Heydon, Cole and the building industry

There was a moment on television, not long after Royal Commissioner Heydon decided that he should continue, when a couple of trade union officials said something like: ‘This whole Royal Commission is political’. They meant that it was an attack by the Abbott Government on the union movement  and the ALP. And, to a degree, it was and is — with respect to a few unions, anyway. But it’s political in another way, too. The unions that are under scrutiny are large and important, and they have a powerful position within the Australian Labor Party. As we saw, when first Julia Gillard and then Bill Shorten had to appear before the Commission, it is a short step indeed from the union movement to the leaders of the ALP.

What I have written above should not suggest that there was nothing in the Commission’s remit at all — that the whole thing was simply the Government’s using its power to skewer the Opposition in a public forum. What we have heard in testimony suggests also that too many officials make no clear distinction between the interests of their members and their own self-interest.

Moreover, in recent weeks the attention has shifted to the CFMEU and building operations, and that reminded me that we have already had another Royal Commission into that area: the Royal Commission into the Building and Construction Industry, headed by Terence Cole, a former judge, who would later chair a second Royal Commission, into wheat payments, Saddam Hussein, and the Australian Wheat Board. His building industry inquiry worked for a year and a half between 2001 and 2003, and was seen by the unions as an orchestrated attack on them by the Howard Government. The CFMEU at that time was in internal conflict, in which, if I am allowed to use old CPA terminology, ‘elements of the old BLF struggled with elements of the old BWIU’.

The short story is that in 2001 a certain Tony Abbott, then Minister for Workplace Relations, received a report from the within his department that suggested that there had been misuse of trust funds, and that union officials had accepted secret commissions and had done other bad things. The outcome was the appointment of a Royal Commissioner to find out. Commissioner Cole found that the industry was characterised by lawlessness in the conduct of industrial relations, and recommended sweeping changes.

The Howard Government accepted the report, but could not implement the changes until it won control of the Senate in 2005, whereupon it established the Office of the Australian Building and Construction Commissioner with strong powers to gain evidence. The unions hated it, and lobbied to have it abolished, which the Gillard Government finally did in 2012. In its place came Fair Work Building and Construction (FWBC).

The FWBC is currently taking a company to court because it discriminated against another company that did not have a CFMEU-friendly enterprise agreement. You can read all about it here. Another link there will tell you about more alleged misdoings by the CFMEU. The FWBC also seems to see that there are problems with the unions and their behaviour.

Now the Heydon Royal Commission is actually about ‘trade union governance and corruption’, and flowed from what is known as ‘the AWU affair’ — the slush fund set up by two officials of the AWU (Ms Gillard having had something to do with the legal side of it) and then, as it is alleged, used for private purposes. At much the same time, Craig Thomson MP and Michael Williamson, a former Federal President of the ALP, were facing fraud charges in terms of their work as officials of the Health Services Union. Fairfax media uncovered what seemed to be millions of dollars in union slush funds, and the Abbott Government quickly announced that it would set up a Royal Commission into the whole issue.

Commissioner Heydon issued a preliminary report at the end of last year (in which he stated that the CFMEU had acted ‘in wilful defiance of the law’), and has had his time extended to the end of this year for the final report. It seems to me that the bad old days in the building and construction industry are still with us. Indeed, they may be worse. Much of the energy in today’s nervous economy comes from building and construction, and the prizes involved in getting work, for large and small enterprises alike, are large and sometimes desperately important, if a firm will go belly-up if it doesn’t get a particular contract.

In such circumstances the power of a union to cause trouble can be a key instrument. I am not at all opposed to unions, but it is simply human nature for those who have power to use it, and it seems to be the case that the CFMEU has used this power to bolster its own position. That union officials seem to have behaved illegally, again and again, is an example.

There is such easy money to be made in the development of land that we are all uneasily conscious that local government planning decisions can make someone rich in an instant, that zoning changes can have the same effect, that  State government decisions can add millions to someone who already has many of them, and so on. I am not singling unions out. But it is fatuous for unions to claim that they are being got at, when the evidence piles up that they, and their officials, have used their power to improve their own existence and bargaining position by threatening firms, or doing sweetheart deals that raise the cost of projects without any increase in productivity, let alone that some of them have diverted union revenue to their own purposes. There is a need for a watchdog here, and I assume that Commissioner Heydon will propose some kind of oversight.

Should he have stayed on? Some of my friends, who have held high places in the public service, are convinced that he should have apologised and resigned. I have never met him, though I met his father (a departmental secretary, and as a young man Menzies’s private secretary for a few months) on a few occasions, and enjoyed talking with him, while my wife nursed his mother at the end of her life. Commissioner Heydon provided a 67-page argument as to why he stayed on, dismissing the union arguments.

It is a a most interesting document, built around what a ‘fair-minded observer’ might think, and he summarises his arguments for rejecting the unions’s application in paragraphs 87-89. First, many judges have given speeches in honour of former judges and politicians, and this case is no different, especially as the occasion was not, as is often said, ‘a Liberal party fund-raiser’. Second, there is no logical connection between any imagined predisposition on his part and the issues in front of the Commission. Third, the fair-minded observer would have no reason from all this to suppose that he could not deal with the issues before the Commission impartially.

Nothing has been heard of the unions’ response to his  long argument (which seems well-argued to me), other than a request for the Senate to give Heydon a vote of no confidence. And the Royal Commission goes on, with new unpleasant stuff almost every day.

On the bright side, at least we have a system that, however slowly, can actually deal with real problems. The Master Builders Association estimates that the value of building and construction projects over the next decade will be $2.4 trillion. That is a tremendous amount of money, and we need a system that makes the decisions honest, and the behaviour of those involved honourable. It may be too tall an order.

A final thought: Who should act as Royal Commissioners? Dyson Heydon was known as a conservative judge, and one unimpressed by judicial activism. But to the best of my knowledge he had said in public nothing that would, on the ground of apprehended bias,  make him the wrong person to chair the inquiry. If Labor were in power, and appointing a Royal Commissioner into something, it would choose someone whose career and expressed sentiments might fit him or her for the job, but not cause public worries about bias.

In this game you don’t appoint commissions of inquiry without having some sense of what they are likely to report. Given the Cole Commission and the work of the FWBC it ought to be fairly clear what the likely outcome of any well-conducted Commission might be in this domain, whoever was chairing it.