Thirty minutes of confidential evidence about negotiations between a Sydney planning consultant and ex-Labor Lands Minister Tony Kelly could be useful in current investigations into the Paddington Bowling Club (PBC) site. Unfortunately, official records of the evidence have completely disappeared.
Hopefully NSW ICAC and the Independent Liquor and Gaming Authority that are both reviewing matters relating to the PBC will have better luck in unearthing the important evidence than a member of the Paddington community group Friends of Quarry Street who applied to obtain a transcript under the GIPA freedom of information Act last year.
The confidential evidence was given during a 2007 Commission of Inquiry into the affairs of the Paddington Bowling Club, including a plan to sell the publicly owned land on which it stands to developer Michael Sanchez's company Woollahra Gardens Pty Ltd, now called CSKS holdings.
Most of the transcript of the Inquiry and the report can be found on the internet. But evidence dealing with further negotiations between Kelly and Brian Kirk, who was then both the Chairperson of the Paddington Bowling Club and Sanchez's consultant, cannot be found on the internet. For this reason, a member of Friends of Quarry Street applied for access.
An officer of the Department of Trade and Investment,Ron Taylor, informed the Friends of Quarry Street member that despite "extensive searches" in Department files, the State records depository and computer drives, no record could be found of the missing evidence. The Department confirmed to me that it could not find the evidence.
To understand the significance of this evidence and the negotiations between Kelly and Kirk, we need to backtrack. (For readers who are new to this story, you may want to read earlier stories in this investigation).
Michael Sanchez and Kirk get involved in Paddington Bowling Club
The central issue underlying this investigation is how public land set aside for community purposes ended up in the hands of a company that had the sole purpose of making money.
Like a number of other licensed clubs, Paddington Bowling Club got into financial difficulties in the late 1990s. An ex real estate agent who had become a property developer, Michael Sanchez saw an opportunity to make some money.
In 2003, his company Woollahra Gardens ( later renamed CSKS Holdings) paid the PBC for an option to buy the land if Minister Kelly could be persuaded to sell it. At that time, Sanchez dreamed of building high rise apartments on the Club site.
As he later told the Commission of Inquiry into the Club's affairs, he originally thought,"I've got a piece of real estate that I can do whatever I wish to do with it." But an open space zoning and resistance to his plan to buy the Crown land soured his vision of development.
The land had originally been leased by the Crown to the Paddington Bowling Club in perpetuity. But in 2006, the then NSW Minister for Lands Kelly finally agreed to sell the land to PBC knowing that it would then be transferred to Sanchez. He gave his approval for the sale without consultation with the community or Council and without a tender. After Woollahra Council found out about the deal, it kicked up a fuss. As a result Kelly withdrew approval for the sale and the Office of Liquor Gaming and Racing Commission of Inquiry was set up.
Kelly retired from politics in 2011 but he has remained of public interest because he was found by NSW ICAC to have acted corruptly in another deal and was also under further ICAC investigation last year in relation to a company Australian Water Holdings (AWH). It is alleged that AWH's attempts to gain a lucrative partnership with the NSW government involved corruption. This second Inquiry is yet to report.
Michael Sanchez was called to give evidence at the 2007 Inquiry and was questioned about his negotiations with officers of the NSW Lands Department to buy the land . He told Commissioner Brian Guest that he believed the sale would have gone through if Woollahra Council had not objected.
He was then asked if negotiations were continuing while the Inquiry was being held. He said that negotiations with the Lands Department were "in abeyance" but that negotiations with Minister (Kelly) were continuing.
Sanchez said his business associate Brian Kirk was responsible for the negotiations with Kelly.
Kirk was an 'unwilling' witness. He told the Inquiry that he had worked for the NSW Lands Department for six years in the 1990s, after which he set up his own consultancy company, Redmane Pty Ltd.
He became involved in the Bowling Club after it was placed in administration in 2003. Liquidator Andrew Wily, who was a business associate of both Sanchez and Kirk, was appointed as administrator and took over financial control of the Club. Kirk attended meetings with Wily, initially representing Sanchez's interests. Soon afterwards, Kirk became involved in the affairs of the Club and in negotiations about the land with the NSW government.
Asked who he was actually representing in negotiations with the government, Kirk agreed that this was "blurred' but that an application to buy the land had been submitted in the name of his consultancy company, Redmane Pty Ltd.
Kirk explained that despite the Department's refusal to sell the land, he had continued negotiations with the Minister because he had 'absolute discretion and power' in this matter.
At this point, barrister Patrick Saidi, who was representing members of the Sanchez family, objected to evidence elicited by any further questioning "going on the public record". He argued,
it should not go on the public record as to what further matters are taking place between the club and the Minister, the Minister's office, so as to allow that to become public knowledge. Or to allow some other party to make use of that knowledge in a detrimental way.
The Commissioner then agreed that the Inquiry should be go into a confidential session which took about thirty minutes.
In retrospect, one would have thought that it was in the public interest for the evidence to have been given in open court in the first place, especially in the context of the disquiet about the Minister's decision that had led to the Commission of Inquiry being set up.
After the court moved back into open session, Kirk was briefly questioned further. He told the court that after he took over as Chairperson of the Club, he couldn't locate its Minute Book.
It would appear that someone removed all copies of the confidential evidence from the Department. But the Friends of Quarry Street GIPA request only applied to the Department of Trade and Investment.
ICAC or other bodies may be able to obtain a copy of the suppressed transcript from lawyers who appeared at the Inquiry. One would expect that they would have had a copy for the purpose of preparing their submissions.
Last year, I asked Patrick Saidi, who is currently representing the NSW state in Roseanne Beckett's malicious prosecution trial, if he was aware of anyone else who might have a copy of the missing transcript. He told me that he thought it most unlikely that the solicitors who instructed him would have a copy.
The Inquiry could only make findings of fact. It was up to government legal officers to decide if any further legal action should be taken. No action was taken.
Although the Inquiry hearings were covered by the media, the findings were not reported until I reported them last year.
The Commission of Inquiry had investigated some complex financial arrangements that involved the Club, Sanchez's company and other businesses.
Some of these arrangements involved a $1.2 million debt that was supposedly owed by the Club. So long as the debt existed, Club was insolvent and in administration under the control of Wily.
Although it was Wily's responsibility as administrator to investigate the basis for the debt claim, the Inquiry found Wily had not done so. The Inquiry itself investigated the claim but could find no evidence to support its existence.
Despite the Inquiry finding, Wily maintained the $1.2 million debt on the PBC accounts in future years. As a result the Club remained in administration and under his control from 2003 until 2011. This was one of the longest administrations in corporate history.
The Inquiry also found that members of the Sanchez family had received very large consultancy fees for working for the Club and that Club funds had been used to pay for 'consultants' to negotiate with the Lands Department.
Although a freehold sale was off the agenda, Kirk continued to negotiate with the government for the PBC lease to be transferred to the company.
He was finally successful in persuading the Lands Department to agree to transfer the lease from the Club to CSKS Holdings. With the consent of the new LNP Minister Andrew Stoner, Kirk signed the transfer document on behalf of the Club on December 31, 2011. By then CSKS Holdings had been transferred from Michael Sanchez to his son Christian who signed the transfer documents on behalf of the company.
In return for CSKS Holdings acquiring the lease, the alleged $1.2 million debt was then wiped from the Club's accounts. Soon afterwards, Wily recommended that the Club, which was now solvent, be taken out of administration. The Club, now a sub-tenant of CSKS Holdings, was back in control of its own affairs
In 2013, Stoner gave ministerial consent for CSKS Holdings to develop part of the site. While Kirk remained Chairman of the Club, he was also the planner for the proposed development. He told me last year, he saw no conflict of interest in holding the two roles. He resigned from the Club later in the year.
The fight goes on
The Friends of Quarry Street, local MP Alex Greenwich, the Greens and Woollahra Councillors continued to press their concerns about the land dealings to the NSW government.
In 2014, the Department of Trade and Investment hired external lawyers to review the land dealings. After receiving their report, the Head of the Department of Trade and Investment Mark Paterson wrote to Woollahra Council stating that,
Had the Review Report findings been known at the time landowner's consent was sought, it is doubtful whether it would have been recommended. The department is considering whether consent can be withdrawn at this stage.
The Department referred the matter to NSW ICAC. It has not yet released the lawyers' report.
The Office of Liquor Gaming and Racing have laid complaints against PBC, which could lead to a cancellation of its license. Friends of Quarry Street have also submitted that CSKS Holdings have breached some of its lease provisions and that the government should withdraw the Crown lease.
Decisions on these matters have yet to be announced. Meanwhile the NSW Land and Environment Court has found that Woollahra Council was correct in not processing CSKS Holdings application to develop part of the site.
Postscript - the noise continues
How have the local residents, including elderly ones, who live immediately above the PBC barefoot bowls venue been faring over the summer? Unfortunately, the news is still not good. Scores of noisy drinkers continue to be bused to the Club. Business is thriving.
Note: This is the 9th story in this investigative series about the exploitation of NSW Crown Land. Do you know more? If so, please contact me. Further reports on the Paddington Bowling Club and the land deal will appear soon.