involved with the minister?---I think probably overall. So the number of requests for personal audiences, as it were, has not increased markedly?---I think it has probably increased but because of what's happening, particularly in the finance area, he necessarily can't get involved. Why do you say that?---Well, to go through the same situation as Ms Searle - - - Because matters are being dealt with by the ministry? ---The liquidator or supervisor or subject to court or sub judice or whatever. I want to ask you some questions in relation to the matters that were the subject of evidence yesterday. You were present throughout yesterday and heard the evidence which was given?---I was. You heard evidence of your attendance at a meeting on 20 August 1999 at the offices of Blackburne and Dixon. I'm sorry; nodding won't be recorded?---I'm sorry. Yes, I was. Can you tell me how you came to be introduced to the matters that were dealt with at that meeting?---I was asked I think on Wednesday the 18th to attend in the absence of Bill Mitchell. Who asked you?---Mr Mitchell. What did he ask you to do?---To attend the meeting as an observer. 1/5/df 5 H.R. SKEPPER XN 20/6/00

What did he tell you about what the meeting was about? ---He told me that a Mr G had requested the minister to endeavour to see if he could see Blackburne and Dixon with respect to getting his money back, his investment back. He told you; that is, Mr Mitchell told you that the minister had asked him to see Blackburne and Dixon? ---Yes. Well, that's not true because - well, I guess it is, yes. Did you know that the ministry was involved?---Only from Mr Mitchell. He told you at the same meeting?---Yes. The same time as he asked you to go to this meeting? ---Yes. So he told you - - -?---That he had been in contact with Mr Dowling and Mr Dowling was to ring me. I believe at that date Mr Mitchell told Mr Dowling that he was unable to attend and that I would attend in his place. Dowling was to ring me to make travel arrangements to get out there. The minister's request as it was conveyed to you by Mr Mitchell was for Mr Mitchell, and in his place you, to go to Blackburne and Dixon to see if you could get the money back for Mr G?---Yes, but the normal course of events is that Mr Mitchell refers it to the ministry. That's because investigations and conciliations in relation to consumer matters are tasks which fall to the ministry?---Exactly. Did you think it unusual that you would be asked to attend on a visit by a ministry officer on an operational matter?---Not on this occasion. Why not?---Because of the request of Mr G and the fact that we had proposed an audit into Blackburne and Dixon. We had been asked by ASIC to withhold on that audit which raised our suspicions straightaway. We had heard rumours that Blackburne and Dixon might be in trouble and I thought it logical that someone who should be reporting to the minister should attend that meeting. Just going back a step, when you say "we heard rumours" who - - -?---The ministry. Sorry?---Mitchell, myself. The minister presumably?---The minister. 1/6/df 6 H.R. SKEPPER XN 20/6/00

You had received that briefing note. Did you see the briefing note on 29 July 97 dealing with those issues? ---I didn't. I don't recall seeing it. I don't know whether you know the document I'm referring to. I wonder if the witness might be shown exhibit 132. Just hold that document up, Mr Skepper?---I don't know whether I have got the right one. No, I don't think you have got the right one. It's the Fair Trading document directed to the minister. Have a look at my copy. Just have a look - the covering note doesn't matter too much; it's the substance of the briefing paper. I ask you whether you saw that at the time that it came in?---It's very possible I did. As I mentioned before, I was doing the chief of staff job at the time so it more than likely came through me. In any event, it's consistent with what you have told us. You were aware; within the minister's office people were aware of the problems or the potential problems with Blackburne and Dixon?---Yes. You were aware, as that briefing note tells you, of the potential involvement of the ASIC?---Yes. And that the board had resolved to request a special audit in respect of Blackburne and Dixon and that had been put on hold because of ASIC's involvement?---Yes. Against that background, why do you say it was logical to have somebody from the minister's office there?---Just to see if we could glean any further information. Is that something you discussed with Mr Mitchell?---No. I didn't discuss it with Mr Mitchell at all. When he asked you to go to the meeting, what did he ask you to do at the meeting?---To do precisely nothing; just to observe. So you made your own assessment as to why that would be a sensible thing to do?---Yes. Have you ever been along as an observer to any other meeting in relation to a matter - I will rephrase the question. Have you ever attended a meeting with an investigator from the Ministry of Fair Trading in respect of a matter being investigated by that officer? MR ..........: Was this an investigation at this stage?---I don't recall, but my area in normal circumstances wouldn't have me attend such a meeting but I attend meetings with the minister all the time. 1/7/df 7 H.R. SKEPPER XN 20/6/00

MR CHANEY: Did Mr Mitchell say to you that the minister wanted the ministry to lean on the trader?---Definitely not. Did he tell you that the minister wanted to make it clear to the trader that the minister was looking at this particular complaint and was interested in it?---He did not. You agree, as I think Mr Skepper did, that the presence of - - - THE CHAIRMAN: That's Mr Skepper. MR CHANEY: I'm sorry - Mr Mitchell. Sorry, Mr Skepper. We will see if Mr Skepper does. You agree, as Mr Mitchell did I think, as I recall, that the notion of having somebody from the minister's office attend even as an observer at this meeting is consistent with the proposition that there was an attempt to give the appearance of interest by the minister and pressure being brought to bear by the minister's office?---No, I don't agree with that at all. MR McKERRACHER: I object to that question, with respect. It's not a fair summary of the evidence in my submission that the attendance of Mr Skepper or any other person from the minister's office could be seen as an attempt to bring pressure to bear by the minister's office. It's not the nature of the evidence given yesterday at all by Mr Mitchell. MR CHANEY: I accept that my paraphrasing of the evidence might be debatable. Perhaps I will put the question in a different way, rather than predicating it on anything Mr Mitchell has said. Mr Skepper, if one wanted to give the impression to a trader that pressure was being brought to bear on the trader by the minister, do you agree that having somebody come along from the minister's office to keep an eye on - to observe the meeting - would be consistent with that objective?---I don't agree with that. Why not?---Well, I think Mrs Blackburne in her evidence yesterday said there were always two people going along. She didn't feel threatened by it. I certainly didn't have anything to say at the meeting at all, so I don't know how you can make that assumption. DR NEWMAN: Mr Skepper, were you introduced at the meeting as coming from the minister's office or were you just introduced by name?---Just by name I believe. Thank you. 1/8/df 8 H.R. SKEPPER XN 20/6/00

THE CHAIRMAN: I would just like to know again, Mr Skepper: why were you there?---I was asked by Mitchell to go and I made the assumption in my own mind on the reasons why I was there which I have explained. Just to observe?---Just to observe. Observe what? You had this background that Blackburne and Dixon were in trouble?---Yes: the question of the audit; we had heard rumours; we had Mr G's request. We were suspicious I guess that things weren't all right in Blackburne and Dixon and in my view, it was my role then to see if I could glean any further information on what the problems were. Did you discuss with Mr Dowling who was conducting the talking part of the interview anything before you went there?---Yes. We discussed something. We had a cup of coffee before we went to Blackburne and Dixon but generally it centred around small talk. "Where did you work before? What do you do? What are you endeavouring to achieve at this meeting?" That was the extent of the conversation prior to the meeting. Was it suggested to you or did it occur to you to ask Mr Dowling, if he was going to do the talking, to ask any questions about Blackburne and Dixon, how they were going - to ask Mrs Blackburne what's the score?---I didn't know whether that was appropriate. I left all the talking to Dowling. I didn't have anything to say at the meeting at all. I appreciate that?---He asked questions like - Mr Rossi was the borrower - where he was and why they had been unable to contact him. I understand he had been in Bunbury for some months working on a project but he had ignored requests to attend their offices. We were given information - like, he was trying to re-arrange the loan and things like that - but, as I say, I didn't have anything to say at all. Thank you. MR CHANEY: Going back to your discussion with Mr Mitchell when you were asked to go to the meeting, you have only mentioned Mr G's situation so far. What did he tell you about Mr G's problem?---That the loan was in default and had been for in excess of 12 months. I understand the interest payments were still being met but he had particular reasons for wanting his loan back. Did he tell you anything about Mr T?---He didn't say anything about Mr T. I should state at this point that I was under the impression that I was going there for the G meeting. I didn't know Mr T. I didn't know the name. I 1/9/df 9 H.R. SKEPPER XN 20/6/00

had never met the gentleman and it follows that I had no indication at all that he was related to the minister. Mr Mitchell yesterday gave evidence that he thought it would expedite things in respect of Mr T's concern to deal with the two at the same meeting which he knew was coming up but he didn't mention that to you at all?---He didn't mention it to me at all. I think you might recall that Mrs Blackburne gave evidence yesterday also that that loan, just as a normal commercial transaction, was resolved on the Wednesday before. That may well be the case but that would not explain, would it, why Mr Mitchell, having decided that he wanted to attend this meeting initially in relation to two matters, in asking you to attend would not tell you about one of them?---Well, he didn't mention it to me. You're familiar with the protocol which exists in relation to communication arrangements between the minister of fair trading and the ministry?---Yes. That's a document that you obviously have to apply on a daily basis, I take it?---Yes. And such documents exist in relation to each of the ministries in respect of which the minister has responsibility?---Yes. Did you consider whether the provisions of that protocol ought be observed in this case?---What particular provision are you talking about? Provisions in relation to the giving of a direction by ministerial staff to Ministry of Fair Trading employees, on the manner in which they are to perform functions? ---I'm unaware of any instruction given. Your understanding was that the minister told Mr Mitchell that he wanted Mr Mitchell to attend a meeting?---Yes. And in that sense you understood Mr Mitchell to have conveyed to Mr Dowling the request at least - if not requirement - that he be present at a meeting and in that sense was directing the way in which the meeting was to be arranged and who was to be present at a meeting on an operational matter?---I thought I had explained the reasons for my attendance. I would have thought that Mitchell would have come to the same conclusion. He was there for the same reasons. The question is: did you consider that the protocol in relation to communications had any application to this situation?---Under the circumstances, as I explained before, I would have to say no to that question. 1/10/df 10 H.R. SKEPPER XN 20/6/00

Is that a position now with the benefit of hindsight that you still consider appropriate?---I still consider it appropriate. Working through to after your discussion with Mitchell, you made arrangements with Dowling to go to the meeting together?---Yes. I think you said you stopped and had coffee?---Yes. What did you discuss over coffee?---Nothing of great substance. I just asked him about his family, where he had worked before and what he expected to achieve at this particular meeting. He gave me probably a little more background on G than I had before. What about Mr T?---Mr T was never discussed. So even after talking to Dowling about what the meeting was going to be about, you still had never heard of Mr T? ---I had never heard of Mr T. You said you discussed the purpose of the meeting and what was to be achieved?---What he expected to achieve. What did he tell you?---He basically told me that he was there in an endeavour to get Mr G's money. Did he tell you anything else about the matter generally? ---From memory, no. You knew that the purpose of the meeting was to discuss a single investment of a particular investor and whether or not that person was going to get any money?---That was Dowling's agenda. Mine was a little broader. What was yours again?---I was there to see if I could glean anything from the fact that we had heard rumours. We had been refused an audit. We had had this request from G and I was there to endeavour to find out any more that we could on Blackburne and Dixon. Were you disappointed when you heard what Dowling's agenda was for the meeting and that it didn't seem to be likely to fulfil your objective?---I really don't understand the question. If you had the hope of gleaning wider information in relation to Blackburne and Dixon's operations generally - is that essentially what you had in mind?---I guess what I gleaned from that was that Mr Rossi, the borrower, was in trouble. Going back a step though, you had an agenda in attending the meeting which was to glean information in a rather 1/11/df 11 H.R. SKEPPER XN 20/6/00

broader range of topics than just Mr G's particular problem?---Exactly. When you discussed the matter at the restaurant with Mr Dowling he said, "I'm trying to get Mr G's money back. That's the limit of it" but that is unlikely to produce that wider perspective that you were looking for?---It probably was but I didn't alert him to the main reason I was there anyway. THE CHAIRMAN: That's what I think Mr Chaney and perhaps the committee at the moment are wondering. Why didn't you ask a question at the meeting to obtain the information or endeavour to obtain the information that you said you were there to see if you could find out? ---Well, I think the information provided by Blackburne and Dixon at the meeting told me that Mr Rossi was in strife and any loan associated with Mr Rossi was more than likely to fall over. What about other loans that they might have had?---It wasn't appropriate for me to ask those questions. MR CHANEY: Wouldn't it have been a much more efficient way of achieving your objective to have allowed this meeting to take place in the ordinary course and then call for some sort of meeting with Mr Dowling or with the registrar or someone to get an overview of the whole picture in respect of B and D, including a report on the outcome of this meeting, rather than attending on what appears to be a rather narrow subject matter?---I think the audit which did proceed achieved those objectives. That's not an answer to my question though, Mr Skepper. Would it not have more effectively served your purpose simply to have obtained a full briefing through the ministry, rather than attending a one-off meeting?---At the time I don't think it would have. Why not?---I don't think we knew enough about Blackburne and Dixon. I don't think the ministry did either. I think the audit was a genuine attempt to get in and have a look at their books, their trust account etcetera and we were denied that until some 2 or 3 months later. The position on the audit was that it was voluntarily put on hold by the board pending ASIC's dealings, was it not? ---It was. So it's not a matter of denial by Blackburne and Dixon? ---Well, that may be the case. DR NEWMAN: Mr Skepper, just to clarify for myself, I think what you are saying - but I would like to confirm or otherwise - is that because ASIC did not want the 1/12/df 12 H.R. SKEPPER XN 20/6/00

audit to proceed, you had concerns and sought to find some information in relation to Rossi which would confirm or otherwise your feelings in relation to the need for an audit and therefore an input to the ministry and to the minister as to whether or not ASIC should be further approached in relation to the audit. Is that correct or am I putting the wrong assumption on it?---No. That's basically correct. MR CHANEY: That wasn't an aspect you discussed with Mr Mitchell though?---No. At the meeting, what happened?---Discussions started on the G loan with respect to the borrower and where he was. Attempts to contact him had been unsuccessful over a period of some months. Information had come to Blackburne and Dixon that he was endeavouring to refinance the loan through another broker or bank. I can't recall exactly what. They had appeared to be unsuccessful. Numerous requests for him to come in to the Blackburne and Dixon office in South Perth had been either ignored or refused and they had had very little contact with him over the past few months. During those discussions, which didn't last all that long, a young lady - a staff member presumably - came in and said that Mr T had come in and picked up his cheque. Mr Dowling said, "That's good. Can I have a copy of the cheque?" and one was provided to him. Was that the first time you ever heard Mr T's name mentioned?---It was. What then happened at the meeting?---As I say, the meeting probably didn't extend beyond 15 minutes - 10 to 15 minutes. THE CHAIRMAN: Mr Skepper, I take it you saw the copy of the cheque?---I saw it handed to Mr Dowling. Did you see how much it was?---I didn't at the time. Did you find out?---I subsequently found out in the past week or so. At the time you didn't know what it was about?---No idea. MR CHANEY: Did you ask Mr - - - THE CHAIRMAN: Did you ask Dowling?---We discussed it on the way back to town. Did he tell you it was a cheque for how much?---He didn't actually put an amount to it, no. Did you ask him, "What was all that about?" Somebody 1/13/df 13 H.R. SKEPPER XN 20/6/00

walks in and hands a cheque; he gets it and out they go. "What's going on? You came here for Mr G, to get his money"?---Yes. Here's a cheque. It's not Mr G's and you just completely ignored it?---No, I didn't ignore it. We discussed it on the way back to town. I said, "What was that about?" and he said, "That was a constituent of the minister's who had seen the minister and requested his help and we've got the cheque." I said, "Okay." You just said, "Very well" and that's it?---Well, it was of little interest to me. He had obviously achieved his agenda. But I thought you were concerned about Blackburne and Dixon and how they were going. You weren't concerned to say, "What was that cheque for?" or even "How much?" or "What was that all about"?---Well, I did to that extent but I didn't take it further. You didn't to that extent. You didn't ask how much it was for?---No, I didn't ask how much it was - no. Very well. Thank you. MR CHANEY: You didn't think that getting a bit of background on what that transaction was about would also help you glean additional information generally about Blackburne and Dixon?---It didn't occur to me at the time, no. So Dowling drove back to - - -?---The office. Did you report to Mitchell as to what had happened?---No. He was in the Eastern States. When he returned?---I would say I would have, yes. Can you recall whether you did or not?---I would have, yes. Did you also report to the minister?---Yes, I did. What did you tell each of them?---That it was most unlikely that Mr G was going to be successful in getting his loan and that whilst we were there, a Mr T had come into the office and picked his cheque up. Did the minister say anything to you about Mr T when you told him that?---He explained at that stage who he was and he asked me to ring him to confirm that he actually had picked up his cheque. Up until that time, did you know of the relationship 1/14/df 14 H.R. SKEPPER XN 20/6/00

between Mr T and the minister?---I didn't at that stage. Did Mr Dowling - perhaps you have answered this question but I take it Mr Dowling didn't tell you anything about a relationship between the minister and Mr T?---Definitely not. DR NEWMAN: Mr Skepper, just to clarify, Mr T was not the minister's father-in-law. He was his former father-in-law. Is that correct?---That's correct. So there was no actual relationship at the time that this transaction took place?---No, no relationship. In a marital break-up, it's not unusual that the parties on the other side are not necessarily considered friendly. Would that be correct?---That's the normal case, yes. So he was not necessarily doing someone a favour because he was a family member. He was no longer a family member and may not even be friendly?---You would think so. Thank you. MR CHANEY: In terms of the information you had gleaned, was the meeting a success for you?---To the extent that we knew that at least one loan was about to fall over, yes. I guess it confirmed our suspicions that there were problems in Blackburne and Dixon. The suspicion of which this formed a part or some level of confirmation was of a broad systemic problem at Blackburne and Dixon as of August 1999?---It was beginning to emerge. THE CHAIRMAN: When you rang Mr T on behalf of the minister, did you know then how much the cheque was for or did you ask Mr T?---No, I didn't. You know now it was for a substantial amount of money? ---Yes, I do. It was $100,000, I have since learnt. If you were inquiring, it's a wonder that you didn't ask somebody at the time. $100,000 - you would have said, "Wow, where did that come from?" - from this company that you were very suspicious of that was in trouble, but you didn't do so?---I have explained before. I had no knowledge of Mr T. It wasn't on my agenda. Mr Dowling appeared to be very happy with the result he got and it was of no interest to me. Thank you. DR NEWMAN: Mr Skepper, was the borrower in the case of 1/15/df 15 H.R. SKEPPER XN 20/6/00

Mr G the same borrow as in the case of Mr T? Do you know, or were they different entities?---They were different entities I understand. So the information you sought in relation to Mr G's borrower and the effect it was having on his loan did have any relationship to the fact that Mr T got paid out or Mr T's borrowing or any of his co-borrowers in that particular loan?---That's correct. THE CHAIRMAN: But at the time, at the meeting, obviously you didn't know that there were different borrowers?---I didn't, no. Once again, somebody walks in and gets a cheque and walks out again. You don't know it's a different borrower, and here is Mr G not getting a cent. That's somewhat strange?---I accept that but as I say - - - Very well. Thank you. MR BLIGHT: Do you know how the other lenders to the borrower who paid back Mr T fared?---I didn't until the evidence of Mrs Blackburne yesterday. MR CHANEY: So you reported to the minister. He told you who Mr T was and asked you to ring him?---Yes. You did that I take it?---Yes. Did you have any further involvement in relation to either of those matters subsequently?---I haven't. Did Mr Dowling in the time that you spent with him - perhaps I should go back a step. I think you may have said already, but was this the first time you had met Mr Dowling in terms of this meeting?---The first time I had met Mr Dowling. Did you have any dealings with him subsequently?---None. Did he say to you in the time that you spent with him anything about Mr Mitchell having said to him that the minister wanted Blackburne and Dixon leant on?---He said nothing of that nature at all. You say "nothing of that nature" so nothing - - -?---He said nothing at all. No other expression that would suggest some pressure was brought to bear?---Nothing at all. Thank you, Mr Skepper. I have nothing further, Mr Chairman. 1/16/df 16 H.R. SKEPPER XN 20/6/00

THE CHAIRMAN: Nothing at this stage? DR NEWMAN: Nothing further. THE CHAIRMAN: Digby, nothing at this stage? MR BLIGHT: No, only to say that I asked yesterday if you could widen - you know, let us know where you fit into the scheme of things up there in the minister's office and you have done that. There are just a couple of things. I have obtained an extract from the Government Gazette setting out the Minister for Lands, Fair Trading and Parliamentary and Electoral Affairs and the departments, statutes, votes etcetera that he administers. From my own point of view, all ministers are busy people. All minister's officers presumably are. In your position, do you cover the whole of the ministerial office processes or just those relating to Fair Trading?---No - the cross-section. So you cover Fair Trading, Parliamentary and Electoral Affairs, Lands - the lot?---Yes. For the benefit of the committee, could you give us any idea later on of the break-up of the workload between the various departments, authorities and so forth within the scope of the minister? We did hear in earlier evidence that even in relation to the eight boards that we are looking at under Fair Trading, the activities of the various boards were split up: about 80 per cent real estate, 10 to 12 per cent settlement agents, 5 per cent finance brokers and 2 or 3 per cent land valuers, so overall statistics wouldn't be a bad idea either. It would be useful, certainly from my point of view, to get an idea of the perspective of how one phone call fits into the overall scheme of things?---We will be happy to provide that. Important though it has since turned out to be. I think Bill Mitchell mentioned yesterday that Mrs Searle was one phone call out of about 30 or 40 he would have received that day and he was the policy officer in Fair Trading. Some sort of statistical overview of the activities of the minister's portfolio would be very useful for me? ---We would be very happy to provide that. MR CHANEY: That reminds me, Mr Chairman. I should have tendered the flow chart. THE CHAIRMAN: The flow chart will be exhibit 136. EXHIBIT 136 Flow chart MR CHANEY: I propose, on Mr Blight's motion, to tender through the minister the Government Gazette showing the full range of his responsibilities. 1/17/df 17 H.R. SKEPPER XN 20/6/00

THE CHAIRMAN: Thank you. Yes, Mr McKerracher? McKERRACHER, MR: Thank you, Mr Chairman. Just on that last point, Mr Skepper, would I be right in understanding that there are currently seven boards or committees under the Ministry of Fair Trading alone?---I think there are eight. And some 47 acts of parliament under that ministry alone? ---Under the Fair Trading Ministry, yes. We heard evidence yesterday of Bill Mitchell's 30-odd phone calls a day around 98-99, as I understand it. You were in the inquiry at that stage, were you?---I was, yes. If a phone call was just a run of the mill phone call, would you expect Mr Mitchell to be able to recall all the details of that discussion from that length of time?---I would hardly think so. Can I just take you back to your brief involvement in relation to this particular aspect? First of all you received a request I think from Mr Mitchell that you go along in his place to this meeting at Blackburne and Dixon?---That's correct. It was described to you as being a meeting in relation to Mr G?---Correct. Absolutely no mention of Mr T whatsoever?---None whatsoever. You had never heard of Mr T at that stage?---I had not. Not the slightest hint of leaning on Blackburne and Dixon in any way whatsoever?---Never mentioned to me. Nor any suggestion of mentioning that the minister was interested in the matter?---Not at all. You proceed to the meeting and on your way to the meeting you were picked up by Mr Dowling?---I was. You hadn't met him before?---I hadn't met him before. You stop and have a cup of coffee?---Yes. You talk about matters generally, including his background?---Yes. Did you mention the G matter to you?---We discussed it briefly I believe. 1/18/df 18 H.R. SKEPPER XXN 20/6/00

Did he mention that there was security in relation to a hotel in relation to the G matter?---I think it was a tavern in the north-west from memory. Prior to your attendance at the meeting and through your discussions with Mr Mitchell, had the tavern been mentioned at that stage?---No. I believe not. Did you know that Mr G was a constituent of the minister when you attended the meeting?---I believe I did. Looking at the matter now, would it also be a logical matter for the minister to retain involvement with due to his expertise in the hotel industry - in light of the fact that there was a tavern security in relation to the G advance?---If I was Mr G, I would have asked the same questions of the minister. You know of course that although this inquiry is talking about the events stopping after that meeting, the minister has continued for a period of about 12 months to remain involved in assisting Mr G in relation to resolution of his matters, has he not?---Subsequently I understand that to be true, yes. You also know that Mr G is a constituent of the minister? ---I do. And there's a particular interest in relation to running taverns or hotels?---Yes, that's true. Does anything about that surprise you at all, that the minister would remain involved with Mr G?---Not at all. When you attended the meeting, you still knew nothing at all of Mr T until the fact that his cheque was to be collected was mentioned in the course of the meeting. Is that right?---The first part of the question, no. You're right. I didn't know Mr T. The second part of the question is that I think from memory a young lady interrupted the meeting and said Mr T had been in to collect his cheque. Not at the beginning of the meeting necessarily?---It was shortly after it started, from memory. It was not suggested by Mr Dowling at the beginning of the meeting but, rather, in the course of the meeting? ---In the course of the meeting. As Mr Dowling said, he was there to try and get the money back for each of these people. Is that right?---That's my understanding subsequently, yes. That was the whole purpose of being there, to get the money back if he could?---Exactly, yes. 1/19/df 19 H.R. SKEPPER XXN 20/6/00

Clearly the other matter of which you knew nothing - that is, Mr T's matter - had a successful outcome, whereas Mr G's matter was to be ongoing?---Exactly. As you look at the matters now with the knowledge you have now, would it be fair to say that Mr G's loan and its set-up was a deal more complex than the T loan? ---Definitely. Now, we have also heard that Mrs Blackburne didn't hear a word of the involvement of the minister in any shape or form prior to or at this meeting. Did she mention anything at all about the minister at the meeting?---I believe not. Was there any suggestion of surprise that the T cheque had been paid back, along with all the other borrowers in that loan who wanted their money back?---No. It seemed perfectly normal?---Yes. Mr Dowling didn't even seem surprised that he got the cheque or a copy of the cheque. Did Mr Dowling say anything about - "Well, what about the other people in this loan? Have they got their money back"?---He didn't raise the question. Was Mr Dowling handed in your presence some paperwork indicating the resolution of the matter in terms of repayment of the loans?---That's my understanding. You now know that it's not just Mr T who got his money back on that occasion but everyone in that loan who wanted their money back?---That's the evidence of yesterday, yes. Your approach at this meeting was to see if you could pick up information, if it emerged, but to sit silently as an observer. Is that right?---Precisely. Did you think it was appropriate for you as a representative from the minister's office to intervene or say anything or meddle with Mr Dowling's inquiries in this matter?---I thought it would be most inappropriate if I did. You seem to be criticised either way - criticised for not inquiring and criticised if you do?---Yes, exactly. Have you got any basis at all to believe that at this point of time after the marital dispute the minister was the slightest bit friendly with Mr T personally?---I don't have a great knowledge of it but I would think there's not a great relationship there at all. 1/20/df 20 H.R. SKEPPER XXN 20/6/00

Mr T was of course a constituent in the minister's electorate, wasn't he?---Exactly. He was. Who was treated in precisely the same way as Mr G?---As any other constituent, yes. When you reported back to Mr Mitchell after the meeting, was it just a comment in passing or was it a detailed conference about what had transpired at the meeting?---It was just a passing comment. I think you have told us what you said and you reported in similar terms to the minister, did you?---I did. Did you phone Mr T?---Subsequently, yes. Did you have any knowledge prior to this time of there being other borrowers in the advance with which Mr T was concerned?---I didn't know that there were. Did you have any basis to make an inquiry as to whether there were other borrowers who might also be affected by this transaction?---It didn't occur to me, no. Did Mr T or any other person after the meeting suggest to you that there were other borrowers as well?---No, he did not. You were asked by the chairman questions about your suspicions about the company. Can I make this quite clear? At this stage did you have some suspicions about Blackburne and Dixon?---We did. You obviously didn't have any suspicions about the borrower in relation to T because you didn't know anything whatsoever about that transaction?---I didn't know the borrower. You didn't even know there was a transaction until the cheque was produced?---No. With all the questions you have been asked and looking at the matter in hindsight, do you think that there was the slightest impropriety in any aspect of this matter whatsoever?---I don't believe there is. Thank you, Mr Chairman. THE CHAIRMAN: Thank you, Mr McKerracher. MR BEECH: I have no cross-examination. THE CHAIRMAN: Mr Hooker? MR HOOKER: I don't cross-examine, Mr Chairman. 1/21/df 21 H.R. SKEPPER XXN 20/6/00

THE CHAIRMAN: Thank you very much indeed, Mr Skepper.

(THE WITNESS WITHDREW) THE CHAIRMAN: We will adjourn.

____________________ 1/22/df 22 H.R. SKEPPER XXN 20/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Mr Chairman, I call Douglas Shave. DOUGLAS JAMES SHAVE sworn: THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. Mr Shave, you're the minister for lands, fair trading and parliamentary and electoral affairs?---I am. How long have you held those portfolios?---Since January 1997. Prior to that were you in the ministry?---I was for the first 6 months of 1993. Then you had a break until January 1997?---I did. And came back with these portfolios?---The portfolios I held in 1993 were different to 1997. Yes, and in particular you weren't then the minister for fair trading?---No. I will just ask you to look at this document, thanks. It's an extract from the Government Gazette of 13 April this year. That is a list of the acts which fall within the responsibility of the different portfolios which you hold?---That's correct, yes. Are you able to say to what extent your workload is divided amongst the different portfolios?---The parliamentary and electoral affairs is a minor workload area. The lands area and the fair trading area are very extensive portfolios. Under the fair trading area there are a number of boards and committees set up, I think. Do you know what that number is?---There are seven boards, five committees and it involves 47 different acts. In terms of the division - and this may be something which fluctuates from week to week, I suppose, but the division of workload between fair trading issues and lands issues, are you able to apportion that workload? ---You would probably apportion it to - well, you could apportion it to 70 per cent fair trading, 25 per cent lands and 5 per cent parliamentary and electoral affairs. Has that been the case throughout the time that you have held the portfolio or has that mix changed over time? ---I'm talking just at the present time. Of course, with the finance brokers issue there has been a lot more work 2/1/rmo 23 D.J. SHAVE XN 20/6/00

in the fair trading portfolio, but initially in probably the first 12 months I would suggest it would probably be a 55, 60, 35 break-up, but still 5 per cent for parliamentary and electoral affairs. Mr Chairman, I tender the extract from the Government Gazette WA of 13 April 2000. THE CHAIRMAN: Yes, exhibit 137. EXHIBIT 137 Extract Government Gazette WA, 13 April

2000 MR CHANEY: Mr Shave, I have asked other witnesses and I will ask you the same questions, some questions about the way your ministerial office is structured and how you go about dealing with correspondence which comes in to you as minister. Perhaps before I ask you that, is there any difference in the procedures adopted in relation to correspondence in respect of one portfolio from another or is it a standard sort of process?---No, it's generally a standard process. What is that process?---If letters are written directly to me as the minister, they're first vetted by the chief executive in my ministry. I then get a photostat copy of any letters that come in perhaps a day or 2 days later. They are generally referred down to the ministry for response, because obviously a lot of them are involved with ongoing activities, and sometimes there are requests for appointments and then we deal with those requests on a one-by-one basis depending who is wanting the appointment and for what reason. So you actually receive a photocopy of all correspondence that comes into the office?---To the ministerial office, yes. To the ministerial office?---Yes, so every 3 or 4 days they give me a folder about that thick with probably 100 or 200 letters on lands issues, people wanting leases, native title issues, fair trading issues, whether it's car dealers, finance brokers, real estate agents - every area. For the transcript, you have just indicated, what, about 15 to 20 centimetres?---Yes. That's my estimate of your gesture?---Yes. How do you handle that in terms of dealing with it? Do you have the opportunity to actually go through that correspondence on a regular basis?---Well, what I usually do with the initial letter that comes through, I will thumb through the letters that have been received, the photocopy, and the originals will be sent by my chief of 2/2/rmo 24 D.J. SHAVE XN 20/6/00

staff down to the fair trading office and then when the answers come back in that they have prepared for me there is usually a precis of the issue, what's being done, and I will scan that and then I will sign the letter. If I scan the precis that's given to me and I have a particular concern regarding it, then I will go through on a more thorough basis with regard to the actual letter that I send, and the reason I say that, with some letters that I send there may be a duplication of 500 or 1000 letters. If I'm writing, for instance, to investors with Grubb or Global Finance there will be 500 letters which are duplicated. I sign them all. No letters get sent out from my office without myself signing them, and of course if they're duplications, as I scan the letter that I'm sending I will check the address and the person I'm sending it to and further down in the letter I like to have a citation in there referring to the person. So if Mrs Jones has written to me the letter will be addressed to Mrs Jones, then further down in the letter I will say, "Mrs Jones, if we can assist you further please contact my office," or whatever. So I check all the letters, but if it is a standard letter going to 500 people I will vet the proposed letter that they have prepared for me. If I'm not happy with it, if I think it's too blunt, informal or needs corrections, I will then make the corrections on those letters and send them back to the Ministry of Fair Trading. How much of your average week is consumed in responding to correspondence?---When you say "responding to the correspondence", in terms of the physical signing of the letters you're probably looking at on an average week half an hour to an hour per day, but actually dealing with an individual issue you might devote 1 hour to one particular issue. So it just depends on the nature of the correspondence. But can you put a figure on what an average week would involve in terms of dealing with that aspect of your work?---Which aspect? With the signing of mail, outgoing correspondence? ---Well, I suppose the outgoing correspondence you would probably spend an hour to 2 hours a day on the signing and that includes the vetting and the reading and calling your lands people in or your fair trading people in and having a discussion, "I'm not happy with this letter. Would you please send it back and change it." So probably an hour to 2 hours a day. Looking at the finance brokers area of your activities in particular, when you took over the portfolio in January 1997 were you aware of concerns within the industry and the ministry as to the effectiveness of the Finance Brokers Control Act?---No, because I had just come into the portfolio and what you need to do, of course, is to - 2/3/rmo 25 D.J. SHAVE XN 20/6/00

like anything, if you take a business over you need to make an analysis of the way the ministry is being run, try to get a feel for the capabilities of the senior people, whether it's effective or not, and that takes some time. Obviously there were, as you have indicated from exhibit 137, a large number of areas to become familiar with. In respect to the finance brokers area in particular, over what period did you start to become familiar with issues within the industry?---What happened, in mid 98, I think - yes, about mid 98, there were a couple of complaints, a Mr Lenz and a Mrs Searle, I think, wrote about that time, and people were commenting - there was some comment in parliament. I think it was 12 November, either 98 or 99 - 98 it was - that Alannah MacTiernan - either 12 October or 12 November 98 - that Alannah MacTiernan made a speech in parliament about finance brokers and said there was a group of some 30 or 60 investors that were having difficulty. So up until that time there had been a couple of complaints made by Lenz and by Searle. They had been referred to Bill Mitchell and when Alannah made her comments in parliament the department was actively looking at the first of the finance brokers with whom people were going to experience difficulty, and that was Global Finance. In parliament last week Alannah said that she had raised it before that date with a question in parliament. Whether there had been the odd question or not, I'm not sure about that, but in her speech, in her comments, she made the point that she was going to let members of the parliament be made aware of the issue of the finance broking situation and what she thought about it and the particular matters that had been brought to her attention. Those issues raised in that speech and alluded to in the complaints in relation to Searle and Lenz were problems of loans going bad with brokers?---That's right. Which have now escalated?---That's correct, yes. I'm interested in the operation generally of the act prior to that and the state of the development of concerns about the efficacy of the act generally, even putting aside what now has transpired. Perhaps it might assist you if I ask you about the industry reference group?---Yes. It published an interim report in July 1997?---Yes. At the time you came to the portfolio were you advised of the existence of the industry reference group?---I can't say specifically that I was, but I would have been advised. It would be the normal practice of the chief executive of the Ministry of Fair Trading to advise me that there was a review taking place and at that time 2/4/rmo 26 D.J. SHAVE XN 20/6/00

there was a review of all of the acts in terms of the national competition policy, so that I would have been aware at that time that they were looking at making recommendations and having a view on certain issues. So what the reference groups normally do is come out with a discussion paper. That happened in this case, and then people would be asked to make submissions and they would come out with a final recommendation to the government. At the time the interim report came out was it drawn to your attention for review?---As I said, it would have been. I would have, I'm sure, been given a copy of the actual interim report. Yes, if the witness could be shown that document. I seem to have lost my note of the exhibit number but it's found in the context of Mrs Brazier's evidence - probably volume 6. It's exhibit 107. It may be some time since you have seen this document, I appreciate, Mr Shave? ---Yes. Feel free if you need to, as I ask you questions - if you feel you need to familiarise yourself with it, then take the time to do so. There are a couple of observations made in the interim report. It's dated, you will see on the front page, July 1997?---Yes. Can we take it that at some stage around that time it would have been drawn to your attention?---Yes. If you turn to page 22, after setting out an analysis in the earlier portions of the document as to the finance brokers industry generally, the participants, activities and then the history and objectives of the act - - -? ---You're on page 22? Well, I'm not yet but I'm getting there. The earlier stages set out the background, do you recall that, of the act and the industry generally, how it operates?---Well, I know basically how it operates, yes. Yes. Perhaps it might assist you just to walk through the document quickly?---Yes. If you go to page 7 you will see reference there to the key participants in the industry, over the page, key activities, and then there's reference on page 9 to the history of the act and referring to at the top of page 10 the recommendation of the Law Reform Commission that persons who in the course of their business negotiate loans of money should be subject to statutory control. Generally did you appreciate the purpose of the act to be to protect those who lent money through finance brokers by proposing some degree of statutory control over their activities?---That's correct. 2/5/rmo 27 D.J. SHAVE XN 20/6/00

Then the document goes through - in section 4.3 on page 11, Current Impact of Statutory Intervention on the Industry. A lot of this is directed necessarily to the question of competition review, is it not?---It is. The shortcomings of regulatory regime are referred to on page 12?---Yes. Then there are some precontractual issues at page 13:

Lenders, investors. There are reasons other than defalcation for loss of investors' money. Lack of knowledge about terms and conditions of loans and inadequate or over-valued securities for loans have resulted in losses of money?

---Yes. So was that a matter that you were sort of conscious of at this stage as to the sort of background and objects of the legislation?---Well, it's always an area that I have been familiar with because of my former involvement in the business sector. Those issues such as valuations and security and issues such as that is something that I have been conscious of. Yes, and readily appreciate the risk that investors face of improper practices by people in this industry?---Yes. Probably that covers the point I wanted to draw your attention to at page 22, but if you go through to page 32 there's a section, "Appropriate post-contractual protection for consumers" and at the top of page 33:

Misrepresentation of the value of land offered as security resulting in inadequate security in the event of foreclosure and defalcations in the course of management of private mortgages were recognised by the reference group as practices demanding post-contractual safeguards. The reference group was told that finance brokers often make interest payments on time whether or not the payment has been received from the borrower.

Were those sorts of practices and the recognised need for post-contractual safeguards something that you were mindful of in the context of - - -?---It's something I would have supported. When I say that, I certainly wouldn't support a broker using someone else's money to pay interest or in fact paying it out of their own pocket. The area I would have been particularly concerned with was the initial information supplied to the borrower and particularly the area of valuation. If the borrower is a dishonest person and the valuation is solid, then there is protection through a process which may cause people to have to employ legal assistance, but 2/6/rmo 28 D.J. SHAVE XN 20/6/00

providing the valuation is solid, in general terms the people have got protection, providing, of course, they have been registered on the mortgage in the correct manner. So whilst that issue of post-contractual obligation is an area of importance, the first and the most important area in my mind was the information supplied by the broker and the valuation that was done, because if all else fails, if the value is okay and the property can be sold over a period of time, in general terms or in most instances the borrower can obtain their money - sorry, the lender can get their money back. So certainly that is an area of concern that you have raised that is appropriate, but it's not, as I see, the key issue in terms of someone securing or providing finance in a mortgage loan. There is reference further down on page 33 to the fact that the current finance brokers' bond - this is in the third-last paragraph:

The current finance brokers' bond set at $50,000 is totally inadequate as a safety net for clients' losses.

Was that an issue that you addressed your mind to back in 1997, the question of consumer protection through a bond or indemnity insurance?---At that point in time the problem hadn't arisen in terms of people losing money or being defrauded, but obviously it was an issue that needed to be addressed. So just again to understand the way things have developed over the last few years and your own role in relation to it, can we take it that this document alerted you to or reconfirmed things you already knew about the elements of risk in the industry and some concerns about the adequacy of the statutory protections?---When I read this document I would have been aware that there was that area of concern, yes. Thank you. Now, also around that time, in early August 1997, according to the minutes of a meeting of the Finance Brokers Supervisory Board - and perhaps I can ask you to look at this document. That's not a meeting at which you were present, Mr Shave, obviously, but on the second page of the photocopy I have given you - the front page is really just to identify the particular meeting and who was present, there's reference, you will see, in item 4.2 to a meeting with the minister which was reported on by the chairman, the meeting having been on 5 August 1997. If you might have a look at that and see whether you can recall the meeting, Mr Shave?---I don't recall the meeting - and I have met a number of times with the board and with the chairman, but I don't specifically recall that meeting. 2/7/rmo 29 D.J. SHAVE XN 20/6/00

Perhaps the subject matter - it seems that the meeting related to the question of exceptions under section 5(2). We have heard a great deal of evidence about mortgage originators and the granting of exceptions by the minister which is provided for under the act which was of concern to the board. Do you remember that being an issue which you discussed?---No, I don't remember discussing that at all. When I say "at all", if it was discussed, it was discussed. I don't recollect referring to section 5(2). When the board met with me they would have a general overview of what they felt should happen in various areas and I would have the chief executive of the department there and if they wanted legislative changes or if they believed something should be done in regard to the legality in whatever area, I would say to the chief executive at that meeting, "Would you please meet with your senior people, would you discuss this issue and would you please come back with a recommendation to me?" and that's the way the process would work. In respect to the Finance Brokers Supervisory Board you have said that you met with the chairman or the board on a number of occasions?---Yes. How often during the duration of your period as minister would that have - - -?---Yes, I would suggest probably every 6 months they would come. The chairs of most boards, the department would endeavour to ensure that we had contact with them as the minister on say a 6-monthly basis and the department chief and his staff would meet on a far more regular basis. I would meet with my CEOs once a week and they would update me in regard to meetings or concerns or recommendations that they may have. So the three heads - the Electoral Commission area is different. It's mainly the - we have a set meeting with the CEOs of the Ministry of Fair Trading and lands. We try to have a meeting each week. If an issue comes up - some of the work being done on behalf of the board was done, of course, by ministry staff, so you had this integration between the Ministry of Fair Trading and the board on a day-by-day basis. So when issues such as a section of the act that you have mentioned there came up, that I would have expected would have been discussed. The registrar of the board was in effect seconded from the Ministry of Fair Trading, so if there were issues related to the board the registrar would go back to his superior, as I understand, he would discuss it and then the Fair Trading ministry would have meetings to determine what recommendations they would make to the minister. In the context of those meetings and in particular looking at say the first 18 months of your period as minister, up until the middle of 1998, are you able to recall what issues, if any, were being raised through the 2/8/rmo 30 D.J. SHAVE XN 20/6/00

board or from the board either through the ministry or direct from the board to you - through the ministry or direct to you?---Yes. To my record there was nothing of any issues that - we're talking up until 1998? Yes. The middle of 1998, yes?---Mid 1998. Yes, there may have been a number of issues raised but not to my knowledge anything of where the board had an urgent issue that it felt it needed to address, and if they had done a decision would have been made. The chief executive would have come to me and said, "This is an issue that we have got to address. You have to make a decision, minister, one way or the other on this. This is our recommendation. These are the meetings. This is the philosophy behind it or the reason why it should happen," and all of that would be on the record and Mr Walker, who is going to give evidence later on, would have a record of all of those meetings. He should have minutes of most meetings that he had with myself. Yes, but from your own independent recollection you don't recall any particular issues that were being thrown up for your consideration at that time?---At that time in regard to finance brokers there weren't any major issues raised with me. My primary concern at that point of time and when I became the minister in 1997 was that they had had an acting head in the Ministry of Fair Trading for about 3 or 4 years - in fact two, and they were only in an acting capacity. There was Mr Bodycoat there and he was also in an acting capacity. I was concerned that there needed to be a stable situation, so whilst in the first half of 97 I had an acting - or most of 97 I had an acting person in there, I was very keen to get someone in on a permanent basis, because I didn't believe that having an acting CEO was a stable situation. In addition to that, I thought it was opportune to have a review of the positions in the department. There was a major restructuring that took place in 1998. I think there were 14 positions thrown open and eight new appointees were put into the senior management area. What was the genesis of that reorganisation? What brought it about?---It was a decision I made as the minister. I was concerned that there was a need to introduce some stability, if I can use that term, in the Ministry of Fair Trading. I don't think that it does any harm from time to time to have reviews of people's capability and I think it's a benefit. So with that in mind we went through a process of a restructure and the number of senior management under the CEO was reduced from five to four and three new senior management people came in. Was it born of any dissatisfaction with the efficiency and effectiveness of the ministry at that time?---I had a view that the people in the ministry were working to 2/9/rmo 31 D.J. SHAVE XN 20/6/00

their capacity. I also understood the importance of the areas that they were in control of, and I suppose you could say that it was a precautionary decision on my part to do an overview of the effectiveness of the people involved, but I certainly - a lot of the people had been there for a long time and experience is very, very important, but sometimes it's important also to have some new blood in an organisation, if I can use that term, and I probably had that perception at the time, that the senior level of management were a group of people that had been there for a long time and perhaps we needed some younger people and some different faces in the ministry. Now, if we can go back to the report to the Finance Brokers Supervisory Board of the meeting with you on 5 August 97, accepting you have got no independent recollection of the meeting, you will just see that it records:

The chairman indicated that the meeting was most productive. He said the minister understood the board's point of view in relation to exceptions under section 5(2) and that the section of the act was not meant to provide a means of circumventing the requirement to obtaining a licence -

and that section - I appreciate you have got 47 acts in this portfolio alone and that section is a provision which allows the minister to grant exceptions from the application of the act and in particular the requirement to be registered. The evidence we have had to date is that it relates to people who are known as mortgage originators who had emerged during the nineties effectively introducing people to financial institutions for mortgage purposes. So that, I think, in the context of the evidence so far is the issue about which discussion occurs there:

The chairman advised it was made quite clear to the minister the board could not comment on each application before the minister without interviewing the applicant.

Do you have any recollection of that issue at all?---Not of that issue, but I do - with the chairman of the Finance Brokers Board, he was a lawyer by training, and the clear impression that I got from him in discussions with myself was that he was in control of what he was doing and that it was appropriate that the board under the act had the right to act independently of the minister and that's how the statute was. I didn't have a difficulty with that. I had a concern with if I wasn't happy with the way things were going how I would approach that matter and there is some correspondence between myself and the chairman on a number of - or on one matter in particular where I did urge him to act urgently on an 2/10/rmo 32 D.J. SHAVE XN 20/6/00

issue, but I still couched the letter in a nice way to encourage him to proceed with what I felt needed to be done. If I had been running my own company outside of the government I probably would have been more direct in my approach. What was that issue?---It was regarding the indemnity insurance issue. When was that?---I think the letters were written in 99. I wrote a series of about three letters in relation to indemnity insurance There seemed to be reluctance on the part of the board to support the indemnity insurance. I think I wrote three letters over about a 4-month period and to the best of my knowledge I didn't get a response to the first couple of letters. I think the third letter I asked for the matter to be dealt with urgently and in a nice way I suggested if it couldn't be done at a board level that perhaps it would have to be done on a legislative basis. I think that would indicate to anyone reading the letter that there were two options: the board either introduced the indemnity insurance or I was going to legislate to see that it was introduced. Counsel has just handed me three letters, the first of which bears the date 28 May 1999, the second, 2 July 99 and the third 12 August 99. Just bear with me for a moment, Mr Chairman, while I have a look at these. Perhaps if I just show you those letters. Is that the correspondence you have just been referring to?---Yes. The date isn't on one of these letters, but they are the three letters. It's obscured at the bottom but it bears a date 28 May on a stamp?---That's it. Yes, that's the first letter. The first one?---Yes. Mr Chairman, I tender the three letters from the - - - THE CHAIRMAN: Sorry, just a moment. Before you do that, did you tender the extract from the Government Gazette? MR CHANEY: Yes, I think I did. THE CHAIRMAN: That's 137, that one. Right. MR CHANEY: Yes. THE CHAIRMAN: Very well. Thank you. MR CHANEY: The three letters from the minister to Mr Urquhart dated respectively 28 May 99, 2 July 99 and 13 August 99, and we will arrange for copies to be made available. 2/11/rmo 33 D.J. SHAVE XN 20/6/00

THE CHAIRMAN: Yes. Those three letters will be 138. EXHIBIT 138 Three letters, minister to Mr Urquhart,

dated 28/5/99, 2/7/99 and 13/8/99 MR CHANEY: Those requests arose, I take it, as a result of things which were emerging in the industry and some need for some urgent action?---Yes, and the issue that some people had been pursuing was a fidelity fund. There hadn't been a decision made with this fidelity fund. It had been under consideration, I think, for some 15 years before I became the minister, and a succession of ministers hadn't made a decision to do anything about this area of protection. I had some reservations with the fidelity fund. If you had 100 brokers out there and you had a fee of say $50,000 that those 100 brokers would have put into a bond situation - or $100,000. If you had $10,000,000 there in this fidelity fund it would only take one or two brokers with dubious practices to wipe the fund out and my view was that the indemnity insurance was a much better process in terms of protecting all of the borrowers. Now, that was something - that was the view I expressed to the ministry on a number of occasions, that's what I expressed in the letter to the board, and at the end of the day, as I understand it, the board supported the position I put to them and in fact are looking at and have been getting quotes for indemnity insurance and now agreeing to that position. Yes, we may come back to these letters. This in fact starts with - it's the follow up to a cabinet endorsement of the industry reference group recommendations. That's the genesis of the correspondence, I think. Is that right?---Yes. We will deal with that later on. Going back to the meeting on 5 August 97, there's reference to the fact in the report given by Mr Urquhart to the board that Mr Buchholz also attended the meeting with the minister:

Discussed the matter. Further advised the board that approvals for exceptions granted in future will be conditional on evidence of professional indemnity insurance being lodged with the ministry.

So at that stage professional indemnity insurance or the need for it was being discussed at least in the context of the exceptions to the act. Do you recall that?---As I say, I don't recall that actual meeting. All right. The second thing is:

The minister recognises and understands the difficulties the board has in carrying out its statutory functions under a piece of legislation

2/12/rmo 34 D.J. SHAVE XN 20/6/00

which is outdated and ineffective in dealing with current market practices.

Third: The minister has instructed the ministry to give a higher priority to review of the regulation of the industry.

Do you remember discussing at a meeting with the chairman and Mr Buchholz those issues?---No, but I may have discussed those issues with him. I don't recognise or remember talking about it being outdated and ineffective legislation. He may have expressed the view that changes were necessary. So that wasn't the impression you had in mid 1997?---No. The evidence earlier in the inquiry - a long time ago now - was to the effect that from the MIFAA and the Institute of Finance Brokers was that they had been making representations, those organisations, to government and in part through the board, over a period of - it came back, I think from memory, to about 1983, seeking changes to the act on the basis that it was precisely what's expressed here, outdated and ineffective. Were representations to that effect made to you in the early period of your time as a minister?---No, they told me after the finance brokers business had - when the difficulties with Grubb and Global had emerged. A group of brokers came to me and said, "You know, we have been trying to get changes to the act for a long period of time and what you really need to do is look at" - I mean, I have read these minutes of the board here, but you really need to look at the letters that Mr Urquhart may or may not have written to me in regard to these matters to ascertain the importance that he put on those particular issues, because it's one thing for them to comment that they made some proposals in a general discussion with me, but the appropriate issues should have been put on paper if that was a concern to them, and I guess that when Mr Walker comes along they will have a record of any correspondence they have received from Mr Urquhart and any replies they gave in any correspondence that I have received. So again, and accepting that reconstructing events over 3 years is a difficult task, but in terms of your independent recollection, was it the case that at no time prior to this meeting with some brokers who came after the bubble had burst, so to speak - you had not been aware of concerns in the industry of the inadequacy of the act?---Well, it depends the date that the actual brokers came to see me. I think that they came to see me, in my view, to tell me that basically the industry was made up of a group of nice people and that members of 2/13/rmo 35 D.J. SHAVE XN 20/6/00

their association weren't the particular problem in the industry and that they had been trying to ensure that people behaved in a proper manner and that it was only 5 per cent of the industry that was creating the problem. When they came to see me that would have been well advanced into 1999. I listened to their view and their advice. Now, prior to that meeting I would have of course been dealing with issues of the indemnity insurance necessity with the issue of the change of the code of conduct. There was a raft of things that I put through cabinet in March of 99 as a result of those reviews that took place prior to that. So it would be fair to say that prior to these people coming to see me, which probably was towards the middle of 99, late 99, that I was well aware of some of the areas of concern, because the department had actually made recommendations to me of how the legislation should be changed and I took those recommendations to cabinet. Yes. In fact that was through the industry reference group which published its final report in December 98? ---Yes. It actually recommended abolition of the act?---Yes. That's as your letter, the exhibit just tendered, demonstrates something which cabinet adopted a recommendation to pursue. The industry reference group had, had it not, concluded that the Finance Brokers Control Act was ineffective?---Yes. So there was a position of which you were aware as of at least the end of 1998 of an act which was ineffective in controlling modern day practices?---Yes, and part of the reason for that was with the change over of banking - you know, interstate banking, these pooled mortgages really only started to explode, if I can use that term - that's not to say go bad, but to expand in 92, 93, 94 when interest rates dropped from 10 and 11 per cent when Rothwells and - - - Teachers Credit?--- - - - Teachers Credit went, then it appeared what happened was that a number of financial advisers and accountants recommended to people around about 94, 95 that they could invest their money safely with these finance brokers as pooled mortgages. So events simply outstripped the act, as it were, in terms of - - -?---Well, the act, if action had been taken in terms of - if the department had been aware that there was a major problem there the act probably could have resolved some of the issues but not all of the issues. Particularly in the area of suspending or taking away a valuer's licence or a broker's licence, once you take away the licence you effectively incapacitate them in terms of their ability to write up new loans. So the old 2/14/rmo 36 D.J. SHAVE XN 20/6/00

act, while it had deficiencies, it had the ability, in my view, to allow people, if they were aware of activities that were improper or inappropriate, to take appropriate action. So I don't think people can blame it totally on the act. I think that it wasn't just the act that was the problem of the finance-broking issue. One of the problems that has emerged from evidence before this inquiry is the consequences of a process through which complaints were dealt with, which the evidence is if they were dealt with very quickly then they might be resolved in 6 months and normally it might stretch anything from there out to 2 years. So that the proposition arises that in terms of dealing with urgent issues the procedures at least adopted in enforcing the act were inadequate to respond in a timely way. Do you have any comment in relation to that issue?---Yes. Of course, it depends a lot on the complexity of the actual issue. Some matters can be resolved just by conciliation. If someone says they're not getting their interest payments I would expect a phone call or a visit from an inspector would resolve those issues on a conciliatory basis. If it is a matter of an allegation that a broker - or let's say the valuer has inflated a valuation, as occurred in some of these cases, that's a more difficult thing to prove, and taking action against someone to actually be able to substantiate that they have falsified a valuation is not an easy process. The people will use the legal system. So in terms of the department responding quickly, they were in a situation where everyone has the right of justice and if there was an allegation about someone falsifying a valuation, then that would be a more difficult thing to substantiate, and I understand that. The brokers, if a broker, for instance, has taken a secret commission, that again - and there's a couple of those matters that will come up before the fraud squad and are before the fraud squad at the moment. If you had that situation, depending on how quickly people are prepared to give evidence, you might resolve it quickly, you might resolve it in 2 months, you might resolve it in 2 years. It just depends on the position that the people take in relation to it. So some matters - I have heard this term "fast-tracking". Some matters can be fast-tracked because people resolve them. If a broker, for instance, hasn't paid someone their interest and they get a phone call from the ministry saying, "We would like to come and discuss this matter with you," they might be inclined to resolve that by paying the interest. Yes, but in terms of dealing with serious underlying problems, assuming an uncooperative broker or valuer, uncooperative perhaps because they're engaged in at best negligent, more likely criminal behaviour, the problem exists of being able to dispose of those issues in a 2/15/rmo 37 D.J. SHAVE XN 20/6/00

timely way. Was that something - - -?---That's always going to be a problem. When you have got that litigation I wouldn't have thought that if someone was - unless you could lay it out in front of their solicitors that it was a straight-out fraud, if there was an area of doubt in terms of the valuation or what had transpired, it wouldn't be - and I'm not a legal person, but from my observations as a business person, someone could delay a resolution of that for 12 months, 18 months, perhaps even getting to court. If they just ask their solicitors to delay it as long as possible they would achieve that by delaying it and using the legal system. Accepting that what amounts in the end to rights of natural justice which have to be extended, was that ever a concern to you, that, "Look, really the system is a problem because we, the department, can't get in and simply shut people down quickly and we have to find some other way of achieving that end"?---Yes, that is a problem and I think 97, 98, we were working extensively with the federal legislators to improve the corporate regulations, because at the end of the day a lot of these finance-broking issues - and I'm not looking to deflect responsibility, because there was a state licensing system, but effectively the federal Corporations Law is far more powerful than the state laws and legislation that was passed through the federal parliament in 98 was moved to address some of these issues, to try and give more teeth to the people in an effort to control the activities of people who might behave in a fraudulent. So that legislation was effective - there was a transition period, I think, between June 98 and 15 December 99, as I recollect. You're talking of the Managed Investments Act?---Yes, and so there was always that concern, and if this concern was raised in that meeting by the chairman of the inability of the state legislation to control the act, if that was his view in August of 97, the officers and the legal people down at the Ministry of Fair Trading would have been aware that they were pro-actively working with the federal people to make sure that the encompassing legislation was going to be as strong as possible. So I'm sure if you ask the questions of the CEO of the Ministry of Fair Trading when he gives evidence, he will give you advice of meetings that they held with the federal people between say middle of 97 or 98 and the process that took place to formulate that legislation, because it was done in cooperation with all of the state bodies. In the context of that happening and the industry reference group working through its report through 97 and 98, was it the case that the writing was on the wall for the Finance Brokers Control Act, in the sense that the 2/16/rmo 38 D.J. SHAVE XN 20/6/00

ultimate recommendation, which was for its repeal, was really something that everybody was expecting to come out of those inquiries?---My observation, having read all of the advice and the submissions that were made, would be, yes, the recommendation was that it should be repealed, and it's my view that that's in fact what would have happened. Yes, and indeed it was fairly apparent to those working on the industry reference group that that was the direction that they were heading. Would that be a fair comment from your perspective?---Yes, that's a fair comment, and in fact they were heading that way before the Global Finance and Grubb Finance matters exploded. Yes, and that fact, coupled with the fact that, we have heard again evidence, within the ministry the finance brokers control activities were a relatively minor proportion of the overall activities of the ministry. You would accept that proposition, I take it, from your knowledge of the ministry?---That's my understanding. Towards the end of 98, they had, I think, maybe one or two complaints on Global, and of course what happened in February of 99, ASIC had the directors of Global agree to a voluntary administrator going in there, and of course when that became public a lot of the people who had remained silent up until that time, because for whatever reason they just felt that everything was all right, we started getting a flood of people putting complaints in and asking for us to look into issues. So you had the voluntary administration of Global in February of 99 and then in May of 99, as I recollect - it may be July but I'm pretty sure it was May - the liquidators liquidated the company. Yes, but even historically, going back before these problems, the fact was that the finance brokers aspects within the ministry comprised, compared to say real estate agents and settlement agents, a small proportion of the ministry's activities?---That's the advice they were giving me. I suppose in 96 - or, sorry, 97, because I wasn't the minister till January 97, I probably received one or two or a few more inquiries a month and I would expect that there were more issues raised up until August, September of 98 in relation to the activities of real estate brokers - someone overcharging on a commission and writing to me as the minister asking for an investigation. There was probably more activity - and that's understandable, because there's a lot more real estate transactions out there than finance-broking transactions. There's a lot more real estate agents as well?---Yes. 2/17/rmo 39 D.J. SHAVE XN 20/6/00

Were you aware of the restructure which had taken place, I think, from memory, during 1996, where the real estate board had become self-funding, utilising its own funds. Did you know about that transition?---I didn't have detail on that, but as I understand it, there was about - I think there's about 22 or 23 million dollars in a trust account, which is the interest earned off real estate transactions, and at that stage I was still a back bencher and I assume that something went to cabinet where cabinet made a decision that it was appropriate for the industry to be funded as a result of that money. Yes, the effect of the evidence given from a number of ministry officers around that time was that previously real estate agents, settlement agents, finance brokers, had all been within the same directorate, under the same management, but when the real estate agents became self-funding, utilising that trust account, finance brokers were left effectively homeless and were put in with the REVS scheme and certain other unrelated activities. Were you aware of that sort of homelessness, the poor relation status of finance brokers during that period?---Well, no-one expressed that to me. They were still being funded by the government. The board was being funded by the government, investigators were still being provided by the government. I think that perhaps prior to that the real estate agents I assume were being funded by the government. The fact that they went over and the funds were used out of the trust account to give perhaps more impetus to the real estate side probably suited the real estate agents. I don't know that the finance brokers would have had any right to those funds anyhow, if it was as a result of interest payments on real estate transactions. I wasn't aware. To short-circuit the comment, I wasn't aware. I would like to move away for a moment from background material and ask you some questions about the Avey and Gough issues which have been the subject of some publicity recently and I gather you have had the opportunity of refreshing your recollection of your involvement in relation to that?---Mm. I wonder if you might have a look at the file in relation to that matter which is exhibit 110 please. It's found, I think, under the tab in relation to Mr Rossi's evidence. DR NEWMAN: 110 actually is in the Bunbury file, Mr Chaney. MR CHANEY: It's not in my file, Dr Newman, but I must say, I think I went looking for it in the Bunbury file and found it somewhere else. So that's where it in fact should be. 2/18/rmo 40 D.J. SHAVE XN 20/6/00

Mr Shave, I don't want to go through - this document you have just been given, or bundle of documents, is a series of papers extracted from the file in relation to Avey and Gough, it's not the complete file. I just want to trace through with you your involvement on the matter and the starting point is a letter from you to Mr Tenger of 14 December 93?---That's correct. Do you have that?---Yes, I do. You have located that in the bundle?---Yes. THE CHAIRMAN: Is this 23 November? MR CHANEY: 14 December. THE CHAIRMAN: Thank you. MR CHANEY: Mr Shave, can you outline to the committee the background to your writing this letter?---Yes, well, at that time - just let me have a look at that. 93. At that time I was the member for Melville and what normally happens, every Friday we have an electoral office day in our electorate for people that have issues that they want to raise, and as occurred on this occasion, Mr Avey lived down in Palmyra and apparently he was having some difficulties with a real estate matter. He came to my office, or he rang my office and asked for an appointment and I had an appointment with him. As far as I know, that was the first I had met him. I may have met him when I was door-knocking, but I didn't know him on a personal basis. He said he was having an issue with the board and could I assist him in trying to resolve it. It wasn't, as I understand it, about a matter of fraud or anything like that, it was something to do with his licence, and he and his partner were either buying into a business - and the registration hadn't been done correctly and there was some problem with the board. So I wrote that letter to the board and then they responded and then I wrote a further letter because Avey had said that he was getting nowhere and could I assist him, so I wrote a follow-up letter. All right, just before we move on, you asked in the second-last paragraph:

I would therefore be grateful if you could take the appropriate action on Mr Avey's behalf to allow him time to renegotiate his employment with Mr Gough.

Making a request of that sort to a member of the public service, is that an unusual thing for you to do as a member of parliament?---No, because they would make the decision. In a lot of these cases, whether it's a compliance matter, the department would look at the 2/19/rmo 41 D.J. SHAVE XN 20/6/00

seriousness of the issue and if they believed that it was critical that the person stop acting as an agent at that time they would just write back to me and say, "No, Mr Shave, we can't do it." If it was a matter of going through a process, whether the person had to go through a registration, and it wasn't in their view a major problem, they would normally, I would expect, allow the person time to comply. And that was the nature of the problem as you understood it?---That's as I understood it, yes. But how often in the course - putting aside your obligations as a member, how often do you correspond with government departments in relation to inquiries or questions or assistance required by constituents?---I would write between 20 and 50 letters a week to a combination of government departments, federal, state, local councils, Water Authority, immigration. All of those areas I - on a Friday I can have between two and 10 people from my electorate that come in for a meeting and the process follows this position: the chap will come in, like Avey, and say, "I have got a problem with the department and it doesn't appear to be getting resolved," or, "I would like you to assist me because we want to get on with our business," so I will write a standard letter like that and I will wait for the reply. If the department writes back and says, "No, this is a matter that he has to do this or has to do that," then that's the end of the story. I think in this particular case they said that there was going to be a series of negotiations between Avey and people involved, including the ministry, and that's fine. If they can resolve it and he can get his house in order, then that's the appropriate way that the matter should be handled, but I suppose I would write to government departments - in 1993 when I was the member for Melville it included the areas of Willagee and Hilton Park and people were constantly trying to get accommodation from Homeswest. My workload at that time would probably have been 50 letters a week. Some of them would have been as a result of people coming in for meetings which I have every Friday other than when I'm not in the state or I'm not in bed with the flu and the others would be to local councils asking about footpaths to be repaired. So you could say that type of letter that I wrote on behalf of Avey I would write between 200 and 1000 of those a year. We have heard some evidence, and admittedly the evidence varies to some degree, as to the extent to which dealing with inquiries of this nature, whether coming from a minister's office or from a private member, cause some level of disruption to whatever the activities in the ministry are. In other words, they have to stop what they're doing, go through the process of formulating the response, which has to go through the appropriate chain 2/20/rmo 42 D.J. SHAVE XN 20/6/00

of command, and all of that can impede the general conduct of the affairs of the ministry concerned, and as I say, the evidence has varied as to the extent to which that disruption occurs. What do you say about that, and is it a factor which you take into account in deciding whether or not to make an inquiry or request some action on behalf of a constituent?---You always have the right to request the action on behalf of the constituent, in my view. If someone comes in, providing they don't want you to interfere in the system - and some people do want you to interfere in the system. Some people want you to intervene if there is a legal case going on or make a submission to a judge or to get involved, and you very clearly in those circumstances say, "Look, I can't get involved. The judicial system has to carry on," and my answer to that would be that the proof is in the pudding. As a minister now I get Labor members of parliament coming to me on a daily basis asking me to resolve or assist with issues that apply to their constituents. I have meetings with their constituents, I have former members of parliament who have problems who say, "I would like you to meet with a constituent because there's an issue," and I will meet with that person. So if you're talking about causing an inconvenience, I would suggest, yes, it does cause an inconvenience perhaps at times for some of the investigators involved, because it might prompt them to perhaps move a little more quickly than they are moving at the time. That's not to say they're not doing their job properly, but the pattern of these letters where I have written on 14 December and then again in February or March, which is the next letter, may provide an irritant for the investigating officer, but I would have thought - my view is that when a member of parliament gets involved that the ministry people would know that the member of parliament is being asked to do so by the person and expects to try and get the matter resolved, whatever the result might be. In the case of these people, as I understand it, the actions that occurred within the ministry, Avey says it cost him his business and he was unemployed and he's not too complimentary towards me, but, you know, that's one of the things that you have to live with. Just tracking through the course of events, two pages on from your letter of 14 December is what appears to be an undated letter, although the figures 21/12 are scribbled on the bottom right-hand corner?---Which one are we talking about? The letter to you from Fair Trading, so if you find your letter that we were talking about of the 14th - - -?---I have got that, but there's no letter just following that. Here we go. Yes, I have got 21/12. 2/21/rmo 43 D.J. SHAVE XN 20/6/00

The evidence is to the effect that's the response to your - in fact, it is on the face of it clearly a response to your letter?---Mm. It says:

On the basis of information to date it appears Mr Avey and Mr Gough need to rearrange their business affairs in terms which are legally acceptable under the act -

then it talks of a meeting planned to assist in that process?---Yes. When you received that letter did you do anything more about - - -?---I thought everything was fine. I thought they would get their affairs in order as a result of that conciliation and they would get on with running their business. I think it mentions in the final paragraph:

The ministry can offer no indemnity in respect of the institution of proceedings, however as mentioned earlier, a legal settlement within the terms of legislation is the preferred outcome.

Did you take it that they were saying they may still prosecute Mr Avey at that point?---Yes. Yes, and that's appropriate, but, you know, having read that letter, that to me is the appropriate course for them to take, providing that they weren't exposing the public and the people were decent people. If they were setting up a business and they needed to correct something I would have read that letter and thought, "Fine." Then there was a further letter, your letter of 10 February. Do you have that?---Yes. Again it seeks help and assistance in bringing the matter to a satisfactory conclusion?---Yes. Can you recall the reason you wrote that letter?---Well, it would have been as a result, I'm sure, of Avey contacting me, because it says in the second paragraph:

The principals of A1 Real Estate have been experiencing difficulties.

I don't think I ever spoke to Gough. I might have. They may have even come in together, but in my first letter I would have said, "Avey and Gough," but I suspect Avey was the one that came to see me, because he lived down in Palmyra and was in my electorate. The fact that I stated in the second paragraph that the principals have been experiencing difficulties due to the investigation by the 2/22/rmo 44 D.J. SHAVE XN 20/6/00

Ministry of Fair Trading, it seems to me that Avey or Gough were obviously concerned, they have come to me and I have written another letter and said, "Could you please resolve the issue." In retrospect do you see anything inappropriate about that level of intervention?---I would do exactly the same thing tomorrow and probably did last week with something along these lines. Do you recall what involvement you had in relation to the matter thereafter?---No, that was just about the end of it. I contacted Avey. I noticed that he was still in the phone book after this suggestion that - I think the front page of The West Australian had said I had blocked an inquiry and I said, "You may have to give your side of the story to what happened in regard to this matter. Do you remember?" and he said, "Yes, I remember quite clearly. The department was next to useless and you were next to useless and I lost my business because of the fact that you did nothing," and he added - he also reminded me - or he reminded my electoral officer when he called that he had never voted for my side of politics and wasn't likely to change. Didn't like me or my politics. Back in 1994 though you had no further involvement after 10 February?---To the best of my knowledge, other than when I rang Avey and got Gough's number and said, "You may be required to give evidence as to what I did in relation to this matter." That was probably a month - maybe 2 or 3 weeks ago. Mr Chairman, I don't propose to ask any more questions on that topic and I wonder whether before I move on it might be a convenient time to break. THE CHAIRMAN: Yes, I'm sorry. We will adjourn. 2.15.

____________________ 2/23/rmo 45 D.J. SHAVE XN 20/6/00

THE CHAIRMAN: Yes, Mr Chaney? MR CHANEY: Thank you, Mr Chairman. Mr Shave, in the middle of last year, mid-1999, had you began to become aware of problems in respect to Blackburne and Dixon?---Yes. You had a meeting some time in June of that year with a retired finance broker who had expressed some concerns about Blackburne and Dixon?---Possibly; I'm not sure at that meeting. If you would give me the name of the person, it might help. I don't actually have the name. What I'm looking at is a memorandum from Greg Harvey, the then registrar of the Finance Brokers Supervisory Board, to the chairman of the Finance Brokers Supervisory Board in which he reports - it is dated 14 June 1999 - that he recently attended a meeting with the minister and a retired finance broker who alleged that Blackburne and Dixon's nominated auditor was in partnership with Blackburne and Dixon. Do you remember somebody making that allegation?---That could well have happened, yes. And if it happened, it would have been round about mid-1999?---Yes. I think you had had meetings at your electoral office with a number of investors?---Yes. Some time on 25 June 1999 or thereabouts?---Thereabouts, yes. Again going on information I have obtained this morning in a fax from an investor, he says there was such a meeting attended by you, Mr Walker, Patrick Walker from the ministry, Bill Mitchell and Denise Brailey and a Mr Fitch?---Yes, I know Mr Fitch. At that meeting there was discussion generally about problems in the broking industry?---Yes. And Blackburne and Dixon in particular?---Yes. I think in late July 1999 you had received a briefing note in relation to events concerning Blackburne and Dixon and the role of ASIC?---Yes. That is exhibit 132, for the record. That briefing note was to the effect that a special audit of Blackburne and Dixon had been decided to be undertaken by the board?---Yes. 3/1/ces 46 D.J. SHAVE XN 20/6/00

ASIC at that stage had become involved with Blackburne and Dixon?---Yes. They were seeking to obtain some enforceable undertakings from Blackburne and Dixon?---Yes. And the board had agreed to put on hold the special audit pending ASIC's activities?---Yes. So they were all events of which you were aware by the end of July 1999?---Yes. Not long after the end of July you became aware of a complaint by a constituent. You're probably aware that in the inquiry so far in an effort to maintain the privacy or confidentiality of persons we have been referring to them by the first letter of their surname. There was Mr G who was a constituent of yours. Do you understand what I'm - - -?---He came to see me on 30 July. What did he come to see you about?---About Blackburne and Dixon. He had a mortgage - he was part of a pool mortgage on a property. I think it was Port Hedland or Karratha. It was a country hotel, and he had been trying to get his capital out and principal out of Blackburne and Dixon and he wasn't having any success with it so he came along to ask me and get my advice in regard to what could be done to assist him. Had you met Mr G before this?---He was on my known list by first name so I would have met him perhaps when I was doorknocking, but he wasn't a personal acquaintance. I may have met him at the supermarket or in the street. I don't think I had any other meetings regarding Blackburne and Dixon with him prior to that date. Do you know whether you had had any other meetings with him in relation to any other issues that he had been involved in in the past?---No, to the best of my knowledge, I hadn't. So he asked what you could do in relation to his problem in getting his money from Blackburne and Dixon. What was your response?---Well, he outlined the problem with the loan and what was going on. I had Mr Mitchell in attendance at the meeting and I asked Mr Mitchell to look into the issue and to take a complaint. I said, "I think the best you can do is lodge a formal complaint," and it may have been that Mr Mitchell recommended it, but he did in fact fill a complaint in and lodged it with the department. Did he do that at that initial meeting or subsequently? ---No, I think Mr Mitchell had to get him a complaint form and he filled it in. 3/2/ces 47 D.J. SHAVE XN 20/6/00

Was any other action discussed at that meeting that might be taken other than filling in a complaint?---No, not at that time; no. What was the next thing that you knew about Mr G's complaint and its progress?---I had a further complaint some 2 weeks later or an inquiry or a concern raised with me some 2 weeks later on the Friday, 13 August and I would have spoken to Mr Mitchell on that date about both of those issues. Did that complaint relate to a Mr T?---Yes. Was Mr T known to you?---Yes, he was my former father-in-law. How did he come to express the concern that he expressed to you? Whereabouts did you speak to him?---He just turned up at my office. He may have made an inquiry or an appointment with my electoral officer. It was in my diary that he was due to see me at 9 o'clock on Friday, 13 August and he turned up and said he had something he wanted to discuss with me. What was it that he wanted to discuss with you?---It was an issue with Blackburne and Dixon. I was aware that he was having a - Mr T or my former father-in-law was having a problem with a mortgage broker. I wasn't sure which mortgage broker it was, but I was aware there was a problem because Mr Fitch who had come to see me some months before had said, "You know, Mr T's got a bit of a problem," and I assumed when he said "Mr T", he was talking about my former father-in-law because Mr Fitch, as I understand, was a farmer and a long-time acquaintance of my former father-in-law and what had happened was that Mr Fitch had had problems with Global Finance and they had refused to pay his money out and there had been some media presentation of it, as I remember, with him parked outside the offices of Global Finance. I'm pretty sure it was Global. It may have been Grubb, but with one of the finance companies that were in some trouble. I'm pretty sure it was Global. He made the comment that he wasn't going to move until he got his money or words to that effect from the outside of the finance broker's office. Fitch said to me, "Mr T's got a problem with one of these finance brokers." He may have mentioned it was Blackburne and Dixon but I don't think so. I think he said it was one of the finance brokers and it wouldn't surprise me if he hadn't mentioned the firm because Mr T or my former father-in-law kept most of his business to himself anyhow. So when Mr Fitch had come in - this was 3 months before then - I took no further notice of it. I just thought, "Well, he's got a problem. If he wants to speak to me, he will come and speak to me." My former 3/3/ces 48 D.J. SHAVE XN 20/6/00

father-in-law lived down in Myaree and I thought if he has got a problem, he will come and see me. Mr Chairman, can I just pause for a moment? Mr Shave has used Mr T's first name and, in my submission, that too should be the subject of suppression. THE CHAIRMAN: Yes, certainly. MR CHANEY: With respect to the reference to Mr Fitch, just so one can understand the consistency of the decision, as I indicated, a letter was received from him this morning offering his assistance to the inquiry and I read that as indicating that he does not wish his name suppressed. THE CHAIRMAN: Very well, thank you. MR CHANEY: As a result of your meeting with Mr T, what did you do?---Well, obviously it started to raise some alarm bells for me because we had put in the request for a special audit in July of Blackburne and Dixon and whilst ASIC had asked us to stay out of it, if I can use that term, or the department to stay out of it, Global and Grubb Finance were well and truly in the media that time but Blackburne and Dixon - whilst there were probably some letters on file regarding it, there wasn't a major storm in terms of that particular finance company, but what was happening in parliament from when Alannah MacTiernan raised it from about November 98 through to June or July of the next year - there were a number of times when debates were held in the parliament and people were saying, "Two finance brokers have gone under or going under and there's probably five that are going to go under," and there were suggestions other than Global and Grubb that there were other finance brokers that were going to find themselves in difficulty. So when I got the inquiry from Mr T or my former father-in-law, I said to him, "Would you mind giving me any papers you've got on it?" and he gave me a copy of a letter which was dated, I think, 21 July with a payout due on 10 August. So that was consistent with him coming into my office on 13 August. Apparently he didn't get his money by 10 August and he came to my office and said words to the effect, "I know you're very busy. I don't want to bother you, but I've got a bit of a problem with a finance broker that's been promising me money since last November and then again February," and I took the piece of paper off him or the advice that he was going to get his money and just wrote words to the effect, "Promised money November; promised money February," and I asked my electoral officer because this was a standard procedure with a constituent coming in, albeit it was my former father-in-law - and I asked Enid, my electoral officer, to fax the letter to Bill Mitchell and I would 3/4/ces 49 D.J. SHAVE XN 20/6/00

have run Bill Mitchell and said, "I've got a chap with a concern with Blackburne and Dixon. Can you see what you can do in regard to the matter?" Can I ask you to have a look at exhibit 124, please? That is the ministry file in relation to Mr T?---Right. Go to page 9?---Yes. Is that a copy of the document that Mr T gave to you? ---That's right, and that's my handwriting down on the bottom right-hand side which says, "Principal due November; agreed to February payout," and that's what my electoral officer would have faxed to Bill Mitchell. So the Post-it fax note at the bottom is attached by your electoral officer. Is that the time it's sent?---No, I think perhaps the stamp there is what is stamped when it gets to the ministry office so they have got a note of when they received it from Minister Shave to Bill Mitchell. That stamp has probably been put onto that document at the ministry rather than the electoral office. Are you talking about the stamp immediately under the letterhead Blackburne and Dixon?---No, I mean the notation down under - - - Under your handwriting?---Under my handwriting, yes, and I think that that stamp up under Blackburne and Dixon is also an administrative thing that the ministerial office does. I think Mr Mitchell's evidence - and nothing much turns on it - was to the effect that the note underneath your handwriting in fact is attached at the sending end as an indication of where it's coming from and going to?---It could well have been. My electoral officer could have done that. It's easy enough to ask her. It will be her handwriting if it is. In any event, as I say, nothing much turns on that? ---Mm'hm. You say you sent it off. It was just those two pages, was it, pages 9 and 10 in the bundle?---I didn't actually send it off. My electoral officer - - - No, but you caused it to be sent off?---Yes, and as far as I know, I sent that. I would have sent number 8, the preceding one; those two pages, the pages marked number 8 and marked number 9 and perhaps number 10 also. Yes, I think 8 and 10 are the same?---Are a duplication, yes; they're a duplication. 3/5/ces 50 D.J. SHAVE XN 20/6/00

In any event, it was just the two pages that you were handed by Mr T?---Mm'hm. Initially what did you tell Mr T you would do about it? ---I said that I would send it through to one of my people and they would do what they could to assist him with the problem. So you sent it through to Mr Mitchell and then you had a telephone conversation with Mr Mitchell?---I haven't noted a telephone call but I would have rung him a said, "There's an issue with a constituent. I'm sending some paperwork through. See what you can do in regard to the issue." Did you tell him that you wanted him to arrange for someone to lean on the broken with a view to assisting this matter?---No, I didn't. Did you tell him that you wanted him to let the broker know that you as minister were looking at this matter? ---No. What did you have in mind that he might be able to do? ---In relation to the Mr G matter there were two issues. What was alarming me was that what I had seen had happened with Global Finance - not particularly Global, but Grubb. There was a lot of money being shifted round inside Grubb bar table 95 and 96 and that will come out in evidence as the public examinations of Grubb go ahead. It occurred to me that in a 2-week period I had had one constituent come to see me on the 30th in regard to Blackburne and Dixon and another one come on 7 August - sorry, 13 August, and so therefore that concerned me. I mean, the fact that he was my former father-in-law was certainly of interest to me. What is your relationship like with your former father-in-law?---I had a very good relationship with him when I was married. My wife left in 1993 and I have been raising my two daughters since then. My wife hasn't seen the kids for about 7 years. My father-in-law - I think it's fair to say our relationship deteriorated. When I say "deteriorated", I mean he was my former wife's father and whilst I had a good relationship for the 16 years that we were married, my divorce wasn't a happy situation. We had Peter Dowding cross-examining me for about 4 or 5 hours in the divorce hearing and my former wife was granted 60 per cent of the assets by the court. So I don't have a strong relationship with my former wife. I have never had a meeting with her since the day she left. So it's a difficult situation. You have got an elderly person like that where - - - 3/6/ces 51 D.J. SHAVE XN 20/6/00

How old is he, by the way?---He's over 80 now. He has had a stroke in the last 12 months to 18 months. So whilst I would see him from time to time, usually he might come into the office once every 6 to 12 months. I mean, the fact that his daughter left - there's always two sides in every marriage and I tried to be hospital to him without being in close contact. The relationship I had with him after she left - as I said, my former wife was granted 60 per cent of the assets and so I wasn't very pleased with that, but that's life. Going back to when you handed the letter to your electoral officer, did you discuss its contents with him or give him any instructions about what was happening? ---To her, no. Her, I'm sorry?---The instructions I would have given to her was to fax it through because up until 3 weeks ago I didn't know how to operate a fax machine, but I have now been taught. Something in common with the chairman, I might say?---I now know that you feed the paper in at the top and the number and you press the button. Someone gave me that instruction over the phone 3 weeks ago so that was the first fax I have ever sent in my life, so I know that Enid sent the fax. Now, in terms of what Mr Mitchell might do in relation to this matter and what you discussed with him on the telephone, did you ask him to go to a meeting with Blackburne and Dixon in relation to G or T or both?---No, but if he had told me that there was a meeting arranged and that he thought it was appropriate to go to it or he would like to go to it, I wouldn't have objected to that. Did he tell you that?---I can't recollect that he did. Are you able to say that you knew there was to be a meeting on 20 August at any point prior to the meeting taking place?---It may have been brought to my attention, but if there was to be a meeting on the 20th, it would have been unlikely if it had been arranged. As I understand, it was on either 13 or 18 August. It would have been physically impossible for Mitchell to go to the meeting because Mitchell and I were already booked to go to a ministerial conference in Hobart which we went to on 20 August which had been arranged for several months. We have these 3 or 6-monthly meetings between the various state ministers. All right. In relation to Mitchell, he couldn't have been going to a meeting on the 20th. Did you know prior to the meeting taking place that Skepper was going to go?---No. 3/7/ces 52 D.J. SHAVE XN 20/6/00

When did you first learn that there had been a meeting? ---When we got back from the ministerial conference which was in Tasmania, Skepper had made the comment to me that he had been to a meeting in regard to Mr G and that there had been a comment about a payment of a cheque to another constituent of mine. Again we should refer to Mr G?---Mr G. I'm sorry, I interrupted you?---That's all right. So he told you there had been a meeting in relation to Mr G?---Mr G, yes. Did he tell you anything about Mr T?---He just said that he was in the meeting and that someone walked in and said something about, "Mr T has been in to collect his cheque." Did he know by this time that you had an interest in Mr T as one of your constituents?---I think I made that aware to him at that time when he raised it 3 or 4 days after the meeting. Perhaps we should go back a step. How did the conversation whereby he reported on the outcome of the meeting arise? Did you make an inquiry or did he simply volunteer that?---No, he just offered it. He was the chief of staff at the time and he just said, "There was a meeting that I went to," and I said, "That's fine." Did he tell you about both G and T's fairs as discussed at that meeting without prompting or was he prompted in relation to T?---I didn't ask him. I didn't even know that he was attending a meeting in relation to T or G. Somehow he reported to you on that, did he not?---Yes, which would be reasonable. How did that arise?---If I had had an electoral meeting with Mr G and then Mr T and if Bill Mitchell had suggested to him that he might go to the meeting, it would - if there were two electoral issues there, it would be normal that they would make me aware of that circumstance if the meeting had occurred. Who was it that made you aware on this occasion?---To the best of my knowledge, it was Mr Skepper. Mitchell may have mentioned it. It could well be that Mitchell had rung from Tasmania and been talking to Skepper and Skepper could well have said, "I was at that meeting," but to the best of my knowledge, it was Mr Skepper as my chief of staff. When I got back from the meeting interstate, he would bring me up-to-date with different issues and say, "This is the position. This is what 3/8/ces 53 D.J. SHAVE XN 20/6/00

happened. I went to a meeting," and he raised that issue, and I may well have said to him when he did raise that, "Well, that will make my former father-in-law happy he got his money." I may well have said that but I don't know. I can't relate the text of the discussion. In any event, it was Mr Skepper who volunteered to you the information about Mr T without being asked?---Yes; to the best of my knowledge, I didn't ask him. The only way I would have asked him is if while we were away Mitchell had been speaking to him on the phone and said there was a meeting on. Now, if that had occurred, I might well have said to Skepper, "How did the meeting go along?" But you're unsure about whether you knew about the meeting at ll?---That's right, yes. When you heard there had been a meeting at which your officer had been present with an investigator from the ministry, did you think that an odd thing?---No, not at all. What happens or what I do in my ministerial capacity if issues come up or constituents come to see me with issues that are relevant to a particular area, whether it's a Lands area or a Fair Trading area, I just farm them out and for that specific reason that's why Mr G was - Mitchell was with me when I met with Mr G because Mr G must have raised with my electoral officer and said, "I'd like to come and see Mr Shave about" - when he came to see me, I was aware that there was a problem with a finance broker. That happens on occasions. Sometimes they won't say to you what they want. They will ring the electoral officer and say, "I want to see Mr Shave," and the electoral officer says, "Well, what's it in relation to?" and they say, "It's a personal matter," and so they don't declare their hand. So in terms of Mr G, he would have made it clear to someone because that's specifically why I would have had Mitchell down at the office because the process would have been, "This chap's got a problem. Can you try and assist him?" If he's sitting in the meeting there and taking detail of the issue, it takes it off my plate. Yes, accepting that is the position, the question is though in assisting a constituent, do you agree that it is an unusual thing for your adviser or somebody from your office to actually become involved in the investigation or the conciliation process undertaken by a ministry officer?---No, not at all. I mean, Mr Mitchell has on dozens of occasions had to conciliate between people that have borrowed money between brokers. There have been meetings with brokers, with liquidators, with constituents. He has gone out to constituents' houses where the people have been, say, incapacitated and can't come into the office. On various occasions he has gone out and met the people so it wasn't something unusual. 3/9/ces 54 D.J. SHAVE XN 20/6/00

In fact, if I had have been asked - knowing what I knew at that time with Mr G's problem and Mr T's problem right on top of it, if I had been asked - and I emphasise that - "Would you object or would you like me" - if Mitchell was to ask me to go along to a meeting, I would have been quite prepared to have that happen because you had all these allegations going around that the board wasn't operating correctly, that the ministry wasn't picking up the problems and right on top of - 2 weeks on top of each other you suddenly had the one broker who didn't appear to be under the firing line but with whom there was a problem with an audit requirement and ASIC being involved and if had said to me, "Do you want me to go along and just see what's going on here?" I would have said, "I don't have a problem with that at all." Do you agree with the proposition that it is inappropriate for people from the ministerial office to become involved in investigations?---In the actual investigation, yes, certainly. Yes, and in the operational procedures, if they amount to a conciliation process rather than an investigation, that's something the ministerial office would avoid interfering with or becoming involved in?---Well, not interfering with, no. I get people all the time, members of parliament - there's some evidence here that will be submitted from independent members of parliament and others asking me to use whatever appropriate means there are to try and resolve matters in regard to finance brokers. There are letters here from Alannah MacTiernan, from Phillip Pendal. Whether you people suggest that Mr Mitchell shouldn't have gone to the meeting or not, I'm quite comfortable with whether he went to the meeting or didn't go to the meeting, if he made that judgment, because I like to think that he can give me a view. If the view had been that in relation to the Mr G matter certain other action may need to be taken, then the fact that he was there at the meeting, I would have thought, was an advantage for all of the people involved. Accepting that it is not only common but undoubtedly desirable for ministers doing their job to have their ministerial office employees endeavouring to assist constituents, as you're requested to do, I think you have said, by members from both sides of the house, presumably - - -?---Yes. - - - the request invariably is to take appropriate action. Would you agree with that?---Yes. Nobody suggests you should take inappropriate action. The critical question is when does something cease to be appropriate action and become inappropriate action. Do you agree with that?---Let me give you an example. With 3/10/ces 55 D.J. SHAVE XN 20/6/00

Global and Grubb Finance there were some supervisors put in. In relation to Grubb there were people on titles and waiting to get their money and people who should have been on titles that weren't on titles and the liquidators were holding up settlements. People were coming to me, including estate agents, who were saying, "This property needs to be settled. If it's not sold and the people don't get their money, if the settlement doesn't go through, then the values of the properties may go down if there is a lull in the market." I had one chap come to me and say, "We're going to hold the government directly responsible." I would then say to Bill Mitchell, "Set up a meeting between Mr Smith" - let's say he's the estate agent - "and the liquidator who is effectively acting in the broker's capacity and try and see what you can do to get this matter resolved so that the people can get their money." I have had meetings with Conlon and Herbert and urged them when people are needing their money to say, "I know that you have a duty of care in respect of some people who aren't on the mortgage and some people who are on the mortgage and that you have liability, but if there is a clear case where you can pay out some of the proceeds that you're holding in a trust account, could you please give consideration to do this?" Now, at those sorts of meetings - I had a Mr Farris come to see me who made all sorts of accusations about the fact that the liquidators were holding up settlements and people were going to lose money, and you must remember the liquidator was effectively operating - when he was in there as an administrator, was effectively controlling the business on behalf of the people. This is particularly in relation to Global because it was a liquidator that went straight into Grubb and not first an administrator. So there were many, many meetings which Mitchell attended on my behalf. If parliament was on, as it is today, and there was a meeting arranged, Mitchell would go to those meetings and keep me advised. Now - - - Can I interrupt for a moment? Accepting that there are all sorts of meetings at which it is entirely appropriate for somebody from your office to attend and seek to deal with concerns expressed to you as minister, there is a distinction, is there not, between attending those meetings where there is an issue between perhaps a supervisor and some investors or investors amongst themselves or whatever and attending a meeting which involves the conduct or the performance of duties of an officer of the ministry and, to take an extreme example, forgetting the niceties of this case, for Mr Mitchell to direct Mr Dowling as to the way he should conduct his conciliation would have been inappropriate?---Absolutely. So the issue in terms of looking at this question is, is it not, which side of the line the meeting with which we're dealing in respect to Mr T and Mr G falls? Do you accept that proposition?---Yes. 3/11/ces 56 D.J. SHAVE XN 20/6/00

If there is no issue, I take it, on your part as to the requirement to follow certain procedures where any attempt is to be made by an officer from your office to give a direction in relation to - - -?---Absolutely; it's a very clear line. Yes?---I mean, if Mitchell had said to Dowling, "I want you to do this" or "The minister wants you to do this," that would be a dereliction of his duty. It would be equally inappropriate for Mitchell to say to Dowling, "I want you to lean on the trader"? ---Absolutely. Or "I want you to tell the trader the minister is looking at this"?---Absolutely. Which has the same effect?---Absolutely; I mean, it's like saying, "You can interpret that that I'd like you to go along there with a hand grenade and threaten the person," or you could have a different interpretation of "lean", but all of that aside, if Mitchell was to give any direction to Dowling at all, I would see that as being inappropriate. If Mitchell were to do anything which was to give the impression even without stating the words to the trader, in this case, "The minister is looking at it," somehow seek to bring pressure by giving that impression, that would be equally inappropriate?---If it was his intention to do it. When you used the words, "The minister is looking at it," I wouldn't think it would be inappropriate for Mitchell to say, "The minister has had two complaints come in and he wants to be kept advised of what's going on," and that's the distinction you must make because what happens with these electoral appointments is the person comes to see you one week and 3 weeks later they will come back and want to discuss their matter again and they will want to know what has happened. So you obviously want to be updated. When you farm out these various responsibilities to these people, you expect to be kept updated and on every occasion I would say, "Please keep me advised of what's happening because I need to know," as was in the Mr G case. He came back for some further advice on what he should do in relation to the problem he had and I need to know what has transpired, otherwise the attitude of the people is, "Well, you go and see your local member of parliament or you go in and see a government minister and they're very nice to you and then they do nothing," so quite clearly if there's going to be someone come in and see you, there's going to be a follow-up, there's going to be another inquiry, and what happens with these letters that I send, for instance, on 14 December regarding the matter of the real estate agent is I would send a copy of a 3/12/ces 57 D.J. SHAVE XN 20/6/00

letter out to Mr G or Mr Smith and say, "Mr Smith, please find enclosed a copy of a letter I received. When I get a confirmation or response, I will let you know." If in the case of Mr G there has been a meeting in my office and Mr Mitchell was at that meeting, I would say, "Please see what you can do to help Mr G and keep me advised," and the chap would be sitting there while I say that because he would need to know that I'm going to follow the issue up. He just doesn't want to go to his member of parliament and find the thing is put in the bin, as sometimes people suggest they are, but, you know, if they're doing their job, the members of parliament, they don't operate that way. Do you accept that the presence of a ministerial officer or somebody from the minister's office at a meeting in company with somebody from the ministry may give the impression of some special attention being given to a particular matter the subject of the meeting?---I don't think that the people involved would even know the distinction. If the person works for the ministry or works for the minister, it's all government. I don't believe they would even know the difference. In the meetings that I have had where I have had - in the case of Mr Dowling who came down to - sorry, Bill Mitchell who came down to the meeting with Mr G, Mr Dowling came to a subsequent meeting at 30 July. I would just say whether Mitchell was there or whether Dowling was there, "This gentleman works with me. He is one of the people who works in my department and he will do what he can to assist you," and that's the way that it carried. You don't define and say, "This chap's ministry and this chap's in the ministerial office." People who are senior public servants and people who are actually familiar with the system would understand that differentiation but 99 out of 100 of my constituents would have no idea of the differentiation. In respect to Mr T I take it there was no further dealings on that matter after Mr Skepper made a phone call at your request?---That's right. Do you remember making a phone call?---Yes, as I understand, that's what he did. And that was the last you had an involvement with that matter. What about the G matter? What happened in relation to that?---Mr G was more complex because in the case of Mr T it involved $100,000. Mr G was involved in a pooled mortgage on a hotel in Karratha or Port Hedland or that location and he came back to see me again to tell me that he still hadn't resolved the problem with Rossi about the money and apparently there had been an auction of the property. The mortgage was $1.2 million and they had received an offer of 950,000. For all my sins - I 3/13/ces 58 D.J. SHAVE XN 20/6/00

have been in the hotel industry for about 30 years and he was asking me what I would do in his position, and I said, "In relation to what?" He said, "Well, do we take the offer of 950,000 or do we - what would you do? We're having a meeting in Floreat Park and I have to go along there and I have to agree to whatever's done because it's a pooled mortgage," and he said, "What would you do in your position?" I said, "Well, I don't think that's really my place to do that. I said, "You know, you're the one that's in the difficulty and it's a bit unfair for you to ask me what I would do," but, anyhow, he pressed me on that and said, "Well, the reason I'm doing it," I think he said, "because of your business experience or the fact you've been a hotel owner," and I said, "Well, give me the details on the rents," and certain things that I wanted to know and if you will bear with me, I will explain to you how it works. When you sell a lease on a hotel, if you sell a 10-year lease, you get what's known as key money or lease premium. Mr Shave, I'm not sure we need to go into the details really?---Okay. So you had a discussion with him where he sought some advice in relation to the commercial aspects. Is that it in summary?---Yes, and I think it's important just to let you know, to shorten it, they were getting between 120 and 130 thousand a year in rent and he had to make a decision whether to take 950 or 990 thousand and for the group to drop 200,000, and I made the point, "If you have a fire sale and the tenant was the one trying to buy it - if you have a fire sale, you mightn't get the capital now that you will get later on," and I said, "What's the problem?" They said, "The rent's going over to Blackburne and Dixon and we're not getting it regularly," or words to that effect. I said, "There's a simple solution to that. If I was in your position - and you've asked me. If you became a mortgagee in possession on a capitalisation of 10 per cent, if the rent is 120,000 a year, your mortgage is very safe at 1.2 million. In addition to that, if the tenant" - who actually was the person that had apparently made the highest bid to try and pick up the hotel cheap at 950,000, "If he defaults on the rent to you, you can put him out and you can sell another lease to 2 or 3 hundred thousand dollars' key money by giving another 20-year lease to someone." He came to me. He asked me on a business basis what I would do and whilst I was reluctant to give him the advice, I gave him that advice and then he went away and he made the decision. When was that?---That would be about 4 months ago; 4 or 5 months ago, yes. 3/14/ces 59 D.J. SHAVE XN 20/6/00

Have you had any subsequent contact in relation to the matter?---No; no, he hasn't been back to see me. It was 2 days before he was going to this meeting of the people that were in the pooled mortgage and I haven't seen him since. I want to ask you some questions in relation to Global going back in time?---Yes. When did you first become aware of problems in Global? ---There were a couple of letters written, as I understand it, in between June and October of 98. I think one was from Mr Lenz and I think Penny Searle had written in also regarding Global Finance. There may have been one or two letters but principally they were the two letters or two people that initially raised issues regarding Global. Were those letters drawn to your attention?---They would have been, yes. As I said earlier today, every letter that was written in would have been photocopied and replies would have been prepared. I wonder if the witness might have exhibit 133. Do you recognise that bundle of papers starting with a memorandum to you from Bill Mitchell?---Yes, I would have been given - that would have been given to me at the time. The second page in that bundle is an earlier memorandum concerning a request from Mrs Searle to meet with you to discuss her complaint?---Yes. And reporting that there had been a meeting on 16 September between Ms Searle and Mr Hellens, Peter Rowe and a representative from the ministry and Mr Mitchell? ---Yes. You may have covered this generally already, but in specific terms, given that the request from Mrs Searle was to meet with you, why did you not see her?---Well, I would get probably on an average between 30 and 50 requests a week to meet with people as the minister on various issues and the normal procedure would be if this letter had come into the ministerial office, then it would have been dealt with by a senior person. It would have been farmed out on that basis. If Mrs Searle had lived in my electorate and had asked for an electorate appointment, then I'm sure that she would have just been put into my diary on the same basis as everyone else. When Mr Fitch came to see me - Mrs Denise Brailey at the time was trying to get a number of appointments with me and at the same time she was being highly critical of the ministry in the terms of their activities and whilst I 3/15/ces 60 D.J. SHAVE XN 20/6/00

think I met with her once or twice, when Mr Fitch came to see me as a constituent some time before July of 99, he brought along Denise Brailey and I wasn't aware that Brailey was coming to the meeting and I had considered it was a bit of a hijack but I guess it was her way of getting an electoral appointment with me in the company of one of my constituents, although Mr Fitch did say that she was there to assist him with his problem, but both of them were basically there to tell me there were major problems with Global and Grubb and I think Fitch may have even said or Brailey may have even said, "There's a couple of other brokers where there's a problem." If it comes into the ministerial office, the normal process is that one of my senior people - at that time the acting chief of staff would have been Mr Rowe and he would have met. That would have been just the normal process. As more letters came in or more requests came in, they would have given me advice whether it was appropriate for me to meet and whether they considered that I should meet with them. In any event, after the meeting you received the memo of 21 September bringing you up to speed on what it was about?---Yes. By this time there was a fair bit of public agitation in relation to brokers' matters generally?---Yes. So it was becoming an important topic for you?---Yes. The attachments to that memo of 21 September include a letter of 7 September which is the original request for a meeting and then a document headed "Complaints against a finance broker. Attempts to formally submit our complaints to the Finance Brokers Board"?---The first entry there is dated April 1998. That's right?---The letter is 7 September 98. That's right?---It just gives a chronology of what happened. That's right; it follows through the chronology. Is that a chronology you looked at at the time that you received that memo in September?---I'm sure that I would have looked at it at the time and I would have said to Mr Rowe or Mr Mitchell or whoever, "Would you give this to the ministry and would you see that this issue is dealt with?" If you turn to page 3 of that document, the attempts to formally submit the complaints to the Finance Brokers Board, you will see the section marked "Summary"?---Yes. 3/16/ces 61 D.J. SHAVE XN 20/6/00

It records in the second paragraph, "We have established that many other investors are experiencing the same or similar problems with the same finance broker that we still are experiencing"?---Mm. And complaining that they have been contacted in relation to other investors with Mr Willers of the ministry but no action appears to have been taken?---In the view of Mrs or Miss Searle, yes. And then she expresses the concern with the large amount of money and the large number of active accounts, mortgagees involved, "Many Western Australians could be at risk of losing their investment or superannuation funds"?---Mm. So that concern was being expressed to you back in September?---September 98. 98?---Yes. Did that raise a concern on your part about those issues?---Yes, it would have done and Mitchell was advising me with issues such as that that he had raised the issues with the department and the department were addressing those issues. You're aware that Miss Searle herself had some six matters of complaint, not just one?---If that's in the documentation. Were you aware at that time or not?---Well, whether it was six matters or however many matters. I don't know the precise number. And then following the meeting there was a letter of 16 September which is the next one in the bundle?---Yes. In paragraph 2 of that letter there is expression of concern in the interests of public good?---Mm'hm. Penlass considered, "The practices of the finance broker concerned, if allowed to continue unchecked, could have a significant adverse effect on the funds of other investors"?---Mm'hm. Your response to these concerns was to do what?---Well, my response was to have the appropriate people in the department look into the issues that were being raised. One of the complaints that was being made and the reason that Mrs Searle had come to your office was that she was concerned the people in the department weren't progressing things at a sufficiently acceptable pace? ---That may possibly have been her view. 3/17/ces 62 D.J. SHAVE XN 20/6/00

Did you form a view as to whether that was a justified concern?---What happened with every complaint that was put into me - they would give me a briefing note on it on what action was taken, and pretty regularly in parliament Alannah MacTiernan would raise each individual issue and say, "Why hasn't the department taken this action and why hasn't the department taken that action?" and I would get a briefing note and then I would explain in parliament that the advice I had from the department was that they were doing this, this, this, this and this. So over a 12-month period you had a multitude of issues being raised towards individual finance brokers and whenever I received that inquiry, I would expect that it would be dealt with by the department and that the response would come. Were you satisfied that what you were learning of of the action by the department was adequate?---I believed that they were endeavouring to do their job properly, yes. Were you conscious at that time of any inadequacy of resourcing in relation to investigation and prosecution of these complaints?---Well, the department will always want extra resourcing. I don't have the details involved, but as the finance-broking matters progressed, the level of resourcing was increased. Mr Walker will have all the detail on that, but my instructions to Mr Walker were that if he needed resources, if he needed people, then to approach me and I would ensure that they were provided. Were any such approaches made to you?---From time to time he came to me and said, "We need to put some more people into this area," and I would say, "That's fine; do it." In relation to finance brokers?---Yes, I think the number of investigators increased during the process of the problems that occurred. Do you accept now with the benefit of hindsight which we all enjoy - - -?---Wonderful thing, isn't it? - - - that the response time on the part of the ministry in dealing with these problems which emerged during 1998 was simply too long to really prevent continued losses accumulating over that period?---No, I think that a lot of the issues that occurred were in a gestation period for a long, long time. The issues inside Grubb, for instance, I suggest go back to 94-95 and money was shifted round inside that organisation so that in 95, 96, 97, first half of 98, you weren't getting a lot of complaints and so the ministry, I'm sure, was of the opinion - they believed audits were being done. They believed that matters were progressing on a reasonable basis. I found that when I wrote to them and asked for a 3/18/ces 63 D.J. SHAVE XN 20/6/00

briefing, the briefings were reasonably punctual and in all cases if I received a request in terms of Mrs Searle's issue or Mr Smith's issue, they would give me a response to that. I believe they were attentive. The difficulty was, of course, knowing where all the problems were. Yes, and indeed the time it took to really identify the problems, the tip of the iceberg having appeared? ---Absolutely. I mean, the letters from Grubb and Global investors were minimal in 1998. As soon as a voluntary administrator was put into Global in February of 99, the letters came from everyone and then the people that weren't getting their money with Grubb - they started to write in. I mean, the facade that has been painted is that Penny Searle and others in September and October of 98 exposed the issue. The reality of the matter is that the board and ASIC - perhaps not ASIC, but the board was aware at just about the same time that these people were - and Alannah MacTiernan was making comments in parliament. When she made her comments, I think, 12 November or 12 October, the board and the department were already moving in relation to Global Finance. That being the case, it took them until February 99 before an administrator was appointed?---It took ASIC till February 99. Yes. The board may have been looking at it some earlier time. The board, in effect, didn't bring about that conclusion, did it?---I think we need to be careful there because the board would have been liaising with ASIC, just as they were liaising with ASIC in relation to Blackburne and Dixon in July of 99 when the board said they wanted to go in and do an audit and ASIC said, "We don't want you to do that." I suspect that there was discussion. There may not have been discussion, but I would have expected that the - at the time that ASIC put the administrator into Global in February of 99 I would suggest that most of the prompting for that probably came from the investigations of the Ministry of Fair Trading officers in relation to issues raised, say, by Penny Searle, issues raised by one or two other people that had written in. So when you say the people that moved on Global in February of 99 was ASIC, I'm not sure that they did all of the investigating, if I can use that term. I guess this is a question ultimately for this committee to answer, but in terms of how one might do things differently faced with a similar problem in the future, do you think that the structures in place, the resources in place, were as good as one can get in all the circumstances?---Well, we had the review and there was a recommendation that perhaps a tribunal would be a better system to control all of the boards. I always believe 3/19/ces 64 D.J. SHAVE XN 20/6/00

the ultimate sanction is the licence the people hold and I wouldn't support a system where you didn't have a licence that the board had the capacity to terminate. It was put up to me, I think, in 98 or 99 that we would go through a system of deregulating land valuers. They were going to get rid of the licensing system. What happens with these proposals they put up is they go over a 12 or 18-month period and they come to you with a recommendation of deregulating land valuers. If I had agreed to do that when that proposal was put up to me - and that was the recommendation that came forward from the working group - I think it would have been negligent of me to do it because the ultimate sanction against a land valuer - and they are the key area. They're not the only area of problems with these loans, but with a land valuer who spends 4 years doing his licence and then 2 years' practical training, if you have the sanction of taking the licence away from them, they have a very, very heavy financial loss to bear if they're doing the wrong thing. The issue is making sure that when they do the wrong thing, that you take their licences off them and for that reason when it was recommended to me to deregulate land valuers, I rejected it. The proposal was that they do a qualifying period - sorry, they would have tertiary requirements and they wouldn't have to have a licence, perhaps a form of registration, but they wouldn't have to have 2 years of practical experience before they got their licence. If I hadn't realised the value of the need to have a sanction there - when this inquiry looks through all of the papers, I would probably be in an embarrassing position if I had taken up the suggestion to deregulate those land valuers, the proposal that was put to me 2 or 3 years ago. Where does that sit in relation to the proposal which went through cabinet - received some publicity and I think is dealt with in those letters - to deregulate the finance-broking industry and replace the act with a mandatory code of conduct under the Consumer Affairs Act?---What the Labor Party tried to do was to say that that proposal was to deregulate. Effectively what we tried to do was to shift the responsibility under the Fair Trading Act because the Fair Trading Act had far heavier penalties and so what it was actually going to do and will do - it has actually strengthened the position of the Ministry of Fair Trading to take action against these people and coupled with the federal changes that took place in June of 98 and were finally fully enacted in December of 99 - the coupling of the two strengthened the control that you had in relation to these people. Some of the fines in the Finance Brokers Act in my view weren't adequate and I think the committee found that. What it did by putting it in the Fair Trading Act - I think there were sanctions of 50 and 100 thousand dollars for - I won't say misdemeanours. Obviously it would be 3/20/ces 65 D.J. SHAVE XN 20/6/00

reasonably serious offences there, but the same sort of offences under the Finance Brokers Act - you could only either suspend the licence or have a fine of $1000 or $2000. So the level of fines had stayed at a level for a long time that I wasn't happy with and when I spoke to Walker who was the chief executive officer - when we talked through which way we were going to go in terms of restructuring everything, we came to the conclusion that if you shifted it all over into the Fair Trading Act, there were already significant penalties there that we could take out against these people. The sanction under the Finance Brokers Act and the Land Valuers Act of taking the licence off them is still a very good sanction and that's why when you asked me earlier whether I considered the act was deficient, certainly it could have been upgraded. The argument that some people put is that not enough sanctions were taken in the form of removing licences and removing people out of the game. The argument that the other side puts is that they weren't fully aware of a lot of the illegalities and the fraudulent behaviour that was happening inside those companies and that's the issue that will become abundantly obvious when there are public examinations of St George Bank, of Global Finance and of Grubb Finance because I have been trying to urge the federal government to fund those public examinations for some time now and I have been having some difficulty. Some weeks ago I made a decision. Whilst it wasn't the responsibility of the state government, I made a decision to transfer some of the funds which we had had allocated to the supervisors' jobs - to transfer them over to do a public examination under the Federal Corporate Laws of St George Bank and of the liquidators in Grubb and Global because the meetings I have had with the liquidators in Grubb and Global have told me there is blatant fraud inside the organisations an there is an urgency that there is a public examination of those companies as early as possible and that's the problem I have been having with the federal people. This is not a matter of passing the buck because there is no dollar as far as they're concerned at the moment. They have appointed these liquidators to go in and they have done nothing. What happened with Global Finance in February of 99 is they put the liquidators in, they provided the supervisors, they provided them with no money and 2 or 3 months after that the investors in Global came to me and said, "We've got a problem," and I said what's the problem?" and they said, "Well, there's a liquidation going on" - and this was after - the actual liquidation was in May; the administrator was in February, "There's a liquidation going on in Global Finance, as you know, and we can't get any information." I said, "Why can't you get any information?" and they said, "Because the liquidators won't give it to us," and I said, "Why won't they give it to you?" and they said, "Because they have no money to do the liquidation." So 3/21/ces 66 D.J. SHAVE XN 20/6/00

ASIC - what they did was they put these liquidators in and then they just sat pat and let the people try to look after themselves so the state government has spent 1 and a half million dollars so far on providing supervisors/liquidators to try and assist these people. I have got funding for another nearly 1 and a half million dollars to continue that process, but the attitude of ASIC is they don't pay for liquidators to operate. What their view is that they put a liquidator in and the funds that are in the company are used to fund the liquidation, but, of course, in Global and Grubb - they're shell companies and there's no money there so the investors - they only had one other place to turn and that was to the state government and whilst they try to - the various people are trying to apportion a certain amount of blame in relation to this to all the different parties. As I said to Cameron, the head of ASIC, when I flew over there - I flew over there 3 weeks ago and met him with Hockey, the federal minister, and I said, "You know you're not doing anything in this exercise." He said, "My people over there are helping and cooperating with the police," and I said, "Yes, there are 40 police officers in the fraud squad working on all this and the state government is paying for it and you're not doing anything and you have put this liquidators in here and their own liquidators have told me in meetings that they believe there is an extreme likelihood" - and this is in discussions with my staff there - "that some of the directors of these companies could well be trying to shift assets now because there isn't a public examination going on and these people aren't being brought to account." Can I take you back to finish a topic that we got diverted onto, that is, you expressed your views as to the adequacy of the act and the suggestion of the mandatory code of conduct under the Fair Trading Act as a substitute?---Yes. That was the nature of the recommendations of cabinet early last year?---Yes, that was one of them. There were some other issues in relation to disclosure and those sorts of things. There were about three or four, yes. The code of conduct and the issue of client, both of which I addressed when I became the minister, were the issues that concerned most of the people. The three major issues that people were concerned about, apart from the frauds that were going on, were the code of conduct issue, either fidelity fund or the insurance, the indemnity insurance, and the client issue. Yes, and the client issue substantially arose out of the code of conduct inadequacy, did it not?---Yes. And that has been addressed by a new code of conduct in the latter part of last year?---Yes. 3/22/ces 67 D.J. SHAVE XN 20/6/00

The position in respect of compulsory professional indemnity was the subject of those three letters?---Yes. What is the state of play in relation to that, so far as you understand?---Well, as I understand it, they were looking to get a suitable insurer to handle the business. You can understand that in light of the activities of some of the brokers there may well not be a lot of insurers out there that would be knocking their doors down to handle that sort of business, but I was advised either verbally or in a memo 2 or 3 weeks ago that they believed they had come to a situation where someone could undertake that sort of insurance. In respect of the client issue you were made aware or have been aware, I gather, of the concerns on the part of some investors that their complaints weren't being dealt with by the board and the ministry because they were deemed not to be clients. When did you first become aware of that as an issue?---Probably end of 98-99; round about then. It may have been before. I may have received a letter in which I sent off and asked for a response and it may have referred to the client issue. It may have been before that. So I couldn't give you an accurate date on that. Was that an issue of concern to you?---Yes, I was concerned quite obviously. I think that the issue of who is the client and who is not the client - I guess the majority or a large number of the investors that went to a broker would like to think that they were a client of the broker - this is the lender - but the legal opinions, the Queen's counsel opinions - they have one Queen's counsel opinion. They got another Queen's counsel opinion which is here with the commission that gave certain advice. I'm not a lawyer. I mean, I assume that if that is the case, that is the case, but having known that that area of concern was there, then obviously what we had to do was try and widen the definition of "client" which is effectively what I asked the administration to endeavour to do and that's what they did. Just going back, you understood the object of the act to be, in effect, the protection of lenders whose money was being handled?---You would expect that, yes. You accept that?---Yes. It has got to be an operating act so that you have got - I'm not talking about borrowers because there's no real onus on them. They have got the money. There is not much they can lose really?---Not much they can lose, no. So generally the act is there to assist with the proper administration of that area of mortgage-broking. 3/23/ces 68 D.J. SHAVE XN 20/6/00

So given the legal advice and accepting the legal advice as being soundly based and correct was to the effect that, as currently drawn though, the act or the code of conduct or both aren't giving protection to the lenders, it rendered the whole act useless, in effect, did it not?---My advice from Mr Newcombe - and you could ask these questions of him when he gives evidence - was that the client issue didn't apply in all the cases that actually issues could be dealt with, but it was on a case-by-case basis, depending on the evidence. Yes?---It wasn't totally deficient in relation to every complaint. But you understood that a significant number of complaints - - -?---It had limitations in relation to a number of complaints, yes. Rendering the act at least less effective than it ought to have been?---I agree with that. What steps were taken to address that problem that there was a legal issue that rendered the act, in effect - - -?---Yes, the review committee that looked at these issues came up with recommendations and that committee had effectively started, I think, just as I became the minister or before I became the minister perhaps. That is the industry reference group?---Yes, and there were recommendations from both themselves and the department on how the issue may or may not have been resolved and therefore they made recommendations on what should happen and when those recommendations were made, I supported them. 3/24/ces 69 D.J. SHAVE XN 20/6/00

Just bear with me for a moment. I just want to ask you about a couple of issues that are really a miscellany of issues that have arisen in the context of evidence from investors who have given - - - THE CHAIRMAN: Excuse me, Mr Chaney, just before you proceed, minister, those recommendations that you just mentioned, where are they now?---They have passed through cabinet and the regulations have been amended and the code of conduct now covers a wider spectrum than that client issue. So it's actually in effect now. But the act itself has not been amended?---No. Thank you?---If I could just comment further on that, with any changes that were proposed to be made to the act there was a suggestion that a tribunal - a recommendation to me that a tribunal would be a better operation than the Finance Brokers Board, and that's probably a recommendation I would have accepted but the decision was made that until this inquiry was completed it would be inappropriate to be putting legislation into the parliament when this inquiry might come out in 3 months' time or 2 months' time and say this, this and this. So for that reason, the fact that the code of conduct had been addressed and the client issue was being resolved, which were critical issues, the urgency had gone out of it and therefore we didn't put the legislation in in the last month or 2 months. Now it's back on our head. MR CHANEY: As I say, Mr Shave, there's just a couple of observations made by witnesses on which I would like to invite your comment by way of a response. If I can show you this first. I'm showing the witness a copy of exhibit 67 tendered through Mr Allen's evidence. I'm told that these documents to which I'm about to refer have all been fitted with a yellow flag in your hearing papers. THE CHAIRMAN: Volume number? MR CHANEY: Volume 3. THE CHAIRMAN: 3. Thank you. MR CHANEY: This is a letter to Dr Constable, who is the local member of Mr Allen, and it's in response to a letter from her raising a concern on behalf of her constituent. That was Mr Allen who drew the committee's attention to the passage on page 2 where you talk about giving a public warning and say:

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However, under the circumstances known to the ministry at that time to issue a public warning about Global Finance based on only two complaints could have placed the ministry at risk of litigation. The alternative may have been to give a general warning to the public without mentioning Global which has the effect of warning all investors, potential and existing, about all finance brokers. Such action would seem to be somewhat unreasonable given the vast majority of finance brokers conduct their affairs in an appropriate manner with their clients.

Mr Allen took exception to that on the basis that he was of the view that such a warning would be appropriate What is your response to that proposition?---Hindsight is a wonderful thing. At that time, as I think it said in one of these paragraphs, there were only two complaints received against Global Finance during 1998. The administrators went into Global Finance in February of 1999. To be issuing, let's say, a complaint about Global Finance in September or October of 98 or perhaps a little bit later, the department was already looking into that particular company anyhow. So from the department's point of view, they were aware of the issue that existed there. One of the problems that people in the department were concerned with was that if they were openly critical and you had a loss of confidence in the industry, that a lot of people might well suffer if people were named unreasonably or for whatever reason. Now, in hindsight, if we had known the monopoly that was going on inside Grubb and we had known the monopoly that was going on inside Global, everyone in this room would have agreed that you should have issued a warning in 1998, but out of all those investors - out of all those investors the department are telling me that they had two complaints in 1998. At the same time there is evidence that in July 1998 and earlier in, I think, from memory, September 1996, there had been publications by the board in the Finance Brokers News, a publication made to finance brokers, expressing concerns about valuation issues and over-valuations that had been encountered, expressing concerns about audits, and there was another area of concern which I can't readily identify off the top of my head, but it seems that although there was an awareness of at least a level of those sorts of problems, the only action taken was to publish in effect to those who were guilty of the inappropriate actions themselves, rather than going to the public at large. Now, why wouldn't it have been appropriate in those circumstances to try to get to the public to warn them to take care about those sorts of issues and make inquiries?---That's probably a question better - I'm not diving from the answer. That's probably a question better answered both by the board and by the 4/2/rmo 71 D.J. SHAVE XN 20/6/00

ministry, because - sorry - yes, the Ministry of Fair Trading, because they had the number of complaints that were there and the board, which acts independently, made that decision not to take that action. The only basis that I could think of is the area of concern for confidence, that if you create a major run on any of these organisations, you might find people are less well off at the end of the day than if you handle things in a reasonable manner as it's going through the process. We're now finding that with the - I mean, the example I gave you of Mr G. If he had panicked and said, "We will take the $950,000, I believe that he would have lost $250,000. On the advice I had, the property involved there, on the turnover of 35,000 a week wouldn't have been worth less than 1.5 million or 1.4 million. I didn't make that decision, the board made that decision. I think you really need to ask them. But in retrospect - - -?---In retrospect you would say it would have been desirable for them to have made that comment, yes, certainly. And indeed to have - well, I will leave it at that. Mr Fletcher gave evidence. He was also an investor who had some substantial investments. He expressed concern about issues of membership of the board, and in particular the proposition that the board comprises in part, two out of five, finance brokers, finance brokers who may themselves be engaging in the sort of conduct that creates or has created the problems or at least be sympathetic to that sort of conduct, and he called for review of the membership of the board because of that potential problem. What is your position in relation to that? Sorry, can you answer the question? Do you need the question again?---No. I think there's always that possibility of conflict. Whether it occurred or not, the chairman is not a broker and he would probably be better placed than myself to indicate the value of having the finance brokers on the board, but there is always that possibility, that there could be a conflict of interest, yes - and that's not to be derogatory to the current board members. No?---It's just a fact of life that they are part of the industry and they may well at times want to represent the industry's point of view and this happens across all of these government boards, but the chairman of the Finance Brokers Board, with the number of inquiries and what has occurred over the years, should have a very clear view, I would have thought on the answer to that question. Yes. In particular, Mr Fletcher goes on to say this in relation to Mr Fisher, who was at one time a member of the board:

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The minister failed to take action against Fisher when he knew of Fisher's involvements through MFA and this shakes all my confidence in the minister's administration of the industry regulatory scheme.

In relation to Mr Fisher did you consider taking action to remove him from the board?---It wasn't necessary. Fisher had indicated he was going to resign anyhow. I think he was only a deputy person there. I don't know that he ever attended a board meeting. I don't think he was one of the actual board members, I think he was just a deputy; that is, if someone is not able to attend a meeting he attends. He may have been a board member, I'm not sure about that, but on the basis when this business arose, Fisher offered to resign and I accepted that. The issue had - and it was before Fisher was even charged. He said he was prepared to step aside and I suggested that that would be appropriate and that I was comfortable with that. So he may not have been a deputy person, he may have been the actual board member. I don't have it in front of me, but that was the case with one - either Mr Fisher or one of the other people was either a deputy or one was a board member and one was a deputy. How soon after the public allegations, if you like, in relation to Mr Fisher, was it before he agreed to resign?---Once the public allegations came forward I received his offer to stand aside very shortly after that. At any time before the allegations became public were you aware of any information which might have caused you to be concerned about his membership on the board?---It may have been raised in a letter to me. Someone may have written to me or raised it. There was a lot of inference in regard to the premier's brother being a director of the company and in fact when the issue of MFA Finance was first raised with me I made some investigations of - I just asked to get a general view of what the issues were, because Jim McGinty every day in parliament, or second day, was saying that there were inflated valuations and floating things, so it was an ongoing issue. To the best of my knowledge, from the time that the issue was raised with me - Fisher didn't attend a board meeting from when those allegations or that matter was raised to the time he resigned. Finally, Mr Horn, who gave evidence, expressed some concern about the level of assistance provided by you as minister in relation to avoiding the capital deeming provisions which prevent investors obtaining assistance from Centrelink. What do you say of that criticism?---I think that's quite unfair. I wrote to Senator Newman and made a number of representations on behalf of the people. 4/4/rmo 73 D.J. SHAVE XN 20/6/00

Yes?---The government's position is that we, just like everyone else in this room - well, perhaps not everyone in this room, but a lot of the people in this room, a number of the people, the members of parliament and the government, they have friends and some of them have relatives who have been exposed to these people and the government is very, very sympathetic to the problem that people have. The government has demonstrated that by taking whatever action it can to resolve the issues. That, of course, doesn't satisfy some people and it doesn't bring the people's money back, but from a government point of view, to have someone make a comment with the Centrelink issue that the government doesn't care or the government hasn't taken enough action, I just don't support that, because the objective of the government - or my objective particularly, because I have lived with this now for 2 or 3 years, is that the objectives are going to be that we are going to see that the people that need to be charged are charged and we have only got the tip of the iceberg at the moment. We have only just got the brokers at the moment. We are going to fund the public examinations wherever possible, even if the federal government don't realise the area of responsibility that they have, and I'm quite surprised, because I would have thought Ogilvie down at ASIC would realise that if he actually did his job it would be in the federal government's interests to expose people so that the next lot that come along won't do the same thing. So I can't quite understand his logic in not providing funding, but that aside, we are going to do whatever we can and we are going to have a public examination of St George Bank in relation to its activity, where its trust account has run overdrawn 84 times and at one time it was overdrawn between 6 and 8 million. You might say, "Well, why did the government allow that to happen?" The government didn't allow that to happen, the auditors allowed that to happen and the bank officials allowed that to happen, and in due course as we go through the process there will be other people that are brought to account in regard to this matter. Mr Chairman, that completes my examination of Mr Shave. DR NEWMAN: Mr Shave, I have one question. You mentioned your approach as to ASIC. Did ASIC at any stage inform you that one of their procedures which they expect liquidators to adopt is to seek an indemnity from the actual creditors of the company to carry out legal action?---No, I wasn't aware of that. What I was aware of, that at one stage the liquidators were trying to get a court ruling that they could get into the trust account to cover their costs and there was litigation and actions taken between the investors and the liquidators to try and restrict them from doing that. That was something that I certainly wouldn't condone, them getting their 4/5/rmo 74 D.J. SHAVE XN 20/6/00

money from area, but in response to the question that you asked, the short answer is no. Because it is a fact that normally ASIC will look - or the liquidator will seek funding to carry out their duties by actually going to the creditors who are affected - in this instance it would be the investors - and seeking a contribution of funds from them to enable legal action to be taken, such as a public examination, with a review of directors' activities for the possibility of recovering funds from them on the basis that they have carried on trading when their entity was insolvent and they should therefore be personally liable for the debts that have been incurred and that would mean that the creditors would be entitled to be recouped either fully or partly out of the directors' personal assets?---Yes, if there are any assets left. Yes, that's a fair comment?---As I understand it, when it was initially happening and there was no money there to pay the liquidators, they did go to the investors and I understand the investors tried to look at collecting some money both to take legal action, I think against the government, but also to protect their position in relation to the trust account and to try and get some money for the liquidators. The costs of the liquidators are very, very high, and for supervisors, and of course the people involved are elderly people that might only have their last remaining savings or their superannuation in these mortgages, so when you go to them and say, "We want you to start shelling out for lawyers," the first thing they do is say, "No, we don't want to do that, because it's a bottomless pit." So therefore that's basically what happened. I think some of the people weren't getting any income at all and that was why I made approaches to the federal government and Centrelink and of course those people, if they're not getting any money each week, they're in dire straits - and there are some very, very sad stories out there. I had a situation of a lady when I was doorknocking down in Myaree last year and she was incapacitated; she was deaf. She only had $30,000 and she put the money into one of these people Her husband and her had a relationship where they lived apart, but they had a reasonable relationship. She used to go around and get some money from him every fortnight and she said, "Well, I would like you to help me, Mr Shave, but I don't want you to tell my husband because I would be so embarrassed if he knew that I had lost the $30,000." Now, there was another example where I had Mr Mitchell go out and meet with her and try to assist and resolve her issue. When I doorknocked her house she didn't have any documents or anything. She didn't know what her mortgage was about or where it was, whether she was on the title, off the title. She had no idea. You know, there are a lot of - Jim McGinty used the example of a lady in parliament last week who was not well. 4/6/rmo 75 D.J. SHAVE XN 20/6/00

There are a number of those examples out there and a lot of those examples have been brought to me, both people as constituents and people through the ministry. Which means that the ministry - or the state government, perhaps, is the more correct term, has actually stepped into the place of the investors in providing the funding to the Grubb and the Global liquidators?---There's no question about that. Yes, a couple of the investors - and I think one of them is in here today as an observer - got cross because we were using money to untangle the trust account rather than using the money to get into the public examination, and I think that he has a valid point, that there has to be a combination of both. We're not trying to pass the dollar, if I can use that term, over to the federal government, we're just asking them to do their job. Their liquidators are telling me in meetings that there are public examinations that should be going on now because they have a concern that funds are being shifted by some of these directors to avoid the day of reckoning, and this public examination by the liquidators, particularly on Grubb and Global, should have started well before Grubb and Global were charged, and the lack of funding on behalf of ASIC is an absolute disgrace. MR BLIGHT: I would just like to ask - an observation more than a question. You mentioned that it's the intention to charge the people who should be charged. We have seen some fairly confidential information and no doubt the subject is raised at cabinet. I have no doubt about that. Are you able to tell us through your relationship with the minister for police how close the net is to closing? I know it doesn't get people's money back necessarily, but it's the next best thing to see he perpetrator of these frauds brought to heel. I know that the wheels of justice grind slowly, but I think if they were to be speeded up a bit it would alleviate a lot of the pain that has been felt by a lot of people who have lost money?---Well, I don't want to comment on whether Grubb is guilty of any offences or not or whether Margaria or any of the others that are charged are guilty of them. The last discussion I had last week with one of my staff - it was actually just before Margaria got charged - was that there were a number of other people who were going to be charged. I get back to the public examination. What the public examination will do under the Corporations Law is it will require the auditors to get in there and give evidence under oath and it will require the liquidators to get in there - sorry, not the liquidators, the borrowers, and the lenders. If you read the article in The West Australian several weeks ago, a Mr Casella, who I have had some dealings with and Jim McGinty has accused me of breaking the provisions of the Finance Brokers Act by exposing Mr Casella publicly, his comment, if the newspaper article is correct, said, "It 4/7/rmo 76 D.J. SHAVE XN 20/6/00

was all part of the game," and that's in fact as some of these people saw this operation. They fleeced Teachers Credit and they fleeced Rothwells and then when the interest rates dropped in 93, 94 and 95 they turned on these elderly people. That's what has happened. THE CHAIRMAN: Mr McKerracher? MR McKERRACHER: Mr Chairman - - - MR SOLOMON: I wonder, Mr Chairman, if I could make an application? MR McKERRACHER: I was about to say that you were going to. MR SOLOMON: Pardon? MR McKERRACHER: I was about to say that you were going to. MR SOLOMON: All right. Well, you can announce it or I will announce myself. My name is Solomon, for those of you who don't know me. I appear for some hundreds of investors who have suffered losses, many of them, and I want to make an application to cross-examine this witness on behalf of some hundreds of people. It will take me a short period of time to articulate it. THE CHAIRMAN: Yes, well, make your application. Come forward - - - MR SOLOMON: Would it be possible I can speak into a transcript-recording instrument? I have a set of notes which will briefly elucidate what I want to submit about and why I want to cross-examine. I have a set for each member of the committee and counsel. There's probably a couple of things that have arisen out of what I have heard today. I also have a file - you may have all of these documents, but I have got them in a convenient form here. THE CHAIRMAN: Mr Solomon, with respect to time - - - MR SOLOMON: Sure. THE CHAIRMAN: Sure what? MR SOLOMON: Well, I have also got all these authorities here, copies of them, and what I thought is I might be able to articulate this for you before you rise. You can take a copy of all of the cases which I have got there and consider it, because this is a brief resume. If I leave it with you overnight it will probably shorten the 4/8/rmo 77 D.J. SHAVE XN 20/6/00

time in the morning considerably. I would only need about 15 minutes now. The short - - - THE CHAIRMAN: Yes, well, just a moment, Mr Solomon. I don't want to keep the minister sitting here in the witness box while all this is going on. It's certainly not usual that a witness is subjected to lawyers arguing or discussing things. MR SOLOMON: It's an application to cross-examine him, that's the point. THE CHAIRMAN: Yes, but not tonight. MR SOLOMON: Well, indeed. If you want to let him go and we will deal with the determination in the morning, I'm happy with that, of course. THE CHAIRMAN: Well, thank you very much. Mr Shave, can you make yourself available at 10 o'clock tomorrow morning?---Thank you. There will possibly still be an application going on, but available in case?---Thank you. Thank you very much. You're excused for the moment.

(THE WITNESS WITHDREW) THE CHAIRMAN: Yes, Mr Solomon? MR SOLOMON: Let me say this in commencing this application, if I might: I make the application on behalf of hundreds of investors who have lost money, including about 100 presently who have indicated an intention to join an action for pre-action discovery and, if that discovery should reveal actionable negligence, then action against the board and the board members. I don't base it on any narrow argument of standing and nor do I think it would be fair, reasonable or appropriate for the application to be dealt with on any narrow basis of standing. I have risen to make the application at this point after the examination by your counsel assisting by reason that I have read his comments in the media previously that it is his role largely to protect or to present evidence with respect to the interests of all interested persons. My point is, that process having completed, there are significant matters, in my view, which have not been dealt with and which should be dealt with. They are matters which my clients would like to know the answer to and they are matters which, with respect to the committee, are at the very heart of matters arising under the terms of reference and which the committee ought to 4/9/rmo 78 D.J. SHAVE XN 20/6/00

consider. So I am here and, might I say, I'm charging no-one for my time, unlike everybody else, sir. THE CHAIRMAN: Please, Mr Solomon, just stick to the point. MR SOLOMON: Sorry? THE CHAIRMAN: Just stick to the point. MR SOLOMON: It is the point, with respect. THE CHAIRMAN: It is not. MR SOLOMON: Well, it is. THE CHAIRMAN: Just get on with your application. MR SOLOMON: The point is, I am here in an endeavour to elucidate material through this cross-examination which I consider will be highly material for your inquiry and are matters which are not - - - THE CHAIRMAN: Have you got that material for us to have a look at overnight? MR SOLOMON: Yes. Well, I'm about to articulate it. THE CHAIRMAN: Thank you. MR SOLOMON: The first point is that there must be an open, thorough and public examination of the question of whether the legal advice which was said to have been obtained prior to a series of letters written in 1998 is subject of legal professional privilege. You may be aware of a line of authorities that legal advice with respect to furtherance of crime, fraud or illegality is not privileged. You may be aware, I don't know, of a decision of Attorney-General of Northern Territory v Kearney in 1985. That concerned legal advice given to government officers by government lawyers in the Northern Territory for a purpose of promulgating regulations for a purpose other than for which they should have been done. What it actually involved was that that was of course before the Mabo decision. There was legislation applicable in the Territory with respect to land rights' claims and advice was given that that legislation did not cover town sites and planning regulations could be brought in to expand the size of the township of Darwin and another town in the territory and that would give rise to these particular claims being defeated, because under a planning regulation the subject matter would have become part of the town. 4/10/rmo 79 MR SOLOMON 20/6/00

The High Court held that legal advice to government officers for a purpose of exercising a power for an ulterior purpose comes within the exception of illegality and that legal professional privilege does not arise. The same point was recently determined by Finkelstein J in the Federal Court with respect to a Health Insurance Commission search warrant which was obtained at a time that there was no investigation. MR BEECH: Mr Chairman, I hesitate indeed to interrupt Mr Solomon, but it's just a point of clarification, and that is, on the question of whether the ministry will indeed be claiming or will be waiving any claim to privilege, because of course if any claim for privilege is waived, that might shorten some of the matters Mr Solomon is raising. That request has been made, instructions are being sought and it has already in train on the basis that the position in that regard will be known by tomorrow morning. I rise to mention that simply in case it may shorten some aspects of the matter now. THE CHAIRMAN: Thank you. Mr Solomon? MR SOLOMON: Yes, that's an interesting point. I was given a letter from your counsel assisting to a journalist at The Australian 2 days ago saying that all of this legal advice was subject to privilege. So that is - - - THE CHAIRMAN: Privilege can be waived, and that's the point that Mr Beech was making. MR SOLOMON: I would have thought if that was going to happen I might have heard it from counsel assisting today, but anyway, if I can - that is, I might have heard some cross-examination on the issue of how and why this advice was obtained which resulted in complaints outstanding for years being summarily rejected and hundreds or thousands of other complaints not even being considered. THE CHAIRMAN: Mr Solomon - all right. Just - - - MR SOLOMON: Thank you. Well - - - THE CHAIRMAN: Would you just be quiet for a moment and let me speak? MR SOLOMON: Yes, I'm - - - THE CHAIRMAN: Have you discussed this at all with counsel assisting, the question of the opinions? MR SOLOMON: As I say - - - THE CHAIRMAN: Have you discussed - - - 4/11/rmo 80 MR SOLOMON 20/6/00

MR SOLOMON: No. No, I haven't. THE CHAIRMAN: Please, Mr Solomon, as I understand it, counsel assisting is calling evidence from solicitors with respect to this very matter, and if privilege is waived then of course there won't be even that issue raised. So at the moment, having heard what Mr Beech has said, I suggest that you don't worry about this aspect for a moment today. You may raise it again tomorrow, of course, and discuss the matter with Mr Chaney this evening. MR SOLOMON: All right, but can I just say this in answer - unless you haven't finished. THE CHAIRMAN: No, go on. I was just asking - - - MR SOLOMON: Whether privilege is waived or whether privilege is not waived, I want to cross-examine this witness about the legal opinion and the legal advice, how and why it was obtained and what was done about it and why not. THE CHAIRMAN: I think Mr Chaney and you could get together and discuss that very point and it might satisfy you. MR SOLOMON: All right. Well, could I just, before we leave it - I will give you the cases and you can look at them if that's not an issue, but could I just articulate from the file that I have given you what a mish-mash there is of statements about what this legal advice is, and we now have yet another version from Mr Shave today about two Queen's Counsels' opinion, one of which is said to be in your possession. But could I just - - - THE CHAIRMAN: This committee is going to investigate that very matter, Mr Solomon, when it arises. It hasn't arisen yet. MR SOLOMON: I'm sorry. Well, in my respectful submission, it is a matter of fundamental importance to the examination of the minister. I don't accept it hasn't arisen. I have got no idea when the committee thinks it is going to arise, but in my mind it's live now. So all I wanted to say then was that for those humble people like me who just happen to spend a couple of years representing these victims, what is on the record about this opinion now? If you could just look at my file for a moment, under the first tab I have got one of those July 13 letters. I have got about four of them. I put a second one in there that was Mr Timms. I know he has given you evidence. I have put a first one in of Mr Chapman. It shows he had a complaint that had been outstanding for a 4/12/rmo 81 MR SOLOMON 20/6/00

year and a half, that he had lodged it in November, and it's said that there is advice from the ministry to the board about who is the client, supported by a senior counsel, and it says simply it is the person for whom - the person who is being represented who is the party. There is then a letter from the chairman of the board. It doesn't have a date on it. You can elucidate or infer its date because he refers to a letter of 17 June 1999, and that refers to, "Counsel's opinion obtained earlier this year." That would seem to be something else. Says it's the property of the ministry and not the board. There's then a further letter by Mr Walker, two pages on - he's the chief executive - dated 31 January 2000, and a similar letter to Mr Geoff Taylor of 15 February this year, and that says, in completely different terms from the July 13 letters:

We have previously advised you concerning advice that legal officers within this ministry have given -

no reference to outside counsel at all - concerning the use of the word "client" in clause 7 of the code of conduct. The advice in essence is that whether or not a particular person is a client will depend upon the facts and circumstances of each individual transaction. The borrower as the party who generally actively seeks funds will generally but not always be the broker's client, however in some cases it will be the investor. It's even possible for the broker to act for both parties.

Completely different version from the July 13, 1998 letters. The same version is put to Mr Taylor, and I have then got the letter to the journalist at The Australian 3 days ago saying the matter is privileged. Now, I will leave the authorities with you overnight, but there are two ways of approaching this and each leads to the same result. The first is that - and when I first read a July 13, 1998 letter, let me say from my point of view I knew that something was terribly, terribly wrong in the state of Denmark, because it's elementary when one reads section 83 of this act that there's four heads of power for disciplining brokers. The code of conduct is referred to in 83(2)(c), a breach of the code of conduct, and yet 83(2)(b) refers to there being:

Cause for disciplinary action if the finance broker has in the course of any dealings with a borrower or a lender or a prospective borrower or lender been guilty of conduct that constitutes a breach of any law other than this act.

Or (d): 4/13/rmo 82 MR SOLOMON 20/6/00

Any other cause exists that in the opinion of the board renders the finance broker unfit to hold a licence.

Even if there was a legitimate opinion that the only client of a broker under the code of conduct is a borrower, the board had the plainest jurisdiction under 2(b) and 2(d) to deal with these people. Now, I gather you have got evidence already that this opinion was obtained for the purpose of trying to get rid of an absolute stream of complaints that were coming in and that was the purpose it was used for. Well, one thing is for sure. I have got no idea what two Queen's Counsel have been asked to advise upon, but I could have not the slightest doubt that anyone has advised anyone, respectfully, that section 83(2)(b) does not apply to unlawful conduct concerning lenders or prospective lenders, because in its plain terms it does, and the same with section 83(2)(d):

Any other cause exists that in the opinion of the board renders the finance broker unfit to hold a licence.

We have on the face of this, Mr Chairman and members, the most palpable failure to exercise disciplinary jurisdiction imaginable, and it's all said to have been based upon this legal opinion. It was plainly given for a purpose which is outside of this act. It is to prevent the proper investigation and enforcement of the disciplinary provisions in the act. Now, that's exactly what the High Court held in Kearney as the type of advice that is no place for lawyers to give, the same as advice about furtherance of a crime or furtherance of a fraud. It's not function of a proper lawyer to give that advice and that's why there is no legal professional privilege ever attaching to it. The concept is completely alien. The second point, and that's point 4 of my notes, is that there is a whole second line of argument quite apart from the fraud on the power argument that renders privilege absolutely inapplicable, and that is this, that in a decision of Waterford, which is first referred to earlier in the notes - a High Court decision in 1987 and it's first referred to in 2.4 of the notes, Waterford v The Commonwealth (1987) 163 CLR 54, the High Court by majority held that government lawyers and some judges, although not others, held that generally employed lawyers, their advice is subject to legal professional privilege, but it depends on the facts. It has to be independent legal advice, and if a legally qualified person working in a non-legal department gives advice that is not legal advice but policy advice, then privilege doesn't attach. Now, that again is a question of fact that requires examination. 4/14/rmo 83 MR SOLOMON 20/6/00

What I have said at point 5 of my notes really is that what I have read of the reporting of the committee's proceedings to date and the letter written to Ms Egan by Mr Chaney, the whole claim of legal professional privilege seems to be something that is accepted at face value, as Hamilton LJ put it, "like pronouncing a spell which once uttered makes all the documents taboo." My point at point 6 is simply this, that there is a letter in the file that I have given you there at the end of tab 1 dated 28 September 1999 to a Mrs Armstrong based upon this same view. For all I know this view is still being propagated by the ministry and the board. I have articulated in point 3 what I want to cross-examine about and this will apply largely whether or not privilege is claimed, because I still want to pursue the minister. I have no idea who is said to be the client. I don't mean the client of the broker, I mean the client of the lawyer. This term "ministry" is thrown around as if it was some corporation, which it's not. The plainest reading of section 12 of the Finance Brokers Control Act shows that everyone who does work for this board is an officer of the board and 12(3) says they may hold other office in the public service. So whoever it was obtained for, it was obtained, it would appear, for the board or an agent of the board. Now, Mr Beech has risen and said the ministry may not claim privilege. Well, who is the client who got it? I gather Minister Shave claims to be the client and he claims to have the power to waive privilege. Somewhere down the line the documents have been delivered to this committee and I would have thought the time to claim privilege was in response to a coercive subpoena, that that's the time privilege is waived. You have apparently got some of the documents. I don't know what they are. I know there are conflicting and differing references to it. What I want to see is the document that gave rise to the 13 July 1998 letters which summarily rejected all of those complaints and the basis for complaints being rejected for years thereafter, and I want to explore how and why anybody is possibly articulating a view that there were deficiencies with this act that meant these brokers could not be dealt with for conduct concerning lenders when the plainest terms of section 83(2)(b) and 2(d) are to the contrary. There may be some who understand this thing. I am not amongst them. As I have said at point 3.6, there is a very long line of case law about people like brokers acting in an ad hoc agency arrangement for both parties and the car dealer is the classic. It went to the House of Lords in 1969. A car dealer acts for the buyer and then they pull out the forms and they act for the hire-purchase company 4/15/rmo 84 MR SOLOMON 20/6/00

or other form of financier. They are an agent for both in the one transaction. Is there something hard to grasp with all of this, that a finance broker acts for an applicant for money and also acts for clients who deposit money or who lend money which they arrange. Apparently two Queen's Counsel think otherwise. The question has to be examined. I have got some other issues then that I have mentioned at points 8 to 13 to ask Minister Shave about. I have got a number of letters under his signature which are plain misleading, in my view, and I want to find out from him whether he read the background material or if he didn't, who wrote them and why he hasn't corrected them even yet. There are other letters written - two letters to a Mr Moulton suggesting that there had never been a qualified audit of Grubb. Surely you have seen the 1993 document by now. I hope you have. If you haven't, it's at the start under tab 2. There were unreconcilable amounts in the trust account so that you couldn't tell whose money it was and they weren't reconciled at month end. This is in 1993. Letters being written by the Fair Trading Ministry saying there was never any qualified audit. I mean, these are matters going to the heart of what this committee is inquiring into. Why? Because the inefficiencies that have resulted in probably 100 or 150 million dollars ultimately going to be lost out of this weren't caused by the inadequacy of this act, they were caused by inadequacy of administration of the board and the board officers and the minister. I don't know what the minister thinks his position is, and this is the other thing I want to cross-examine him on out of today's thing. He says Mr Urquhart, the chairman, told him, "We're independent. We're not amenable to direction." Well, that's very interesting, but if you have a look at sections 12A and 12B of the Real Estate and Business Agents Act and 12B and 12C of the Settlement Agents Act, which I assume you are going to look at, both sections were introduced giving the minister power to obtain information, to obtain documents and to direct the board either generally or specifically. Now, how and why it is that those sections are not in the Finance Brokers Control Act is an interesting question in itself. How and why Minister Shave tolerated treatment from Mr Urquhart that more or less told him to, "Butt out and buzz off because we're independent," and didn't introduce the same provisions that regulate the real estate boards and the settlement agent boards are also matters I want to ask him about, and indeed, how and why when he understood it was independent and he understood that board officers can't disclose information under section 88 he thought on the one hand he could tell them 4/16/rmo 85 MR SOLOMON 20/6/00

about a problem and get a report back which is in breach of section 88 - or I think it is - and yet on the other hand, when it suits him, he says, "Don't ask me, ask the board." We have an incredible duplicity of position. "I can tell them something. I can make complaints and I get reports about the investigations, but if you ask me something about problems there you had better ask them." That's an issue I want to ask him about, because that's an issue that his evidence today throws up in stark relief as a matter crying out for answer, because somewhere down the way we need to get a system where the position of the board and the board officers and the ministry and the minister are clarified and who can do what. Now, those sections in the Real Estate Act and Settlement Agents Act, they come from the Burt Commission recommendations a long time ago. These sort of boards should not be out there floating against the tide. They should be accountable to the parliament through ministers. Ministers should be entitled to get information, should be entitled to direct them, and as in the other acts, any direction goes in the statutory report to parliament. That's accountability. That's a matter I want to ask him about, as to why in his term in office he didn't introduce those sections when they are in the other two acts, when he was faced with a direct confrontation, as I understood his evidence today, from Mr Urquhart when he wanted to direct him on something. So that's my application. As I say, I will leave the cases if they are of any use. I have got copies of all of them at the back and I will leave them if they are of any use. I put it on two bases: (1), and it's a broad-standing issue, I act for a lot of people who are desperately interested in some answers to this question, and secondly, that I hope I can provide you with some help and I'm doing it gratuitously to get to the bottom of some of these issues which I don't think have properly been explored. If it please the committee. THE CHAIRMAN: Mr Chaney? MR CHANEY: I wonder whether you might hear from other counsel? THE CHAIRMAN: I'm sorry - - - MR McKERRACHER: Not at all, Mr Chairman, thank you. It just might be that Mr Chaney can mop up. THE CHAIRMAN: We're becoming flavour of the month, aren't we? 4/17/rmo 86 MR SOLOMON 20/6/00

MR McKERRACHER: Apparently. THE CHAIRMAN: We have everybody appearing now who said they never would. MR SOLOMON: Well, if I could just rise to comment to that, Mr Chairman, because - well, no, it's not a fair comment in this sense: I wrote to Minister Shave a long letter of 28 September. He told me in writing he was sending it to you; I hope he did, and a detailed release that I put out with Denise Brailey. I got two letters from the state ombudsman after I got that letter, one in December and one in February. THE CHAIRMAN: Mr Solomon, don't take it to heart. It's just a quick - - - MR SOLOMON: No, no, well - hang on. All I'm saying - can I just say this - - - THE CHAIRMAN: We're trying to have a - can't we laugh at anything in this place? MR SOLOMON: Pardon me? THE CHAIRMAN: Can't we laugh at anything at any time? MR SOLOMON: Yes, we can, but can I just say this: I'm not the one who has made the about-face. I have been wanting some answers from this minister since September. I had two letters from the ombudsman that I was getting the reply shortly and in the very near future. I ultimately got a letter after the committee was announced saying he didn't think it was appropriate to reply. THE CHAIRMAN: All right. Thank you, Mr Solomon. MR SOLOMON: That's why I'm here. I still want my answers from him. I have been the same for a long time. MR McKERRACHER: Mr Chairman, I won't - - - THE CHAIRMAN: You don't demand anything here though, Mr Solomon, you know that. MR SOLOMON: Sorry? THE CHAIRMAN: You don't demand anything here. MR SOLOMON: I'm not demanding, I'm just saying that you haven't become flavour of the month. My flavour was some answers from Minister Shave. I have been asking him for many months. When I saw him in a press conference with you, Mr Chairman, announcing the appointment of the committee and I got a letter from him saying he wouldn't answer until after the committee, I did not read all of 4/18/rmo 87 MR SOLOMON 20/6/00

that as the conduct of a chairman of a committee or a minister who was a prospective witness. I think things have changed. I am here because they have changed. I didn't read it that he was going to be here. THE CHAIRMAN: Thank you, Mr Solomon. Yes, Mr McKerracher? MR McKERRACHER: Mr Chairman, can I be brief? I won't reply to all the matters that have been raised. I simply don't have any instructions on them and haven't received any notice from Mr Solomon on the detail of matters. I have noted though that Mr Solomon has accused the minister of misleading conduct and duplicitous conduct and that is unfortunate, because only a matter of weeks ago Mr Solomon was the solicitor for the minister and on that occasion did charge him $950 for - - - MR SOLOMON: No, hang on. MR McKERRACHER: No, no, you wait your turn - for giving him advice in relation to Grubb Finance and actions which the minister was able to take within his portfolio. The minister objects first on the grounds of a clear conflict of interest, that Mr Solomon has a clear conflict. Secondly, if I may say, with respect, Mr Chairman - - - MR SOLOMON: You (indistinct) that with instructions. MR McKERRACHER: - - - there are no distinctions of any merit between Mr Solomon's application and the application by Mrs Searle, for the simple reason that the inquiry does have counsel assisting. If Mr Solomon has questions which he would like put to any witness, doubtless counsel assisting will consider the merit in those questions and will oblige where it is appropriate, but there is no meritorious distinction whatsoever between Mr Solomon's application and that made by Mr Quigley. Thirdly, Mr Chairman, it is very clear from what Mr Solomon has said that the real purpose of his appearance today, and if he is permitted to continue to appear, is to conduct a fishing expedition to support some litigation against the board, and a fishing expedition is not an appropriate purpose for which counsel should appear in an inquiry of this nature. The purpose is to assist an inquiry or to assist a witness who may be the subject of examination and adverse comment by the inquiry. No such situation whatsoever exists for any one of the investors whom Mr Solomon represents. So for those three grounds and, perhaps, one fourth, which is that Mr Solomon wishes apparently to conduct what is clearly investigation of a very legal nature of the minister about matters which happened well below the 4/19/rmo 88 MR McKERRACHER QC 20/6/00

minister's portfolio. He's not in a position to answer questions of law, that's been made very clear today, nor are they matters directly under his control. So we raise on instructions the conflict point, the inconsistency point, the fishing exercise point and the legal questioning point. On those grounds we oppose any application. THE CHAIRMAN: Thank you, Mr McKerracher. Mr Beech, any comment? MR BEECH: No submissions, sir. THE CHAIRMAN: Mr Hooker? MR HOOKER: Briefly, if it please the committee. The position of the board is that this being an appeal to the committee for the exercise of its discretion, if it were to ultimately consider weighing up all the matters it may consider relevant to the exercise of that discretion that it's appropriate for the role that Mr Solomon on behalf of his clients seeks, then that discretion ought be granted accordingly. There are two observations we would make which in our submission go to circumstances that are material for the committee in its exercise of discretion. The first is to echo, with respect, what Mr McKerracher says, that given that Mr Solomon has flagged the fact that those who he represents are presently giving thought to commencing litigation against the board and its members and to make application for pre-action discovery allied to such litigation, that does set the potential flavour as to how the cross-examination of the minister may proceed. Mr McKerracher has put it in terms of the real risk that it's going to give rise to a fishing expedition. Whilst not necessarily on the board's part putting that label on it, and it's a matter for the committee as to the inference it might wish to draw from the fact that Mr Solomon's clients are potential litigants, it's nonetheless a material circumstance in the exercise by this committee of its discretion as to whether the fact that this counsel on behalf of those potential litigants is going to so broad the subject of the cross-examination that it might become something other than the purpose which has been stated. The second and related observation is that there is a real risk, in our submission, of a multiplicity of issues in terms of quantity and detail and the length of time for those issues to be traversed that is material to the exercise by this committee of its discretion. An inquiry of this kind, in our respectful submission, has to be kept within certain rational limits. Ultimately the committee is guided by the terms of reference and any exercise of discretion must turn upon this committee's 4/20/rmo 89 MR HOOKER 20/6/00

construction of those terms of reference, but that real risk of a multiplicity of issues being generated which turns the inquiry into something beyond the bounds of a rational investigation of those terms of reference becomes material to the exercise of discretion. The only remaining observation we would make is that those issues might become relevant again even if the committee were minded to grant leave to Mr Solomon in its ongoing supervision of how the task of cross-examination might take shape. It would be open to the committee, in our respectful submission, even if it were minded to grant leave, having regard to those factors I have mentioned and any other factors it considers relevant, to review the cross-examination as it proceeds and if it appeared that it was being exercised for a purpose ulterior to assisting the committee with its terms of reference or was giving rise to an inappropriate number of issues or an inappropriate depth of investigation of those issues, it would be within the power of the committee to truncate the cross-examination accordingly. Those are the submissions of the board, if it please the committee. THE CHAIRMAN: Thank you. Mr Chaney? MR CHANEY: Mr Chairman, Mr Solomon in addressing his application commenced by saying that this is not a matter that ought to be decided on a narrow question of standing and glossed over the issue of standing entirely, other than to say that he represents in other proceedings large numbers of investors, but in my submission it's not appropriate simply to gloss over that question, because it is the very threshold question that needs to be answered. For all the reasons that were advanced in relation to the virtually identical application made by Mrs Searle, in my submission there is no basis upon which Mr Solomon ought on behalf of his various clients be permitted open slather, as it were, to cross-examine on whatever he thinks this committee might like to know, much less those things that he wants to know for the purpose, presumably, of his other proceedings. That is simply an inappropriate basis upon which to grant somebody leave to cross-examine a witness in an inquiry such as this, because as I said in relation to Mrs Searle's application, this inquiry exists and statutory powers are conferred upon it to carry out a particular function. It is not open, in my submission, to anybody to walk off the street who merely has some desire to put some questions, even if that desire is born of a belief that that might assist the inquiry or the desire born of a need to obtain some information for clients who may have 4/21/rmo 90 MR CHANEY 20/6/00

interests which are being served in other jurisdictions, and it would be an inappropriate use of the powers given to this committee to permit that facility to be taken by anybody who simply wished to put the questions. So it's not open, in my submission, to simply gloss over the question and say, "Well, these are the things I want to ask him about, because I want to know the answers to these and I have been trying to get these answers for a long time." It's necessary to identify, in my submission, the basis upon which some interest of his clients is affected, in the sense that there is some potential for some adverse finding to be made in relation to those clients, or some finding which acts in a way adverse to those clients' interests, and that cannot be, in my submission, demonstrated, and certainly hasn't been, and on that basis alone the application ought not be permitted and as Mr McKerracher has suggested, that position is entirely consistent with the decision already made by this committee in relation to the application made by Mr Tsaknis last week. When one looks at the areas in respect of which cross-examination is sought to identify the particular interest or area that is sought to be the subject of cross-examination, in my submission the whole question of legal professional privilege is simply not an appropriate one to be dealt with in the context of a cross-examination of the minister. For a start, the propositions of law, which seemed to be an argument about whether or not privilege exists, are clearly not matters that the minister is in a position to answer questions about, nor - and I haven't seen the bundle of correspondence that has been provided to you, but it seems from what Mr Solomon has said that most of it is correspondence emanating from the ministry. So it's an artificial view of reality, or it's an artificial view to suggest that ministers somehow bear some responsibility in relation to the particular contents of different letters sent to investors in relation to operational matters within the ministry and the minister is not in a position or would not be in a position to answer those questions in any event. What all of that section, which is the bulk of the submission, or the first four pages of the submission, 3 and a half pages of the submission, really amounts to, in my submission, is an argument which no doubt Mr Solomon will wish to run, if necessary, in what he has told you will be his application on behalf of a hundred investors for pre-trial discovery in an action against the board, and that is the place for such an argument. It's unlikely, one would hope, depending on what Mr Beech's instructions are tomorrow, that it will be an 4/22/rmo 91 MR HOOKER 20/6/00

issue at all for this committee as to whether legal professional privilege subsists. In order to fulfil its terms of reference the committee has issued a summons for the production of various legal opinions. As the chairman has indicated, it's a matter to be explored in evidence tomorrow, and the committee can fulfil its function, if necessary, maintaining the privilege. All that the committee needs to do is understand the opinions and where they came from and so on. So the fulfilment of the terms of reference simply doesn't require any public airings necessarily of those opinions and certainly not their release to Mr Solomon or his clients. In the event that they are produced, in the context of these proceedings they would be produced on a limited basis usual to documents produced in proceedings where they are subject in effect to an implied undertaking or limitations as to their use, and so whatever the objective may be of Mr Solomon to obtain this material, it can't be served through these proceedings in any event and should be taken up elsewhere. As to the other matters, issues for cross-examination, I was given, other than a mention just before we commenced today, no indication of the substance of this application. I have not had a chance to consider paragraphs 8 to 13 of the other issues that are identified. They're matters I'm happy to take on board and consider as to whether or not I think it's productive to the function of this committee to investigate those matters and if necessary that can be taken up in the morning. They are my submissions. THE CHAIRMAN: Thank you. Mr Solomon, do you wish to reply tonight? MR SOLOMON: Yes, very briefly. Inside the file under the second tab, if you could just go in about 10 pages you will see a letter addressed to me from the minister. Sorry, the last tab. It's about eight pages up from the bottom of the file. It's a letter dated 10 March on letterhead of the minister for lands, fair trading, addressed to me. It goes on to tell me why he has decided now not to reply to my letter, but in the last paragraph he says in his customary style of putting the addressee's name:

Doug, I am looking forward to meeting on Monday to discuss our mutual concerns regarding the finance-broking industry -

and, yes, indeed, I did have a record meeting with Minister Shave at that point and he rang me up and asked for another one in early May, and at the one in early May 4/23/rmo 92 MR HOOKER 20/6/00

he asked me in the course of it whether I would give him some advice about one discrete issue with respect to Grubb Finance and in particular whether action could be taken by the liquidator against St George Bank. He asked me to write him a letter about that and send him a bill for the advice, and I did. That is the only job I have done for the minister. I have the file and I have the advice I gave him and if you want to see it, you can see it. MR McKERRACHER: No, I object to that. MR SOLOMON: Well, as far as I'm concerned, it's out of the question that there could be an objection to it not being looked at, but what I can tell you is I don't act against clients in matters where I have acted for them. I am not here to cross-examine the minister about the very discrete issue that he asked me about at what was our second private meeting to discuss some issues. I am not here to cross-examine him about matters I have advised him about and I reject categorically any suggestion that I have a conflict of interest in doing so. If Mr Shave, Mr McKerracher and others want to pursue that, well, no doubt they will do it with appropriate disciplinary personnel and I will respond to that there, but I am not withdrawing on grounds of a conflict of interest and if the minister wants to enjoin me he knows where the Supreme Court is. The second point of reply is Mr Chaney has misheard what I said. I don't currently have enough clients to pursue a representative action. I am hopeful that we may ultimately get enough clients to pursue a representative action, but we are not at the moment. All I am saying is that I act for people with a direct proprietary interest in the outcome of the recommendations of the committee and they plainly are interested. Quite frankly, to hear the word "fishing" in the context of a board of inquiry as an objection to lines of questioning is incredulous. I mean, this is an inquiry. I want to pursue what are prima facie very clear problems with this reliance on this legal opinion and the claim to legal professional privilege maintained at least until tomorrow morning over a long period of time. These are issues that are directly relevant to your inquiry. Mr Hooker said that it should not go into matters outside of the inquiry. It won't. That's why I have taken the trouble to write down what the things are I want to cross-examine about and to articulate the few other things that have arisen today. I'm perfectly amenable to being stopped or truncated or limited if you think what I'm asking about isn't relevant to your terms of reference, because that's all I want to do. 4/24/rmo 93 MR SOLOMON 20/6/00

The suggestion that there are other proceedings elsewhere being pursued and that this is some collateral purpose, it is true there are some people pursuing some proceedings. There a mighty lot with nothing to pursue. They are the unheard victims who I would like to represent in a representative action who can't afford it and who have virtually nowhere to go to. They would like at least to see a thorough examination of how and why it came to be that this body set up to license these finance brokers summarily rejected their complaints at the door on an utterly spurious ground that there was no jurisdiction to deal with them. THE CHAIRMAN: Mr Solomon, are you still answering the objections raised by other counsel? MR SOLOMON: Well, what I'm saying is this is directly relevant. It is of fundamental materiality to your terms of reference. I'm not trying to stray beyond them. I am here because I am concerned that this is a major issue which is not being thoroughly and fully ventilated and it needs to be inquired into. So if it's fishing, indeed it is, and that's what it's meant to be. THE CHAIRMAN: Thank you, Mr Solomon. You will discuss your questions with Mr Chaney before the morning, if you wouldn't mind. MR SOLOMON: Yes. Would you like a copy of the cases I have referred to? THE CHAIRMAN: Certainly. You may have those sent in. MR SOLOMON: I have brought them here. I will leave them for you. THE CHAIRMAN: Thank you very much. We will adjourn till 10 am.

____________________ 4/25/rmo 94 MR SOLOMON 20/6/00

GUNNING COMMITTEE OF INQUIRY INTO FAIR TRADING BOARDS AND COMMITTEES MR I.R. GUNNING, Chairman DR D. NEWMAN, Member MR D. BLIGHT, Member TRANSCRIPT OF PROCEEDINGS AT PERTH ON WEDNESDAY, 21 JUNE 2000 Transcription by - SPARK AND CANNON PTY LTD 3rd Floor International House 26 St Georges Terrace PERTH WA 6000 Telephone: 9325-4577 1/1/ces 1 21/6/00

THE CHAIRMAN: With respect to the application made late yesterday afternoon, the committee has given this matter consideration and advises as follows: first, all these matters ultimately are a matter of discretion of the committee. With respect to the question of the opinion re the word "client" that we have heard so much about, that is a question of law and not a question for the minister and will be dealt with by the committee in due course. It is a question ultimately for this committee to resolve; (2) the question of the interpretation of the act that was mentioned by counsel appearing on the application is again a question to be considered by the committee and not a question for the minister or anybody else other than perhaps one of the legal officers to advise us about. None of the investors who have been a witness has had an attack made upon them and there is no suggestion that such an attack can be made or that there can be an adverse finding upon him, her or them. The committee cannot see that the application in any way differs from that made recently by Miss Searle just because it is said to be made on behalf of more than one, in fact many investors, does not affect the criteria that has to be satisfied and the committee repeats what it said recently in the aforementioned application and I think it appropriate, of course, if I repeat again the quote that was made then. The question of whether leave to appear should be granted is a discretionary matter for this board, in this case the committee. It is not to be accorded to everybody who merely feels interested in the subject matter. Representations should be confined to those who have a peculiar and material interest to protect or advance. I use the word "peculiar" in the sense of an interest attached to the individual and not merely shared by him or with a substantial section of the public. I use the word "material" in the sense of describing something more than a self-inspired or merely temporary or passing interest. Applying those considerations to the application - it is applications in the quote - it would be appropriate to grant representation to anybody who is under attack, suspicion, in relation to the dealings which are the subject of the inquiry but not to a merely self-constituted accuser or a self-constituted helper of the board or to a mere witness who is doing nothing more than being a witness without any particular attack being made upon him, her or them. Finally, counsel assisting is the proper person to protect the public interest and approaches should be made to him and then the committee, believing it has followed 1/2/ces 2 21/6/00

and considered all the proper legal matters, is of the opinion that the application should be refused. Mr Solomon? MR SOLOMON: Yes, I am about to withdraw in light of your ruling, Mr Chairman, of course. I have prepared some notes. Obviously I don't agree with you, although I had a somewhat helpful discussion with Mr Chaney last night with his views, some of which have been articulated in your ruling. I had prepared and I have prepared in anticipation of this ruling some notes of things that I would have cross-examined on. I would like to provide them to you simply really by way of a submission for your assistance. THE CHAIRMAN: Provide them to counsel assisting and he will vet them and if he thinks it proper, they will be handed to us. MR SOLOMON: I would like to have handed them to you myself actually. THE CHAIRMAN: That I think is the correct procedure, Mr Solomon, if you would kindly do that. MR SOLOMON: That will be done, Mr Chairman. So if I could have leave to withdraw, I have provided these notes to counsel assisting. THE CHAIRMAN: You certainly have leave. MR SOLOMON: Thank you very much. THE CHAIRMAN: Thank you. We will adjourn for a few minutes.

____________________ 1/3/ces 3 MR SOLOMON 21/6/00

THE CHAIRMAN: Mr Chaney? MR CHANEY: Thank you, Mr Chairman. As Mr Solomon indicated before withdrawing, he and I did have a reasonably lengthy session after proceedings adjourned last evening and it was productive from my point of view in the sense that it identified a number of documents and issues which are relevantly the subject of inquiry by the committee and, as I say, provide some background upon which I can base some examination of witnesses to come. I might say that I formed the view that the bulk of the material which was adduced by Mr Solomon in writing and in the folder of documents he gave and in the discussions I had with him relates more to matters which are properly the province of other witnesses who are yet to be called and in that sense, as I say, the exchange was helpful. I undertook overnight to review all that had been said by Mr Solomon and in particular the documents which he had supplied with a view to identifying whether I thought there were any issues in that material which should be put to Mr Shave before his cross-examination and I have formed the view - and this is a matter on which Mr Solomon and I differ - that there is nothing in that material which can sensibly or usefully be put to Mr Shave and therefore I propose to ask no further questions. THE CHAIRMAN: Thank you. Mr McKerracher? MR McKERRACHER: May it please you, Mr Chairman, members of the board. Minister, I think you have lived in Western Australia all your life. Is that correct?---I have, yes. Did you leave school in 1964?---I did. After that time, did you work in the insurance and real estate industries before moving into the hotel industry? ---I did. I think, as you said yesterday, you spent some 30 years in the hotel industry?---Yes, that's correct. As a result of your interest in the hospitality industry, did you serve 4 years as state president of the Western Australian Hotels Association and then national vice president for 2 years?---I did. Prior to the 1993 state election, did you hold the positions of shadow minister for employment and training and shadow minister for small business?---I did. 1/4/ces 4 D.J. SHAVE XXN 21/6/00

We know that with that background in mind, following the last state election you would reappointed to cabinet and you were appointed as minister for Lands, Fair Trading and Parliamentary and Electoral Affairs on 7 January 1997. Is that right?---That's correct, yes. Now, can I ask you some questions about the A1 Real Estate matter and Mr Avey?---Yes. You described year ended your role in relation to that inquiry as being confined to sending two letters. I think?---That's correct, yes. Your role has been described by a number of people including my learned friend Mr Chaney, counsel assisting, yesterday as intervention. Do you accept that the writing of those two letters constituted intervention in any sense at all?---None at all. The only basis for intervention would be that there was a concern on the part of the constituent to get the matter resolved. It wasn't in relation to any determination that they should make. The inquiry has heard evidence that the suggestion that the two letters delayed it in any sense was absolute nonsense or totally inaccurate. Do you have any evidence of delay being caused by your communications?---No, I don't. Was any complaint made to you at any time having caused delay at all?---The only complaint would have been between the two letters with Avey contacting me saying that he couldn't get the matter resolved. That would have been the purpose for sending the second letter. Only a complaint by him?---By Avey, yes. Certainly no complaint against you for causing any delay in the inquiry?---No. Now, in a general sense can I ask you some questions about the topic of intervention generally? As a member of parliament in relation to constituents, do you receive requests from time to time to make inquiries on their behalf in relation to matters?---Yes, I do. Do you ignore those requests?---No, you try to assist. Whether it's a member of parliament or a member of the public you try to assist in resolving the issues. Now that you hold the portfolio of minister for Fair Trading, do you also receive requests from time to time from some of your parliamentary colleagues?---I do. From any party presumably?---All parties, yes. 1/5/ces 5 D.J. SHAVE XXN 21/6/00

Or independents?---All parties and independents, yes. I'm showing you a bundle of documents in relation to such requests. There were just three instances and you mentioned at least one of them in passing yesterday. Perhaps I could show you an exchange between yourself and Dr Turnbull in the first instance. I think that was by letter dated 22 March, was it not?---Yes. THE CHAIRMAN: Which year, sorry? MR McKERRACHER: I'm sorry, Mr Chairman, thank you. This year?---2000, yes. Does Dr Turnbull hold the seat for Collie?---That's correct, yes. Which political party is he affiliated with? ---Dr Turnbull is a member of the National Party. Thank you. I will tender the letter, but in substance what was she asking you to do?---She was concerned about the actions of the supervisors and the liquidator Mr Conlon in regard to Grubb Finance and the general text of her letter says, "It appears to me that Mark Conlon is the liquidator of Grubb but is also the provisional liquidator of Oakley," and there was an effort on behalf of constituents to try and get some funds out of a settlement. Did you respond to that letter from Dr Turnbull?---I did. I replied to her letter dated 28 April and said, "Thank you for your letters enclosing correspondence from Mr and Mrs Humphreys. I have already directly replies to Mr and Mrs Humphreys and I have enclosed a copy of my letter of response for your information," and then I have said, "Please assure your constituents that it's the government's intention to recover the maximum amount of money and funds and pursue the company directors and the brokers, the auditors and the valuers." That's in the letter there. Thank you. Was that the substance of your response to the constituent?---It was, yes. I will tender these as a bundle, if I may, Mr Chairman, so I will deal first with two others. Can I show you another exchange between yourself and Mr Phillip Pendal of 19 April 2000, please? Again can you identify which political party Mr Pendal is affiliated with, if any?---Mr Pendal is an independent member of parliament. 1/6/ces 6 D.J. SHAVE XXN 21/6/00

What was he writing to you about?---He was writing to me about some mortgages that hadn't been settled. There was a dispute about people being registered on the title and some people that weren't registered and the supervisor Mr Conlon apparently was opposing the payment of people that were registered on the title in some instances because of the fact that there were people that he viewed that should be on the title that were unregistered and he didn't want to apparently pay the funds out until he was absolutely sure as the supervisor and liquidator that that was his responsibility to do that. This happened in quite a number of cases so you had people going to their local members of parliament and saying, "I'm on the title and I should get the money," and there was an argument being run by Mr Solomon at the time that people who were on the title should be paid out and that people who weren't on the title - if they were subsequently found in a court case that they should be entitled to some of the money, that they would have the right to sue for that money. I think Mr Conlon took the view that it would be better to put the money into a trust account before any payments were made and to get substantiation from the court as to who was entitled to the money. So there was this ongoing dispute between the supervisor and Mr Solomon in a legal dispute about whether the money should be paid out. What the constituents were doing was going to their members of parliament and saying, "I'm on the title. I want my money." In fairness to them, they felt that they were entitled to it, but I think the attitude of Mr Conlon was you just can't cast aside all these other people who may have a legal right to that money, and the principle, I think, was that if you pay the money out to the people that are registered on the title and if they were to spend the money or the person that was entitled to some of the money who wasn't on the title was to take legal proceedings, they mightn't be able to afford those legal proceedings. Of course that has been referred to in this inquiry, but the interesting thing is people have talked about people pressuring people and what a minister should do and shouldn't do and in this letter written to me by Mr Pendal - this is what he says in the letter:

It seems to me -

and this is in the fourth paragraph - that in the context of the current debacle the state and federal authorities involved ought to be bringing all legitimate pressure to bear on its own agencies to bring about as much resolution as possible including, if possible, expedited hearings.

So here you had a member of parliament who has written to me saying, "You should exert legitimate pressure on your 1/7/ces 7 D.J. SHAVE XXN 21/6/00

agency." Well, the answer is: what is legitimate pressure, of course, and that's the difficulty you have as a minister. Was that request from Mr Pendal that you should exert legitimate pressure on your agencies an unusual request to receive from a colleague or in the context of this topic were you receiving such requests quite commonly? ---Quite commonly we would get requests. They may not have used Mr Pendal's terms of exerting pressure on the agencies but they were - quite often I would get requests, "Please see what you can do to help my constituent. I can't understand why he can't get his money. He's on the title. He's a registered mortgagee. Conlon's not doing the right thing and you should get involved to tell Conlon what to do." That was the sort of comment that people were making to me from all political parties. Just on that topic, do you regard it as being proper to get involved in Conlon and try to tell him what to do? ---Well, what I did do with Conlon - because there were a lot of settlements and concern there, I asked him if he could legitimately within his area of responsibility and legal obligations make some partial payments; where there might be a partial dispute over funds, to try and get the funds out to the people if he could do it legally. It was a request on that basis. I think Mr Mitchell has gone along to see supervisors and such like to make requests on behalf of people who have in turn made requests to you?---There have been meetings between myself with the supervisors on that issue. Mr Mitchell has gone along and had meetings. Departmental officers from the Ministry of Fair Trading - they have been to the meetings also to try and resolve the issues. So that requests to try to recover funds for people being made against the supervisors who were standing in some sense in the position of the brokers is not at all an unusual thing?---Not an unusual thing at all. Providing the request is legitimate and there is an inquiry as to whether it can be done legally?---Yes, and I have always understood that Mr Conlon has a legal responsibility as a liquidator and supervisor and in discussions I have had with him and with Mr Herbert from Global I have always indicated that they should not step outside their area of obligation, and I expect they wouldn't have done that anyhow even if I had asked them. Finally, I think you referred to Ms Alannah MacTiernan yesterday in the course of your evidence. Can I show you a third and final communication to you dated 13 January 1/8/ces 8 D.J. SHAVE XXN 21/6/00

2000 from Ms MacTiernan and your response?---Yes, it's a similar situation. There was a request from Alannah MacTiernan to try and assist some people that were involved with Grubb Finance and with the Pioneer Village and she expressed the view that the matter had become bogged down and that nothing was happening and she urged me to take appropriate - to use her words, "I urge you to take appropriate steps to get this matter resolved," and then she refers to the dramatic deterioration of the site and the effect that it's having on the elderly people. Did you respond to that request at all, minister?---Yes, I did. I outlined the department's position and comments that the supervisor made. One of his comments was, "The supervisor has suggested has suggested in his view the appointment of a liquidator, Tonalka and Saveaway, would be in the best interests of all creditors of the companies, including the registered mortgagees," so he was giving some advice. As a result of my submission to him that MacTiernan had raised the issue, he was giving some advice how those mortgagees may best approach the matter to get their money back. Thank you. Did you receive any complaints from your parliamentary colleagues who requested your intervention in those instances of your having intervened at their request?---None. Mr Chairman, may I tender the bundle of documents that I have described from and to Dr Hilda Turnbull MLA, member for Collie, from and to Ms Alannah MacTiernan MLA, member for Armadale, and Mr Phillip Pendal, the independent member for South Perth. THE CHAIRMAN: Certainly; 139. EXHIBIT 139 Bundle of documents re Dr Turnbull,

Ms MacTiernan and Mr Pendal MR McKERRACHER: May it please. Could I request, Mr Chairman, that some copies be taken of those. We should have copies of all the others but not of those. THE CHAIRMAN: Yes, certainly. MR McKERRACHER: Now, on the topic of intervention, have you received complaints or accusations of another character in relation to interventions that you have pursued and particularly on the topic of a Mr Casella? ---Yes, I have. What happened in the Casella case was that an article appeared in The West Australian newspaper which said a complaint had been lodged with the Ministry of Fair Trading. The letter or the alleged complaint was dated 25 January 1999, as I recollect. 1/9/ces 9 D.J. SHAVE XXN 21/6/00

Can I show you a bundle of documents to refresh your memory on the topic?---Yes. There are some copies of this material for the board, Mr Chairman. THE CHAIRMAN: Thank you. MR McKERRACHER: You made reference to an article published in The West Australian asserting that - perhaps you could take us through the bundle, Mr Shave?---Well, on 31 January 2000 a front page heading in The West Australian newspaper said, "Watchdog ignored broker's $1,000,000," and it then goes through to outline the allegation that a million dollar bribe had been entered into between a broker and a borrower, the broker being Blackburne and Dixon. It didn't outline the borrower's name and when I - what I then did was I asked the department to - because I had been given no knowledge of it - give me some advice as to what the matter might relate to and, as it happened, the allegation that was made by Mr Domenic Casella was that he was a party to a million dollar bribe. He was the borrower and the inference was that they pumped the valuations up on a property with Blackburne and Dixon on the basis that Blackburne and Dixon were going to get some money out of the proceeds of the loan and some equity in the deal. What happened was I said to the department, "Have you got anything on the file? It's alleged a complaint was to you and you didn't act on the complaint." They sent me up some paperwork which is a letter written by Domenic Casella to the Finance Brokers Supervisory Board and dated 19 January 1999. There were a couple of things that concerned me. First of all was that - and I will get to the contents of the letter later. Apparently the deal was that Casella has been involved by his own admission in this secret commission and the commission took place in 1993. The deal took place in 1993 and I thought to myself, "Well, why would you leave until 1999 to make it public to the press?" That was my first concern. What also concerned me was that Mr Casella had apparently gone to the press in the year 2000, January of 2000, but he had written his letter to the board on 19 January 1999 and I was trying to deduce, as you would try to do, why you would leave such a serious allegation for a year after you sent an alleged complaint to the board to investigate. So there was quite a lot of public interest. Obviously if The West Australian was going to put on the front page that the board was being negligent, we wanted to try to get to the bottom of the matter. So I then asked, "Do you have anything else on file?" and they apparently had some file notes there where an investigator had spoken to Mr Casella about this complaint in 1999 when they received the letter and Mr Casella had refused to put the detail or give the 1/10/ces 10 D.J. SHAVE XXN 21/6/00

detail of the participants and the complaint. I mean, I can understand that because he was a party to the deal. So what transpired as a result of that was I wrote to The West Australian newspaper on 15 February and said, "Your coverage of the Gunning inquiry and related issues requires a response," and I said I won't be giving directions but in that particular document letter to the newspaper I nominated Domenic Casella as being one of the parties to the complaint. This caused a great deal of interest and what happened as a result of this is The West Australian newspaper on 18 February printed another heading "Shave broke secrecy rule". The article then went on to say that I had obtained the information. It appeared that I had obtained it illegally and that I had committed an illegal act. The reality was that that wasn't the case. The ministry had sent me out the information. Even if I had gone to the board and obtained the information from the board, my legal advisers have told me that I wasn't covered by the secrecy provisions of the Finance Brokers Board anyhow because I was a minister and I had the right to that information. If I was injudicious with that information, it would for people to judge me in another place or the parliament and, as the premier said, if I had done anything illegal or wrong, then I would be judged on that. So you had this scenario in the paper where the front page one day says, "Watchdog ignored broker's 1,000,000 deal," then you had "Shave broke secrecy provisions". McGinty got in on the act and he wrote in the paper - very rarely does he come outside parliament and bob his head up but on this particular issue he did and inferred that I had committed and illegal act and I went to my solicitors and took out defamation proceedings against The West Australian newspaper and against McGinty and they are still in progress. Mr Casella decided to get in on the act and the next headline on April 8 says, "Shave faces writs in broker scandal," and the article opens up by saying:

Fair Trading minister Doug Shave is facing criminal and civil court actions for revealing the identity of a businessman who lodged a complaint against a finance broker.

Then there is a photo of Domenic Casella and a James T who is described in the article as - yes, "Domenic Casella and his solicitor James T leave the court." So I did a bit of checking on James T. He's not actually a legal practitioner but he doubles as one and when they have business to do, he tells people that he's a legal practitioner. So those writs were served on me with a great deal of fanfare. There's a photo of McGinty and Casella and T leaving the court and the writs were issued. So they went down there and filed it. I sought to have the writs struck out because they were false and 1/11/ces 11 D.J. SHAVE XXN 21/6/00

also because I didn't believe there was any substance. Mr Casella and Mr T didn't even bother to turn up to the court hearing to hear the application and the court struck out the writs and awarded costs against Casella. So that was the substance of the allegations, but if you would like, I'm quite happy to read the contents of the letter that Mr Casella wrote. I think it should be on the record. Yes, certainly?---This is the letter that Casella wrote to the board. I believe that the actions - why Casella wrote the letter on 19 January and made the allegations is things were starting to hot up with the brokers and people involved in some of these deals and I think the Mr Casella sought to distance himself from this deal by saying, "I'm an innocent party." What his lawyers hadn't told him is that if you are a party to an illegal act, you're as guilty as the person giving the money if you take the money or if you take the money, as guilty as the person giving the money, but here is the context of the letter and it's addressed to the Finance Brokers Supervisory Board, attention registrar, from Domenic Casella:

Dear sir, I wish to obtain answers on the following points: (1) can a mortgage broker take up an interest in a property deal and have its interest in the deal hidden so the mortgagees are not aware of the broker's interest; (2) if so, is the broker allowed to charge the brokerage fee and expenses; (3) has the broker broken any laws and if so, what can be done; (4) the broker in this case did not comply with taking any risks or put up any personal guarantees; (5) in this particular deal the broker put my partner and myself in an embarrassing position and were left with no alternative but to accept his proposition and give a one-third carried interest free of any obligations; (6) can this deal which the broker's interest is involved be cancelled or made void; (7) the broker now wishes to sell its one-third interest for approximately 500,000-odd; (8) previously the broker was wanting around 1,000,000 approximately 2 years ago; (9) this deal will now cause financial hardship as my partner and I haven't been able to extract funds out of the deal due to the fact that it is a long-term project. Could you please advise me of the position the broker would be in and what can I do about it? I'm considering handing this matter to the Real Estate Consumer Association, Denise Brailey and my member of parliament and the media because I'm sure the conduct of the broker is illegal.

Well, if that's what happened, of course it was illegal but unfortunately for Mr Casella he was involved in the illegal act also: 1/12/ces 12 D.J. SHAVE XXN 21/6/00

I await your urgent fax reply, regard D. Casella.

Signed and dated 19 January 1999. Thank you. To recap on the allegations by The West Australian that you had committed a criminal act, your advice is that that is completely wrong and you intend to continue suing The West Australian newspaper for defamation?---I do. And Mr McGinty?---And Mr McGinty particularly. I think there is finally just a reference to the parliamentary debate on the top of this bundle of papers in which you responded in parliament?---Yes, and I outlined what had occurred. So you were accused first of doing nothing and then you were accused of doing something?---That's correct. The press carried it either way?---Well, whichever slant they care to put on it. It's one way most of the time. Mr Chairman, can I tender the bundle of papers which the committee has in relation to topic of Mr Casella? THE CHAIRMAN: Yes. Is this a separate bundle? MR McKERRACHER: Yes, it is, Mr Chairman. THE CHAIRMAN: Exhibit 140. EXHIBIT 140 Bundle of papers re Mr Casella. MR McKERRACHER: May it please you, Mr Chairman. Can I also ask you about Mr Julian Grill, as to whether the topic of intervention has arisen with Mr Grill. MR CHANEY: Mr Chairman? THE CHAIRMAN: Yes. MR CHANEY: I rise perhaps a little early given that arose halfway through the question that was being put, but I have a concern that the committee ought not get into issues which relate essentially to the manner in which Mr Shave may or may not have carried out his ministerial duties and the disputes and issues which have arisen. We have just had an illustration of that in relation to a proceeding against The West Australian. That is because the terms of reference of this inquiry do not involve and under the Public Sector Management Act they could not involve an examination as to the adequacy or otherwise of the performance by the minister of his portfolio. 1/13/ces 13 D.J. SHAVE XXN 21/6/00

It is on that basis that a number of those matters on which Mr Solomon would have sought to cross-examine and which I considered last night as to whether I should cross-examine were rejected by me, namely, it didn't seem to me that they were going to, in essence, whether or not the minister was doing a good job and that is, in my submission, outside the committee's terms of reference. Where the minister's conduct is relevant to the terms of reference is where it impacts in some way or there is some assertion in that it may impact some way on the efficiency and effectiveness of the board which is, of course, the terms of reference. I accept that the basis upon which Mr McKerracher has led this evidence, as I understand it, is illustrating examples of intervention against which one can compare the intervention which clearly has been relevant to the terms of reference and had been dealt with in the past day. It may be that the doors ajar on that basis, but I have a concern generally which I felt I should voice at this point that we not be simply entering into what is undoubtedly highly political issues which are of great public interest but, in my submission, go beyond the proper terms of reference and although one might well understand the minister desiring to have a public forum in which to elucidate some of these issues, in my submission, the committee needs to be careful to limit the issues to those directly relevant to the terms of reference. So I'm not at this stage formally objecting to anything but perhaps putting Mr McKerracher on notice as to at least what my submission would be in relation to where he may be leading in his evidence. THE CHAIRMAN: Thank you. Mr McKerracher? MR McKERRACHER: There is only one other matter, Mr Chairman, and my learned friend Mr Chaney has put it accurately. It does go to the topic on which we were given notice of the evidence which had been given against us, namely, the suggestion that the minister had intervened and caused problems, and that is what I have been addressing. There is only one other matter I wanted to raise and I'm conscience that we shouldn't dwell on these issues rather than on the substantive matters in which the committee is inquiring. THE CHAIRMAN: Mr McKerracher, subject to any of my committee members disagreeing with me, let's put it this: you have made your point and I think that is enough. MR McKERRACHER: Thank you. I take it that no other member disagrees from the silence. DR NEWMAN: I support the chairman's comments. 1/14/ces 14 D.J. SHAVE XXN 21/6/00

MR McKERRACHER: Thank you, doctor. Can I move on to a completely different topic then, Mr Shave, and particularly on the topic of Mr T. I think we can be relatively brief on this as well in light of your extensive evidence yesterday. Can I show you your diary entry for Friday, 30 July at 9 am? THE CHAIRMAN: Which year? MR McKERRACHER: I beg your pardon, Mr Chairman, 1999. THE CHAIRMAN: Thank you. MR McKERRACHER: Does the diary entry for Friday, 13 August record the name Mr T in handwriting next to 9 o'clock?---Yes. Whose handwriting is that?---That's my electoral officer Enid Russell's handwriting. Did you know anything at all about Mr T attending on this day prior to the morning of the 13th?---No. Nothing had been communicated to you by him or by her at all in relation to his attendance?---Nothing. He simply attended you in your electoral office at about the time of the appointment, did he?---That's correct. What did he say to you?---He said that he had a difficulty with a mortgage broker in relation to some funds and he nominated who the mortgage broker was. Who was it?---It was Blackburne and Dixon. Did you say anything to him about the query that he had raised?---Well, he made the comment that he didn't want to bother me particularly because he realised I was very busy, but as he was a constituent, you know, he was entitled to be there. I don't know that he used those terms, but he said he had been waiting to get some money for some time and I said, "I wish you'd come and seen me sooner," and then I asked him for the paperwork which he produced. I think at that stage you had already seen Mr G in a meeting with Mr Mitchell on two Friday mornings before? ---Yes, on 30 July. Again was anything unusual about Mr Mitchell being at that meeting?---No. You were also aware of a recommendation by the ministry to the board that a special audit be conducted of Blackburne and Dixon?---That's correct. 1/15/ces 15 D.J. SHAVE XXN 21/6/00

I think that was on 16 June, was it not?---Yes. Despite that recommendation, what had happened in relation to the recommendation that there should be a special audit of Blackburne and Dixon?---Well, there had been communications between ASIC and the board and ASIC had asked if the audit could be delayed because they were taking certain steps in relation to Blackburne and Dixon. That was some time in July that communication took place, as I understand. Thank you. So you said to Mr T you wished he had come to see you earlier?---Yes. Did you then phone Mr Mitchell and fax through the paperwork that he had handed to you?---Yes. I didn't fax it. My electoral officer faxed it. Thank you, yes. Did Mr T explain to you whether he had spoken to any other person before coming to see you?---He said he had spoken to no-one else and I understand that he signed a statutory declaration to that effect. When you say no-one else, do you mean no-one else in the ministry?---In the ministry, yes. And so the first reference of this matter was when he came to see you?---Yes, on the morning of 13 August last year. Thank you. Did he explain to you and did you note on the paperwork that he had a letter indicating that he was to get a payout of the existing mortgage by 10 August and that he was visiting you following the failure of that payout?---Yes. Which was in fact the Tuesday of that week, I think? ---Yes, it was 10 August the payment was due. Did you ring Mr Mitchell and briefly outline the problem to him?---I did. In the course of that telephone conversation, did you say anything to Mr Mitchell to the effect that he should lean on Blackburne and Dixon?---No, I didn't. Did he use any terminology whatsoever which might be construed as suggesting that?---No. Did you suggest to him that the broker should be informed that the minister had a personal interest in the matter? ---No. Did you use any terminology at all which might be construed as suggesting that?---No. 1/16/ces 16 D.J. SHAVE XXN 21/6/00

Incidentally, did you mention to Mr Mitchell that Mr T had been your father-in-law?---No. Was there any reason for not mentioning that?---I just thought it should be treated the same as everything else. Was this matter treated differently in any way whatsoever from other matters?---No. Now, you knew Mr Mitchell to have been a - Mr Chairman, it is quite hard to concentrate with the commotion behind me. THE CHAIRMAN: Yes. Any further disturbance I will throw the people out causing it. MR McKERRACHER: Thank you, Mr Chairman. You knew, of course, Mr Mitchell had been in the public service for many, many years?---Yes. Did you hold him in high regard?---Yes. Did you have any concerns at all that he would give an inappropriate direction to any person?---No. Did Mr Mitchell suggest to you that there was anything at all inappropriate in your communication with him?---No. Was this a particularly urgent matter?---No. Blackburne and Dixon in a general sense was becoming more of a live issue. Is that fair to say?---Yes, obviously there was a concern that would have been a result of some of the letters that had been received. That's why we would have been talking or the department would have been talking to ASIC in July about a special audit and why I assume the board made the decision in June to request that special audit. Thank you. Was the next that you heard about the matter when it was mentioned to you by Mr Harry Skepper? ---That's correct. Mr Skepper was your chief of staff?---He was. Did he tell you that he had attended a meeting at Blackburne and Dixon?---Yes. On 20 August?---Yes. Did he say what the meeting was about?---He was apparently there to meet with regard to Mr G. 1/17/ces 17 D.J. SHAVE XXN 21/6/00

Mr G?---Mr G, yes, and that was his understanding of what the meeting was about. I hadn't asked him or spoken to him about the meeting. You hadn't spoken to him at all about that meeting?---No, not at all. Until after the meeting?---That's correct. Did he also mention in passing that Mr T had apparently collected his cheque that day or that he had been told that?---That's correct. Do you recall saying anything to him in response?---Just he had said that in the meeting someone had walked into the meeting and mentioned that a cheque had been paid to Mr T and I then advised him that he might call Mr T and gave him phone number and just see that he had got his cheque. Was it ever suggested to you that there were other people involved in the investment that Mr T was involved in? ---Yes. Was there ever any suggestion to you that there was any risk of other people getting their money back?---No, the advice I had - we did a check on the discharges and the other people apparently that wanted their money out of the investment - all of the other people that wanted to take their money, took their money. Thank you. You never received any complaints from any of the investors associated with that transaction?---None at all. I wanted to ask - - -?---Could I just qualify that? There may be something on he file prior to the date that the settlements took place where people were concerned about the money. I mean, there may have been someone in that mortgage that wrote and said, "I've got a worry with Blackburne and Dixon," but I don't know that I have ever seen anything that was applicable to that mortgage. In relation to Mr G, did you consider that his position as a constituent gave rise to a dual responsibility on your part?---Well, yes, I mean, as the minister I have a responsibility to try and resolve issues at a ministerial level and as a local member. Some people have been saying, "Well, because you're the minister, your constituents get preferential treatment," but there is another side to that. Other members of parliament are ministers in other portfolios and other backbenchers so even if your local member of parliament is not a minister, you still have the opportunity for you local member of parliament to work for you as your local member 1/18/ces 18 D.J. SHAVE XXN 21/6/00

and then you also have the access to the minister through that member of parliament. So in a lot of instances people would say having a minister as your local member is an advantage. It probably is in terms of discussions that take place at a cabinet level but generally what ministers try to do is make sure that when backbenchers come to them with constituents' problems, they're treated fairly and given every assistance. So it's probably not accurate to say that if a person is in a constituency that is represented by a backbencher, it's a disadvantage. In many cases they're more advantaged because the backbenchers haven't the workload and they have the opportunity to spend more time on constituency matters. Often it has been said to me when someone becomes a minister, you don't get access to them as a local member of parliament as you do as a backbencher, and that's understandable. They're going interstate, overseas. They have got cabinet meetings. They're meeting with a variety of people in regard to their issues. I have had that proposition put to me probably 50 times. I know with my predecessor Barry Hodge when I was doorknocking people, they would say, "We used to be able to see Barry Hodge at functions quite a lot but we don't see him now he's a minister." That's a natural fact of life. The minister has got a workload which is far in excess of that of a backbencher. But you nevertheless see your constituents on Fridays? ---Yes, I do. Now, I wanted to take you to what has been loosely described as a note of Mr Dowling in these proceedings. It is actually an electronic record which he has completed. May the witness please be shown exhibits 123 and 124, Mr Chairman? THE CHAIRMAN: Yes. MR McKERRACHER: Just while that is happening, Mr Shave, I asked you if you thought you had a dual responsibility with Mr G. You have answered that. Was the position with Mr T any different?---No different. Now, in these two documents, minister, Mr Dowling has explained that exhibit 123 is what he noted in relation to the Mr G matter and that several days later, in fact 18 August, he had simply copied over into the T file, exhibit 124, some 26 lines or so which had been originally recorded several days earlier in relation to the G file?---Mm'hm. It is also said that he saw absolutely nothing untoward or improper in any communication that he received on the matter, but can I specifically take you to the only evidence at all in this inquiry suggesting that 1/19/ces 19 D.J. SHAVE XXN 21/6/00

Mr Mitchell had conveyed an instruction to lean on the broker? If you look at exhibit 123 at page 1, you will see an entry which is untimed but there is an asterisk "Pm Friday, August 13, 1999". Do you have that entry? ---I do, yes. Similarly if you look at exhibit 124, you will see precisely the same entry appears on page 6?---Yes. And indeed, as is perfectly evident, there are some 26 lines or indeed the bulk of the entire T memo has simply been copied out of the G file?---It would appear that's exactly what has happened. Several days after the particular telephone conversation?---Yes. In particular, can I take you to the entries that do appear in the T file?---Yes. And ask you these questions: first, can you see the entry "Friday, August 13, 1999 Bill Mitchell phoned and asked"?---I can. It goes on to say, "Phoned and asked what was happening with C complaint"?---Yes. First of all, in relation to Mr T, was there any complaint at all as at the date of that record?---No, the memo is false and it's untrue. You can't substantiate it. It goes on to say, "I advised that I received it this week." Had Mr Dowling received any complaint at any time in relation to Mr T, let alone this week?---No, as I said, this note on that file can't relate to Mr T because he had never put a complaint in. And similarly the entry, "I was going to contact Blackburne and Dixon early next week to arrange to call at their premises to discuss this," is there any possibility that he could have recorded that in relation to Mr T?---Not in my view. As at this date, had he heard anything about Mr T other than in the communication with Mr Mitchell?---No, he hadn't because Mr T hadn't been to visit anyone that week prior. He had only been in my office at 9 o'clock on the Friday morning. And had not lodged any complaint at any time, let alone this week?---No, Mr T hadn't; no. There is finally the words "BM asked" with nothing following it. Are you able to throw any light on what that might be?---No idea. 1/20/ces 20 D.J. SHAVE XXN 21/6/00

So those four errors in this memorandum are apparent. Are there any other errors, in your view?---Only that he talks about the word "lean", as I recollect, further into the memo. It's immediately after three of those four errors that he records, "The minister wanted someone to lean on T"? ---Yes. The trader?---Yes. Immediately after and in the same sentence says, "Even advising that the minister is looking at this complaint"?---Yes. He has made all of those comments in regard to Mr T, but unfortunately when you copy things, you want to make sure that you get the detail correct because in this circumstance there is no human possibility that that memo on the Mr T file can be the truth. Thank you. Those exhibits could be returned, thank you. At any stage at all did you receive any complaint from Mr Dowling or anyone that an improper direction had been given?---No. Or an inappropriate direction?---No. Is Mr Dowling an officer of some several years' standing in the public service?---I understand; I don't know his term of service. Is there a grievance policy within the ministry requiring that any aggrieved employee should, if he or she feels comfortable in doing so, attempt to resolve the grievance by approaching the person or persons who are the cause of the grievance?---Yes. And if the employee feels uncomfortable in doing so, the employee should promptly and initially verbally inform the immediate supervisor of the grievance?---Yes. May the witness also please be shown exhibits 135 and 136, Mr Chairman? Incidentally, while that's happening, Mr Shave, do you know of other occasions on which Mr Dowling has expressed rejection of requests made to him?---Well, there was this one occasion when there was a requirement for a staff member in my office. It was required that the person was to come up and notice was given that they were due up to help with the ministerial office because someone had left and the night before the person was due to come up to the office Mr Dowling was in discussions with my chief of staff and said that my chief of staff couldn't have the officer who it was agreed was going to come and work in 1/21/ces 21 D.J. SHAVE XXN 21/6/00

my ministerial office and my chief of staff had to make it clear to Mr Dowling that that was the arrangement that had been agreed to and that the officer was needed and that the arrangement was to stand. So in that circumstance Mr Dowling was quite prepared to tell my chief of staff that he needed the officer down in his department and that my chief of staff would have to wait. You don't have any criticism presumably of him doing that?---No, he has got a right to try and keep his staff member. I mean, the arrangement was apparently made 2 or 3 weeks before and he made a decision that he wanted to keep his staff member. But Mr Dowling is not a person who would be reluctant about expressing an objection or concern, in your experience?---I didn't appear so, in my experience, no. I have shown you two documents, Mr Shave. Exhibit 135 should be entitled "Referrals from minister for Fair Trading and requests for meetings attended by Bill Mitchell on the minister's behalf"?---Yes. Mr Mitchell has given some evidence about those matters. Can I also ask you about a matter concerning a Mrs L? ---Yes. Can you tell the inquiry please what happened in relation to that matter?---Mrs L had a problem in regard to - - - Sorry, Mr Shave, to stop you. There's apparently a suppression or confidentiality order concerning the name?---Okay. THE CHAIRMAN: Yes, there is. MR McKERRACHER: Mr Chairman, we will refer to her as Mrs L, if that's in order. THE CHAIRMAN: Yes?---Mrs L had a problem with regards to tenancies and rights of people - she lives in Jim McGinty's electorate - and I arranged for Mr Mitchell and an officer from Fair Trading to go and meet with her to try and resolve the problems that she had. What were the nature of the problems again?---It was to do with retirement, issues to do with the rights under the Retirement Villages Act, and she was an elderly lady and needed assistance so it was arranged that a compliance officer or a person in that area would go and meet with her and discuss the issues and try and assist her. Did you see any problem in Mr Mitchell attending with a compliance officer in relation to that difficulty?---No. 1/22/ces 22 D.J. SHAVE XXN 21/6/00

Mrs L appears on that list towards the bottom of the page. Is there also a matter concerning someone by the name Mr P. THE CHAIRMAN: This whole exhibit is confidential. MR McKERRACHER: Thank you. THE CHAIRMAN: There are names but they certainly wouldn't wish to be named at this inquiry. MR McKERRACHER: Was Mr P, as you understand it, the senior compliance officer to whom you have referred in relation to the L matter which appeared on this list? ---I'm not sure if he was the actual person that went there or not. Thank you. Can I move on to some more - - -?---My understanding with Mr P is that there was a problem with a settlement agent, a compliance matter, and Mr Mitchell had gone out with Mr P who was a compliance officer to visit the settlement agent to look at the issue. So I think you will find that the L and P matter are probably two separate issues. Can I show you a copy letter sent by Mr Mitchell to Mrs L on the topic? Do you recall the context of this communication, Mr Shave?---It was actually handled by Mr Mitchell and, as I had said yesterday, Mrs L would have come to me. She had a problem. The fact she wasn't in my electorate - she was very close to my electorate. My office is on the corner of Stock Road and Canning Highway. Her home is located in McGinty's electorate. His office is over in Fremantle so being an elderly lady she came to see me and said, "Can you assist with this matter," and I would have said to Bill Mitchell, "Will you get one of the people from the ministry and yourself and will you try to resolve her issue?" Thank you. Mr Chairman, can I tender the letter from Mr Mitchell to Mrs L dated 9 November 1999? THE CHAIRMAN: Yes, that is exhibit 141. EXHIBIT 141 Letter from Mr Mitchell to Mrs L of 8/11/99 MR McKERRACHER: Thank you, Mr Chairman. Mr Shave, can I bring you to the period of time at which you were appointed as minister for the portfolio of Fair Trading? After your appointment in January 1997, did you cause some structural redevelopment of the department to occur?---Yes, I did. 1/23/ces 23 D.J. SHAVE XXN 21/6/00

Mr Skepper has identified a structural chart which is in front of you now and is exhibit 136. Is that structure the consequence of your restructuring effectively of the department following your appointment?---No, 136 is a structure of my ministerial office and the structure of the department, the Ministry of Fair Trading, which was an alternate restructuring that took place. Was there any restructuring in your own office or was it purely within the ministry?---Well, from time to time you change the combinations that you use. You're basically allowed to have a certain number of people in your office and depending on the workload, you will change the combination of your ministerial office. So that has changed to a minor degree from time to time since I became the minister, but the major restructurings took place in the Ministry of Fair Trading. Can you broadly describe the nature of those changes that you made and why you made them?---We had a review of the department and an outside group was brought in to consult how the ministry might operate effectively or more effectively and those consultants made a number of recommendations. There were five senior officers in the department at the time. The proposal was to restructure with four senior officers. The positions were thrown open and a number of people were interviewed for each of the positions and only one person remained at the senior level from the previous structure. In addition at a lower level there was also a number of changes. I think in all out of 14 senior positions there were eight new departmental people or people elevated from within the department to more senior positions. Was it in October 1998 that Mr Patrick Walker was appointed as the CEO of the ministry?---Yes, it was. That, of course, would have been preceded by several months of advertising, interviewing and so on, presumably?---It was. Why did you consider there was a need to endeavour to restructure or revitalise the department?---For a period of 3 or 4 years they had had acting directors in there and with any organisation people aren't sure of their future and I didn't think it was a healthy situation to have a structure which was, let's say, not concrete in terms of the chief executive. I thought that the people needed to know that the person that was in that position with whom they were going to work with was a person that was appointed for a set period and therefore I felt it was important to resolve that issue as a matter of priority. 1/24/ces 24 D.J. SHAVE XXN 21/6/00

Thank you. Now, at the date of your appointment the independent management group had been appointed as such. It had been established as at the date of your appointment. Is that correct?---Which independent management group are you referring to? I'm sorry, the industry reference group?---That's correct. You were awaiting, presumably, the outcome of recommendations made by that group?---Yes. You were aware at that stage, were you, that there had been some suggestion from the chairman of the board that the act needed attention in areas?---Yes. Was it a matter of awaiting the outcome of the industry reference group which had been established prior to your appointment to see what that group was recommending? ---Yes. In December 1998 did that group release its report? ---Yes. I think that one of the recommendations of that group in proposal 1 to attachment 3 was that the board should consider imposing a requirement that finance brokers involved in the handling of private investor funds obtain professional indemnity insurance?---Yes. Were you aware of that recommendation by the time the report came to cabinet?---Yes. I think the records show that cabinet met on 22 March 1999 to consider the recommendations made by the industry reference group?---Yes. Can I show you a copy of the cabinet minute, please, Mr Shave? Could I ask, minister, from your perspective whether there is any suggestion or concern about confidentiality in relation to this cabinet minute? ---Cabinet minutes normally are confidential. I don't mind talking about the terms of the cabinet minute because ministers do that from time to time but actually releasing the cabinet minute wouldn't be appropriate. THE CHAIRMAN: No, I agree completely. This exhibit will be confidential. MR McKERRACHER: Thank you, Mr Chairman. There is at the back of this document several pages of submissions on your part to the premier and the members of the cabinet, is there not?---That's correct, yes. 1/25/ces 25 D.J. SHAVE XXN 21/6/00

I think it is self-explanatory, but can I ask you this in general terms: what was your view about the recommendations which were being made by the finance brokers industry reference group?---In principle I supported most of the recommendations or all of the recommendations that they made. The objective was to minimise the potential loss for lenders and borrowers by changing the criteria to ensure that insurance was required, to provide precontractual information and post-contractual information, so basically the recommendations which cabinet endorsed and which I took forward were aimed specifically at assisting people that were involved in providing finance in the mortgage industry lending area. Minister, did you consider it was appropriate to attempt to legislate any amendments to the act prior to the date of receiving the recommendations from this group?---Well, it wouldn't have been appropriate to do that because what would have happened if the group very similar to the Gunning inquiry - if I was to legislate at the moment to set up tribunals which I favour to deal with some of these matters and the inquiry didn't come forward with that proposal, we would be attacked in the media by the Labor Party immediately and if I implemented any of these changes while a review was going on, what the Labor Party would say is, "You've just created this reference group for no real reason and you're not taking any notice of them," so you're damned if you do and you're damned if you don't. It has a familiar ring, that slogan?---It does. And the recommendation appearing at the end of the cabinet paper was:

Cabinet endorsed the submission to release the finance brokers industry reference group report of the Finance Brokers Control Act 1975, to implement the reforms recommended by the group and to instigate interim reforms to address current issues of concern pending the full implementation?

---Yes. Mr Chairman, can I tender as a confidential exhibit the cabinet decision sheet of 22 March 1999. THE CHAIRMAN: 142. EXHIBIT 142 Confidential exhibit of cabinet decision

sheet of 22/3/99 MR McKERRACHER: May it please you. 1/26/ces 26 D.J. SHAVE XXN 21/6/00

Following the adoption by cabinet of those recommendations which you had made to it, on 28 May 1999 did you write to Mr John Urquhart, the chairman of the Finance Brokers Supervisory Board, stressing a number of reforms which needed to be implemented quickly, including compulsory professional indemnity insurance?---Yes. May the witness please see exhibit 138, Mr Chairman? THE CHAIRMAN: Yes. MR McKERRACHER: While that is coming, Mr Shave, did you consider that it was appropriate for you to legislate as soon as you had had the group's recommendations or did you need the input of others such as the board?---It was appropriate to get the board's view on the matters. I think these letters were mentioned in passing yesterday, Mr Shave, but can I just take you to the detail a little? On the front page of exhibit 128 - - - THE CHAIRMAN: Just a moment please, Mr McKerracher. We seem to have different documents. MR McKERRACHER: Mr Chairman, there are three letters. They were marked collectively exhibit 138 yesterday. THE CHAIRMAN: They were three that were going to be copied for us. DR NEWMAN: This has only one copy for the three of us to share, is it? MS..........: That's right. That's what I said. I only had the one copy. THE CHAIRMAN: Yes, very well, Mr McKerracher, thank you. MR McKERRACHER: Do you have exhibit 138?---I do. And do you have the letter of 28 May 1999?---I do. Does it commence:

Dear John, as you're aware, the government has recently completed a review of the act. The review was conducted because the act has been in operation for more than 20 years and some concerns have been expressed -

etcetera?---Yes. 1/27/ces 27 D.J. SHAVE XXN 21/6/00

Does it go on to indicate those recommendations of reform which cabinet had recently endorsed?---Yes. Then does it set out that in the longer term cabinet endorsed recommendations for legislative change to strengthen controls?---Yes. Including the establishment of a mandatory code of practice, repeal of the act, simplified registration, increased penalties?---Yes. Does it spell out the purposes of those recommendations? ---Yes. Before we look to the long term, are the four dot points on the first page matters which you were suggesting to the chairman should be considered, as you say, for implementation quickly?---Yes. Do they include amending the code to clarify the definition of client?---Yes. And to strengthen pre and post-contractual information requirements to consumers?---Yes. That there be more frequent audits of trust accounts? ---Yes. That a consumer information brochure on mortgage investments be published?---Yes. And compulsory professional indemnity insurance for new finance broker applications and on renewal of existing licences?---Yes. Of those four matters was there more weight, in your view, in any particular one of them?---The first one was important, the last point was critical. Why was the last point critical, in your view?---Because you didn't have - where there had been an error on the part of a broker in the arranging of a loan there was no protection there for the lender in terms of having insurance or indemnity insurance. So in the legal profession, as I understand it, you have insurance there and if a lawyer is negligent - albeit that if he defrauds I'm not sure of the right of claim, but certainly if he's negligent or doesn't do the right thing there is an opportunity there for the person to get redress through the insurance process. In this case that wasn't there and that was a major concern to me. Thank you. Did you write again to the chairman on 2 July 1999?---I did. 2/1/rmo 28 MR D.J. SHAVE XXN 21/6/00

Do you have that letter in exhibit 138?---I do. Is it there in its complete form, Mr Shave?---It is. What did you recommend to the chairman on that occasion? ---I spoke again about the need to see that the current issues and interim reforms were put into place as quickly as possible with the introduction of the amended code of conduct which I just referred to as pursuant to my first letter. I spoke of more frequent trust account audits and the compulsory professional indemnity insurance. So the two points out of the four on the first letter that I wrote I reiterated my concern that we needed to get the code of conduct issue resolved as quickly as possible and that we needed the compulsory insurance in as a matter of priority. The letter appears to have followed a meeting, because in the first line you say, " appreciated the opportunity of meeting with you and other board members recently," and you said yesterday, I think, that you held meetings from time to time with the board. In the course of those meetings was the topic of either professional indemnity insurance or a fidelity fund discussed?---I would have spoken at those meetings - this letter would have been a follow-up to one of those meetings where I would have verbally indicated my desire to see that the insurance was put in place. Do you recall the reaction of the board to your suggestion that the recommendation of the group; that is, for the implementation of PI insurance should be endorsed? ---My general view was that they were ambivalent towards it. In what sense?---Just didn't respond positively to what I was proposing. Did they favour another form of protection?---There was some talk about having a different form but I didn't favour that. What form was that?---That was to have a similar situation where you had a fund as they do with the real estate fund, but as I pointed out yesterday in the evidence I gave, that would have been, in my view, impractical. If you created a fidelity fund and there's probably only going to be 100 brokers who would form part of it and if they put in 50,000 or 100,000 as a lodgment fee you would only have 5 or 10 million dollars to cover the issue. The insurance, in my view, was a better proposition. If you assume that only 5 per cent of the brokers out there are either negligent or dishonest, if you have got the insurance premiums spread across all of 2/2/rmo 29 MR D.J. SHAVE XXN 21/6/00

the people you are going to catch everyone in terms of the opportunity to get access to financial redress. If you have a fund that has a limited pool in it and you get something that happens, as happened with Global Finance or Grubb, you will find that your first 10 per cent or 20 per cent get access to it and then there's nothing left, so no-one is protected. In my view a more sensible approach was to have everyone insured, similar, as I understand, they do in the legal profession. I may be wrong, but they have a requirement that people carry indemnity insurance, all lawyers. It's part of their registration requirement, and then if they're negligent in an action with a particular person that person can apply to that insurance company or take action to get redress. So the indemnity insurance always seemed the logical way to go as far as I was concerned and I could never understand why that issue hadn't been pursued prior to myself becoming the minister. As you say, through 1999 when you were writing these letters the board appeared to be ambivalent or to possibly another form of protection?---Mm. By the latter part of that year, on 12 August 1999, did you write a firmer letter to the chairman on the topic exclusively of professional indemnity insurance?---I did, and whilst it is a firmer letter, as I said yesterday, in the private sector I probably would have been a little more blunt, but as these boards act independently and you need them to assist you when you're trying to resolve these issues, whilst it was a firm letter it wasn't as blunt as I might have been at other times. Nevertheless, it does say:

I am informed that insurance could be made mandatory by either legislative change or by way of condition imposed?

---If you read between the lines, what I was saying was, "If you don't make the change I will legislative to make the change myself." We now know that steps have occurred in relation to - - -?---They have done that and they have been out getting quotes, yes. Yes, thank you, Mr Shave, if that exhibit could be returned. Can I just set the chronology a little bit in terms of financial support for this exercise? Is it correct that in July 1999 the treasury provided $947,000 to the ministry for the cost of supervisors in relation to Grubb and Global?---Yes, that's correct. 2/3/rmo 30 MR D.J. SHAVE XXN 21/6/00

You have mentioned the restructure of the ministry and the new positions being appointed. At about the same time as you wrote your second letter to the chairman of the board did you also write on 2 July 99 to Senator Jocelyn Newman, the federal minister for Family and Community Services?---Yes. Would you please look at this document?---Thank you. Was the purpose of this communication to stress to the senator that because many of the investors relied on the return from their investments as their only primary source of income, that it had placed some people in a position of financial hardship and you wanted assistance and advice in relation to Centrelink?---Yes. Did you receive any response or reaction from the senator in relation to this request?---I don't have the record in front of me but I assume that I received a written response from her. Did you learn that Centrelink set up a dedicated special line for such investors as a consequence of your request?---Yes. Mr Chairman, can I tender the letter from the minister to Senator Jocelyn Newman dated 2 July 1999? THE CHAIRMAN: Yes, 143. EXHIBIT 143 Letter dated 2/7/99, Minister Shave to

Senator Jocelyn Newman MR McKERRACHER: If it please, Mr Chairman. You indicated in that letter that you would support any genuine claim for assistance under circumstances of people suffering financial hardship in consequence of the finance brokers' collapse?---Yes. On 27 July 1999 I think we have heard that the ministry was informed that ASIC had seized some documents from Blackburne and Dixon and were preparing demands and suggested that the board defer the special audit until an agreement was reached on proposed undertakings. Is that right?---Yes. On 29 July were you informed that ASIC had apparently investigated Blackburne and Dixon early in 1999 and found that the only concerns were poor administration and management practices?---That's correct. So as at that date did you have any greater cause for concern about the finance-broking firm?---Well, in my earlier evidence there were some letters there and we were asking, or the board was asking, for a special audit, and I didn't have a lot of faith in the advice 2/4/rmo 31 MR D.J. SHAVE XXN 21/6/00

that ASIC had given that everything was in order and I had my doubts about that firm, yes. Was there any basis why you had your doubts about the accuracy of advice from ASIC?---Well, just after 29 July Mr G had been to see me and said people hadn't given him his capital back. I had had Mr G, I had had Mr T come in, two people, two constituents, right on top of each other, and I had my concerns. There would have been a number of other letters, I expect, written to the ministry, and that's why we would have been requesting, or the board would have been requesting, that there was a special audit to take place. Thank you. Is it correct that the ministry relocated on 28 September 1999 to new premises?---Yes. Are they at 209 St George's Terrace?---Yes. Were there then four directorates, namely business services, corporate services, industry and commerce services and strategic development?---Yes. Was Mr Gary Newcombe in charge of the strategic development section?---Yes. I think he's a qualified lawyer, is he not?---He is. Just taking things through chronologically a little, if I may, Mr Shave, did the board, as you understood it, on 13 October 1999 agree to revise the scope of the Blackburne and Dixon audit since legal advice indicated that the scope previously determined was outside that provided in the Finance Brokers Control Act?---Yes. Would you just look at this minute please? I hope this hasn't already been before the committee?---Thank you. Is that a minute of the meeting of the Finance Brokers Supervisory Board for 13 October 1999?---Yes. At item 5.6 at the foot of the second page does it record the matter on which you have just given some evidence? ---Yes. Do these customarily come through the minister's office, the board minutes?---Not normally. The board issue is usually an issue between Mr Walker, the CEO, and the board. The actual operations of the board and the decisions that are made are usually discussed with the chief executive. I would assume that that is in part because of the fact that there is this requirement of differentiation between the minister's rights to intervene and the board to act as an independent body. 2/5/rmo 32 MR D.J. SHAVE XXN 21/6/00

Mr Chairman, I don't want to burden the committee with this record if it's already in, so perhaps I will just leave for the moment and Mr Chaney could - - - MR CHANEY: No, it's not. MR McKERRACHER: In that case I will tender the minute. THE CHAIRMAN: Yes, very well. That minute of the board is exhibit 144. MR McKERRACHER: I have been corrected by counsel assisting. It's actually an extract from the minute, Mr Chairman. THE CHAIRMAN: Extract. Thank you. EXHIBIT 144 Extract of minutes of meeting of Finance

Brokers Supervisory Board dated 13/10/99 MR McKERRACHER: It's also the case, is it not, that the special audit of Blackburne and Dixon was commenced on 18 October 1999 and included the examination of their trust accounts together with a random selection of 20 loan portfolios?---Yes. That was completed, I think, on 29 October last year? ---Yes. On 1 November last year did the registrar issue a direction to investigate the loans in default for any breaches of the act or the code of conduct?---Yes. Is it your understanding that the registrar informed ASIC on 3 November last year of the completion of the audit and provided ASIC with a copy of the special report? ---Yes. Did that special report also come before the board on 10 November 1999?---Yes. History has shown, I think, that Blackburne and Dixon gave enforceable undertakings with ASIC on 15 November 1999. Is that right?---Yes. Just to continue with the chronology, is it the position that on 24 November 1999 Mr Patrick Walker, the CEO of Fair Trading, at your request wrote to the chairs of all of the boards within your ministry in relation to the preparation of a discussion paper considering the advantages and disadvantages of establishing a fair trading tribunal to handle disciplinary matters?---Yes. Also to consider the implementation of a public sector code of conduct and general administrative issues 2/6/rmo 33 MR D.J. SHAVE XXN 21/6/00

affecting the activities and operations of the boards? ---Yes. Would you look at this letter please? There are seven chairs referred to on the attachment to that letter. Is that the letter that went out to the various personnel in relation to the matters discussed, including the establishment of a fair trading tribunal?---Yes. Thank you. Mr Chairman, can I tender the letter of Patrick Walker, chief executive of the ministry, of 24 November 1999 to the chairs of the various boards under the ministry? THE CHAIRMAN: Yes, Mr McKerracher, 145. EXHIBIT 145 Letter dated 24/11/99, P. Walker to chairs,

boards under ministry of fair trading MR McKERRACHER: Thank you. Following that letter did you in fact learn that Mr Walker did meet with all the chairs of the various boards in order to discuss the issues referred to in that letter of invitation - or if not all of the chairs, then certainly some of them?---Yes. This was all as a result of your instigation and it was reported to you as it proceeded?---Yes. Now, continuing the chronology, in February of this year was funding of $1,941,000 provided by the treasury for the cost of supervision of the Grubb and Global Finance matters?---Yes. On 22 February 2000 did ASIC advise investors whose loans were in default to seek their own legal advice?---Yes. Following that communication on 22 February this year did you write to the Honourable Joe Hockey, the federal minister, in relation to the role of ASIC?---Yes. Would you look at this bundle of letters please? This bundle is not strictly in sequence, Mr Shave. Perhaps I could show you first your letter and then the others which followed. You are being a shown a copy of your letter of 24 February 2000 to Mr Hockey and you commence it with the words, "I have previously written to you regarding funding for the liquidators to Global Finance Group and Rowena Nominees"?---Yes. Was it the case that prior to this letter you had written to the minister?---Yes. While it was on the topic of funding, what had you requested?---Essentially what was required was some money 2/7/rmo 34 MR D.J. SHAVE XXN 21/6/00

so that the legal actions - the investors could be assisted in their legal actions against some of the auditors and valuers and borrowers and brokers who had defrauded them and that's without casting aspersions on any particular brokers, but there was a real need to get some public examinations so that we could actually get these people up in front of a microphone under oath, because I had the view that it was critical that the examinations take place as quickly as possible and at the same time I was meeting with liquidators who were telling me that there was the prospect of directors reducing their financial position and their assets while this process was not going ahead in terms of the public examination. So that's why I went to Hockey and I made the point to him when I met with him that - and he had Cameron, the head of ASIC, the federal head, there, and I made the point to Hockey and Mr Cameron that it would be in the public's interest and it would be in the interest of ASIC, in my view, that they were seen to be meeting what I considered to be their obligations under the law, and that was to bring these various company directors before a public examination under the federal Corporations Law. I think your letter of 24 February speaks for itself, concluding with a request for his involvement in the situation, or his involvement to have ASIC reconsider its position as soon as possible?---Yes. Mr Chairman, I tender the letter from the minister of 24 February 2000 to the Honourable Joe Hockey MP. THE CHAIRMAN: Yes, that's exhibit 146. EXHIBIT 146 Letter dated 24/2/00, Minister Shave to the

Honourable Joe Hockey MP MR McKERRACHER: Did you write again to Mr Hockey on a similar topic by letter dated 1 March 2000?---Yes. Would you look at - - -?---I have just got to find that letter. I have a separate copy of that for your, Mr Shave? ---Okay. Thank you. So you wrote again on 1 March to the federal minister reporting on the establishment of this inquiry?---Yes. And repeating the observation that you had written on a number of occasions requesting financial support "in order that we can further pursue brokers who have misused and abused investors' funds"?---Yes. In the last two paragraphs I say:

2/8/rmo 35 MR D.J. SHAVE XXN 21/6/00

Joe, I believe we should be working towards the same end in order to protect these elderly people form unscrupulous practices. In view of these circumstances I ask that you involve yourself personally in order to resolve this issue and I would like to meet with you as soon as possible to discuss my concerns.

In the last paragraph I say:

It is essential that ASIC is pro-active in regard to this issue as quite clearly its powers are extensive and should be used to resolve many of the problems that exist.

Thank you. As you say, you also met with Mr Hockey and Mr Alan Cameron, the head of ASIC, to endeavour to impress upon them the view that you held that ASIC had to get itself involved in view of its wide powers?---Yes. Mr Chairman, can I tender the letter of 1 March 2000 from the minister to Mr Hockey, the minister for financial services and regulation. THE CHAIRMAN: Yes, 147. EXHIBIT 147 Letter dated 1/3/00, Minister Shave to Mr

Hockey MR BEECH: Mr Chairman, Mr McKerracher tells me he has still got a little way to go and I wonder whether you're envisaging us having a morning break? THE CHAIRMAN: That's a good idea. We do have still another bundle. MR McKERRACHER: I'm just about to come to that, Mr Chairman. THE CHAIRMAN: By the thickness of it, we will wait. We will adjourn for a few minutes.

____________________ 2/9/rmo 36 MR D.J. SHAVE XXN 21/6/00

THE CHAIRMAN: Yes, Mr McKerracher? MR McKERRACHER: Thank you, Mr Chairman. Minister, can we now look at the bundle of copy documents which I think you still have? These follow your letters to the federal minister to which you have just referred and given evidence. They are essentially on the same topic of the involvement of ASIC. Is the first of those letters a letter from the Honourable Peter Foss QC, MLC, attorney-general, to Mr Hockey?---It is. The letter will speak for itself, but just in short, what is the thrust of that communication--The attorney-general has been quite scathing of ASIC's involvement in this whole issue and he has expressed in the document to Minister Hockey that he believes that ASIC has been negligent in its responsibilities and it's not pursuing the people as they should and his view is that they are urgent, the issues, and that ASIC should be meeting its responsibilities under their Corporations Law. Thank you. Following that bundle through, there's a response from Mr Hockey to your two letters?---Yes. By which he has requested a response from ASIC?---Yes. Then there is a longer letter to you from Mr Hockey dealing with the same topic?---Yes. Commenting on the letter he had received from the attorney-general?---Yes. And seeking an explanation from the chairman of ASIC, Mr Cameron, in relation to the matters which had been raised?---Yes. Is there also a copy of a substantially longer letter of a little more than five pages from Mr Hockey to the attorney-general?---Yes. Was any funding received from ASIC or from any quarter of federal parliament in relation to these issues?---None. The remainder of that bundle deals with first another attempt by the federal member for Curtin to procure support from Mr Hockey?---That's correct. Now, are the remainder of the letters in that bundle of significance to this topic?---Well, the first letter in front of me, the attorney-general to Hockey, that's relevant. 2/10/rmo 37 MR D.J. SHAVE XXN 21/6/00

I'm sorry, just the ones below the letter from the federal member for Curtin?---No. There's a letter to Mr Urquhart regarding the Finance Brokers Supervisory Board and then there is a recommendation - there's a letter dated 1/10/99 to Mr Urquhart noting that there is a revised code of conduct. There is a memo dated 30 September to Mr Patrick Walker from the finance - sorry, from Mr Castiglione, the acting legal officer at the Ministry of Fair Trading, the subject of finance brokers, and in that the recommendation is that the minister write to the Finance Brokers Supervisory Board recommending further amendments to the new code of conduct for finance brokers which was gazetted on 10 August in order to strengthen the protection afforded to investors. Thank you?---It then goes on to a whole legal area of the clauses and how it may be changed to further protect the interests of people who are lending money through finance brokers. If you turn back to the previous page, minister, it would seem that the letters below that to the federal member really relate to a different issue than the ASIC issue on which the top letters relate. Would that be right? ---Yes, that's correct. I wonder if your bundle could be returned to me and I will detach those and simply submit those letters on the ASIC issue on which you have given evidence. Thank you. THE CHAIRMAN: Mr Shave, did you get any money out of ASIC?---No, sir. MR McKERRACHER: Mr Chairman, what I would like to tender, just to clarify that, in light of the amendment to the bundle, is the letter from the attorney-general, Western Australia to the Honourable J.B. Hockey MP of 10 March 2000, the letter from Mr Hockey to the minister of 16 March 2000, the further letter from Mr Hockey to the minister of 20 March 2000 and the letter from Mr Hockey to the attorney-general of 20 March 2000, and finally, the letter from the federal member for Curtin to the minister dated 24 March 2000. THE CHAIRMAN: The rest are not included? MR McKERRACHER: No, Mr Chairman. Thank you. THE CHAIRMAN: Thank you. Those letters mentioned will be exhibit 148. EXHIBIT 148 Five letters dated respectively 10/3/00,

16/3/00, 20/3/00, 20/3/00 and 24/3/00 2/11/rmo 38 MR D.J. SHAVE XXN 21/6/00

MR McKERRACHER: Still dealing broadly chronologically, if I may, Mr Shave, on 1 March 2000 did you write to the Honourable Kevin Prince MLA, minister for police, stressing the need for establishment of formal communication channels between the Police Department and the Gunning inquiry as a matter of priority so that pertinent information could be passed on quickly and acted on in an efficient and timely manner?---I did. Would you look at this letter please? Did you ask the minister that in the interests of justice being pursued would he please ensure every possible resource was made available to further investigate allegations of improper or illegal conduct raised by the inquiry and by the public and by the ministry?---I did, yes. Mr Chairman, I tender the letter from the minister to the minister for police dated 1 March 2000. THE CHAIRMAN: Yes, 149. EXHIBIT 149 Letter dated 1/3/00, Minister Shave to

minister for police MR McKERRACHER: Thank you, Mr Chairman. On 4 April 2000 did you also write to the local commissioner of ASIC in Perth, Mr Ogilvie, asking for action and assistance in relation to investigations concerning Blackburne and Dixon?---I did. THE CHAIRMAN: 4 October? Which one is this? Which year? MR McKERRACHER: 4 April 2000, Mr Chairman. THE CHAIRMAN: April. Sorry. MR McKERRACHER: In that communication did you seek his advice about the obligations Blackburne and Dixon have in relation to assisting those investors involved in the defaulting loans, what action would be taken against parties, such as the finance broker, borrower, valuer or other parties if misuse of investor funds is identified, and measures ASIC may be able to take to prevent directors from divesting their assets with a view to reducing returns to investors if recovery action is undertaken?---I did, and the concern I had with Blackburne and Dixon, I had a view that ASIC never handled the Blackburne and Dixon matter correctly. What happened with Blackburne and Dixon, I had a view that they were no different to Global Finance or Grubb and what happened when we finally got the audit done of Blackburne and Dixon, ASIC took the attitude that as a result of some arrangements they came to with Blackburne and Dixon that enabled Blackburne and Dixon to write to 2/12/rmo 39 MR D.J. SHAVE XXN 21/6/00

all of the defaulting - the elderly investors who were in default telling them to get their own legal advice and that they were no longer handling the matter. I had a view that that was an injustice. I believe that ASIC should have gone into Blackburne and Dixon on the same basis that they did with Global and Grubb. You had the scenario where Blackburne and Dixon just wrote out to all of these people whose loans were defaulting and told them to do their best and get their own legal advice and then the directors of Blackburne and Dixon were allowed to continue on carrying business. Albeit that the undertaking they gave ASIC was that they wouldn't continue on in the mortgage-broking area, they were still able to conduct a business which I believed had a responsibility to the people that they had managed to secure funds from to give to some of these defaulting borrowers. So we had an anomaly which I considered was quite improper and unfair, that the directors of Blackburne and Dixon could walk away from their obligations in relation to their borrowers and only handle - in fact, I think they're only handling the loans that are in force - that are performing. So everyone whose loan wasn't performing was virtually told to go and make their own arrangements, and I think that that was an incorrect and unreasonable position for ASIC to take. DR NEWMAN: Mr Shave, in view of what you have just said, is there any reason given by the ASIC as to why they have not appointed a provisional liquidator to Blackburne and Dixon with a view that the provisional liquidator would investigate, report to the court, and if it is then appropriate, a liquidator be appointed?---I would have thought that the appropriate thing for ASIC to do was to either put in an administrator or a liquidator on the same basis that they did with Global and Grubb Finance. One of the problems I have from a lot of the investors is they're coming to me and saying, "We know that it's the state government that is spending all the money and doing all the work in relation to trying to untangle the Grubb and the Global trust accounts, but we're investors with Blackburne and Dixon and we have just been cast out into the wilderness." That's the sort of comment that people are making to me. Has there been any comment from ASIC as to what was to be done to control the investors' interests where there are defaulting loans - and we are aware, of course, from what has been said in evidence and from what we have heard from investors and from media reports that there are a lot of defaulting loans attached to Blackburne and Dixon's operations?---My understanding is that Blackburne and Dixon came to an enforceable undertaking with ASIC. Blackburne and Dixon and ASIC came to an agreement where Blackburne and Dixon wouldn't underwrite any more loans and that as a consequence of those undertakings they wrote to the people and said, "Make your own 2/13/rmo 40 MR D.J. SHAVE XXN 21/6/00

arrangements." I understand that either in correspondence to myself or to the department that ASIC may have clarified that and in fact after concerns were raised as a result of Blackburne and Dixon's letter to all of these people they may have been advised by ASIC that they had ongoing responsibilities in regard to those loans, but I'm not sure about that. You would have to ask ASIC, because I don't know the extent of all the enforceable undertakings or the agreement that they had with Blackburne and Dixon, but the principle of allowing Blackburne and Dixon to trade as either a real estate agent or a broker in view of the activities that had taken place was in my view an unreasonable proposition and shouldn't have been allowed. Because of the pooled mortgage legislation and the way that Blackburne and Dixon operate, the Finance Brokers Supervisory Board, I take it, is not in a position to appoint a supervisor?---That's right. That's absolutely right. If the liquidator had been put in to look at the broking issues, just as they had with Grubb and Global, then we could have perhaps gone in and put another supervisor in there to do the job that ASIC or the liquidator should have been doing. It would have been open to you, of course, if a provisional liquidator had been appointed by ASIC, to have appointed that person as the supervisor so that you had a non-duplication of duties and an effective control of assets?---Absolutely. Thank you. MR McKERRACHER: Thank you, Dr Newman. Mr Chairman, I tender the letter from the minister to Mr Ogilvie, commissioner of ASIC in Perth, dated 4 April 2000. THE CHAIRMAN: 150. EXHIBIT 150 Letter dated 4/4/00, Minister Shave to Mr

Ogilvie, commissioner, ASIC MR McKERRACHER: On the same day, 4 April, did you also write to the commissioner of police in Western Australia in relation to the Crimes (Confiscation of Profits) Act 1988?---Yes, I did. Essentially were you asking the commissioner to give careful consideration to the use of the powers under that act in relation to finance-broking matters being investigated by the Police Service in view of the fact that Mr Domenic Casella was reported as auctioning his residence?---Yes, that's correct. 2/14/rmo 41 MR D.J. SHAVE XXN 21/6/00

You had previously written to the commissioner concerning Mr Casella, I think, had you not?---That's correct, yes. Is that the same person in respect of whom you have been the subject of what you say is very misguided criticism in relation to the handling of the matter by Mr McGinty? ---That's correct. Both he and The West Australian have been the subject of defamation proceedings on that topic?---That is correct. Mr Chairman, I tender the letter from the minister of 4 April 2000 to Mr Barry Matthews, commissioner of police. THE CHAIRMAN: Yes, 151. EXHIBIT 151 Letter dated 4/4/00, Minister Shave to Mr

Barry Matthews, commissioner of police MR McKERRACHER: Beyond your description of your involvement in attempts to amend the act after you took over the portfolio, and that is, your communications with the board and your awaiting the receipt of the report and your submissions to cabinet and so on, prior to that time did you have any specific knowledge of detailed suggestions of inadequacies in relation to finance-broking legislation?---There may have been - I think there was a comment in one of the returns by the Finance Brokers Board that they would like to see changes to the legislation in one of the annual reports. I think that was there. If that be one or two, in either event did you consider that you had to await the outcome of the report?---That's correct, yes. In the meantime, while you were awaiting the outcome of the report, were you taking steps to try to improve the level of efficiency in the department, including the restructuring to which you have given evidence?---That's correct. Has your department or the ministry, I should say, been the subject of examination by the auditor-general for Western Australia?---Yes, it has. Broadly speaking, what role does the auditor-general play in relation to government departments?---There are a number of issues. He looks at whether the department - whether there is transparency, whether the department is meeting the requirements under the government acts, whether they are not disclosing information or going through processes that are required under the Public Sector Management Act, and looks at all aspects of the operation of the department. For example, there was an 2/15/rmo 42 MR D.J. SHAVE XXN 21/6/00

issue once with Fair Trading about some measurement issues with petrol pumps that the auditor-general was concerned about and that created quite a lot of interest at the time. They felt that the processes weren't being properly conducted. You could quite properly describe the auditor-general as an auditor, auditing to see that the correct procedures were adhered to by the department. It's probably common knowledge, but would it be fair to say that the auditor-general is very much at arms-length from your department and any of the departments under your portfolio and will make criticisms where they are due?---Yes. I mean, in fairness to the auditor-general, his job is to make sure that the departments are complying and are efficient and in doing that there are a lot of facets in the various departments with what they're doing. It would be more likely on most occasions that the auditor-general in his report would say, "This issue needs to be addressed here in this department." So the view of most of the departments and of most of the ministers is that usually the auditor-general's report will pick up areas of deficiency where the ministry might improve their manner and their behaviour, and by doing that in his annual report he would ensure that the minister or the ministry addressed that issue prior to his next report and if they didn't do that, of course he would state that in the next report and the ministry would come under criticism both in the parliament and the press. Can I show you two reports from the auditor-general for Western Australia in relation to the Ministry of Fair Trading? The first is report number 4 of June 1998, near the commencement of your ministry, and the second is report number 1 of April 2000. In relation to the latter; that is to say, the year 2000 report in relation to the ministry, at page 56 of the report what has the auditor-general said about the ministry?---In his overview he says:

There have been significant changes in the leadership and structure of the Ministry of Fair Trading following a restructure and the office has been relocated. Performance indicators have now been developed and baseline data reported but conclusions cannot yet be drawn about whether the ministry is becoming more effective and efficient. Planning and reporting mechanisms have been introduced that include measures of quantity, quality, timeliness and cost against quantity targets and quality standard. A standardised format of quarterly reporting has been adopted but this format does not lend itself to overall evaluation of programs or identification of trends and requires further development. Pro-active approaches to marketing and technological strategies for delivery

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of ministry services have been identified but have yet to be implemented. A temporary - - -

Can I just stop you at that point please, minister? That just gives a flavour of it. Can I take you to the next page, page 58, where there is a list of findings in relation to management, leadership and structure, and just ask if you could read aloud that small portion at the top of page 58?---The findings under management, leadership and structure states:

There have been significant changes in the leadership and structure of the Ministry of Fair Trading since the report weighing up the marketplace was tabled in 1998. The new chief executive officer and commissioner for fair trading commenced in June 1998 and since this time the ministry has undergone a restructure. This has had the effect of separating policy functions from operational areas. Staff have been relocated across the branches. The number of full-time employees has fallen slightly from 223 to 214. Relocation to the Forrest Centre from East Perth has provided customers with the convenience of having the business name service at the same location as other ministry services. The telecommunications system and counter-queuing system have been upgraded to coincide with the relocation, providing the mechanism to monitor the quantity and quality of customer service.

I think we can leave it at that, thanks, minister? ---Okay. Obviously you would have been pleased with the 2000 report compared with the earlier report?---Yes. As it appears the auditor-general has been?---Yes. Mr Chairman, may I tender the two reports of the auditor-general for June 1998 and April 2000. THE CHAIRMAN: Yes, as one exhibit, number 152. EXHIBIT 152 Two reports of the auditor-general, June

1998 and April 2000 MR McKERRACHER: Thank you, Mr Chairman. Can I take you briefly to the topic of funding and resources for the ministry? Mr Chairman, I'm in your hands. I have noted the hour, but whatever is a convenient time for the committee. THE CHAIRMAN: It's always convenient. How long? 2/17/rmo 44 MR D.J. SHAVE XXN 21/6/00

MR McKERRACHER: I won't be very much longer, but I'm about to embark on a new topic. THE CHAIRMAN: Just keep going for the moment. MR McKERRACHER: Minister, is this a briefing note that you received on 10 November last year on the topic of resources and funding?---Yes. Was it reported that on 10 November 1999 the registrar of the board had written to the chief executive of the Ministry of Fair Trading seeking additional funding to support the board and identified a number of issues? ---Yes. On 16 December did the chief executive meet with the under-treasurer who agreed to additional funding of $356,500?---Yes. The break-up of that funding is spelt out on the page which follows?---That's correct. In the letter which is attached is there the submission by Mr Patrick Walker, the commissioner for fair trading, of 30 November 1999 to the under-treasurer in relation to a request received from the registrar of the board for additional resources to support the board's functioning? ---Yes. The reasons for and the detail in relation to the case workload, the investigators and so on and what was outstanding is articulated at some length in that submission, together with a request for urgent consideration and support for the attached temporary funding request?---Yes. With that submission there was a breakdown of a request for $356,482?---That's correct. On 8 February 2000 did you tender a submission to the cabinet budget standing committee in relation to the funding needs of the ministry?---I did. Is that the document which appears at the end of this bundle?---It is. Can you just briefly outline the background to this and what came of the request for further funding?---Well, basically there was a need to upgrade a lot of the facilities, and if you look at the document under subsection 1(a), it talks about the fact that the department's funding is largely generated from a variety of sources. It talks about under subsection (c) seeking $370,000 to fund a major marketing strategy at significantly increasing consumer and business awareness. There was a request under subsection (d) for 650,000. 2/18/rmo 45 MR D.J. SHAVE XXN 21/6/00

Can I just stop you there, minister? Mr Chairman, this being a communication from the minister to cabinet it's clearly of a confidential nature. THE CHAIRMAN: Yes, very well. Thank you. MR McKERRACHER: I propose to tender it but I will ask that the exhibit and the substance of it being referred to by the witness be treated with confidence. THE CHAIRMAN: Yes, this will be a confidential document. Thank you. MR McKERRACHER: Thank you. Yes, I'm sorry, minister? ---Particularly under (d) the ministry was seeking a recurrent funding of $650,000 which was to be utilised to increase the level of compliancy activity, allowing the ministry to undertake intensive reviews across industry groups and to reduce the likelihood of non-compliance and to allow for early detection of non-compliant activities. So there was clearly the position that we wanted to have the maximum amount of funding applied into those areas. That was your submission and recommendation?---That is correct. What was the outcome of that?---That was approved. Thank you. Is it always easy to get money for every government department that wants to have it?---No, it's not. The problem that you have is that police, health and education usually take about 80 per cent of the budget and it's a bottomless pit there in terms of what you can spend. That's not to be derogatory. They're very, very important areas. They're the major areas and the major issues that the public are concerned about, so there is always the pressure for more police. You would have seen that in this morning's paper. There is the pressure on extra for more hospitals and of course people are wanting new schools and upgraded facilities all the time. So the bigger budget areas such as education, health and police, which are the big three, they consume most of the budget and these smaller agencies have to apply to try and get what they can and to achieve that and get that level of funding that we got was an indication of the premier's commitment to these areas and his concerns in these areas. Mr Chairman, I tender the confidential exhibit, being the submission by the minister to cabinet dated 8 February 2000 with the accompanying documents. THE CHAIRMAN: Exhibit 152. MR McKERRACHER: I'm told that may be 153, Mr Chairman, with the auditor-general's reports being 152. 2/19/rmo 46 MR D.J. SHAVE XXN 21/6/00

DR NEWMAN: We didn't receive copies. MR McKERRACHER: No, they will need to be copied. THE CHAIRMAN: I beg your pardon. Yes, this will be 153. Thank you. EXHIBIT 152 Confidential - submission by minister to cabinet dated 8/2/00 MR McKERRACHER: Have you asked that departmental statistics be provided in response to the request of the committee, both in relation to the department and in relation to your particular office in terms of people, activity, business and such like?---Yes. That will be provided in due course, I think?---Yes. Could I come now to a new topic? I'm in your hands, Mr Chairman? THE CHAIRMAN: We will keep going now. I'm sure the minister would love to get back there by 2 o'clock. MR McKERRACHER: I don't think there's any particular urgency. He's quite happy to be in the hands of the committee, Mr Chairman. I don't want to inconvenience the - - - THE CHAIRMAN: Very well. We will adjourn till 2.00.

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THE CHAIRMAN: Yes? MR McKERRACHER: Thank you, Mr Chairman. THE CHAIRMAN: Mr McKerracher. I didn't know which one to look at. MR McKERRACHER: Minister, I think you have answered some questions concerning why it was that you were not able or chose not to see Mrs Searle when she tried to have a meeting with you?---Yes. Do you recall that topic generally?---Yes. I think you explained that you do receive numerous requests for constituents to meet with you and indeed for people who have issues to raise with you in relation to your portfolio to see you?---Yes. As a consequence, particularly in relation to the hundreds of investors, it's just impossible to see them all?---That's correct. Is it a standard practice for ministers to arrange for senior officers within the ministry to interview such people on behalf of the minister and to pass on to the minister anything of importance arising out of that interview?---Yes. Is that ministers across the board and across governments?---Yes. There is nothing peculiar about your particular situation?---No. When Mrs Searle sought to visit you and to discuss her problems with you were you aware at that stage that she had ongoing matters with the board concerning her difficulties?---Yes. Did you receive any advice from Mr Mitchell in relation to whether or not you should see Mrs Searle in those circumstances?---Yes, I think Mrs Searle at that time had made a very lengthy submission or request for certain questions to be answered, and very often when there is the prospect of people making accusations or the prospect of litigation the advisers will normally say to the minister, "There may be an ongoing legal dispute in relation to this matter. It is more appropriate that rather than you meeting with the person that we meet or that your legal advisers meet with the person." You say Mrs Searle's submission was lengthy. I think it's 80 pages or something like that. Is that right? ---80 pages in detail questioning certain decisions the board had made and certain actions it had taken, and I 2/21/rmo 48 MR D.J. SHAVE XXN 21/6/00

understand that the board will respond to those areas - or some of those areas. From your perspective, did you just ignore Mrs Searle's submission or did you do something about it?---No, I asked that it was dealt with. That's someone in the ministry to deal with it, is it? ---Yes, and I understand Mr Mitchell had a number of discussions with Mrs Searle or corresponded with Mrs Searle and the ministry regarding it. Is Mrs Searle's position unique in terms of wanting to come to see you while there are other proceedings in train, or are other investors in that position as well? ---No, other investors would be the same, and you must - the job of the adviser is to do an analysis of it, work out whether it is something that I should answer. A lot of the questions that Mrs Searle would have been asking and allegations that she was making were matters that were things that the ministry should respond to and I asked at the time that Mrs Searle's large lot of correspondence came in that it be properly analysed and that each allegation or assertion be dealt with and to make sure that they responded accordingly. You were asked some questions yesterday about the resignation of Mr Fisher from a board position. Is it customary in boards established by the government to have someone from the particular industry that the board is examining, one or more members of that board, sitting on the board?---Yes, it is. Is that just in your portfolio or is that in all boards in all governments and for all times?---No, well, I can only relate to my two, the lands area and the Fair Trading, and in the lands area we always have input from people who are involved in the industry. For instance, the lands portfolio covers the pastoral board and you have environmentalists on there, you have pastoralists and graziers on there. So there is generally a view that if there is a person from the industry that you will get a worthwhile contribution from those people. That's the intent of having those people on the board. Presumably you try to select the best people possible to sit on the board?---Yes. In some cases the actual industry nominates the people themselves. In the case of the Finance Brokers Board it's in the statute that they are entitled to have two representatives and they actually elect those people from within their area. So Fisher was actually nominated from within his industry. Not actually your selection then?---Not my selection, no. 2/22/rmo 49 MR D.J. SHAVE XXN 21/6/00

Speaking of land issues but still referable to the finance brokers, you mentioned yesterday your views that the qualifications and controls over valuers was one of the most important issues in relation to ensuring there is a safe industry?---That's correct. Can I show you this bundle of documents please concerning the Land Valuers Licensing Act? What I would like to ascertain, minister, is whether you have ever expressed these views on which you have given evidence now - whether you have expressed those views historically publicly and what steps have been taken in relation to regulation of that particular aspect of the industry. Could you just take us through this documentation and tell us how it touches on that topic please?---Well, this is a recommendation that I sign a letter to REIWA and the parent group representing the valuers in relation to some proposals that they were going to deregulate land valuers; that is, to have a situation where land valuers, if they had a certain qualification, would automatically qualify to become a valuer, and then if they transgressed proper procedures or if they showed themselves to be incompetent you could have that right - under some sort of registration system to cause them to stop valuing. My view was that that was putting the tail before the horse and that the current system where the person had to not only have the qualification but had to be approved and be given a valuer's licence and then had to undergo 2 years of practical experience was a far more appropriate way for the land valuers system to be run, because as I mentioned yesterday, with all of these things with Grubb and Global, if the valuers had behaved in a proper or appropriate manner a lot of the pain out there that these people are experiencing wouldn't be there. I have written to Griffiths, the executive director of REIWA, on - I don't think my letter is dated there, but anyhow, I wrote - it's dated on the bottom. It was faxed to him on 19 June - sorry, that faxing has come down to you, so it's not actually dated, but some time in the last - it says, "Thank you for your letter dated 29 January." This is in relation to a letter from PIRS, the president of the WA division of the Property Institute. So he wrote to me on 29 January. A short time after that time, which is the letter that I wrote, I supported the principle that - I said:

I share your concerns about a need for practical experience before a person can hold themselves out as a land valuer.

I wrote to Griffiths, who wrote to me - Michael Griffiths. His letter was 1 February 99, setting out REIWA's concerns in relation to the draft report which was looking under national competition policy at this wonderful new proposal to deregulate land valuers and I in the same text of the letter said to Griffiths that I 2/23/rmo 50 MR D.J. SHAVE XXN 21/6/00

wouldn't be supporting it. So we have a review committee there that I believe were under some pressure with this national competition policy. I think in some areas it went over the top and the recommendation coming to me was to go down a different road. I also attended meetings of the land valuers. I went to a luncheon at Kings Park and expressed to them my concerns about any proposal to downgrade the importance of land valuers and they were very appreciative of the proposal I had. There was a response here, recommended response, by the minister to the report that was proposed. As a result of my initiation, I told them I wasn't going to agree to it anyhow and the recommendation from the ministry said I rejected a negative licensing regime as put forward in the original report. I support a regulatory regime and basically I wasn't prepared to go down the path of reducing in my view the importance of having both a formal education - it's one thing to train a person to be a doctor. If they haven't had any practical experience, just because they get through a medical degree doesn't mean that they should go and operate on you the next day. The same thing applies to a land valuer. The sorts of problems where borrowers and brokers and different people want to try and influence you into coming up with a particular sort of value on a property, that if you work for a credible and decent valuer, then he will expose you over a 2-year period to the sorts of problems you might face, where people artificially - or people provide you information. Someone wanting to sell an hotel that wants a valuation will put a very, very good spin on the profitability and the way the hotel is trading to get the value up to justify asking a certain price. So I have had over the years through my association with the hotel industry valuers talk to me about the different ways that they have encountered trying to overcome the fact that hoteliers who are wanting valuations off them were trying to put a very, very good spin on the productivity of the hotel, and to be a good valuer takes years and years and years, in my opinion. In the industry I can quite easily identify valuers who I consider are conservative and they are the valuers I always prefer, because if you are conservative the lender is not exposed. There are other people who are probably more malleable in that area and you will find when the public examinations of Grubb and Global begin the sorts of malleability of some of those valuers, I'm sure. Minister, if I could just take you to the recommended response very briefly which comes from the ministry. It was recommended that you should indicate that you had rejected the negative licensing regime put forward in the original report. May we take it from what you said that that is the position, that you had done so?---Yes. You have gone on to say why you supported the alternative proposal?---Yes. 2/24/rmo 51 MR D.J. SHAVE XXN 21/6/00

Were there some difficulties in persuading some members of the industry; that is, the real estate industry and the valuing industry, that your form of regulation and control was the best way to go as distinct from a free market or is it principally the influence of the national competition policy which has caused the difficulty? ---Yes, well, if you look at the letter that I wrote which is undated but it's in response to the 1 February letter to Griffiths, the executive director of REIWA, and PIRS was the West Australian Property Institute. One of their divisions is the land valuers. They actually didn't require any encouragement at all, because they could see the same dangers that I saw, that if you had people out there going around making valuations who were unqualified - or let's not say unqualified as much as inexperienced, then there was a real danger there. So it was never anything that I was going to accept, and as I said previously, if I was sitting up here now with what we know about Grubb and Global and Blackburne and Dixon and I had to confess to the fact that I had agreed to reduce the requirements of land valuers, I wouldn't be being looked at very favourably by the three people on my left. Thank you. Mr Chairman, can I tender the bundle of communications in relation to the topic of licensing of land valuers commencing with the letter of 9 February 99 by the CEO of the ministry to the minister. THE CHAIRMAN: That's the 9 February document? MR McKERRACHER: The top one is the briefing note, Mr Chairman. The date is at the end of the briefing note. THE CHAIRMAN: 9 February? MR McKERRACHER: Yes. THE CHAIRMAN: Yes, that document will be exhibit 154. EXHIBIT 154 Bundle of communications in relation to

licensing of land valuers commencing 9/2/99 MR McKERRACHER: Thank you, Mr Chairman. There were two names mentioned in the course of evidence yesterday in relation to the time at which Mrs Searle wanted t come to see you. There was also, I think, a Mr Lens in respect of whom you had some submission and to whom you wrote as well, was there not?---Yes. Can I show you this document? I'm not sure if this is subject to any confidentiality. First of all, is this a copy of a letter that was being circulated by Mr Lens 2/25/rmo 52 MR D.J. SHAVE XXN 21/6/00

this morning prior to this proceeding to members of the media and others outside the inquiry room?---It was. Is the letter that you wrote that which is copied and written on the second page?---Yes - no, I haven't written on the second page. No, no. That is presumably - well, it's certainly not your writing on the second page?---No. It's the document which Mr Lens was circulating?---Yes. Identifying Mr T and giving his description on the second page?---Yes. Have you ever received any requests by or on behalf of Mr Lens?---My department has been going through the letters from him today and I understand there was something like 26 or 27 letters. Prior to coming back after lunch I understand they had searched 24 or 25 of the letters and there was no request in any of those letters for a meeting with me. Thank you?---That's not to say there wasn't one in the other two or three, but as far as they could ascertain, there was no request for a meeting. It was more the fact that in his view no-one was doing anything to assist him. Excuse a moment please, Mr Chairman. Yes, thank you, minister. Mr Chairman, can I tender the letter of 17 August 1999 from the minister to Mr Lens? THE CHAIRMAN: Exhibit 155. EXHIBIT 155 Letter dated 17/8/99, minister to Mr Lens MR McKERRACHER: Thank you. Finally, as a matter of convenience, but rather than taking up any time dwelling on it, minister, can I show you a document which has emanated from the ministry? I don't wish to go into the detail of this document at all, minister, but is this a submission from the ministry with a recommendation that you note the enclosed briefing listing the major achievements in the fair trading portfolio from 1997 to the date of the submission?---That's correct. Mr Chairman, as I say, I don't wish to dwell on that, but it is a convenient record of events which occurred during the period which the title describes. Can I tender the minute dated 7 June 2000? THE CHAIRMAN: Yes, that's exhibit 156. EXHIBIT 156 Minute dated 7/6/00 MR McKERRACHER: Thank you, Mr Chairman. 2/26/rmo 53 MR D.J. SHAVE XXN 21/6/00

If I could just ask you this general question, finally, minister. In terms of priorities now and what your personal reaction is to the plight of those who have suffered in this industry, where do you see the priorities lying?---Well, the first priority in terms of practical matters is to get the public examinations of Global and Grubb and also I would like a public examination of Blackburne and Dixon, so that directors, the auditors, the borrowers, particularly the valuers, can be brought before an inquiry of that nature and for those people to give evidence in regard to their activities and what they have done, and then I believe that there will be considerable opportunity for people where some of these directors have assets to take action. There will be in my view the possibility of actions for recovery of funds against both auditors and valuers. That is based on the advice I have from the liquidators who are currently in charge of those companies. They have made it very, very clear. There is a public examination of St George Bank going on at the moment on the basis that the supervisors are doing it. There is some dispute about whether the supervisors have that right. I don't want to get bogged down in that particular area of dispute and I have spoken to the liquidators about a public examination under the federal laws undertaken by the liquidators of St George Bank. That is in the process of being put together now and that will, of course, require bank officials to explain by St George Bank allowed the trust account of - sorry, yes, St George Bank to allow the trust account of Grubb Finance to be overrun 84 times, as I understand it, and on one occasion by about $6,000,000. That is very important from the aspect of the investors getting some sort of restitution. Public examinations will allow evidence to be gained that I believe will lead to further prosecutions and to the opportunity for the investors to take actions for recovery of money. So that's the critical issue. The government's objective and my objective is to continue to try and untangle the trust accounts of Global and Grubb and for the supervisors to ascertain who is entitled to what, to try and get whatever funds can be returned to the people now and at the end of the - not at the end of the day, as the matter progresses, to have prosecutions commence against people. What's happening at the moment is that we have had three or four brokers charged, but the other participants in these particular actions are out there at the moment and aren't under scrutiny. The liquidators have told me that there are clearly audit reports that they believe are inadequate, they believe there are valuations that are highly inflated, which of course we all know. The opportunity is going to be to bring each of those valuers on each and every deal in relation to loans that Grubb Finance made and Global made before a public examination. It is absolutely critical that that takes place, and that's why I have been urging my federal colleague, if I 2/27/rmo 54 MR D.J. SHAVE XXN 21/6/00

can use that term, to see that ASIC get involved in that area now. Thank you, Mr Shave. That completes the examination, if the board please. THE CHAIRMAN: Thank you, Mr McKerracher. Mr Beech? MR BEECH: No cross-examination, Mr Chairman. THE CHAIRMAN: Mr Hooker? MR HOOKER: If it please the committee. Mr Shave, you were asked some questions by Mr McKerracher concerning some correspondence between you and Mr Urquhart last year about interim measures for regulation of the finance-broking industry. Do you recall receiving from Mr Urquhart towards the end of last year a substantial letter with some annexures on that issue?---I could well have received it, but I don't have it in front of me. I wonder if you would be so kind as to have a look at this please? That's a letter under Mr Urquhart's hand of 10 November 1999 with some annexures. Do you recall now having received that correspondence?---I would have received it, I'm sure, if Mr Urquhart sent it. 2/28/rmo 55 MR D.J. SHAVE XXN 21/6/00

Without wanting to traverse through all of its contents, because to some extent they speak for themselves, there are some issues that do arise. If I can direct your attention to the middle paragraph on the first page under the heading Fidelity Fund, Mr Urquhart says there that the members of his board were reasonably certain that that topic was mentioned at the meeting they had with you in mid-June, but that may not have been the situation. Mr Urquhart goes on to say he was under the impression that he sent a letter which had been drafted at about that time but it seems to be the case that unfortunately that wasn't forwarded as was intended?---Yes. And one of the annexures to Mr Urquhart's letter of 10 November is the draft which he's referring to in that paragraph. Do you have that before you?---I'm looking for a draft letter, am I? Yes, it should be commencing directly after - - -? ---Marked 167 and 168? That's right?---Well, yes, it was a draft letter. There is reference to your letter of 28 May 1999 which the board has considered at the top of that draft letter?---Mm. Reference to the fact that Mr Urquhart was saying there in that letter he intended to send that the code of conduct had then been completed and should be gazetted shortly?---Mm'hm. THE CHAIRMAN: Was this draft letter sent or not? MR HOOKER: No, it wasn't, but it's referable back to the earlier paragraph, Mr Chairman, as to what the intention of Mr Urquhart was in dealing with that issue which had - - - THE CHAIRMAN: Yes, but, Mr Hooker, if Mr Shave didn't get it, I'm not sure what the point of this is at the moment. MR HOOKER: It's shortly and crisply dealing with the fact that if there be any interpretation on the evidence that Mr Urquhart didn't respond as swiftly as he might have to what had been raised in the minister's correspondence, it was nonetheless his intention to do so and those matters were recorded in the draft letter even though by an oversight it wasn't sent. I don't need to traverse it in detail, Mr Chairman. THE CHAIRMAN: You could get that possibly in through Mr Urquhart, but certainly not through the minister because he has never seen it. 3/1/ces 56 D.J. SHAVE XXN 21/6/00

MR HOOKER: I accept that. It is just a simple and short way of dealing with the issue lest it take on a life of its own at present, Mr Chairman. Nonetheless, Mr Shave, you don't doubt receiving that letter of 10 November with its annexures on or about that time?---As I say, if - are you saying that the draft letter was sent to me with the original letter on 10 November? Yes?---I don't remember getting a copy of any draft letter. So you don't recall when you received - - -?---That's not to say that it didn't, but when Mr Urquhart is called, my department will have done a search to see if they received this draft letter or not and we're more than happy to advise the inquiry of that. Certainly; could I take you to the final paragraph of the substantive letter of 10 November, Mr Shave?---Yes. There's reference there to an enclosed letter from Mr McComish, a former letter of the board, back on 6 June 1984 which is itself in the copy of the letter I have put before you. Do you have that initial letter of Mr McComish back on 6 June 1984 in that bundle?---Yes, I do. Do you recall whether you received that as an annexure on or about 10 November 1999?---I don't recall whether I did or I didn't but we will check that for you. Nonetheless, the point that Mr Urquhart is making in the last paragraph of his 10 November letter is that that reflects the fact that as early as 1979 representations were being made on behalf of the board to various earlier ministers for changes to the legislation?---Yes, that letter indicates that. Finally on this letter, Mr Shave, if I could take you to the paragraph at the top of page 3 which is under the heading Comment, there is a view expressed there by Mr Urquhart on the behalf of the board as to its disinclination to go down the line of professional indemnity insurance as being placed on licences as a condition?---Mm'hm. The view expressed there by the board is that there is too much discretion on the board in making decisions imposing conditions like that which might be considered to be discriminatory?---Well, not in the letters that - and I don't have the letters that I wrote in front of me, but my understanding was that the requirement is that there will be - for any new licences there would be a 3/2/ces 57 D.J. SHAVE XXN 21/6/00

requirement for professional indemnity insurance and for any renewal there would be that requirement also. So my understanding of the situation was that there was a clear requirement on the government's part that everyone carried indemnity insurance. When you say that, are you referring to what was being proposed to be the new situation if the proposed amendments were implemented?---Yes. What I'm suggesting is as an interim measure before that change, if any, came to pass the view was there being expressed by the board that if was to do as a matter of discretion, it would leave itself open to criticism? ---Why would you do it as a matter of discretion if it was a requirement that any new entrant had to have indemnity insurance and as the renewal came up for all of the existing ones, they had to have it? There is no discretion. If it be a requirement, but in the absence of that requirement for such a condition necessarily to be placed on licence it's an issue as to whether the board decides to do that or not. Would you accept that?---I accept that the board makes the decision on which it does. I can only express my view that they all needed to have indemnity insurance. Would you accept, nonetheless, in light of the comment that's made there at the top of page 3 it's an issue, this issue of indemnity insurance, vis-a-vis a fidelity fund, on which minds might legitimately differ?---Quite so, and my concern with the fact that you had two brokers on the board is they may have had very strong views on indemnity insurance. They may have had the view - and I'm not saying they did - that their colleagues out in the industry - in view of the number of people that had collapsed, they may well have felt the premiums might have been reasonably high to get the appropriate sort of cover. If there was a broker out in the industry who hadn't had any problems with his lending, he may well have taken the attitude that he didn't want to have this indemnity insurance because he had never had a problem, and why should he have to go through the pain of paying 10 or 20 thousand dollars to have insurance when he had operated for 10 or 15 years and never had a problem? The government's position and my position was that irrespective of whether he had a problem before, he might have a problem tomorrow. He may have been deceived by a valuer in terms of representations made to him. He may have been very honest but deceived and therefore there may have been that view with the board members, I don't know, who were representing the industry that it wasn't the best way to go. There may have been conflicting views on that on the board. All I know is at the end of 3/3/ces 58 D.J. SHAVE XXN 21/6/00

the day what my position was and what the government's position was. I accept in answer to your question that there could have been conflicting views within the board for a number of reasons. That's no reflection on the board members. I'm talking less about conflicting views within the board itself rather than the proposition that this is a topic on which there may legitimately be different opinions as to the relative merits?---I would agree with that, that people have a different view, and obviously the board for a number of years went to the government and said, "Have this fidelity fund." I think I expressed the opinion today that my view was that the fidelity fund wasn't the preferred way of resolving the future problems that might occur in terms of people losing their money. Whilst the issue remained one of discretion for the board, that is, before any changes were put into effect, it's not an issue on which you were seeking to impose your own views onto the board as to how it should exercise its discretion?---The only view I was trying to impose on the board was that they introduce the insurance as quickly as possible to all of the operators in the industry. That was my intent. You mentioned briefly during the course of your evidence the fact that statutory boards and committees routinely provide annual reports?---Yes. And with respect to the Finance Brokers Supervisory Board that is an annual report that goes directly to you at present as the responsible minister?---Yes. You may need to check on that; either myself or to the CEO of the Ministry of Fair Trading. I'm not absolutely sure on that but it's certainly given to me. It is something we might clarify with the next few questions, Mr Shave. Can you remember whether - let me go back a step. When you assumed responsibility for the Fair Trading portfolio in January of 1997, I think you said you undertook a review of where that portfolio was at?---Yes. Can you recall whether at that time in January 1997 you read what was then the most recent annual report of a Finance Brokers Supervisory Board?---The most recent report of that board would have been the previous year. It is more likely that I would have started reading the reports as they came, as the minister. I invite you to have a look at this, if you would?---Yes. That is the annual report of the board for the year ending 30 June 1996?---Yes. 3/4/ces 59 D.J. SHAVE XXN 21/6/00

And it is directed to your predecessor as minister for Fair Trading?---Yes. It is provided formally in accordance with a particular provision of the Finance Brokers Control Act?---Yes. Can you recall now whether you had regard to that when you assumed the portfolio responsibility and you undertook your review, as you did, in early 1997?---I can say that I don't remember sighting this document. Very well; that can be put to one side and we may return to it. Can you now have a look at the next annual report?---Thank you. What I have put to you again, as with the last one, is an excerpt of the annual report for the year ending June 1997?---Yes. That's addressed to you in accordance with section 86 of the act?---Yes. Do you recall receiving this, Mr Shave?---Yes, I would have received it. There is a reference at the very top of page 1 of the annual report to the chairman in his previous report referring to the board being somewhat constrained in what it was able to achieve because of inadequacies in the Finance Brokers Control Act?---Yes. There is then in the second half of page 2 under "Regulation of the Industry" reference to the establishment of a working group consisting of representatives from the ministry and others?---Yes. Two paragraphs further down the board expresses its view that it should be a matter for the government of the day to decide whether the finance-broking industry should be regulated or not?---Yes. And then at the bottom of page 2 the view is expressed:

There is no doubt in my mind that the provisions of the act must be amended if regulation by licensing is to continue. This has been a recurring request made by both my predecessors and myself?

---Yes. Having read that and in particular those reference at the top of page 1 and the bottom of page 2 to the recurring nature of the requests made by the chairman of the board, can you recall whether you then went back to look at any of the earlier annual reports?---I can't recall having done that. 3/5/ces 60 D.J. SHAVE XXN 21/6/00

Very well. I wonder if Mr Shave can be shown the document. I don't know if it became an exhibit. It is the minutes of the board meeting of 13 August?---If I could just comment a little further on that, the probability would have been that I wouldn't have because we were looking at having a review of the competency of the act and it was already in train with the working group at that time or the working group was in the process of being put together to look at all of the issues involved. So I probably would have taken the position that all of those issues would be addressed by the working group and recommendations made to me. Certainly; nonetheless, Mr Shave, having regard to what I think Mr Chaney asked you about yesterday, a point made at 4.2 of that extract of the minutes of the board of 13 August 1997, you see there where there is reference towards the end of that paragraph 4.2 of issues that had been raised by the chairman concerning its view of the outdated and ineffective nature of the legislation. Do you recall Mr Chaney asking some questions about that yesterday?---Yes. It's fair to say, isn't it, in light of what is in those earlier annual reports that this was something that had been raised by the chairman of the board previously? ---Well, certainly in view of the - I mean, in the report that was sent to Minister Edwardes in 96 - it's raised in that particular report. And the fact that it was a point of a recurring nature that had been raised?---That was the comment that was made. And indeed had been raised by previous chairmen with previous ministers?---That was so. Thank you, Mr Shave. I have no further cross-examination. THE CHAIRMAN: What exhibit number were we referring to then? MR HOOKER: I don't think it ever became an exhibit, Mr Chairman. DR NEWMAN: Actually it is 137. MR HOOKER: My apologies. THE CHAIRMAN: Thank you. MR HOOKER: I have no further cross-examination. If it please the committee, if there is no difficulty, I tender each of those extracts from annual reports. It may be 3/6/ces 61 D.J. SHAVE XXN 21/6/00

that they are all going to go in in a systematic way in due course. It might be as well for those extracts to go in as a bundle now for the sake of convenience. THE CHAIRMAN: I'm still a little bit diffident about the report of 95-96 which has got this - is that the one with the annexed letter to it? DR NEWMAN: What about the letter that we have got here addressed to Mr Shave and is dated 10 November from Mr Urquhart? Is that part of the same exhibit? MR HOOKER: No, I tender that separately. Again, if need be, it will all be gone through with Mr Urquhart but the sake of convenience they might as well be admitted now. MR BLIGHT: Mr Hooker, can you just clarify that? That is not signed. Was that actually sent, do you know? MR HOOKER: On my instructions, yes. THE CHAIRMAN: I think you had better go in through Mr Urquhart, Mr Hooker - - - MR HOOKER: I have no difficulty with that, Mr Chairman. THE CHAIRMAN: - - - because the draft letter to the minister - - - MR BLIGHT: It may well have come as a file copy, but usually it has got "signed" on the bottom and this is just a plain - it looks like a draft. THE CHAIRMAN: You don't sign or date anything these days. It all goes through the air. MR BLIGHT: This one hasn't gone through - - - DR NEWMAN: Email, you mean. MR BLIGHT: This has no fax or anything on it so you assume it is - - - THE CHAIRMAN: I think you had better tender all those through Mr Urquhart. MR HOOKER: If it please the committee. THE CHAIRMAN: Thank you, Mr Hooker. Re-examination, Mr Chaney? MR CHANEY: Yes, just a couple of matters, Mr Chairman. Before I do that, sir, the annual report for 1997 - was that successfully tendered? 3/7/ces 62 D.J. SHAVE XXN 21/6/00

MR HOOKER: I think the chairman's view is they might better go in through Mr Urquhart and I don't press the tender for the time. MR CHANEY: All of those matters. THE CHAIRMAN: Yes, all of those matters. MR CHANEY: Fine. Mr Shave, just in relation to the matters Mr Hooker was asking you about in relation to your correspondence with Mr Urquhart as to the imposition of requirements for conditions on licences for professional indemnity insurance, do I understand your position to be that your request was that the board should in every case of a licence broker's grant or renewal of a certificate impose such a condition?---That's correct. Did you see any problem, given that the act confers a discretion to impose such a condition on a licence, in effectively substituting that discretion for an invariable practice? As a matter of law, was that of concern to you?---If it had been brought to my notice that the board was picking winners, I would have changed the legislation. I think there are legal issues about which you may not be and wouldn't be expected to be necessarily familiar about the invalidity of fettering a statutory discretion. In other words, it has to be exercised in each case as an independent exercise of discretion rather than just saying, "We'll pretend we don't have it and treat it as though it is the law." Is that an aspect to which you have had your attention drawn?---No. That may have been part of the concern Mr Urquhart had. I was trying to understand what Mr Hooker was referring to. Mr Urquhart is a lawyer. He may have been sharing similar concerns to yourself, but if that concern had been clearly conveyed to me, I would have resolved that issue by saying, "Well, we're going to change the legislation." So if that is what Mr Urquhart was getting at when he met with you and wrote to you, it wasn't communicated in a way you understood?---No. I said I wanted the matter dealt with urgently and there were two things that needed to be done, new licences and renewals. Yes, thank you. I will just hand this back for safekeeping. You were also asked questions by Mr McKerracher concerning the issue of representation on boards and you illustrated the point by reference to the land area where you have people like environmentalists and graziers and so on?---Pastoralists. 3/8/ces 63 D.J. SHAVE REXN 21/6/00

In respect to the Finance Brokers Supervisory Board there is no provision for any consumer representation. Is that a matter on which you (a) have given consideration and (b) have a view?---I think that I lean towards a tribunal because my preferred position would be that you don't have an active finance broker on the board. I think that the legislation as it is - it isn't a healthy situation. I would have no objection to a consumer representative being on the board. I think that could well be positive. It's not a matter of being derogatory to former or existing members of the board. I think some of them worked very hard, but if you're an actual broker and you're out there in the industry, there's a bit of a conflict when you're sitting in judgment on your counterparts. I always had a problem when I was president of the Western Australian Hotels Association with the old Licensing Court. They used to appoint people who were former publicans to sit and make legal judgment on people's livelihoods on the basis that they were competent and capable of doing it. I could never understand how a publican could be determined as having the capacity to make a decision on matters of law so, as the president of the Hotels Association, I opposed and finally got the Licensing Court changed so that the chairman was a qualified legal person and it was treated in a more appropriate manner. So in relation to the board I can accept that a consumer representative may assist being on the board but I think a far more healthy situation is if you have qualified people who can't assume to have a vested interest in relation to that particular board, particularly the Finance Brokers Board. I think history has shown that several or at least one of the former members of the board has been stood down and has been charged. Whether that person is guilty or anything, it's a bit of an anomaly if you have got people judging people who may be in fact charged themselves. Given the variety of selection processes in respect to the boards under your control, the notion of election from within the industry as distinct from selection of a name perhaps or a panel put up by the industry or some other selection - do you have a comment as to those alternatives?---Very often with these positions people may not want the job. Some people may want to take the job on to promote themselves so that when they're writing business, they can say, of course, "I'm a member of the Finance Brokers Board and it gives me credibility." That in itself is a risk, is it not?---It is. The problem with selection if you leave it to politicians to do the selecting is sometimes they select people for boards who may not be best suited. So you have got to say to yourself is it better for the politicians to nominate these people or for the industry to have input. If you don't allow the industry to have any input, then 3/9/ces 64 D.J. SHAVE REXN 21/6/00

what they say is, "We're being totally ignored," and you're putting in people in there who are competent and people that the industry don't support. So you have got two arguments to run. Which way do you go in terms of that? So I think over the years these boards have evolved whereby if there's a board of, say, six or eight, the governments of the day have allowed, say, one or two industry representatives and appointed four or five of their own people. So the government ultimately has kept the control of the board away from the industry but, of course, you get two people on. If those two people have a very clear knowledge of the industry or suggest that they have, they could influence other people who are on the board who may not have the same experience, but my general view is that industry representation on boards that are making legal determinations in regard to the capability of people is not a healthy situation. Exhibit 148 is that bundle of papers. You haven't got one. DR NEWMAN: Yes, we have actually. Is that the attorney-general letter? MR BLIGHT: The letter to Mr Hockey. MR CHANEY: Have you still got a copy of that? On top of it is the letter from the attorney-general to Mr Hockey. Have you still got that bundle, Mr Shave?---I have it here now. I will give you what I have got but I don't think I have - - - It is always nice to have the original exhibit?---No, I think someone has taken it. I would just like to take you to the last page of the bundle?---Yes. This is a bundle which traces through your attempts to get ASIC to do something about all of this. The last document is a letter from the member for Curtin to you saying that she had discovered an act of grace payment with the honourable Joe Hockey who indicated he had recommended to Mr Fahey that it be paid:

Followed up John Fahey's office but, as discussed with you last week, I was subsequently advised by Joe Hockey the letter from The West Australian and attorney-general had changed the course of the matter.

What is the act of grace payment that is there referred to?---Well, I was chasing $900,000 to progress the legal actions against St George Bank and the public examinations that I have spoken on several occasions 3/10/ces 65 D.J. SHAVE REXN 21/6/00

about. Hockey had been receptive to that to a point. When the attorney-general pointed out some of the obligations that Mr Hockey had - sorry, ASIC had, there was a concern on the part of Hockey that if he paid the money, it may be seen to be an admission of liability or responsibility on the part of ASIC. I mean, I made the point to him and - not less to Cameron, because Cameron wasn't the one paying the money, but I made the point to Hockey that there was more damage with these people not being brought to justice than worrying about the protocols involved. In the discussions with Mr Hockey he pointed out that he wanted some changes to the Corporations Law in other areas and if I could assist him with that, then he might be prepared to reconsider my request. He had written to the premier on the Corporations Law aspect so I chased up that letter and had a meeting with the premier and said, you know, "Hockey's wanting this changed to the state-federal relationship and if we can assist here, he may be able to assist with this payment," so that's where everyone was left. That's the referral of powers issue in relation to Corporations Law?---That's the one. So the result was that the course of that series of negotiations caused Mr Fahey to - sorry, Mr Hockey to go cold on the ex gratia payment?---Yes, Fahey hadn't made the decision to give it to us but I would have expected that if Hockey had asked, we had a rough chance of getting it. That is the world of politics?---Mm. You were also asked or reconfirmed in some questions asked by Mr McKerracher of the notion of the independence of the Finance Brokers Supervisory Board and that Mr Urquhart, I think your evidence was, expressed that independence and you accepted that to be the case under the provisions of the act. There is in relation to two other acts which fall within your responsibility, that is, the Real Estate and Business Agents Act and the Settlement Agents Act, provisions in sections 12A and 12B respectively which provide for those boards to be susceptible to direction by the minister. Are you familiar with those provisions?---No, but I understand they do exist in several acts. Yes, and I think they emerged as a result of recommendations that ultimately flowed from the WA Inc royal commission. It appears they were inserted in the Settlement Agents Act in 1995 and the Real Estate Act in 1994. They say: 3/11/ces 66 D.J. SHAVE REXN 21/6/00

The minister may give directions -

this is 12B of the Settlement Agents Act -

in writing to the board with respect to the performance of its functions either generally or in relation to a particular matter and the board shall give effect to any such direction.

Then there is a requirement for the text of the direction to be included in the annual report of that board for the relevant year. Do you understand those provisions? The powers imposed there all emerge as a result of a requirement to provide accountability of these boards through government. Is that your understanding of the genesis of the provisions?---That could well be. I'm not sure that that is the case but that could well be the case. The reason I say that is I was only a minister for 6 months in 1993 and those discussions which would have emanated from the royal commission through to 97 in cabinet wouldn't have been discussions that I was a party to. Yes?---And it would have been more the legal people, the premier and Minister Foss and Minister Edwardes and Minister Prince that would have been on top of those sort of issues and the issues that were emerging out of the royal commission. Do you accept that if such a provision existed in the Finance Brokers Control Act, the scope for you getting involved, as it were, directing the board and pushing things along would have been greatly enhanced?---Yes, I believe it would have. Are you able to say why it is that no such provision found its way into the Finance Brokers Act?---No, I don't know. Is it an issue that you considered in the course of all of these events as they transpired?---It had never been brought up with me. It had just been the basis that the board is independent and that you don't interfere in the operations of the board. Did you understand that the position was somewhat different in respect to the Real Estate Board and the Settlement Agents Board?---I think from time to time it had been brought to my attention that the minister in certain circumstances could override the board, for example, on the Landcorp Board, and I assume that because Landcorp was formed in 1993, that provision is there. So I knew that it did exist. I had never had, as far as I recollect, a need in regard to the Settlement Agents Board or the Real Estate Board to override the decisions 3/12/ces 67 D.J. SHAVE REXN 21/6/00

of that board, but in terms of the Landcorp Board I knew that that provision was there that I could direct if I so wished; for example, I favoured the sale of the government's holding in the Joondalup shopping centre in the last 12 or 18 months which was sold for 58,000,000 and I made it clear to the chairman of the Landcorp Board that I was very keen to see that sale take place and in fact he supported it. He negotiated it actually, but I think about that time he made me aware that if the board didn't support my position, it had the right direct anyhow. So I was aware that it was in the Landcorp Board. I was aware that on the Finance Brokers Board I couldn't intervene. It wasn't an issue that had concerned me greatly because if there is a hearing and something is taking place on a matter of law and you have got a legal person as chairman of the board, I wouldn't think you would want to be telling him how to run a hearing. So with regard to the Finance Brokers Board I saw it in the form of a semi-tribunal that had laymen on it but it had a lawyer in charge. They had been making decisions on people and the only time I thought that I would ever needed to - there wouldn't have ever been a time when I would have needed to intervene in its operations in regard to judgment because they were looking at the evidence. With regard to the matter of the indemnity insurance, having that direction and capacity then when I wrote the three letters, it would have been an advantage but then, having said that, I realised I had another alternative if I didn't achieve what I wanted to achieve and that was to legislate. So there was a basis for achieving what I needed to achieve. Yes, although presumably an ability to direct would have been a lot quicker?---It would have been a lot easier and a lot cleaner. Just to clarify one other aspect, you indicated to the committee a response to Mr McKerracher's questions concerning the changes which were made to the ministry shortly after you took over the portfolio and you said that consultants were engaged to make recommendations in relation to changes. Is that a reference to the Deloitte's report?---Yes. Thank you, Mr Shave. Mr Chairman, I have nothing further. THE CHAIRMAN: Thank you very much, Mr Shave? ---Thank you very much. You are excused.

(THE WITNESS WITHDREW) 3/13/ces 68 D.J. SHAVE REXN 21/6/00

MR CHANEY: Mr Chairman, the next witness is Bronwyn Davies-Taylor. BRONWYN LOUISA DAVIES-TAYLOR sworn: MR CHANEY: Mr Chairman, before I ask Ms Davies-Taylor any questions I should outline the position in relation to the evidence which she will give which concerns the opinion in relation to the meaning of "client" for the purpose of the code of conduct. As the members of the committee are aware, it has been asserted that the legal opinions relating to this issue, just as the legal opinions relating to any other issue obtained by government, enjoy legal professional privilege. The issue has arisen as to the extent to which the committee, having issued a notice requiring production of those opinions and having had them produced to the inquiry, is entitled to publicly air the opinions and examine witnesses in relation to them. I have today had a discussion with the attorney-general over the luncheon adjournment. The issue has finalised been resolved on this basis: the attorney, who asserts the right to privilege and therefore the authority to waive it, points out that the general rule applied by the state in relation to legal professional privilege in relation to its documents is that it will not be waived. The rule applies across the board, subject only to the demonstration of special circumstances for departure from it. I discussed with the attorney-general the special circumstances which we assert apply in relation to this case and in particular the desire of the committee and the importance of the committee conducting its affairs in public and the attorney acknowledges the public interest in that position. The consequence is that he has agreed really as to two points. The first is that he asserts - and I do not argue against the proposition - that by production of the documents to this inquiry pursuant to a notice under section 12 of the Public Sector Management Act the state has not waived privilege in relation to the documents. Having said that and acknowledging the importance of a public airing of these issues, the attorney has given express permission to this inquiry to examine witnesses in relation to the contents of the various opinions in public and in that respect to make reference where necessary for that examination to portions of those opinions but otherwise privilege is not waived and is to be maintained. In my submission, that is an appropriate way of satisfying everybody's interests and it is the way in which I propose to proceed. It will have implications as to access to the actual opinions by anybody at all other than counsel appearing in the matter. 3/14/ces 69 B.L. DAVIES-TAYLOR XN 21/6/00

THE CHAIRMAN: As I understand it then, we will proceed as normal but the documents themselves, that is, the opinion or opinions, however many there are, will be confidential. MR CHANEY: Yes. THE CHAIRMAN: It is really no different to many of the ways we have examined so far. MR CHANEY: No, and indeed in practical terms there is almost no difference therefore between these opinions and the treatment they will be given by the committee and any other exhibits tendered throughout the course of the hearing which are not generally available. THE CHAIRMAN: Mr Beech, is that your instructions? MR BEECH: Yes, although Mr Chaney has had a direct conversation with the attorney and in that way he is one step closer than I am to the source, but that is consistently my instructions, Mr Chairman. THE CHAIRMAN: Thank you. Yes, Mr McKerracher? MR McKERRACHER: I'm sorry, Mr Chairman, at the very moment Mr Chaney has been addressing you I have received some different instructions on the topic of privilege. My express instructions received about 30 seconds ago are that privilege is not to be waived and there is a meeting between the attorney and the minister this afternoon because the minister is receiving contrary advice from the Crown Solicitor's Office in relation to the issue of privilege. THE CHAIRMAN: There is only one good thing about this. We don't have to decide. The other bad thing is, of course, it looks like we are going to lose time, doesn't it, Mr Chaney? I can't ask you to proceed with poor Mrs Taylor here. She would really be the meat in the sandwich. MR CHANEY: Yes, it puts her in an impossible, I think, as to her ability to answers questions or at least as to whether she will claim privilege. THE CHAIRMAN: We will adjourn for a few minutes. You have a discussion and let us know what is going to happen.

____________________ 3/15/ces 70 B.L. DAVIES-TAYLOR XN 21/6/00