Royal Commission into the Building and Construction Industry

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The Royal Commission into the Building and Construction Industry (2001-2003) was a Royal Commission established by the Australian government to inquire into and report upon alleged misconduct in the building and construction industry in Australia. The establishment of the Commission followed various unsuccessful attempts by the Federal Government to impose greater regulation upon the conduct of industrial relations in that industry. Although the Commission found no evidence of organised criminal activity, it did articulate a case that the industry was characterised by lawlessness in the conduct of industrial relations. It recommended sweeping changes to industrial relations laws applicable to the industry. The government's attempts to implement those recommendations stalled in 2004, but but were revived in 2005 after the Howard government secured control of the Senate.

Contents

[edit] Background

[edit] The Building and Construction Industry

[edit] Federal government industry reform policy

In May 1997 the Federal Government, with agreement from the States, prepared a National Building Industry Code of Practice.[1] The government supplemented the Code with Implementation Guidelines.[2] Fundamentally, the Code and the Guidelines were an attempt to regulate the conduct of industrial relations on construction projects funded by government, through the medium of contract rather than legislation.

In July 1997 the (then) Department of Employment, Workplace Relations and Small Business formed a 'Workplace Reform Group' targeting four industries for reform: the meat processing industry, the coal mining industry, the building and construction industry and the waterfront industry. The Workplace Relations Act and the Trade Practices Act 1974 were to provide the legal tools to deliver reform. The 1998 waterfront dispute was a reflection of the focus placed on these important industries. [3]

[edit] Conflict within CFMEU

At about the time that the Royal Commisson was announced, there had been, for some time, open conflict within the Construction and General Division of the CFMEU. On the one side, led by Divisional Secretary John Sutton and NSW Divisional Branch Secretary Andrew Ferguson, forces associated with the old (Stalinist) Building Workers Industrial Union were seeking to maintain their control over the Division. On the other side, led by Victorian and WA Divisional Branch Secretaries, Martin Kingham and Kevin Reynolds, forces associated with the old (Maoist) Builders Labourers Federation were seeking to exert greater influence with in the union. The battle for control over the Divisional Conference led to a range of court cases. At one point, the Divisional Secretary, John Sutton, made allegations of organised criminal activity within the union. These allegations were aired on the ABC 4Corners program, and widely cited by government ministers as justifying the calling of a royal commission.

[edit] Report of the Employment Advocat e

In April 2001 the Minister for Workplace Relations, Tony Abbott, asked the Employment Advocate to provide a report "regarding behaviour in the building industry". In May 2001, the Employment Advocate provided a report which summarised statistics concerning complaints received by his office relating to alleged breaches of Freedom of Association provisions of the Workplace Relations Act; 'coercion' in agreement making, right of entry and strike pay provisions of the Act.

The report criticised other law enforcement agencies, alleging that complaints "will simply not be actioned with any priority, or at all".

This criticism mirrored certain criticisms levelled at the Victoria Police, after the 1998 waterfront dispute, to the effect that police should have been more aggressively involved in a picket-breaking role, rather than merely keeping the piece. [4]

The report alleged that, "ill willed" people have ample opportunities to "cause major disruption to a site" by misuse of occupational health and safety procedures.

The report alleged misuse of various industry funds, including trust funds established to preserve employee entitlements such as leave pay and superannuation: "There have been allegations that senior union appointed trustees have sought to influence the investment decisions of at least one of these trusts for political and/or industrial purposes."

Most dramatically, the report alleged that union officials accepted secret commissions, engaged in bribery, and criminal corrupt conduct.

The report concluded that 'there certainly appears to be a case for a broader investigation of the industry', and that 'it would require special investigative powers to gather and elicity information beyond that normally available to a government authority'.

  • Employment Advocate's report, 11 May 2001.

[edit] Appointment of Commissioner

By Letters Patent dated 29 August 2001, the Honourable Terence Rhoderic Hudson Cole RFD QC was appointed a Royal Commissioner to inquire into certain matters relating to the building and construction industry.

The Letters Patent identified "the Constitution of the Commonwealth of Australia, the Royal Commissions Act 1902 and other enabling powers" as sources of the power of the Governor-General to make the appointment.

[edit] Terms of Reference

The Commissioner was appointed to investigate certain matters in relation to the building and construction industry. Those matters were defined in the Letters Patent as follows:

(a) the nature, extent and effect of any unlawful or otherwise inappropriate industrial or workplace practice or conduct, including, but not limited to:
(i) any practice or conduct relating to the Workplace Relations Act 1996, occupational health and safety laws, or other laws relating to workplace relations; and
(ii) fraud, corruption, collusion or anti-competitive behaviour, coercion, violence, or inappropriate payments, receipts or benefits; and
(iii) dictating, limiting or interfering with decisions whether or not to employ or engage persons, or relating to the terms on which they be employed or engaged;
(b) the nature, extent and effect of any unlawful or otherwise inappropriate practice or conduct relating to:
(i) failure to disclose or properly account for financial transactions undertaken by employee or employer organisations or their representatives or associates; or
(ii) inappropriate management, use or operation of industry funds for training, long service leave, redundancy or superannuation;
(c) taking into account your findings in relation to the matters referred to in the preceding paragraphs and other relevant matters, any measures, including legislative and administrative changes, to improve practices or conduct in the building and construction industry or to deter unlawful or inappropriate practices or conduct in relation to that industry.

Link to external copy

[edit] Terence Cole

The Honourable TRH Cole RFD QC

Cole was made an Officer of the Order of Australia on 26 January 2005, for "services to building industry reform". [5]

[edit] Powers

[edit] Common law

[edit] Royal Commissions Act 1902

Royal Commissions, appointed pursuant to the Royal Commissions Act or otherwise, have powers to summon a person to appear before the Commission at a hearing to give evidence or to produce documents specified in the summons; require witnesses to take an oath or give an affirmation; and require a person to deliver documents to the Commission at a specified place and time: see section 2 of the Royal Commissions Act [6]. A person served with a summons or a notice to produce documents must comply with that requirement, or face prosecution for an offence. The penalty for conviction upon such an offence is a fine of $1,000.00 or six months imprisonment: see section 3 [7]. A Royal Commission may authorise Federal Police to execute search warrants: see section 4 [8].

[edit] Further reading

  • Donaghue, S., Royal Commissions and Permanent Commissions of Inquiry (Butterworths, 2001) [ISBN 0-409-31782-9]
  • Australian Law Review articles, probably cited in Donoghue
  • See generally Royal Commission and Powers of Australian Royal Commissions

[edit] Procedures and Methods

At the opening of public hearings in October 2001, the Commission published a proposed 'practice note' which would govern how parties were to be granted leave to appear before it. The practice note required that any party wishing to be represented and to appear before the Commission must, as a condition of such grant of leave, provide the Commission with a statement setting out all matters within that person's knowledge as to the subject matter of the inquiry. Robert Richter QC (appearing on behalf of a WA official of the CFMEU) described the proposed practice notes as requiring that parties submit to a "stalinist obligation to inform". [9][10]

The Commission conducted open hearings on 171 days, and private (closed) hearings on 22 days.[11]

See generally

[edit] Criticism

  • ACTU Submission to Senate inquiry [13] (Word)
  • David McElrea, Cole Royal Commission: the case for bias [14] (PDF)
  • CFMEU Construction & General Division submission to Senate inquiry [15] (Word)
  • Jim Marr, First the Verdict: The real story of the Building Industry Royal Commission (Pluto Press, 2003) [ISBN 1-86403-240-5]

[edit] Legal challenges

There were two legal proceedings brought against the Cole Commission during 2002. The first, brought in the name of Martin Kingham and others, was conducted on behalf of the Victorian Building Unions Divisional Branch of the Construction and General Division of the CFMEU. The second, brought in the name of Andrew Ferguson and others, was conducted on behalf of the NSW Divisional Branch of the Construction and General Division of the CFMEU. Neither of these challenges were successful.

[edit] Kingham v Cole

The applicants sought administrative law relief to prevent the Commissioner conducting the Royal Commission in accordance with the provisions of pars 12 to 15 of the Commission's Practice Note 2. His decision to do so was challenged under ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth).

The Practice note sought to impose conditions on a person's right to cross-examine witnesses appearing before the Royal Commission. Justice Heely summarised the applicant's argument this way:

Senior counsel for the applicant attacked the validity of par 12 of the Practice Note on two grounds. First it was put that at common law Royal Commissions have no coercive powers: McGuinness v Attorney-General for Victoria (1940) 63 CLR 73 at 98-99, Herald & Weekly Times Limited v Woodward [1995] 1 VR 156 at 159. Any coercive powers must be found in the relevant statute under which the Royal Commission is established. Nothing in the Act compels the provision of a witness statement or its adoption in the witness box as prescribed in the Practice Note. It is impermissible to require, as a condition precedent to the exercise of the right to cross-examine, the performance of an obligation which is beyond the power of the Commissioner to impose. Paragraph 12 of the Practice Note is an attempt by the Commissioner to do indirectly what he cannot do directly: Wragg v New South Wales (1953) 88 CLR 353 at 387-8, Caltex Oil (Australia) Pty Ltd v Best (1990) 170 CLR 516 at 522. Further, it was said that the Commissioner did not have an unfettered discretion to grant or refuse leave to cross-examine. Secondly, it was put that the rules of natural justice may in some circumstances include the right to cross-examine a witness giving evidence adverse to a person affected. Paragraph 12 of the Practice Note was in absolute terms and applicable to all cross-examination, including cross-examination which was an exercise of rights conferred by the rules of natural justice.

These arguments were rejected:

Of course, if in the exercise of his discretion under s 6FA the Commissioner imposed a condition that had no reasonable connection with his function under the Act or the Letters Patent, that would not be a valid exercise of power. To take an extreme example, a direction that leave to cross-examine would not be granted unless an applicant made a donation to a political party would be plainly invalid. But par 12 on its face seems rationally and reasonably related to the efficient performance of the obligations of the Commissioner. Paragraph 12 is a means of ascertaining whether or not an applicant has demonstrated a sufficient interest in challenging the evidence of a particular witness. Further, a statement under par 12 will alert the Commissioner and all others concerned as to the true extent of factual disputes and thus promote the efficient resolution of those disputes. In a large and complex administrative enquiry where there is no equivalent to the pleadings and particulars used in civil litigation, the par 12 procedure has an obvious utility.
Further, I am not persuaded that par 12 creates unfairness in the broad sense which the law relating to natural justice postulates.

The applicants filed an appeal to the Full Court of the Federal Court of Australia, but this appeal was abandoned shortly afterwards.

[edit] Ferguson v Cole

On 29 August 2002 the applicants made an application to the Commissioner that he disqualify himself from, in effect, making findings of fact or recommendations in relation to New South Wales which may have an adverse impact on the applicants. On 6 September 2002 the Commissioner published reasons for his decision to dismiss the application made to him.[16]

In this proceeding the applicants claimed that the Commissioner has shown actual bias towards them or, alternatively, by his conduct has given rise to a reasonable apprehension that he is biased towards them. They also asserted that they have been denied procedural fairness by reason of the process of inquiry adopted by the Royal Commission.

The Court dismissed the application. The Court rejected the contention that the Commissioner by the First Report made findings which directly and adversely affected the interests of the applicants. The Court also rejected the contention that the First Report shows that the Commissioner was, or could reasonably be apprehended to be, so committed to conclusions which he had already formed that he would be incapable of altering those conclusions.

[edit] Interim Report

Interim Building Industry Taskforce

[edit] Final Report

The Royal Commissioner presented his final report to the Governor-General on 24 February 2003.

The Final Report was tabled in Parliament on 26 and 27 March 2003.

[edit] Recommendations

[edit] Prosecutions

[edit] Legislation

[edit] Outcomes

  • Government response to the 212 recommendations of the Royal Commission [17]

Budget allocation of more than $136 million for 2004-05.[18]

Colin Thatcher appointed as a member of the Australian Industrial Relations Commission [19]

On 2 April 2003, Federal Cabinet decided to extend the operation of the Building Industry Task Force, pending the establishment of the proposed Australian Building and Construction Commission ('ABCC'). Cabinet also supported separate legislation to regulate the construction industry. On 25 March 2004, the Minister announced that the taskforce would become a permanent body, and would 'continue to operate until the Building and Construction Industry Improvement Bill (and the establishment of the ABCC) is passed by this Parliament'.

  • Source: Kevin Andrews (Minister for Employment and Workplace Relations), 'Ministerial statement: Royal Commission into the building and construction industry', House of Representatives, Debates, 25 March 2004, p. 27297.

[edit] Prosecutions

[edit] Legislation

Building and Construction Industry Improvement Bill 2003

  • Legislation tabled in Parliament Large PDF
  • Explanatary Memorandum circulated by Minister Large PDF
  • Minister's Second Reading Speech [20]
  • Analysis published by Parliamentary Library HTML PDF 575KB

In October 2003 the Senate referred the Building Industry Improvement Bill 2003 to the Employment, Workplace Relations and Education References Committee for inquiry and report. The Committee received submissions, conducted hearings, and tabled its Report on 21 June 2004. The Committee, by a majority comprised of Senators from the Australian Democrats and the Australian Labor Party, recommended that the Senate oppose the government's legislation. Government senators on the Committee, in minority, recommended that the legislation be passed.

The Coalition government was returned at the 2004 federal election and, unexpectedly, secured control of the Senate with effect from July 2005.

On 4 November 2004, the Minister for Workplace Relations Kevin Andrews announced that the legislation would be reintroduced into the new Parliament.

[edit] Cost

The Commission's own estimate of its expenditures, as at the date of publishing its report, was that it had spent approximately $60 million. This figure makes the Royal Commission one of the most expensive in Australia's history.

[edit] External Sites, Sources and Futher Reading

  • BCI RC Website
  • Building Industry Royal Commission: Background, Findings and Recommendations (Australian Parliament, Department of the Parliamentary Library, Current Issues Brief No.30 2002-2003) PDF
  • Jim Marr, First the Verdict: The real story of the Building Industry Royal Commission (Pluto Press, 2003) [ISBN 1-86403-240-5]
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