Sunday, 9 December 2018

Are statutory obligations optional for ministers: the Minister for Indigenous Affairs and the Indigenous Land Corporation.

                                                                        The laws are mine, not thine
                                                                        Who can arraign me for’t  ?

                                                                        King Lear, Act 5, 3.                       

Trust in our institutions, including the rule of law, is widely viewed as being in serious decline (link here). The causes are complex, and the implications for democracy and for the integrity of public policy are serious. The Indigenous affairs policy domain is not immune from these wider societal trends and forces.

As a community, we have two broad choices: to bury our heads in the sand, and watch as a slow motion disaster unfolds. Or to seek to engage when we see issues, call them out, and require our public institutions to account for their actions.

At the Senate Estimates Hearing on 26 October 2018, the issue of Minister Scullion’s compliance with his legislative responsibilities under the Aboriginal and Torres Strait Islander Act 2005 (ATSI Act) was raised by Labor Senator Keneally (link here; pages 19-20).

Section 192H(4) of the ATSI Act, states:

If an Indigenous Land Corporation Director who holds office on a part-time basis is absent, except on leave granted under section 192C, from 3 consecutive meetings of the Indigenous Land Corporation Board, the Minister must terminate the appointment of the Director.

The ILC Annual Report (link here page 57) had indicated that one Director, Mr Bruce Martin, had missed five consecutive meetings without leave of absence over a period of three months and over the course of the year had missed 8 out of 12 meetings of the Board in all. The discussion in the Estimates Committee was, as is often the case, somewhat confused and at cross-purposes. The Minister, after apologising to Senator Dodson for providing him with unspecified inaccurate information before the hearing, first suggested that the reasons for Mr Martin’s non-attendance related to ‘cultural and business responsibilities’, then shifted to arguing the exigencies of remoteness and communications were the issue. Then he shifted to a slightly different argument:

There was a short period of time in which this individual was unable to attend the meetings. These were not anticipated. At each occasion, some unanticipated things happened…

He went on to state:

It was understood that a leave of absence wasn't granted before the meeting because he wasn't able to communicate that he wasn't going to be there at the meeting. When the extenuating circumstances were provided to the chair, he understood that leave should have been granted should he have known beforehand. In any event, we'll take that on notice.

In response, the following exchange occurred:

Senator Keneally: I want to be clear. My concern is not so much with Mr Martin's actions. It is with the actions of the minister in accordance with the act. As you have flagged, if there are particular challenges of people being able to attend meetings or being supported to do so, could you also provide advice as to what you are doing to address that.

Senator Scullion: I will take that on notice. I appreciate your comments, Senator. This is about me and this is about the board and reporting on the act. I do appreciate that that is what the questions are about. I will provide a comprehensive answer to that on notice.

As of today, the Minister’s promised answer is not on the Senate Estimates Committee website, and is, along with scores of other unanswered questions, listed as overdue. In the light of the information below, it is to be hoped that the Minister’s answer is comprehensive and detailed.

Following the Senate Estimates discussion, a Freedom of Information request was lodged with the ILC for documents related to these issues, and this week a cache of relevant documents was posted on the ILC FOI log (link here). These documents raise numerous issues of concern, not all of which are dealt with here. In particular, they confirm that for an extended period of almost eight months the minister failed to comply with his legislative responsibilities under the ATSI Act. The Minister’s obligation was only resolved when the ILC Board retrospectively granted Director Martin leave of absence on 1 November 2018.The documents also raise an array of serious questions regarding the governance of the ILC.

Like Senator Keneally, I do not wish to raise concerns regarding Mr Martin’s actions, as I do not have adequate information to make an informed assessment. Notwithstanding multiple references to ‘extenuating circumstances’, nowhere do the documents which include formal advice to the ILC Board and to the Minister make clear what exactly those circumstances were.

The following discussion is based on the documents released under FOI. References to item numbers are to documents published on the ILC FOI log.

The released documents outline a rather different sequence of events to the narrative portrayed at the Estimates Committee hearing. Director Martin missed Board meetings #220 on 1 February 2018; #221 on 21 February 2018; #222 on 9 March 2018; #223 on 18 April 2018; and #224 on 11 May 2018.

On 17 March, the ILC CEO advised the Chair that Director Martin had missed three consecutive meetings [item 14]. On 18 April, the ILC Board removed Director Martin as Chair/Director of AIA, an ILC subsidiary (a remunerated position) [item 13]. On 23 April, the Chair wrote to Director Martin giving him the option of resigning to ‘avoid the Minister actually taking the step of terminating your appointment’ [item 16]. The Chair received no response.

On 4 May 2018, (seven weeks after Director Martin missed his third consecutive meeting), the Chair wrote to Minister Scullion indicating that Director Martin had been absent from three consecutive Board meetings without written leave of absence and noting ‘his appointment should now be terminated’ [item 19]. This letter was misleading in that it only mentioned three meetings whereas Martin had now missed four consecutive meetings. The letter also listed the first, second and fourth meetings (#220, #221, and #223), but referred to them as consecutive meetings.

There was no formal response from the Minister to this advice.

On 3 July 2018, unbeknown to other ILC Board members and ILC management [item 40; item 58], the ILC Chair wrote again to the Minister, but abruptly reversing his position in relation to Director Martin [item 21]. He wrote inter alia:

I wrote to you on 04 May 2018 requesting the termination of ILC Director Bruce Martin, who was absent from three consecutive Board meetings without leave granted. With consideration for the Board achieving the best possible outcomes going forward, I would like to rescind this request and I seek to retain Director Martin as a part-time Director.

As discussed when we met in Adelaide on 14 June 2018, the personal extenuating factors which led to the absence of Director Martin now allow him to return to his position and carry our his full duties on the Board…

This letter reeks of a political stitch up. It continues to refer to three missed meetings whereas by this point, Martin had missed five consecutive meetings. Its tone is one of a request from the chair of a statutory corporation for a discretionary decision from a minister, rather than reflecting the mandatory obligation on the minister. Most revealing of all is the reference to the meeting of 14 June between the Minister and the Chair where the issue was discussed. There are two possibilities.

The less likely possibility is that the Chair unilaterally, and without consultation with his Board, changed his mind. There is nothing in the documentary record which provides any rationale for such a change of mind. If this scenario was the case, the Chair could and should have convened a Board meeting and argued for a Board decision to grant Director Martin retrospective leave of absence for his missed meetings, and then advised the (very tardy – two months tardy!) Minister that termination was no longer appropriate. Instead, he secretly wrote to the Minister, and sought to have the termination process stopped. The Minister’s response (see below) acknowledging the requirements of section 192H(4) of the ATSI Act, and seeking confirmation that leave of absence had been granted, and the Chair’s further letter to the Minister were also withheld from the Board and management.

The more likely scenario, however, is that the Minister, acting either on his own, or in response to a communication from Director Martin (who the Government had previously appointed to the Prime Minister’s Advisory Council), sought to avoid terminating Director Martin as was required by section 192H(4) and instead arranged with the Chair for the provision to Director Martin of retrospective leave of absence and a letter rescinding his earlier notification of missed meetings to provide cover for the minister’s non-decision. This scenario is supported by the obsequious tone of the Chair’s 3 July letter which resorts to banality (‘I seek to retain Director Martin as a key Indigenous refreshed participant for the future success of the Board…’) and the weight put on the 14 June meeting with the Minister. Moreover, the obsequious tone continues in the subsequent 31 August letter (see below) which thanks the Minister for the opportunity to retain Mr Martin as an ILC Director, and which includes a further paragraph which only now relays a firsthand discussion between the Chair and Director Martin, and which contrasts with the vague wording of the 3 July letter which links the resolution of the ‘extenuating circumstances’ to the discussion on 14 June, and not to any firsthand discussion between the Chair and Director Martin.

Either scenario is problematic. If it was the first scenario, the Minister was misled as to the number and the dates of the relevant meetings, and the ILC Board was kept out of the loop. Hardly good governance. If it was the second, the Minister was effectively engaged in a collusive process explicitly designed to subvert his clear statutory obligation to terminate Director Martin.

On 20 August, the Minister wrote to the ILC Chair [item 25], ignoring the letter of 4 May:

Thank you for your letter of 3 July 2018 about Mr Bruce Martin continuing as a Director of the Indigenous Land Corporation.
I note your advice that Mr Martin was absent from three consecutive Board meetings due to extenuating personal factors and that he is now able to carry out his full duties as a Director. I would appreciate clarification in writing form you confirming if Mr Martin has been granted leave of absence for the period he was away due to extenuating personal circumstances. [The letter went on to mention the Board’s powers to grant leave of absence and the requirement to terminate a Director who is absent from three consecutive meetings without approved leave of absence].

On 31 August 2018, the ILC Chair replied [item 26], continuing to refer misleadingly to the three meetings, and confusing the dates (again), and stated:

I write to confirm to you, that I have written to Mr Martin, on behalf of the ILC Board, to grant him leave of absence from these Board meetings, due to extenuating personal circumstances.

On the same date, the Chair wrote to Director Martin [item 27] purporting to grant leave for the three missed meetings. Again, these letters were drafted and sent without input from ILC management. Nor was there consultation with, or provision of copies to the ILC Board.  

Following the discussion in Estimates, and an article in The Mandarin (link here), a flurry of activity broke out within ILC and PMC management. A subsidiary issue, which I have not focused on, related to the ILC Annual Report, and its accuracy. During this process, it became apparent to ILC management, following queries from PMC officers, that the Chair did not have a delegation from the Board to unilaterally grant retrospective leave of absence to Directors who did not notify him in advance [item 48]. The consequence was that the Chair’s letter of 31 August to Director Martin purporting to grant leave of absence was beyond power, and consequently the Chair’s ‘confirmation’ to the Minister that leave of absence had been granted was substantively incorrect. It was then decided to convene a Board meeting to formally grant Director Martin retrospective leave of absence, to address the uncertainties around the Annual Report, and in particular to fix the defective efforts by the Chair to grant leave of absence. The final Board paper [item 65] hedges around the defective attempt by the Chair to grant retrospective leave of absence to Director Martin, and somewhat disingenuously references a Board meeting in February 2018 where an in camera session discussed Director Martin’s poor attendance, but no outcomes were recorded. The Board paper goes on to state:

Considering the scrutiny that this has already attracted from the Senate Standing Committee [sic], it is prudent for the ILC to take a very conservative approach to the issue and obtain a clearly recorded Board decision to retrospectively approve Director Martin’s absences from the meetings.

The problem with this too clever by half formulation is that there is absolutely no evidence that the Board delegated to the Chair the power to grant leave of absence during the in camera session, and nor does it square with the Chair’s 4 May letter to the minister advising him to terminate Director Martin.

The Board paper recommended that the Board:

Retrospectively approve Director Martin’s absence from ILC Board meetings 220, 221 and 223 dated 1 February, 21 February and 18 April 2018.

The Board paper also dealt with the Annual report issue by proposing the insertion of a footnote into the 2017/18 Annual Report on the ILC website clarifying the situation. The footnote will state:

The ILC Board approved leave of absence for Director Martin (meetings 220, 221 and 223) in the 2018/19 financial year. Retrospective leave of absence was granted pursuant to s192C of the ATSI Act.

There are a range of issues with the Board Paper and the recommendations.

Nowhere does the Board paper deal with or bring to Directors’ attention the fact that the Minister was misled in various respects by the Chair’s secret correspondence, and nor does it propose any action to address or remedy that. The proposal to grant leave of absence for only three non-consecutive meetings (which reflect the original error in the Chair’s correspondence and which were then listed in the Minister’s reply does not align in any logical way with the ostensible reason for granting Director Martin the retrospective leave of absence, namely the so called ‘extenuating circumstances’. It is as if ILC management (perhaps under the direction of the Chair) are focussed solely on relieving the Minister of his statutory obligation rather than addressing Director Martin’s ‘exceptional circumstances’ (whatever they were). 

The issue with the recommendation in relation to the Annual Report is that it ignores the fact that Annual Reports are provided to the Minister for tabling in Parliament, and this has already occurred. Any change to the Annual Report (even to add a footnote) should therefore mean that the revised document is tabled in Parliament. As of today, the Annual Report does not appear to have had a footnote added to the relevant table.

The Board meeting on Thursday 1 November 2018 approved both recommendations [item 70]. The various versions of the draft minutes are edifying to read, and include a number of rather self-absorbed statements by the Board, and an apparent complete absence of appreciation that the Board has a responsibility to account for its actions. In an email from one Board member who could not attend the meeting and which was circulated to five Board members [item 58], he listed the various instances where the Chair had acted unilaterally without Board involvement, but makes no criticism of the Chair, and suggests no remedial actions. Nor do the draft minutes indicate that Board members expressed any concern at the actions of the Chair. Indeed, the response of the Board, presumably influenced by the views of the Chair, was to suggest that the Chair should have greater power to act unilaterally. One paragraph states:

The lesson learnt from this are that the 2013 resolution [on delegations relating to leave of absence] need to be changed to give greater flexibility to the Chair to deal with exceptional circumstances…

This led to two actions being identified: one to provide the Chair with greater flexibility to approve retrospective leave of absence; another to seek an amendment to the legislation to give the Minister ‘flexibility to decide not to terminate the appointment of an ILC Director if they have missed three consecutive meetings without leave in exceptional circumstances’, notwithstanding that the Minster had explicitly rejected this in his comments to the Senate Estimates Committee. It seems clear that the Board’s underlying focus was squarely on addressing the problem facing the Minister and not substantively on the issue of providing retrospective leave of absence to Director Martin on its merits.

To an outside observer, this seems extraordinary, and raises substantial questions regarding the underlying purpose of the Board’s decision making and its capability to adequately fulfill its statutory responsibilities.

To sum up, what are the implications of this sorry tale.

In relation to the Minister, the documents demonstrate that he comprehensively failed to meet his statutory obligation to terminate Director Martin. Director Martin missed his third consecutive meeting on 9 March 2018. The Minister was only advised formally on 4 May 2018. Effective retrospective leave of absence was only granted on 1 November 2018, almost 8 months later. During this whole period, the Minister took no action to fulfill his statutory responsibilities, and relied for only part of that period on the inaccurate information provided by the ILC Chair that leave of absence had been retrospectively granted as of 31 August. Second, there is strong circumstantial evidence that the Minister actively sought to engineer a situation which would allow him to avoid terminating Director Martin, as he was legally obliged to do. The secrecy surrounding the outcomes of the meeting of 14 June, his reluctance to advise the Senate that he had sought and received confirmation of the (ineffective) retrospective granting of leave of absence, his mysterious inaccurate advice to Senator Dodson prior to Senate Estimates (for which he apologised in the transcript) and his shifting explanations of the ‘exceptional circumstances’ all point to an effort to hide or disguise his involvement in this process.

In relation to the Chair and Directors of the ILC, the documents demonstrate deep-seated governance issues within the ILC. In particular, the failure to inform the Minister in a timely way in relation to Director Martin’s three consecutive absences, and the repeated failure to accurately inform the Minister, arguably in contravention of their responsibilities under section 19 of the PGPA Act 2013, as those absences accumulated. The Chair’s preparedness to act unilaterally without informing his co-Directors and management, contributed to the provision of misleading advice, which taints the reputations of all Board members.

In particular, the Chair’s secret 180 degree turn following his meeting with the Minister raises the possibility that there was some ulterior motivation involved. If such an ulterior motivation came from the Minister, the Chair’s actions in facilitating it would effectively involve the ILC in assisting the Minister in avoiding his statutory obligations. Such assistance would amount to an improper purpose, and would fundamentally infect the granting of the retrospective leave of absence on 1 November. 

In these circumstances, the apparent failure of Board members to hold the Chair to account is deeply problematic, and reflects a fundamental absence of core corporate governance capabilities. While the reticence to take action probably reflects their perception that a strong relationship exists between the Minister and the Chair, it clearly opens up the possibility of poor governance, and as in this case outcomes, which are not consistent with the expectations of the Parliament as reflected in the ATSI legislation. In a worst case circumstance, a mode of operation where the Chair operates without effective Board oversight increases substantially the potential risks of fraud or corruption. It seems highly unlikely that the ILC’s risk management plans and fraud control frameworks (as outlined on page 61 of the most recent Annual Report link here) canvass these types of risks.

Of course, the Minister appoints the Chair and the directors, and has legislated powers to oversight (but not interfere) in the operations of what is an independent statutory corporation. While the Chair and Directors may be primarily responsible for poor governance outcomes within the ILC, the Minister cannot evade responsibility either, particularly insofar as he appoints the Chair and has various regulatory oversight powers.

I began this post by pointing the loss of trust in our institutions. Citizens are normally expected to comply with the laws of the land. When a Minister of the Crown who is responsible for the operation of a particular law fails to comply with a clear statutory obligation in that law, loss of trust is magnified. And if a Minister actively seeks to influence a theoretically independent statutory corporation to retrospectively remove the conditions that require the Minister’s statutory compliance, and is not required to explain his actions, then loss of institutional trust will be even greater.

While the circumstances outlined above may appear to be quite narrow and technical, they provide a window into the mode of operation of the current Minister for Indigenous Affairs in relation to the portfolio bodies for which he is responsible. They also point to the risks which emanate from excessive politicisation of Boards of statutory entities, and the shallow regulatory oversight applied to Commonwealth statutory corporations. The issues involved are hugely significant particularly for the potential beneficiaries of the statutory bodies. In the ILC’s case, it has a highly important compensatory role emanating from the recognition that the recognition by the Parliament that the Mabo High Court decision would not address the needs of those Indigenous citizens whose native title rights had been extinguished by the Crown without compensation.

Indigenous citizens deserve an ILC which is operating according to the highest standards of corporate governance and without inappropriate interference by ministers.

Ministers need to accept that Australian laws ‘are thine, not mine’. If Ministers are not prepared to accept that they too are bound by the laws of the land, they do not deserve to remain in their privileged positions.

Declaration of interest: I was formerly the Chief Executive Officer of the ILC from 2013 to 2015

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