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LEGAL AND CONSTITUTIONAL LEGISLATION COMMITTEE - 29/05/2000 - Australian Government Solicitor

CHAIR —Welcome, Ms de Gruchy and Mr Riggs. I believe Senator Bolkus has questions in this area.

Senator BOLKUS —I refer the AGS to the drop in its dividend from $8.5 million to $2.2 million. Can you tell us the reason for the drop?

Ms de Gruchy —There is a combination of factors. I might ask Mr Riggs if he would elaborate on those for you.

Mr Riggs —Part of the explanation is a difference between the cash flow position and the dividends declared for the year. Our dividends for 1998-99 were a grand total of $7[half ] million, and what looks likely to be recommended in respect of the year just about to end is $3.4 million. The reason there is a drop is that during the last financial year there were some special items of income associated with the reorganisation of our physical infrastructure—in particular, offices in New South Wales, in South Australia and in the north—that gave rise to unusual items of income upon which a dividend was paid. It was very much a one-off special item in the year 1998-99. Our dividend estimate of $3.4 million is well in excess of the normal minimum requirement of a GBE in AGS's condition.

Senator BOLKUS —What is the actual rate of return they expect of you?

Mr Riggs —In terms of profits, they are looking for a return of the order of 13 per cent, but dependent upon interest rates, so that has just recently moved up a little bit. In respect of dividends, the shareholder—the Commonwealth—expects a return at least of the order of 60 per cent of the level of profit. That is 60 per cent of 13 per cent of equity.

Senator BOLKUS —So what is your actual return for last year and for this year?

Mr Riggs —If you give me a moment, Senator, I can answer that question.

Senator BOLKUS —While you look for that: I do not seek the advice itself but I wonder if AGS has been asked by any arm of government to give advice on the validity of the Snowy Mountains scheme.

Ms de Gruchy —I cannot answer that, but I will take your question on notice, if I may.

Senator BOLKUS —There is also a case pending, apparently, in the Federal Court where South Australia is disputing the application of native title in that state. Would you take on notice the question of whether you have been asked to provide advice on that issue and, if so, in respect of both, by which organisation and the date on which the advice or advices were sought. The third one is the Video-Ezy case that the ACCC is going to pursue in one court or another, to advise us whether advice was sought of AGS and, if so, when. I presume, Ms de Gruchy, that you do not know the answer in respect of the three.

Ms de Gruchy —I would appreciate being able to take the questions on notice, Senator, to come back to you.

Senator BOLKUS —Great, thanks. Mr Riggs, would you like to take that question on notice?

Mr Riggs —No, there is no need for that. It was a very unusual year, 1998-99, and the level of profits achieved as reported in our accounts for that year splits into two parts. For the first two months of the year we were an FMA Act body within the Attorney-General's portfolio, and on 1 September last we became a CAC Act body, rather separately reported. Adding together the results of the two periods, and allowing for the special item of profits to which I referred, we have profits of the order of $17 million on an equity base of $35 million. That is over 45 per cent rate of return in a year. I have to hurry to say that those were in an unusual period, for the two reasons I have given. What we are expecting is some revision of the capital structure of AGS in the next short period of time to reflect our current trading position for the years ahead. That will cause, I believe, some change to the capitalisation of AGS to reflect what will be a more normal series of profits. I am certainly expecting that over the next planning period we would exceed the 13 or 15 per cent return upon equity that is required.

Senator BOLKUS —Thank you very much. I think that probably covers AGS, as far as I am concerned. In relation to native title cases in the court system, would it be best to ask you for details of how many are running and what it is costing so far or would it be best to ask A-G's? We can do that later.

Mr Cornall —I think it would be better to deal with those questions when Ms Horner is here.

CHAIR —Thank you, Mr Cornall. Are there any further questions, Senator Bolkus?

Senator BOLKUS —No.

Senator COONEY —Can you give us an idea of what the client base is that you are servicing now?

Ms de Gruchy —Our client base is principally as it has always been. We are here to serve Commonwealth government departments and agencies. In addition to that, we are able to advise where there is a significant interest to the Commonwealth. That could extend to a range of entities such as, for example, entities involved in foreign aid. There are occasions where, in fact, we can act for other entities, for example, state governments if there has been a request by a state government for us to do so.

Senator COONEY —Amongst the departments and the agencies that you have spoken about, who at the moment has given you the most work? Are you able to tell us that?

Ms de Gruchy —We act for just about all government departments and agencies. The amount of work that we have in any year may fluctuate somewhat. But, principally, we have significant clients in all government departments and agencies.

Senator COONEY —You have been going since September last?

Ms de Gruchy —Yes.

Senator COONEY —So you have not been a statutory corporation for a full year yet?

Ms de Gruchy —Since we have been a statutory corporation, we have not seen any significant change in the nature of our clients.

Senator COONEY —Do you run a trust account or don't you have that sort of work?

Ms de Gruchy —I will get Mr Riggs to answer that.

Mr Riggs —We do have clients' funds accounts which are called trust accounts. We handle in those accountings our clients' money as we hold it pending settlements and the like.

Senator COONEY —Do you have those audited?

Mr Riggs —We do.

Senator COONEY —Is that done through the local law institute or law council?

Mr Riggs —No, through the Australian National Audit Office.

Senator COONEY —I was not asking that. Do you have that done through the solicitors association or whatever it would be called?

Mr Riggs —No.

Ms de Gruchy —No. We are not required to comply with any jurisdiction's trust account rules. We are exempted from that. We are audited by the ANAO in relation to our own trust accounts.

Senator COONEY —Is the Solicitor-General with you or is he an independent person altogether?

Ms de Gruchy —The Solicitor-General is not part of AGS. That is an independent appointment as the second law officer.

Senator COONEY —Have you got any counsel at all employed by your body?

Ms de Gruchy —We do employ quite a number of counsel within AGS.

Senator COONEY —How many of those have you got?

Ms de Gruchy —It is a bit hard to give an answer to that. We do have a number of our lawyers who act in the capacity of counsel at some times and at other times provide advice work within AGS that is not exactly in the capacity or on the same sort of level as an equivalent, private bar type counsel. We do have quite a number of counsel who do appear as counsel, but we also have quite a range of people who, to some degree, sometimes do counsel work and sometimes do what you might call solicitors' work.

Senator COONEY —And then you brief out at other times?

Ms de Gruchy —That is correct.

Senator COONEY —Do you brief the Solicitor-General?

Ms de Gruchy —We do.

Senator COONEY —I am not sure what happens here. Does he have to be briefed through you or can a department go directly to him? What is the position? Do you know?

Ms de Gruchy —I will defer to Mr Govey.

Mr Govey —The general position would be that most of the Solicitor-General's work is received via AGS, but he is also able to receive briefs directly from the Attorney-General's Department—normally for advice—and also on occasions he receives briefs directly from other government departments and agencies. Again, that would normally be to provide legal advice.

Senator COONEY —I was trying to get an idea: the Attorney-General's Department does not do much legal work anymore in the sense of court work.

Mr Govey —That is correct. The only area that I am aware of where any court work would be undertaken is in the area of international law where it is international court work.

Senator COONEY —And the departments brief through you directly, Ms de Gruchy. What does that leave the Attorney-General's Department doing as far as court work goes? Not much?

Mr Govey —As far as I am aware, only in relation to international work—that is, work that takes place in international tribunals.

Senator COONEY —While 10 years ago it was all the one thing, what I am trying to get a picture of now is what the Government Solicitor does and what the Attorney-General's Department does.

Mr Govey —Certainly, the people who used to do court work within the department are now within AGS, other than in this international law arena, but there are still areas of the Attorney-General's Department which provide legal advice. In general terms, apart from international law, the legal advice that is provided by different areas of the department is on legislation for which the department is responsible. For example, in relation to the copyright act, the area of the department that looks after that act can provide legal advice, and that applies to other areas in respect of the legislation that is administered by the Attorney-General.

Senator COONEY —But the Attorney-General's Department has by and large become an administrative office looking after a number of very important agencies—

Mr Govey —And of course we provide policy advice in the areas for which we are responsible to the Attorney-General and to the minister.

Senator COONEY —Leaving aside the advice about international law, I was concerned about whether or not—and this is a classic question that is put to many departments—there is going to be such a diminution of legal knowledge within the Attorney-General's Department that it will not be able to judge the quality of the advice coming in.

Mr Govey —For the most part, it is not our role to assess the quality of the legal advice that is provided by other areas, unless we are the client, and then I think it is fair to say that we do have an extra degree of legal expertise within the department that enables us to go on playing a role as a legal department, but we also have many functions and indeed many officers who perform non-legal roles in a whole variety of areas.

Senator COONEY —I think you said that as far as the legal work goes there is some advice you give and the international law situation, and the rest is policy advice—which is really not a legal function, I would have thought, as it is policy about legal matters, which is not really legal advice.

Mr Govey —That is right. A lot of the areas are in areas of subject matters that are particularly legal in nature. But, as far as the areas of the department are concerned that are carrying out the work now, I think it is fair to say that, for the most part, with variations of different kinds as a result of changes in the administrative arrangements orders, the situation has not changed from what it was. In other words, we always had a specialised area of the department that dealt with core legal things like the preparation of contracts, the giving of legal advice and the conduct of litigation. Those are the areas that have moved out. What has been left are the areas that have traditionally provided policy work, with that small component of legal services that I have referred to.

Senator COONEY —I might have been wrong, but I always got the impression that there was cross-fertilisation. It was bit like the old House where the backbenchers and ministers were all loaded in together—there was that sort of cross-fertilisation. When we came up here Senator Bolkus and others went off into the ministerial wing and it was very hard to get to see them, and we suffered as a consequence.

Senator BOLKUS —It wasn't too hard for you, Barney.

Senator COONEY —I get the feeling that the same sort of thing is happening a bit in this area.

Mr Govey —Obviously, there is a degree of separation, both physically and in terms of us not being part of the same organisation. But I think it is also fair to say that, in a very significant number of areas, we work very closely with the Australian Government Solicitor. In a number of cases, they have provided officers on secondment to us. For example, in the constitutional policy unit, that is the way in which that office has been staffed. But in other areas we have to work very closely with them because of the nature of the work that is involved where, for example, we need advice on constitutional issues. The work that is going on in relation to Corporations Law and the consequences of re Wakim is a very good example of that.

Senator COONEY —You have to pay for all of that?

Mr Govey —We do.

Senator COONEY —How do you charge it to groups—on a time cost basis?

Ms de Gruchy —We have a variety of methods of charging. We do record time and therefore have a system of charging hourly rates, but that all depends on the actual arrangement with the client and there are quite a number of other arrangements that we have entered into with clients.

Senator COONEY —Do you go to outside solicitors at all—the Attorney-General's Department?

Mr Govey —There are occasions where we do so, but I think it is fair to say that the bulk of our work is still with the AGS.

Senator COONEY —Is there a trend? There is nothing to stop you from going to any firm anywhere in Australia.

Mr Govey —That is correct, except, of course, for the areas of tied work. I think it is fair to say that the department has a large proportion of work that is tied, particularly in the constitutional law area.

Senator COONEY —Did you say that you have to return so much profit on your capital?

Ms de Gruchy —Yes.

Mr Riggs —That is right.

Senator COONEY —Why is it worked out on that basis, I wonder? Do you know why you have to make so much on your capital rather than on the work—

Mr Riggs —One of the disciplines of the GBE regime is that the Commonwealth is making a financial investment in a business. One of the disciplines is that the Commonwealth expects a financial return on that money which it invested in the business.

Senator COONEY —Do you work out your fees on that basis?

Mr Riggs —Taking account of that and all the other things that we need to take into account.

Senator COONEY —You are not subject to any scrutiny as to the level of your fees, other than from your clients?

Mr Riggs —The principal discipline is a market discipline.

Senator COONEY —So you can charge what you will, other than the market discipline. Is that a fair comment?

Mr Riggs —There are constraints on what the market will bear. We see ourselves as having a long relationship with our client base, so it is not a situation of making a quick killing out of our client base. There is very considerable constraint in positioning ourselves as the provider of choice, which means high value and moderate and competitive pricing as far as our client base is concerned.

Senator COONEY —But that is exactly what a market force is, isn't it?

Mr Riggs —I think it is.

Senator COONEY —Ten years ago you did not charge any of the departments any money. Is that right?

Mr Riggs —Yes.

Senator COONEY —How long have you been with us, Mr Riggs? You have been here for a while.

Mr Riggs —Only a couple of years, I am afraid.

CHAIR —It just seems like a long time.

Ms de Gruchy —I think user pays was introduced in 1992.

Senator COONEY —Yes, that is right. Who was in government then? I don't know. Do you have articled clerks? I was just interested in all this.

Ms de Gruchy —We have articled clerks in those jurisdictions where there are still articled clerks.

Senator COONEY —Do you have them in Melbourne?

Ms de Gruchy —Yes, we do, in Melbourne.

Senator COONEY —How many have you got down there?

Ms de Gruchy —I could not tell you the number off the top of my head, but we do have a number.

Senator COONEY —How many of those stay and how many go? I suppose that is a bit—no, you should know that. It has been going for some time since you have had that system. How many stay within the department?

Ms de Gruchy —I would have to ask them questions.

Senator COONEY —Do not worry; it is all right. Have you lost any of your staff to rivals and outside firms?

Ms de Gruchy —We have lost some staff. We have principally found that more of our senior staff who do leave have joined government departments rather than private sector competitors. But at the more junior end of our ranks of solicitors we have seen more of those go to private sector firms.

Senator COONEY —Is there any pattern to the senior members going to other departments?

Ms de Gruchy —There is no particular pattern, other than what we perceive is turnover of our staff because people wish to pursue different careers.

Senator COONEY —Do you know if they practise as lawyers in the departments that they go to?

Ms de Gruchy —There are a range of legal positions available in the Commonwealth. Some are in more traditional in-house legal departments and others are in policy areas.

Senator COONEY —If they go there they become public servants again. Is that right?

Ms de Gruchy —That is correct.

Senator COONEY —How long would the junior ones you lose to outside have been with you before they go?

Ms de Gruchy —It could be a range of periods.

Senator COONEY —What sorts of areas are they in?

Ms de Gruchy —We have not noticed a trend in any particular area.

Senator COONEY —If it is going to be too much trouble do not do this, but could you give us an indication of who has gone and when over the last two or three years? I am a bit conscious of asking you this because you are not a department; you are a profit making business. If that is going to be difficult, do not do it. When are we back at estimates?

CHAIR —Not for some time, Senator Cooney.

Mr Riggs —We have some information available.

Senator COONEY —All right, if you have it there.

Mr Riggs —We do have some information about turnover of individuals. I think I infer from your question that it would be good if we were to classify it a little bit and give you some indication.

Senator COONEY —Yes, just where they are going, what their range is and what sort of money they—

CHAIR —The next hearings are in November.

Senator COONEY —I do not want to go intruding into your business.

Ms de Gruchy —We would be happy to see if we could provide some information.

Senator COONEY —Thank you.

CHAIR —Thank you, Ms de Gruchy and Mr Riggs. That concludes questions in relation to the Australian Government Solicitor. To facilitate the proceedings, the committee has agreed to address questions now to Dr Graycar in his capacity as director of both the Australian Institute of Criminology and the Criminology Research Council.

[5.02 p.m.]