Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Foreign Affairs, Defence and Trade Legislation Committee - 06/05/2016 - Estimates - DEFENCE PORTFOLIO - Defence Housing Australia

Defence Housing Australia

CHAIR: I now call Defence Housing Australia. I welcome back Senator the Hon. Marise Payne, Minister for Defence, and welcome Ms Jan Mason, Acting Managing Director, and officers from Defence Housing Australia. Ms Mason, welcome. Do you have an opening statement?

Ms Mason : No, thank you.

CHAIR: We will go straight to questions then.

Senator GALLACHER: Ms Mason, I want to revisit some of the material traversed earlier in hearings of the Senate and the departure of the CEO, Mr Peter Howman, and the evidence that was given that there was an AFP investigation. You have confirmed that there was an AFP investigation; that was around 23 March, was it?

Ms Mason : No. I think at that time I indicated that we were aware of a referral of a matter to the AFP from the Department of Finance. We were not aware at that time that there was an investigation; in fact, I do not think there was at that time.

Senator GALLACHER: At which time; 23 March?

Ms Mason : Correct.

Senator GALLACHER: When was DHA aware that there was an AFP investigation?

Ms Mason : On 8 April.

Senator GALLACHER: Do you want to update the committee on any further developments in that space? Has there been a report back to you, or is there any activity that we should be aware of?

Ms Mason : No, thank you. As we became aware on 8 April that there was an AFP investigation, it would be inappropriate for us to comment on that, and any questions you may have in relation to that investigation should be directed to the AFP.

Senator GALLACHER: Very good. Would it surprise you to know that the CEO has had no contact from anybody in respect to that investigation?

Senator Payne: You cannot expect Ms Mason to comment on that. That is not an appropriate question.

Senator GALLACHER: I have asked it. You are ruling it out of order, are you?

Senator Payne: It is not my place to rule it out of order. I am suggesting to you that that is not an appropriate matter to ask Ms Mason to comment on: the conduct of an AFP investigation.

Senator GALLACHER: There is legitimate public interest in this matter.

Senator Payne: Yes, it is the conduct of an AFP investigation.

Senator GALLACHER: The CEO of Defence Housing Australia has had no contact from any police department of any jurisdiction of the Commonwealth.

Senator Payne: The former CEO, I assume you mean. Do you mean Ms Mason, or—

Senator GALLACHER: No, the former CEO has had no contact from any—

Senator Payne: How would you expect Ms Mason to comment on that?

Senator GALLACHER: Maybe I do not expect her to comment on it. Maybe I just want to get this on the public record, because the AFP investigation is now on the public record.

Senator Payne: So when you said 'are you surprised', you did not really want her to answer that question?

Senator GALLACHER: You have ruled it out of order.

Senator Payne: No I haven't.

Senator GALLACHER: It is a matter of fact that there has been no contact with a former CEO of Defence Housing Australia by any police authority of any jurisdiction.

Senator Payne: That is a matter for the investigative processes underway by the AFP.

Senator GALLACHER: In some terms it is a matter of natural justice. If there is an allegation or a report of a Senate estimates or a Senate hearing that there is an AFP investigation into a former CEO, that is on the record. What I am putting on the record clearly is that nobody has bothered to speak to him.

Senator Payne: I do not have the details in front of me but the language you are using is not an accurate representation of the reports that were made, which indicated there was an inquiry into a matter concerning DHA. Asking Ms Mason if she is surprised or not is not an appropriate question for estimates, just for starters, and, secondly, none of the officials at the table or I will be commenting on the conduct of an AFP investigation.

Senator GALLACHER: Thank you. Ms Mason, are you familiar with the Lazard report?

Ms Mason : I am familiar with the fact that a scoping study report was prepared by Lazard for the Department of Finance in relation to Defence Housing Australia.

Senator GALLACHER: Are you aware that there was contest about the veracity of that report and that DHA commissioned three separate independent reports from Deloittes and others to test the veracity of that report?

Ms Mason : No, I am not particularly familiar with those matters that you raise. That is probably before my time at Defence Housing Australia.

Senator GALLACHER: Is anybody else at Defence Housing Australia aware of the commissioning of three reports to test the independence and veracity of the Lazard report?

Ms Mason : Possibly. That is a matter that we might take on notice.

Senator GALLACHER: It would be foolish of me to allow you to take anything on notice, as we have been advised at the start of the hearing that the committee will cease to exist at the calling of a double dissolution, which may well be tomorrow morning. I would appreciate someone who has any knowledge of this being forthcoming and making a statement or giving me an answer.

Ms Mason : We will see if there is anybody able to assist you during the course of the hearing.

Senator GALLACHER: Is there no-one at the table able to confirm these facts or errors, however you want to characterise them? Three independent reports commissioned by the DHA, paid for by DHA, about the veracity of the Lazard report, and no-one in DHA knows anything about that?

Ms Mason : Is probably appropriate if we take it on notice—

Senator GALLACHER: You cannot take it on notice if you have got someone sitting at the table ready, willing and able to answer.

Ms Mason : I moved into the position of acting managing director—

Senator GALLACHER: I am not asking you, then, Ms Mason. Perhaps we could go to other officers of the department. We have a chief operating officer and a chief financial officer, who would have had to pay for these reports.

Mr Brocklehurst : There were some reports carried out—

Senator GALLACHER: Three?

Mr Brocklehurst : There was a Deloitte report—that was the primary one; there were a couple of other reports but they were not directly related to the sort of activity that you are referring to. That work by Deloitte was not directed at testing the veracity of the Lazard report; it was conducted to provide advice to the board of DHA in relation to matters around the review that was being carried out.

Senator GALLACHER: So I will withdraw the word 'veracity'. The Lazard report appears, the DHA commissions further reports—up to three—to better inform the board about the Lazard work—

Mr Brocklehurst : If I could correct you, the Deloitte work was carried out prior to the Lazard report being finalised.

Senator GALLACHER: So, factually, Lazard, and then DHA, who inform the board, took steps to get three other reports done?

Ms Mason : I am not sure of the precise timing of the Lazard scoping study report being finalised but I think it was in approximately February 2015 that that work may have been completed. Again, we would need to check the details of that with our colleagues in the Department of Finance.

Senator GALLACHER: I am going to get to the Department of Finance and the Department of Defence. I just want to confirm that there was the Lazard report, and the board, to better itself, commissioned three other reports. That is all I need to know.

Ms Mason : I am endeavouring to assist you. The Lazard report was not commissioned by Defence Housing Australia. It was commissioned by the Department of Finance.

Senator GALLACHER: I understand that too.

Ms Mason : I think it was completed in around February 2015, although I would wish to check the precise details of that with my colleagues in the Department of Finance. The three reports that you are referring to that Mr Brocklehurst has some knowledge of, the timing of the completion of those reports may or may not be available to us now. I will see if Mr Brocklehurst has that information. If not, we may need to take it on notice.

Senator GALLACHER: We do not have all day to talk, so I am quite comfortable with where we are at. There is the Lazard report and there were other reports commissioned. Is anybody at the table aware of what action the former CEO took in respect of this situation that had arisen—Lazard, by Finance, independent reports to better inform the board—are you aware of the fact to the CEO sought and had a meeting with the secretary of Defence? Mr Brocklehurst?

Mr Brocklehurst : There are obviously meetings that occur on a number of occasions—

Senator GALLACHER: Specifically in respect of Lazard, for better information of the board.

Mr Brocklehurst : I do not think I would be able to answer that question as to whether he specifically had a meeting with the secretary of Defence to discuss the Lazard report.

Senator GALLACHER: So you have no knowledge of a meeting between the CEO of DHA with the secretary of Defence and Mr Grzeskowiak in respect of the proposals that arose from Finance's Lazard report.

Mr Brocklehurst : I do not think I could answer that. I do not attend all the meetings that were conducted.

Senator GALLACHER: Are you further aware that as a result of a meeting with the secretary of Defence there was then a meeting with Prime Minister and Cabinet and Finance where the CEO of your organisation, of which you are the—

Mr Brocklehurst : Chief financial officer.

Senator GALLACHER: Chief financial officer, then was making a presentation to PM&C with Finance and Defence present?

Mr Brocklehurst : I am not aware of any meeting that occurred with PM&C.

Senator GALLACHER: Anybody else? The chief operating officer: are you familiar with any of the situations I am talking about?

Ms Dermatossian : Not directly, but there were steering committees held where that could have taken place. There were discussions with both Defence and Finance in relation to the steering committee.

Senator GALLACHER: Who is on the steering committee?

Ms Dermatossian : I was not involved in the steering committee.

Mr Brocklehurst : I should say that the steering committee was managed by the Department of Finance. I think questions about that were probably better directed to them.

Senator GALLACHER: The department of whom?

Mr Brocklehurst : Finance.

Senator GALLACHER: DHA had no representatives on it?

Mr Brocklehurst : From recollection, DHA was not represented on the committee but did attend meetings as requested.

Senator GALLACHER: This will be in the public arena one way or another. The simple proposition that has been put to me is that there was a scoping study done; DHA sought to further advise itself; and then there was a meeting with the Secretary of Defence, and Mr Grzeskowiak, who I think is manager of estate or director of estate

Senator Payne: Deputy Secretary, Estate and Infrastructure.

Senator GALLACHER: And all of the officials or officers here today from DHA have no knowledge of that. Is that what you are telling me? Is that your evidence?

Senator Payne: I think what the officials have said, if I may, is that the then CEO would have, as a matter of course in doing the business of the role, have had meetings with the secretary of Defence, meetings with the relevant deputy secretaries from time to time. Ms Dermatossian said there are steering committee processes which involve other departments. I think that is the evidence that the officials have given you.

Senator GALLACHER: That they had no knowledge that the CEO was taking these matters up with Defence in the first instance and then Prime Minister and Cabinet and Finance in the second instance.

Senator Payne: I would presume that the view of the CEO was that he was doing his job, but if Mr Brocklehurst or Ms Dermatossian have anything else to add I am sure they will.

Senator GALLACHER: I would like them to say whether they were aware of this or not—yes or no.

Mr Brocklehurst : I am just not aware of any specific meeting that you are referring to that was discussing those. As the minister says, there would have been many meetings that the former managing director would have had with senior representatives of Defence, and no doubt at times would have discussed those matters.

Senator GALLACHER: Were you familiar with the content of the Lazard report?

Mr Brocklehurst : DHA received some material from that report for data and fact checking prior to it being finalised, but we did not receive a copy of the final report.

Senator GALLACHER: Go to the data and—fact checking, was it?

Mr Brocklehurst : Yes.

Senator GALLACHER: Did you find any data or factual errors?

Mr Brocklehurst : I cannot recall the detail, but there were a number of observations that we would have made and passed back.

Senator GALLACHER: Observations. Can you explain the difference between a factual error and an observation.

Mr Brocklehurst : An observation in terms of the accuracy of the data or whatever.

Senator GALLACHER: Was that a positive observation or a negative observation?

Mr Brocklehurst : I cannot remember the detail of the comments we made. I would say that for the most part the data that was in the draft material we received was accurate and well presented.

Senator GALLACHER: But you made some observations—

Mr Brocklehurst : Yes.

Senator GALLACHER: and you cannot remember what they were.

Mr Brocklehurst : No. There were a number of—I think that is something that we would need to take on notice.

Senator GALLACHER: You can remember the good stuff but you cannot remember observations. I find that a little—

Mr Brocklehurst : This was about 18 months ago.

Senator GALLACHER: How do you record your observations? Are they diary noted? Are they minuted? Do they go to the CEO? Are they just passed across in a conversation and disappear?

Mr Brocklehurst : From recollection, we made annotated notes within the material that was provided to us and provided it back to the Department of Finance in that form.

Senator GALLACHER: What about the chief operating officer, did you have any observations or did you do any factual checking of the Lazard report?

Ms Dermatossian : We did receive a draft that we had to review to ensure that the factual information was accurate. I did that with my team and with the CFO, and the CEO at the time.

Senator GALLACHER: What were the results of your investigations of the factual aspects of the report?

Ms Dermatossian : Some facts had to be corrected.

Senator GALLACHER: They were wrong?

Ms Dermatossian : I would not say they were wrong.

Senator GALLACHER: How do you correct something that is not wrong?

Ms Dermatossian : I think it is the way it was presented more than it was incorrect.

Senator GALLACHER: Can you give us an example?

Senator Payne: I am not sure of the status of the report. As I understand it, it was an independent scoping study following the National Commission of Audit. In terms of its position as advice to government I am not sure of its status, but I would suggest that discussing the specifics of the scoping study are probably not appropriate, because of the nature of the advice to government.

Senator GALLACHER: How can it be advice to government if it was a publicly paid for, taxpayer funded study into DHA's operations which needed to be checked for factual accuracy and veracity? Both of the officers here have had either observations or corrections to make to the report. I think that is hardly advice to government.

Senator Payne: Of course it can still constitute advice to government.

Senator GALLACHER: When do the people who actually pay for this stuff get a look at it? In 25 years time, or something?

Senator Payne: Part of the processes of government informing itself and supporting the decision-making process is the commission of studies and reports all the time.

Senator GALLACHER: All right. I will put the question that there were nine pages of errors arising out of the analysis of the Lazard report, and that was taken to the secretary of Defence. Have you any knowledge of nine pages of errors which were taken to the secretary of Defence?

Ms Dermatossian : I don't.

Mr Brocklehurst : I couldn't comment on that, and I am certainly not aware of anything being provided to the secretary of Defence.

Senator GALLACHER: The secretary of Defence—you are not aware.

Mr Brocklehurst : I am not aware of any material of that being provided there.

Senator GALLACHER: And after discussion with—

Ms Mason : Senator, perhaps on process—

Senator GALLACHER: the secretary of Defence there was then convened a meeting with Prime Minister and Cabinet, Finance, Defence and DHA. And you, Mr Brocklehurst, the chief—

Mr Brocklehurst : Financial officer.

Senator GALLACHER: officer, head of corporate services and Ms Dermatossian, the chief operating officer, had no knowledge of this?

Mr Brocklehurst : As Ms Dermatossian outlined, we were aware that there was a steering committee for the review that was managed by the Department of Finance.

Ms Mason : On processes, perhaps I can assist you. It is a fairly common process, which has been used by governments over the years—not just recently—that independent pieces of work are commissioned from experts in their field, be that legal or investment—

Senator GALLACHER: I have no difficulty understanding that. I know you may think I am a simpleton, but I can understand that. The reality is I am going through a factual series of events, asking responsible officers of the department whether they knew about things. That is all I want to know.

Ms Mason : Certainly. I was going to—

Senator GALLACHER: What I am putting to you very clearly is that there were nine pages of errors taken to the Secretary of Defence. You have no knowledge of that? Then there was a meeting convened between Prime Minister and Cabinet, DHA and Defence at which these nine pages of errors were discussed, and you have no knowledge of that either? That is all I want to know.

Mr Brocklehurst : I am not aware of having been a participant in that meeting, so I am not—

Senator GALLACHER: Were you aware of the process?

Mr Brocklehurst : I was aware of the process whereby we received draft material from the Department of Finance and we provided some comments on that. Absolutely, I am aware of that.

Senator GALLACHER: Nine pages of errors is what I am specifically saying.

Mr Brocklehurst : I could not recall that detail.

Senator GALLACHER: You cannot recall?

Mr Brocklehurst : No. That would be something I would need to have a look at as a question on notice.

Senator GALLACHER: You cannot recall nine pages of errors?

Mr Brocklehurst : I cannot recall the volume of what was provided back in that regard.

Senator GALLACHER: But you do recall that there was some volume?

Mr Brocklehurst : I do recall that we provided some comments back on the draft material that we received.

Senator GALLACHER: Okay.

Ms Mason : It is a fairly common practice in those expert reports that there would be draft material provided to an entity for verification purposes. In the verification process, it is quite common that there would be either factual errors which need to be corrected before the report gets finalised and submitted to government or additional information that needs to be provided in order to give government the complete picture of an issue. Sometimes there are also presentational issues to do with charts, graphs or diagrams that need to be altered in order to improve the quality of information going before government. So that part of the process—and I am not familiar with the detail of it because I was not there at the time—

Senator GALLACHER: That is why I am not asking you the question.

Ms Mason : That process is quite normal.

Senator GALLACHER: Okay. So we know that there were some comments or, as my information says, nine pages of errors, which were taken to the Secretary of Defence, who, at his instigation, suggested there be a meeting with Prime Minister and Cabinet and Finance to discuss these issues. You are aware there was a meeting and there were some observations, but you were not present at the meeting with PM&C, Defence and Finance?

Ms Mason : I think Mr Brocklehurst said earlier that he was not aware of the meeting.

Senator GALLACHER: I would appreciate it if you let him answer the questions. We would probably get through the day a lot easier.

Mr Brocklehurst : As I said before, I was aware that there was a steering committee that had participants from those departments, but, in terms of the specifics of those steering committees and what they talked about, they were generally attended by the previous managing director.

Senator GALLACHER: The steering committee would presumably have been DHA and Finance, not PM&C as well.

Mr Brocklehurst : As I said before, the steering committee was managed by the Department of Finance. My understanding is that DHA was not a member of that steering committee; it attended as invited.

Senator GALLACHER: Okay. This was a separate meeting, a meeting which I would probably imagine, in your operation's normal course of a year's work, would be unusual to go to—that is, going to PM&C with Defence and meet with Finance about a contested issue. But your evidence to this committee is you had no knowledge of that?

Mr Brocklehurst : I can be clear that I have no knowledge at all of a meeting that occurred at PM&C.

Senator GALLACHER: Ms Dermatossian?

Ms Dermatossian : I have no knowledge of that specific meeting.

Senator GALLACHER: Haven't we got the appropriate officers of the DHA here? Is there anybody at the senior executive levels who would have been aware, or are you the team?

Senator Payne: Senator, you have the CFO, you have the COO and you have the acting managing director. I am sure we have the appropriate officers.

Senator GALLACHER: Absolutely, and that makes it even more remarkable that you were unaware of this meeting—a meeting with the Department of Defence, which suggested that a meeting with PM&C and Finance be convened. I have been given some information that that meeting took place.

Senator Payne: Meetings like that happen all the time.

Senator GALLACHER: But without the knowledge of the responsible officers in the DHA?

Senator Payne: Yes, but in multilayered organisations several senior staff meetings like that happen all the time!

Senator GALLACHER: They have both said that they were involved in the Lazard scoping study by DHA and they have both said that they made observations and/or factual corrections. So following your work, as you do through the day, it would be surprising if you did not know what happened to your work—if the CEO just started off and did not inform his organisation that—

Senator Payne: That is a statement that you are making. You cannot expect the officers to comment on it.

Senator GALLACHER: All right. I think we have probably got to the end of that 'dry gully', so to speak. It will appear in other forums, and there will probably be questions in another parliament.

There is the evidence that we have been provided with by yourself, Ms Mason, where I asked Mr Kreitals if:

… DHA outsources all its sales and leasing activity right across Australia?

and outsources the majority of its SLB activities to its contracted externals team—and also more recently to a panel of real estate agents. Is there actually potential for DHA to outsource its three core lines of business and still stay as DHA—as an entity called 'DHA', but privatise the business activities you have?

Ms Mason : That is a theoretical question, I do not think that I—

Senator GALLACHER: Well, is that what you plan to do? Do you have plans to do that?

Ms Mason : No.

Senator GALLACHER: That is not theoretical.

Ms Mason : Okay. I have answered your question, 'No'.

Senator GALLACHER: You have no plans to outsource any of the respective business arms of DHA?

Ms Mason : No, Senator.

Senator GALLACHER: Which could be done—

Ms Mason : We already operate in conjunction with the private sector in a number of ways, using real estate agents.

Senator GALLACHER: Yes.

Ms Mason : We have no particular plans to alter what we are doing currently, although we may take business decisions from time to time. But there are no plans to outsource the sorts of functions that you are referring to.

Senator GALLACHER: And going back to the Lazard study: did they recommend areas like that?

Ms Mason : I do not know.

Senator GALLACHER: You have not seen it?

Ms Mason : No.

Senator GALLACHER: You have not seen any of Lazard or the three reports I have been talking about?

Ms Mason : I have not seen the final version of the Lazard report. I did see some draft material—

Senator GALLACHER: So you have seen it?

Ms Mason : No, I saw some draft material in 2014 when I was working at that time within the Department of Finance. As I have given evidence, I think to the February estimates hearing—

Senator GALLACHER: Did you design the report?

Ms Mason : No, I did not.

Senator GALLACHER: And you have not seen the final draft?

Ms Mason : No, I did not see the final report. I do not think it was finalised until after I was no longer at work in the Department of Finance.

Senator GALLACHER: Okay.

Ms Mason : I have given evidence previously that my last day at work in that department was 24 December 2014. The report was not finalised until sometime after that. I think it would have been about February 2015.

Senator GALLACHER: Okay. So, clearly, your evidence here today is that there are no plans afoot to outsource the respective business practices of DHA—like the maintenance?

Ms Mason : We already use private providers for maintenance activities within DHA. That has been the practice over a number of years.

Senator GALLACHER: I understand that.

Ms Mason : If you are asking if there are any plans to make dramatic changes to those arrangements then, no, there are not. If your question goes to the issue of privatisation, I think that the Minister for Defence and the Minister for Finance have stated clearly that that is not the government's preferred direction.

Senator GALLACHER: I understand that the KordaMentha report has been accepted and that it will not be privatised. What I am asking is: is there 'privatisation'—for want of a better word—by stealth?

Ms Mason : No.

Senator GALLACHER: Thank you. Going to the topic of Seaward Village, the decision has been made not to proceed. How does DHA feel about that? Did you spend any money on the proposal to get it all up? Did it cost you any money?

Ms Mason : We welcome the government's decision in respect of Seaward Village; it gives us a clear pathway forward. We have officers who can speak about the expenditure to date in relation to Seaward Village.

Senator GALLACHER: From a purely DHA perspective, what costs have you incurred in the Seaward Village exercise?

Mr Dietz : We have spent approximately $900,000.

Senator GALLACHER: That is what you have spent to date. Are there any bills to come?

Ms Mason : To understand your questions, there will be many bills to come in relation to Seaward Village—

Senator GALLACHER: If you understand my question, you should give me the answer in the first place. How much money has DHR expended and does it expect to incur as a result of this exercise?

Senator Payne: Senator, Ms Mason said: 'To understand your questions', then I believe she was going to ask you a question to get some clarity around the information you were seeking.

Ms Mason : There will be many bills to come in relation to Seaward Village, because we will be undertaking work to refurbish the homes in Seaward Village.

Senator GALLACHER: I did not ask that question, with respect. My question is: as a result of the decision—not as a result of your refurbishing Seaward Village—as a result of the decision not to proceed, what costs have been incurred by DHA? I got the answer—$900,000—and my simple question then was: are there any outstanding bills? Is that the total amount that you are going to lose?

Mr Dietz : There is a number of smaller bills that will continue to come from works that have been completed to date. I will also say that for much of the work we have completed we will be able to use some of that value towards the refurbishment project.

Senator GALLACHER: What is the dollar figure that will not be able to be billed against anybody else that the DHA lost? What is the cost of the decision?

Mr Dietz : It would be difficult for me at this moment to say how much of that $900,000 is not valuated to the refurbishment project. I would take it on notice to give you an estimate.

Senator GALLACHER: Well, we would have to come back in another parliament and pass a resolution to order you to give us the answer—so you have put forward a figure of $900,000, but the answer is that you do not know?

Mr Dietz : As an example of how we would use the information we have already gained, we are looking very soon to have consultants inspect each of the individual houses. With the contractors that have already provided us information for some of the development project, we would be able to roll those contractors into that position, so their ability to be up to speed on the project is value added already.

Senator GALLACHER: Why did the review by Lieutenant General (Retired) Mark Evans AO, DSC recommend not proceeding with the redevelopment? Does anybody know the answer to that?

Ms Mason : I think the rationale by Lieutenant General Mark Evans was set out in his report which, I believe, has been published.

Senator GALLACHER: I am not sure that every taxpayer in Australia has read that report, so that is why I am asking questions at estimates. Do you know why he—

Ms Mason : We have an officer who is familiar with the report and can probably assist you with that question.

Mr Gallagher : I worked for some time with General Evans on the report and, to go into the reasons that he recommended not to proceed, it was very much along the lines that he saw the disruption to the SASR members and their families as being a critical element, and he recommended that that disruption be minimised. That was the main reason, I think, that he gave for not proceeding with the full redevelopment.

Senator GALLACHER: In an ABC article, on 26 April 2016, titled, 'WA Swanbourne SAS Defence housing sale quashed', foreign minister Julie Bishop is quoted as saying:

… when you compared it to a refurbishment and an upgrade we believe that the best option was the refurbishment.

Is that DHA's view?

Mr Gallagher : In the longer term; the problem with the refurbishment is that at some time in the future the houses will need to be either refurbished, again, or knocked down and replaced. So the redevelopment option gave a much better long-term solution for housing of SAS members.

Senator GALLACHER: So the current government policy is not to develop this site but to refurbish it. In the long term, that is probably a less-than-excellent outcome.

Mr Gallagher : As Ms Mason said, the government has made that decision and DHA will implement the decision.

Senator GALLACHER: Following on from that, is it also correct to assume that beyond this refurbishment decision there is nothing to stop the redevelopment of Seaward Village, in the future?

Mr Gallagher : One of the requirements for the redevelopment was the transfer of Defence land to DHA. On top of that, we needed approval from the WA government and the local council, some mix between the two. Unless we get all of that together, it will not proceed at any time in the future. We would also need Defence agreement to remove the covenant, in order to do that.

Senator GALLACHER: There was earlier evidence about the covenant being lifted and re-established. That is not the case, at the moment, though, with the refurbishment. The covenant would remain in place. Is that how it works?

Ms Mason : That is correct.

Senator GALLACHER: What is the status of the refurbishment? Have we just started it or are we halfway through it, because there were two proposals, weren't there: refurbishment and redevelopment?

Mr Dietz : That is correct. The refurbishment, we have now kicked off, in angst. We have a project delivery team and governance structure in place. We are drafting a consultation, stakeholder-engagement and public relations strategy, which will be very well-considered. We are also preparing to scope the individual houses for the works that will be required for the refurbishment, and we have begun considering the implementation strategy of the refurbishment.

Senator GALLACHER: Will all the properties within Seaward be refurbished?

Mr Dietz : Yes.

Senator GALLACHER: What is the time frame for that refurbishment?

Ms Mason : If I may add, there, the assistant minister's statement in respect of Seaward Village indicated that there are some properties that will not be able to be refurbished and may need to be replaced. That has been acknowledged because they will not be able to be refurbished to meet Defence's specifications for the properties. Those properties will need to be replaced. I just want to be clear about that.

Mr Dietz : That is correct.

Senator GALLACHER: Do we have a time frame for the refurbishment completion?

Mr Dietz : We are still going through the process of defining the time frame.

Senator GALLACHER: How many new residences, if any, will be built at Seaward.

Mr Dietz : As the acting managing director said, there will be a minority of houses that could possibly be demolished. We have not done the scoping exercise to determine how many.

Senator GALLACHER: Is that, 'We don't know,' or are you going to do an evaluation?

Mr Dietz : I would suggest it is fewer than a dozen.

Senator GALLACHER: We have dealt with the covenant being lifted and re-established; that is no longer necessary. What are the protocols around lifting that covenant? I understand the covenant but how does it get lifted and re-established?

Mr Gallagher : I can answer that. The covenant is purely an agreement between DHA and Defence. It is not applied to the title of the property, and any lifting or replacing of that covenant is purely between Defence and DHA.

Senator GALLACHER: At what level though? Is it the Minister for Defence, the Assistant Minister for Defence or the Minister for Finance? Who is the person responsible for initiating changes to the covenant?

Mr Gallagher : It was actually signed at quite a low level, but we certainly would not intend to change it without approaching the minister.

Senator GALLACHER: So you are saying that it is signed by a deputy secretary?

Mr Gallagher : Even lower, I believe.

Ms Dermatossian : For the covenant to be lifted, it requires the approval of the Minister for Defence.

Senator GALLACHER: Sorry, I did not quite catch that. The Minister for Defence is the one who initiates the lifting of the covenant?

Ms Dermatossian : The covenant can only be lifted with that minister's approval.

Senator GALLACHER: So it starts as a decision of Defence, essentially? Defence has to agree?

Ms Dermatossian : Correct.

Senator GALLACHER: Would the Seaward community be consulted, Minister, if you were to lift that covenant?

Senator Payne: It is not a question which is in contemplation. There is no discussion around removing the covenant. The covenant remains in place.

Senator GALLACHER: But we have just gone through a scenario where it was lifted and then re-established. My simple question is: you are the minister, so would you consult with the community if you were making the decision to lift that covenant?

Senator Payne: The matter does not arise. I am not contemplating lifting the covenant.

Senator GALLACHER: Why don't we go back a step. Does anybody know if the community was consulted prior to the lifting of the last covenant?

Ms Mason : I do not believe that the covenant was lifted.

Mr Gallagher : No, it was not.

Ms Mason : The covenant has remained in place, and there is now no need for it to be lifted.

Senator GALLACHER: Mr Grzeskowiak refers to the covenant being lifted and re-established.

Senator Payne: I am not sure what material you are referring to.

Senator GALLACHER: I refer to evidence given by Mr Grzeskowiak at the Foreign Affairs, Defence and Trade References inquiry into the operations of Defence Housing Australia on 23 March. Mr Grzeskowiak said:

The current redevelopment proposal is on hold … pending government consideration of the review. Under the proposal for redevelopment, the covenant would be lifted to enable a sell-off of around 25 per cent of the land. Then the covenant would be re-established on the remaining part of Seaward Village in a similar way to the way the covenant exists to do today.

That is his evidence.

Senator Payne: Yes, but that is not what you said.

CHAIR: His evidence is that that is what would happen if that set of events was to take place.

Senator Payne: And that set of events is not taking place.

Senator GALLACHER: My question is: is the community consulted? Basically, this could have happened. We are simply asking: do you consult with the Seaward Village community if you are going to do this sort of stuff? It is not a difficult question, I would have thought.

Ms Mason : That evidence referred to the prospect of the lifting of the covenant, and I think Mr Wallace at the February estimates hearing gave various examples of consultation about Seaward Village matters that took place previously. But the redevelopment proposal is now no longer in contemplation and we have no need to lift the covenant.

Senator GALLACHER: And the community is very happy in a lot of areas about that. The simple question remains: in the event of a minister lifting the covenant, would you consult with the people affected?

Senator Payne: As Ms Mason just said, we discussed the consultation with the community at a previous estimates.

Senator GALLACHER: Anybody listening can draw their own conclusions as to the questions and the answers.

Senator Payne: You are right about that.

Senator GALLACHER: That concludes my look at Seaward Village.

Senator DODSON: I have one question in relation to the covenant. Just so that I am clear, the covenant could be lifted at any time by a future minister—is that correct?

Ms Mason : I think it is correct, if the minister was so inclined and if—

Senator DODSON: I understand that aspect. Therefore, the 25 per cent of the land could then be subject to redevelopment if that was the mind of the minister of the day—is that correct?

Senator Payne: I am sorry. This is not a matter which is being considered. The decision has been made to retain—

Senator DODSON: I understand that. I am just trying to get clear that there is a legal situation embedded in this arrangement where a future minister could in fact lift this covenant and, if so inclined, according to their policy, ideology or preference, develop the 25 per cent of land that was proposed to be developed or was contemplated to be developed.

Senator Payne: As has always been the case.

Senator DODSON: That is what I wanted to get clear. So that development could proceed in the future?

Senator Payne: Yes.

Senator DODSON: I just wanted to get that clear. Thank you.

CHAIR: That concludes the committee's examination of Defence Housing Australia. I thank Ms Mason and the officers for their attendance. We will now examine the budget estimates for the Department of Veterans' Affairs.