The Untold Story: The ACCC’s role in the Waterfront Dispute

Part 2: Hold Cleaning

Introduction

The practice of cleaning out the holds of vessels had been around for a very long time.  The practice started in Sydney’s Balmain in 1900 with the establishment of the Balmain Labourers Union whose members were engaged primarily in painting, cleaning, docking and undocking of vessels.

In 1916, the Balmain Labourers became the Federated Ship Painters and Dockers Union (Painters and Dockers).

The Painters and Dockers came to prominence in 1980 when it became the subject of the Royal Commission on the Activities of the Federated Ship Painters and Dockers Union, better known as the Costigan Royal Commission. 

In the course of the Royal Commission, the Royal Commissioner Mr Frank Costigan, concluded that the Painters and Dockers union was in actual fact an organised criminal organisation.

Mr Costigan summarised the activities of the Painter and Dockers in the following way in his Report:

I became satisfied that the union, at least in Victoria, Newcastle, Queensland and South Australia (if not in Sydney as well), was an organised criminal group following criminal pursuits. At least in Victoria, those in charge of the union recruit exclusively those who have serious criminal convictions. The union gives active assistance to those criminals, be it in the selection of criminal activity, or in harbouring and protecting the criminals from the consequences of their crimes.

The criminal activities of the members of the union were not restricted to any particular sphere of crime. In my reports, I referred to crimes of violence, theft, extortion, intimidation, fraud, illegal gambling and trafficking in drugs. There was evidence of wide-scale racketeering, loan sharking and active participation in organised prostitution. I doubt whether there were any forms of criminal activity in which there was not some active participation. In this respect, the union presented no different picture to that found on the eastern seaboard of the United States of America, where longshoreman were found to be engaging in similar widespread criminality.

The Painters and Dockers were also surprisingly implicated in tax evasion – namely, the aptly named Bottom of the Harbour tax evasion schemes.

The Costigan Royal Commission was probably best known for the Goanna controversy – namely, an unsubstantiated rumour that the late Mr Kerry Packer was involved in a range of criminal activities.

Another practice which the Royal Commission highlighted in its report were the extortionate practices by the Painters and Dockers in relation to the provision of hold cleaning services to ship owners.

Historically, the Painters and Dockers had been the relevant union responsible for cleaning out the holds of a vessel whenever a ship owner required that service.  Such cleaning was necessary if, for example, a bulk vessel came to Australia to discharge fertiliser and was proposing to load a different cargo. The risk was the residue from the discharged cargo would contaminate the new cargo.  The level of cleaning which was required depended on what the nature of the cargoes; for example, if the second cargo was food, such as grain, the holds would have to be cleaned very thoroughly before loading that cargo.

Shipowners did not have to use the Painters and Dockers to do such work. In fact, many shipowners did not like to hire the Painter and Dockers because they claimed that they were very expensive and did not do the work properly.

To the extent that members of the Painters and Dockers Union simply approached a ship owner and offered to carry out the hold cleaning work, there was obviously no breach of the TPA.

However, the problem arose when the Painters and Dockers Union demanded the work and the vessel owner refused. In these circumstances, the Painters and Dockers would often organise a “picket line” (of sorts) of the vessel to prevent it from sailing from the port until  its holds had been cleaned by members of the Painters and Dockers Union. 

The way the “picket” was organised was quite novel.  Usually a number of unidentified persons, most probably Painters and Dockers union members, would simply turn up at the vessel at the scheduled sailing time and sit on the bollards which held the line tying the vessel to the wharf.  The linesmen (who were also members of the Painters and Dockers) would then arrive at the vessel to release the lines. However, when the linesmen arrived at the bollard, they would see the unidentified men sitting on the bollards and refuse to release the line on the basis that to do so would cause a safety issue.  The linesmen claimed that if they tried to move the men sitting on the bollards, the men may be injured in some way, for example by falling off the wharf.

After the vessel had missed its scheduled time window to sail from the port, the men who had been sitting on the bollards would simply wander off, only to mysteriously reappear on the next occasion that the vessel would be scheduled to sail.  

Such conduct had significant financial consequences for the shipowner and/or the charterer. The costs of delaying a bulk cargo vessel for even one day could be as much as $10,000 a day in charter fees alone.  The ship owner or charterer would also incur demurrage costs and the costs of the linesmen, towboats, and pilots who had not been able to do their work due to the picket.

This conduct would continue for many days until the shipowner relented and agreed to use the Painters and Dockers for the cleaning work.

In some situations, the Painters and Dockers would demand to clean the holds and receive payment even if cleaning was not even required. 

However, the most serious conduct related to cases where the Painters and Dockers either:

·       demanded payment for hold cleaning in situations where the cleaning work had already been completed by another cleaning company or

·       demanded payment for hold cleaning where the vessel had left Australian waters without being cleaned at all. 

In the latter case, the Painters and Dockers would take reprisal action against the shipowner’s next vessel to Australia to punish the shipowner for not having paid the Painters and Dockers for the hold cleaning work on the earlier occasion. 

The Painters and Dockers union was deregistered in 1993. It was deregistered under the Hawke union reforms because it had less than 1000 members and not because it had been found by Costigan to be a criminal organisation. Members of the Painters and Dockers joined  either the MUA or the Australian Manufacturing Workers Union.

The ACCC’s Waterfront investigation team was very surprised to discover that this illegal practice, which had been exposed by the Costigan Royal Commission in 1984, was still continuing unabated in 1997 in a number of Australian ports.  The practice of either forcing vessel owners to use MUA labour to carry out required or unnecessary hold cleaning work or demanding payment for hold cleaning work already carried by another cleaning company was occurring quite regularly in the bulk cargo ports in Western Australia, South Australia, Newcastle and Port Kembla.

Although some of the allegations from the Costigan Royal Commission about hold cleaning had been referred to various police agencies, including the NSW State Crime Commission, the practice had not been stamped out.  What was even more surprising was that some of the particular individuals named during the Costigan Royal Commission were still engaging in the same conduct almost 20 years later.

ACCC’s investigation

The first stage in the ACCC’s investigation of the hold cleaning conduct involved trying to gain the trust of the major bulk shipping companies operating in Australia.  We needed their assistance if we were going to obtain the evidence to establish the contraventions. However, the major problem which the ACCC faced was a lack of credibility.

The industry did not have a high opinion of the ACCC as an effective and fearless regulator. The industry was also sceptical that the ACCC could clean up hold cleaning when the Costigan Royal Commission itself had failed to stop the conduct. Accordingly, we spent a great deal of time and effort trying to convince the industry that we were willing and able to stamp out the practice.  We did this a number of ways.

First, we sought to present ourselves to the industry as uncompromising, no nonsense investigators who were up to the task of stamping out illegal hold cleaning.  This meant we talked very tough with everybody we interviewed, sometimes to the point of being quite belligerent.  

By way of example, on one occasion we were interviewing a number of staff from a large European owned shipping company when the Managing Director of the company walked into the interview and started to tell us that the ACCC would never succeed in its hold cleaning case and that we were wasting his staff’s time. I immediately turned to the Managing Director, looked him straight in the eye and said in the most serious sounding voice I could muster that he was wasting our time and that it would be better if he left so we could get on with our investigation.  He immediately walked out of the room looking decidedly sheepish.  

Incidentally, this company continued to assist us throughout the investigation and provided the ACCC with valuable evidence which we used in our legal proceedings.

We also nonchalantly dismissed the concerns raised by industry participants that there may be a risk of violence if we sought to tackle the hold cleaning issue. 

Second, we spent a great deal of time explaining to the industry the way we were proposing to approach our investigation and what outcomes we would be seeking to achieve.  One advantage that we had was that section 45DB had recently been introduced into the TPA which made it much easier for us to establish a contravention of the TPA. Providing such detailed explanations to the industry was an important element in winning the industry’s trust. The industry would only trust us if they believed that we knew what we were doing and that we were confident of being successful.

Third, we had to convince the industry we were not part of some broader Howard Government plot to destroy the MUA.  We quickly realised that while the industry was quite reluctant to get involved in litigation against the MUA, it was even more reluctant to get involved in the political machinations of the government. 

This final issue proved to be the most difficult aspect of the investigation due to the interference of two Howard Government consultants in our investigation.  Shortly after we had commenced our investigation, it came to our attention that two individuals were seeking to reinterview the same people we had been interviewing. We soon discovered that these individuals were Dr David Trebeck and Mr Stephen Webster, who had been hired as consultants to the Howard Government to investigate various strategies in relation to the MUA.  These individuals had heard about our investigation and were trying to find out more. 

We were very concerned that the actions of these individuals would seriously jeopardise our investigation by blurring the fact that the ACCC was an independent statutory body which was enforcing the TPA and not an organisation which was simply doing the government’s bidding. 

Industry participants started to ask us whether we were working with “Dr Trebeck and his people.”  We were very direct in our response to the industry stating in no uncertain terms (and in the toughest sounding way we could) that:

·       we had nothing to do with “Dr Trebeck and his people”;

·       we did not know what “Dr Trebeck and his people” were doing;

·       we did not appreciate “Dr Trebeck and his people” interfering in our investigation; and

·       “Dr Trebeck and his people” better stay well away from our investigation.

Ultimately, we were successful in gaining the trust of a large part of the industry.  Based on our preliminary investigation we were able to issue a number of section 155 notices to ship owners and shipping agencies to obtain information and documents. We then started the chore of reading and analysing thousands of pages of documents about hold cleaning incidents going back over ten years to work out how many potential contraventions of the TPA we may be looking at.

Unfortunately, an unexpected and very significant event occurred which forced us to put our hold cleaning investigation on hold – namely the 1998 Waterfront Dispute. 

Despite putting the hold cleaning investigation on the back burner, we were always determined to run this case once things returned to normal.  However, it would be one year before we could recommence our hold cleaning investigation and two years before we were able to commence legal proceedings against the MUA for its hold cleaning activities.