Part 4

This is the fourth part of my Paddington Bowling Club series. Soon I'll complete my investigation into the Club (PBC) and the controversial land deal but in the meantime, there has been some good news.

As I reported in Part Three, following a meeting between Ministerial staff and two Councillors Andrew Petrie and Katherine O'Regan in March, Woollahra Council was told that NSW Deputy Premier and Minister for Trade and Investment Andrew Stoner would review the transfer of a Crown lease from PBC to developer CSKS Holdings.

This was welcome news for local residents' group  Friends of Quarry Street who have campaigned for several months for an inquiry into the NSW government's handling of the lease and to save the land for open space. But the nature of the review was not clear. The group had earlier asked for a judicial inquiry or a NSW Independent Commission against Corruption (ICAC) inquiry into the land dealings.

On Thursday, Stoner provided more clarity by issuing a statement referring to representations he received from the community and Woollahra Council "raising serious allegations of misconduct." The statement continued:

“We take these allegations seriously and have listened to the community’s calls for a  review into this matter. I have therefore asked the Secretary of NSW Trade & Investment Mark Paterson AO  to conduct a review into the matter. This investigation will be independent from the Division of Crown Lands,”

So although this will just be an internal review, it seems that Stoner wants a thorough investigation that will look beyond formalities of the lease. Terms of reference are still being developed. It is not yet clear whether the review will accept submissions or publish its report. ( Since I first published this article, it has become clear that submissions will be accepted.)

Local MP Alex Greenwich who has been supporting local residents and Friends of Quarry Street in their campaign welcomed Stoner's decision on Friday:

" The government has an obligation to protect Crown land as a community asset.Community members have been raising concerns over a number of years. I’ve asked for these allegations to be properly investigated – this is important for the club and the community. The concerns raised must be properly investigated and the Government must ensure that this lease is above board.”

Greenwich has also written to the Minister for Tourism, Major Events, Hospitality and Racing George Souris requesting an investigation into the PBC, which held a perpetual Crown lease on the club's site until it was transferred into a 50 year commercial lease in 2010. The new lease was transferred to Christian Sanchez company CSKS Holdings in December 2011. (Greenwich's representations  can be found on his website.)

The review of the land deal will involve an investigation of the actions of ex Labor Minister for Lands Tony Kelly and the ex Register General of Lands, Warwick Watkins both of whom were found to be corrupt by an ICAC Inquiry into the sale of 'Currawong' on Sydney's Pittwater.Kelly gave evidence at an another ICAC inquiry this week when he was questioned about his role in altering a cabinet minute in a way that favoured Australian Water Holdings' push for a major NSW public-private partnership.

The events involving the transfer of the PBC lease go back to 2009 when NSW Labor Ministers and Watkins appeared to support those lobbying for the transfer. Ex Mayor Andrew Petrie who consistently opposed the deal told me earlier this year, he was surprised by a meeting in which Warwick Watkins was “aggressive towards us … It particularly stuck in my mind. He had made up his mind and that is the way it was going to be.” I attempted to reach Watkins to interview him without success. The transfer finally happened in December 30, 2011, nine months after the Liberal government had come to power.

Stoner has now decided that Crown law officers will not be involved in the review and instead it will be conducted by the head of his department Mark Patterson. In the light of some of the answers he has been advised to provide to parliamentary questions, this is just as well.

Some surprising answers

Both MP Alex Greenwich and Greens David Shoebridge have received answers to their parliamentary questions about the transfer this week.

In response to Greenwich, Stoner states that he had held no meetings with representatives of CSKS Holdings; that some of those who dealt with Crown Lands were both "representatives of both CSKS Holdings Pty Ltd and Paddington Bowling Club" but that "no conflicts of interest" were identified; that four meetings were held between the Paddington Bowling Club representatives and Crown Lands officers on the Paddington Bowling Club site. ( Crown's law officers' advice that they saw no conflicts of interest although at least one individual was representing both parties is surprising and will be explored in my next story.)

As I have previously reported, an inquiry was conducted in 2006 to investigate Minister Kelly's earlier decision to sell the publicly owned PBC site to CSKS Holdings. Back then, CSKS Holdings was called the Paddington Bowling and Sporting Club Pty Ltd and before that it was called Woollahra Gardens Pty Ltd.  During the Inquiry, a Crown Land officer, developer Michael Sanchez and President of PBC and CSKS Planner Brian Kirk gave evidence about the negotiations that led to that sale decision. Confidential Evidence was given about ongoing negotiations between the developer and Crown Lands during the time of the Inquiry. Nevertheless, in response to this question:

Was the Government aware of the Registered Clubs Act section 41X "Inquiry in Relation To Paddington Bowling Club Limited" carried out by Commissioner Brian Guest when the decision to transfer the Paddington Bowling Club lease was made?

Stoner responded:

I am advised that Crown Lands was not aware of the Inquiry at the time that the decision to transfer the lease was made.

So weren't these earlier events noted in the file? Did the Crown land officers dealing with the lease transfer read the file? Why not? (There had been prominent reports of the Inquiry in the Fairfax and suburban press in 2007.)

Answers to questions by Greens MLC David Shoebridge were also posted on the parliamentary website this week.

In answer to:

Were Crown Lands officers aware that CSKS Holdings P⁄L was the same company as Woollahra Gardens P⁄L which was the subject of the 2007 Inquiry in Relation To Paddington Bowling Club Limited conducted by Commissioner Brian Guest pursuant to section 41X of the Registered Clubs Act 1976?

Stoner answered "No".

Those who have read my earlier reports and Greens Senator Lee Rhiannon's recent speech will know, most of the companies in which Michael and Christian Sanchez were involved were in severe financial distress at the time of the lease transfer. Some of these are now being wound up. Shoebridge had also asked:

At the time the lease was transferred to CSKS Holdings P⁄L was due diligence undertaken to confirm they were financially stable? If so, what inquiries were undertaken?

The answer:

A search of the Australian Securities and Investments Commission register was undertaken. This search did not reveal any adverse findings in relation to the company. An incoming lessee must abide by all of the lease conditions or be at risk of forfeiture in the event of non-compliance.

In dealing with transfers of land under Section 34A of the NSW Crown Lands Act, the Minister must act in the public interest. For this he or she depends on Crown law advice. So is a basic company search the only check that Crown land officers do when they are advising the Minister on the potential alienation of our publicly owned lands? Given the amount of land that is currently potentially being sold or transferred by the NSW government, this is worrying. Companies searches do not reveal "adverse findings' about companies. If on the other hand, Crown law officers had done a credit search, they would certainly had cause to pause.

But let's assume that a single basic ASIC company search was done. To do the search, you visit the ASIC register and identify the company. As soon as you do the search, this is what comes up on the screen.

[caption id="attachment_1463" align="alignnone" width="925"]Basic free search of CSKS shows former names Source : ASIC Website : Basic free search of CSKS shows former names[/caption]

So if the Crown law officers had done the search, how could they not know that CSKS Holdings had used the two earlier company names? However you do the search, you can't miss it. Did they do even the company search or not? Whatever the answer, the absence of due diligence is worrying.

If they had just gone a couple of steps further and done a director's search for less than $100, they would have found that another company with which Christian Sanchez had been closely involved Crows Nest Retail Pty Ltd  had recently gone into receivership owing Bankwest a large amount of money. The whole exercise would take less than 15 minutes.

Having failed to carry out any serious due diligence, the Crown law division chose to advise Stoner that CSKS Holdings was the sort of company that could be described as a "private equity financier".

In the light of these answers, it's just as well that the officers who handled the transfer won't be inquiring into the transfer of the lease.

Stoner also pointed out in his parliamentary answers that: "An incoming lessee must abide by all of the lease conditions or be at risk of forfeiture in the event of non-compliance."

Friends of Quarry Street have already sent a detailed submission to the Crown Lands department arguing that several conditions of the lease have been broken. The company will have a chance to respond to their complaints.

Meanwhile the Office of Liquor Gaming and Racing are continuing to investigate complaints against the PBC which now sublets the site from CSKS Holdings. The Club has been the subject of many complaints and, as I reported in Part 3, has not filed accounts with ASIC for three years.

Note: If you see any inaccuracies in my article, please let me know. If you have any more information, I would be glad to receive it at or by direct message to my twitter Wendy_Bacon. I apply the MEAA code of ethics and respect all confidences.