Section: 2.4.2 Transactions by some Ministers and Others
Part: (c)
In 1977, Sir Edward Lyons was knighted. In 1978, he was appointed a trustee of the National Party. In 1981, he was made the chairman of the T.A.B. Later, when the Mortgage Secondary Market Board was created, he became its initial chairman. He was also the first chairman of the recently failed merchant bank Rothwells Limited, a director for a period of Queensland Television Limited, a director of East-West (Operations) Limited and East-West Airlines (Queensland) Pty. Ltd. and then, after those companies had been disposed of by the Stowe group, a director of Griffin Holdings Limited, the former holding company of that group. He may well also have had other outside directorships. At the same time, Lyons had substantial private interests. Additionally, he had an exceptional relationship with Bjelke-Petersen and extraordinary influence upon him. Some instances have already been mentioned. As has been noted, Bjelke-Petersen regarded Lyons as “his most valuable adviser”. Although Lyons did not always get his way, particularly in more recent years, he received Bjelke-Petersen’s support, on occasions to an extraordinary degree even in relation to matters where Lyons had no legitimate interest or where his personal interests were involved and should have been disregarded. A few of the instances which emerged in the course of the evidence at the public sittings of this Inquiry can be briefly summarised. It is unnecessary to comment on the merits of the respective proposals advanced by Lyons to the Government in order to notice the practical operation of his relationship with Bjelke-Petersen.
(i) A Judicial Appointment
In late 1981, the then Chief Justice, Sir Charles Gray Wanstall, and the Senior Puisne Judge, Mr. Justice Lucas, were due to retire. Politics intervened and the appointment of the new Chief Justice dragged that office into public controversy. By the time this issue arose for consideration at this Inquiry, the Parliamentary Judges Commission of Inquiry had been appointed. Accordingly, the issue was by no means fully investigated and only brief mention of it is appropriate. It should be emphasised that nothing emerged which cast any shadow over any of the judges involved; for example, there was no evidence that any of them was involved in, or promoted, lobbying on his behalf.A number of circumstances seem to have coincided.
The then Minister for Justice and Attorney-General, the Hon. Samuel Sydney Doumany, M.L.A., a member of the Liberal Party, recommended that the late Mr. Justice James Archibald Douglas, the next most senior judge after those retiring, be appointed as Chief Justice. Bjelke-Petersen agreed before this Inquiry that Mr. Justice Douglas had the overwhelming support of his fellow judges, the Bar, and the Attorney-General, and that he was a man of unquestionable ability and integrity. Bjelke-Petersen would not accept Doumany’s recommendation of Mr. Justice Douglas, whom it was rumoured had voted for the Australian Labor Party in a previous State election. Instead he advocated a more junior judge, Mr. Justice Dormer George Andrews, a friend of Lyons, who had discussed the appointment with Bjelke-Petersen. Bjelke-Petersen’s refusal to appoint Mr. Justice Douglas and his nomination of Mr. Justice Andrews met with determined opposition from the Liberal members of his Cabinet. On 12 January, 1982, the matter was resolved when Cabinet unanimously decided that Sir Walter Benjamin Campbell, then a puisne judge of the Supreme Court, be the next Chief Justice. At the same time, Mr. Justice Andrews was appointed Senior Puisne Judge. Liberal Ministers noted their objections to the latter appointment on the Cabinet minute. Superimposed upon the other factors were the influence of Lyons and Bjelke-Petersen’s wish to have his way and not to yield to the junior coalition partner. The respective merits of the prospective appointees and other considerations were subordinated to Bjelke-Petersen’s determination to show his support for Lyons and the appointee whom he desired and that he and his party were pre-eminent in the Government of Queensland.
(ii) The T.A.B. and Rothwells
In August 1983 Lyons was chairman of both the T.A.B. and Rothwells Ltd., the merchant bank. The T.A.B. controlled large funds which, pursuant to its legislation, could be invested upon any security or in any investment approved by the Treasurer. On 19 August 1983, Bjelke-Petersen assumed the Treasury portfolio. Within a month, Lyons, as chairman of the T.A.B., wrote to Bjelke-Petersen as Treasurer, seeking approval for the investment of T.A.B. funds with Rothwells Ltd. as well as other institutions. Two days after the application was sent, Lyons told Bjelke- Petersen in a letter dated 15 September 1983 that he had omitted to mention that he and the T.A.B. deputy chairman were both board members of Rothwells. The letter was seen by the Under Treasurer, Leo Arthur Hielscher, and he noted on it, for the attention of a Treasury official: “Draft reply please. (It would be unwise for this investment to proceed)”. Rothwells made donations to the National Party, including one of $25,000 in October 1983. Lyons probably told the Premier of the donation “because of his knowledge of me and knowing I was on both boards ... it would be more likely that I did”. On 7 November, 1983, Lyons again wrote to Bjelke-Petersen in the terms similar to the original application. Hielscher saw that letter, too, and again noted on it an instruction for the Treasury official: “Urgent. See me please.” About 15 November, 1983, a letter responding to Lyons was drafted by a Treasury official. The draft concluded that the overlapping board memberships raised a potential conflict and that Rothwells should not be authorised a s a T.A.B. investment. However, that draft letter has been ruled through by hand and, on 22 November, Hielscher noted upon it:
“Not signed. The Hon. Premier requires Rothwells to be included in the list of
approved institutions ... ”.
Rothwells Ltd was subsequently approved by the Treasurer as a T.A.B. investment and the T.A.B. invested funds with it. According to Lyons, the approval of Rothwells was sought for “the good of the T.A.B.”. Bjelke-Petersen could recall little of his involvement in the matter.
(iii) Janian-the Southport Private Hospital Proposal
In 1983, Lyons’ family company, F. & H. (No. 8) Pty. Ltd., held a 50% interest in Janian Pty. Ltd., which owned an area of land near the Southport General Hospital. In that year, Janian Pty. Ltd. applied to the Health Department for its approval for the construction of an 80 bed private hospital and nursing home. The application contained little information, although the Health Department was advised that Janian Pty. Ltd. had conducted a survey. The Director General of Health requested the results of the study in order to assess the need for the proposed private hospital and nursing home but received no reply.Later, the Gold Coast City Council approved the rezoning of the land for “Special Purposes”. The likely result was to depreciate its value unless approval was obtained for the proposed private hospital and nursing home, in which case the property would have appreciated very considerably in value. Janian Pty. Ltd. received expressions of interest from potential buyers, and, in 1987, it again applied to the Department of Health for the approval which was required, this time for a 250 bed private hospital. The second application was more detailed. It spoke of permanent employment of 350 people, part-time employment for another 150, and expenditure of a total of $40,000,000. The application stated:
“We have recently completed research into the necessity of such a complex, finding
it of great importance, in fact it is imperative, in our opinion, for an area such
as the Gold Coast ... ”
On 24 February, 1987, the Health Department advised it would undertake an assessment of the proposal and asked for copies of Janian’s “recently completed research”. Lyons’ partner in Janian Pty. Ltd. Responded to the request in a manner which indicated that its research had been limited. “Regarding our recently completed research, it is based mainly upon both my and my company’s judgment. I have been involved in the building and running of private hospitals, especially in New South Wales, over the last 20 years. Over that period we have not only built and sold numerous private hospitals, but also a large number of nursing homes ... during the past few months we have made numerous visits to the Gold Coast to assess its medical requirements ... ” Lyons kept Bjelke-Petersen informed about the proposal. On 3 August, 1987, Cabinet considered the application for the first time, together with three other applications for private hospitals in the Gold Coast area. The then Health Minister, the current Premier, had considered the four applications, and his advice was to reject them all. The Minister justified his opposition to the Janian Pty. Ltd. application on a number of grounds. A Health Department Research and Planning Division analysis showed that none of the hospitals proposed was needed on the Gold Coast; the hospital proposed by Janian Pty. Ltd. would seriously jeopardise the economic viability of two existing private hospitals; and it was believed that Janian Pty. Ltd. only intended to obtain the permit and then sell the land at a profit. Cabinet rejected all four applications. Bjelke Petersen informed Lyons of what the Health Minister had told Cabinet, including his concern that all Janian wished to do was obtain the permit and then sell the land at a profit. At Lyons’ suggestion, his partner in Janian Pty. Ltd. wrote another letter, which disavowed that intention but stated:
“However, should we receive an offer for the project either during its construction
or on or after its construction, we must reserve the right to accept such offer
should we consider it to be in the best interests of our company.”
On 26 October, 1987, the matter was again raised in Cabinet, this time at the request of Bjelke-Petersen, who sought, unsuccessfully, to have the previous decision reversed.
(iv) East-West Airlines
In 1985 East-West Airlines (Operations) Ltd. held a licence issued by the State Commissioner of Transport permitting it to carry passengers and goods by air only between Brisbane and Coolangatta. Stowe was a director of that company and its associates, including the holding company, Griffin Holdings Ltd. in which his family company was a major shareholder. With the intention of extending its limited operations, East-West had made a number of unsuccessful applications to increase its landing rights in Queensland. Its most recent application had been with drawn earlier that year because it considered it futile.In the same period, East-West was seeking to acquire Lindeman Island in order to develop it. Although at that time he had not been formally appointed a director of any company in the group, Lyons requested a map of Lindeman Island from the Department of Lands, Forestry, Mapping and Survey in late November, 1985, and a private firm of mapping consultants was requested to carry out work to produce what was needed at the expense of a company in the Griffin group. On 27 December, 1985, Lyons was appointed chairman of the board of East-West (Queensland) Pty. Ltd., a company associated with East-West (Operations) Ltd. Shortly afterwards, Lyons introduced Stowe to Bjelke-Petersen, and they discussed Stowe’s hopes for expansion in Queensland. Bjelke-Petersen said that he would take up the possibility of a further licence with the then Minister for Transport, Lane, although, as he knew, no application was current. Thereafter, Bjelke-Petersen was kept informed. On 23 January 1986, Lyons was appointed to the board of East-West Airlines (Operations) Ltd., and, on that day, it applied for the issue of a further licence to provide airline services to a number of additional Queensland ports. The application was fairly terse. It was unsupported by economic reports, feasibility studies, environmental assessments, or financial analysis of the applicant or the proposed services. After Bjelke-Petersen had spoken to Lane, an appointment was made for East-West Airline representatives to see the Commissioner for Transport. On 25 January, two days after the application had been lodged, Bjelke-Petersen and Lane issued a press release foreshadowing the granting of the licence. Five days later, on 30 January, the extra licence was granted to East-West (Operations) Ltd., allowing it to
operate between Brisbane, Cairns, Mackay, Mt. Isa, Proserpine, Rockhampton and Townsville. Meanwhile, East-West’s move to acquire Lindeman Island in order to develop it was also proceeding. The proposal would have necessitated the revocation of a declaration of part of the island as a national park.
On 29 January, 1986, East-West entered into a conditional contract to purchase its leases on the island from the State Government Insurance Office (Queensland), and, on 7 February, an application was made for approval of the transfer of the leases. On 27 February, the relevant Minister, the Hon. Peter Richard McKechnie, M.L.A., told Parliament that he proposed to seek the approval of the Governor in Council to the revocation of part of the national park on the Island.There was a public outcry. Bjelke-Petersen supported the proposed development. Lyons said in evidence that he kept Bjelke-Petersen fully informed and that Bjelke-Petersen:
“. . . could see two and a half thousand, two thousand people being employed
there for a period of three years. He also foresaw a very safe seat for the National
Party . . . an extra safe seat for the National Party. It was all very good, but our
President opposed it bitterly”.
Due in part to Sparkes’ opposition, East-West withdraw from its attempt to acquire Lindeman Island, but it had its additional licence for its air service. In May, 1986, another company in the Stowe group, W.R. Carpenter Australia Ltd., lent $600,000 to Lyons’family company, F. & H. (No. 8) Pty. Ltd., on an “unsecured, interest free” basis, repayable on demand, according to the scanty documentation at that time.
Lyons used the money to pay off his bank overdraft and buy shares. He would have had no difficulty in raising such an amount from a bank or other financial institution. Further, the company, F. & H. (No. 8) Pty. Ltd. had substantial assets. The effect of Lyons’ evidence to this Inquiry appeared to be that he did not want to grant any security over any assets of the company or use its money to discharge his personal debts. However, on the face of the company’s transaction with W.R. Carpenter Australia Ltd., he caused it to borrow and did use its money to discharge his personal liability. In July that year, East-West began its first service between Cairns and Brisbane, and offered discounts to aged pensioners and young people. In January, 1987, Lyons, his wife and daughter, Bjelke-Petersen’s son, John, who lives on the “Ten Mile”, and Lewis flew to Western Australia in Stowe’s private jet to view the America’s Cup yacht races. An English accountant, Mr. John Wosner, a member of the firm Pannell Kerr Forster, the auditor of the companies in the Stowe group, was also there. Lyons knew Wosner very well, he said. In his evidence to this Inquiry, Lyons said that he asked Wosner whether he could arrange a substitute loan to enable W.R. Carpenter Australia Ltd. to be repaid by July, 1987. He said that he told Wosner that he needed approximately $720,000.00, and that Wosner did ,not ask for details of the exact amount required, a statement of Lyons’ assets and liabilities, or details of any security which might be provided for the loan. Later that year, one of the major airlines acquired East-West (Operations) Ltd. The price paid reflected its
increased competitive capacity due to its additional licence. On 9 July, 1987, the secretary to W.R. Carpenter Australia Ltd. requested Lyons to confirm with its auditors, Pannell Kerr Forster, that the terms of the loan from W.R. Carpenter Australia Ltd. to F. & H. (No. 8) Pty. Ltd. required repayment within 12 months from the date of the loan with interest at 14.75% per annum and that the total amount outstanding as at 20 June 1987 was slightly in excess of $700,000. Less than a week later, an officer of Lyons’ Brisbane bank wrote to its London associate stating that Wosner would be calling to discuss the transfer of approximately A$750,000 to the Brisbane bank account of F. & H. (No. 8) Pty. Ltd.A few days later the arrangement changed. Wosner was to deposit the money in the bank in London in the
name of F. & H. (No. 8) Pty. Ltd. and the interest payable on the deposit was to be credited to the Brisbane bank account of that company, which would borrow an equivalent amount in Brisbane on the security of the deposit in its name in London and pay interest in Brisbane on the moneys which it borrowed there.
The interest differential was less than 1%. There was never any suggestion that Lyons or F. & H. (No. 8) Pty. Ltd. would pay interest to the person or company which made the deposit in the name of F. & H. (No. 8) Pty. Ltd. in the London bank. Effectively, the transaction appeared to involve a borrowing by F. & H. (No. 8) Pty. Ltd. of over $700,000 at an interest rate of less than 1%. The Brisbane end of the transaction had been concluded by 24 July. F. & H. (No. 8) Pty. Ltd. had available approximately A$750,000 on the security of a lien and charge over the deposit which had been or was to be made in its name in London. Part of the money was used to repay the original loan to W.R. Carpenter Australia Ltd. At about that time, Lyons and F. & H. (No. 8) Pty. Ltd. had approximately $575,000 of their own money on deposit with their Brisbane bank. On 26 July, 1987, Lyons left Australia for London. Thereafter, the overseas component of the arrangement changed again. The sum of approximately A$750,000 was not deposited in a London bank in the name of F. & H. (No. 8) Pty. Ltd. but in Guernsey in the Channel Islands in the name of a company with which Lyons had no connection, Drama Lease Ltd., which had to undertake to the bank that it would not deal with the funds deposited without the bank‘s consent. On 5 August, 1987, the sum of $720,000 was deposited in the name of Drama Lease Ltd. in the bank in Guernsey for a fixed term of 12 months, and, on 24 August, the bank received a form of assignment signed by Wosner on behalf of Drama Lease Ltd. which provided that the sum deposited was to be held by the bank to the order of the bank in Brisbane as security for the repayment of all sums advanced by it to F. &H. (No. 8) Pty. Ltd.The security given to Drama Lease Ltd. was a letter from Lyons to Wosner while Lyons was in London,which was written out in Lyons’ hand on his Brisbane letterhead in the following terms:
“Claridges Hotel, London, 1.8.87,
Mr J. Wosner,
Pannell Kerr Forster,
Chartered Accountants,
London.
Dear Mr Wosner,
Re Drama Lease Pty. Ltd. and F. & H. (8) Pty. Ltd.
To secure the supporting of the $720,000.00 loan by the A.N.Z. Bank, Brisbane,
Australia to F. & H. (8) Pty. Ltd. of Brisbane, Australia, I hereby undertake to
have F. & H. extinguish the loan from the A.N.Z. Bank Brisbane as soon as the
1.5 acre property situate between Nerang and Cougall Street, Southport, Queensland,
is sold which should be within two years. It is also agreed F. & H. will pay
accrued interest to Drama Lease Pty. Ltd. at the same time as the debt to the
A.N.Z. is extinguished. The property to be sold is worth at least $4 million. ...”
On 22 October, 1987, Lyons became a director of Griffin Holdings Ltd. Lyons told this Inquiry that Wosner has instructions not to disclose the identity of the ultimate source of the funds deposited in the name of Drama Lease Ltd., and swore that he had no knowledge of that matter himself. Although he was unable to be compelled to attend to give evidence, Wosner stated on 22 November, 1988, that his firm, Pannell Kerr Forster, acted on behalf of several clients, including Drama Lease Ltd., in the management of investment funds. He also stated:
“I also confirm that the investments of Drama Lease Limited are not pledged as
security and that the company’s officers are at liberty to reinvest their funds. The
company has no legal responsibility for any liabilities of F. & H. (No.8) Pty. Ltd..”
Lyons expressed surprise at what Wosner had said. Although the deposit in the Guernsey bank was made only for a period of 12 months from August 1987, the situation was unchanged when Lyons gave evidence at a public sittings of this Inquiry late in 1988. F. & H. (No. 8) Pty. Ltd. continued to have the use of over $700,000 provided by an unknown stranger and involving F. & H. (No. 8) Pty. Ltd. in only a very small liability for interest to its bank.
