John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

In accordance with the provisions of the Auditor-General Act 1997, I present the following report of the Auditor-General: Audit report No. 11 of 2006-07: Performance audit: national food industry strategy: Department of Agriculture, Fisheries and Forestry.

Kerry O'Brien (Tasmania, Australian Labor Party, Shadow Minister for Transport) Share this | Link to this | Hansard source

by leave—I move:

That the Senate take note of the document.

There is no doubt about the importance of proper and timely audits of government agencies to identify problems and ensure they are addressed in a timely manner. The Auditor-General has a key role to play in this regard, and this report highlights that fact. It is not just external audits that matter. Internal audits also play a key role in ensuring that small problems do not become big problems.

I have an outstanding question on notice to the Minister for Agriculture, Fisheries and Forestry that directly relates to the auditing of activities by his department. My question concerns internal audits of AQIS, the Australian Quarantine and Inspection Service. It concerns an application by an Australian company to import a product into this country and build an international business around that product. It concerns the investment of large amounts of money on the basis that AQIS was doing its job. It concerns commitments made and agreements entered into on the basis that AQIS could be relied on—that Australian companies could bank on its advice. In short, my question concerns the failure of the government to properly administer Australia’s quarantine system. It is, therefore, no surprise that the minister has been so reluctant to answer it.

Marnic Worldwide applied to AQIS to import marine worms for the recreational fishing industry. Marnic relied on advice from AQIS and, on the evidence available to me, did all the things it was asked to do. The company went to considerable lengths to make sure that it understood the advice it got. Communications with AQIS were fully and comprehensively recorded. It wanted to ensure that in the event of a problem down the track there would be a paper trail. Marnic was committing large amounts of money, and encouraging others to commit large amounts of money, so things had to be right.

We now know that the AQIS advice could not be relied upon. We know that because AQIS told us so. AQIS conceded that it provided the wrong advice to this Australian company, and the company is now locked in a process of seeking compensation for the damage done to it and others by AQIS. It would be bad enough if the failure of AQIS to give this company advice on which it could rely was the end of this matter, but it is not. Even though AQIS has admitted guilt, it is becoming increasingly clear that the government is not interested in a timely resolution to the matter of compensation for the company. There is little interest on the part of the government to move this matter to finality. This is a first-order issue for Marnic’s principals and their families, but clearly it is a very low priority for this department and this minister. Just as the process of assessing, processing and issuing an import permit to Marnic was flawed, so is the assessment process that is now being used to determine the level of compensation to which the company is entitled.

Marnic’s claim for compensation is being assessed by the department of agriculture under the Compensation for Detriment caused by Defective Administration Scheme. It is a scheme devised by the Department of Finance and Administration. There are two stages to the assessment process. First, the investigating officer must determine whether or not there has been defective administration. Second, if that is found to be the case, the process progresses to determine the level of compensation payable.

In relation to the Marnic claim, stage 1 of the process was commenced on 7 November 2005—now over a year ago. It was completed on 23 February this year, but the findings were not communicated to Marnic until 2 March. This first part of the process was assessed against the published guidelines for this scheme. The CDDA guidelines were changed on 11 August this year, but no-one bothered to tell Marnic, the applicant. The company and its legal advisers continued to work to the old set of guidelines. There was contact between lawyers representing the department and lawyers representing the company on 21 August. This meeting was about setting up a future meeting with the investigating officer of the department, Mr Dalton, but there was no mention of new guidelines by the department’s lawyers. Marnic was advised that new guidelines were being applied to its claim in a phone call on 12 September, just prior to the Dalton meeting in Perth.

Between 11 August and 12 September the department pressed Marnic for information but did not say the rules had changed. On 31 August, Marnic lawyers forwarded a 10-page letter to Minter Ellison, who are representing the department, in response to a letter dated 25 August. Marnic’s legal advisers were working on the basis that CDDA mark I rules were in force, while the department and Minter’s were operating off CDDA mark II rules. In the Marnic letter there was a specific reference to paragraphs 24 and 27 in the CDDA mark I guidelines. These paragraphs were changed in the mark II version of the guidelines. That is neglect at best. Clearly, if Marnic had been advised that its claim was being assessed against new guidelines, its response to the government’s lawyers might have been different.

I raised this issue in the last estimates round. In relation to the CDDA guidelines, I was first told that the new version was the same as the old version and that, in substance, there was no change. I was then told that the department had written to the department of finance seeking advice on the differences between the old version and the new version. I was then told that the investigating officer, Mr Dalton, had received legal advice about the difference between the two sets of guidelines. All of that is bad enough. But what I have since discovered is that, while Minter’s were advising Mr Dalton and the department on how to manage this claim, the same firm was advising the department of finance on how to toughen up the CDDA guidelines. Forget about chinese walls—frankly, this is completely and utterly unacceptable.

At the estimates hearing, the secretary of the department advised me that, far from being an independent assessor, Mr Dalton is in fact answerable to one of the parties—the department. The secretary, Ms Hewitt, told the hearing that Mr Dalton was acting ‘on behalf’ of the department. Mr Dalton is the assessor of the CDDA claim, appointed to that position by the minister. It is clear that all the information that Mr Dalton is relying on is being filtered through the department, one of the parties to the matter. It is clear that Mr Dalton and the department have legal advice about the CDDA guidelines against which this claim is being assessed. I assume that advice was provided by Minter’s, who drafted the changes. But that advice is not available to Marnic. That means that one party to this action is being afforded a significant advantage over the other. What a mess this has become.

In my view it is clear that this whole process has now been compromised. Any semblance of natural justice has gone. Senators might recall the process followed in relation to the Hewett claim against AQIS. That matter was managed by a well-qualified person who was independent of AQIS and the department, a Mr Kennedy. In that case, Mr Kennedy went to considerable lengths to ensure that both parties were fully informed of all the facts of the matter. He ensured that if one party had relevant information it also went to the other party. He sought to ensure that there was an agreed set of facts. That is clearly not the case here.

Frankly, for the person assessing this claim to have received legal advice and then to have discussed it with one of the parties and not the others is a flagrant breach of natural justice. The minister must immediately appoint a person independent of the department to fully assess this claim and independently determine the extent of the damage. I also find it absolutely obnoxious that a claim lodged under one set of guidelines is now being assessed under a second set published in the course of the action by a legal body advising the department in relation to the very action the guidelines have changed on. That should be assessed by the minister. That may well also be a breach of natural justice. I seek leave to continue my remarks later.

Leave granted; debate adjourned.