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Sugar - Purchases by the Commonwealth through Mr. W. E. Davies in September and October, 1920 - Royal Commission - Report by the Commissioner (Sir E. F. Mitchell) 27th September, 1923


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1923-24.

THE PARLIA lVIENT OF THE CO:H, fONvVEALTH OF AUSTRA LIA.

ROYAij COMMISSl()N IN CONNEXION WITH

SUGAR PURCHASES BY THE

THROUGH

MR. W. E. DAVIES

IN SEPTEMBER AND OCTOBER, 1920.

REPORT BY THE - . - COMMISSIONEl\ (SIR E. F. MITCHELL, K.U.M.G., K.CJ

27TH SEPTEMBER,

P-resented by Comm,and ; orde,red to ue 1JI'intecl, 2 th March, 1924.

[Cost of Paper :- Preparation, not given; 820 copi es ; apvroxilllate cost uf printing and publ.ishl og ,

l'nnted and Pu bllshed for the GOVERNMENT o f the COMMONWEALTH ?f A :U STRALIA by AL&El T J. MULLE't-:', Government Printer for the State of V1etona.

No. 6D.

1647

Davies, ,,r m. Edward . ..

Deane, Percival Edgar . ..

Eaves, Vv1n . .John _Stan ley

lhema.tJ , Gcot:ge· A i't h l LL' SO.tt

:Page on of

evidence.

146, 218,

285, 335, 447.

456, 495.

472.

1:60.

238, 361, Johnston, Arthur Harry Lee, Benjamin J·oseph

Matlwr, Alfred \Villiam Barclay

Mather, Donald IJavelock

Mather,· Leslie Ga.rrreL .. .

:McJ:..ca11, Douglas Allan

.Page on trauscri}Jl of evidence.

440.

177, 271, 328.

134, 416, 423.

113.

176 . .

Funston , · F mdcric k ,James 14H, 1G3, 199, N G S l 321. . asou, eorge tep l eH ' 326.

\V alt.er · 49, 207.

O.ld ershaw, \ViJiiaJll .J. Nurmau 81, 3fJ8 .

Parc;u tJ s., MarLw· 174.

Arthur 4:'18.

1\1 bed: Ui11der 170. ·

I::!ughe0-, lU. Ho n. \Vm. Morris, · .1\'LP. :J4-L Tholllfl;', \Villian1 lleury l :W, 2:JG

lnglis, G eorge Mather::; 172. V a n d c r Heek, Johannes

264.

1649

01?

JtOYAL 'fO INQUillE INTO CERrrAIN PURCHASES OF

S(]fiAR l'HE THROTJGH iVIR.

EDWARD I>AVlES IN AND OC'f013}:R,

INTRODUCTION.

To His Exeelleney t.he H .fOHT HoNORABLF: BARON FoRSTER, a J'VfemlHw nf His _ Majes ty's

l\Jost Honorable Privy Council, Knight Grand Cross of the Most Order of Saint l\Hcha.el

ttnd Saint George, Oorernor-General and Com·mandet·-in-Chief of the Commonwealtlt of Australia.

MAY I 'r l'LT;ASE Youn ExcELLENCY :

1, Bdward }i'aneourt. ::..\fitchell, King's Counsel, ' the Uc;mtni < sinner appointed by Letters l:»atent issued in n am e of Majesty by _Your Excellency t_h e

Governor-G en eral of the Conuiidnwea1i.h o-f Australia, aeL i no with Lho ad vice of the Federal Executive Council, on 24lh August, 1923, to inquire into and report as

t.o cerlai n 1mrdias€s of sugar made in the · months _ of St-, plember and Oqlober in the yea't: 1920, by the Com­ monwealth, t.hr.')ugh 'Villia.m Edward Da.v•.es, of Mel­ Lc: m·ne, in relatio·n to the said pur­

d1ases-(n) the course of the (11) the agent-.'3' remunerabon or profits and the distribution thereof;

( 1:) any brokerage, and fees paid, and

t.h e pers.ons to whom pa1d; and

( r/) w het-.her any gift eonsHlm·a.t1on was offe-red or given t-.o or by , any person or

per so-n s cmployrd hy t.he Commonwealth, or ar1y ,other p er son Ol' per sons, hav r the l1nn onr to report-. t.o Yom· a.s

:--

Th n pur1·hases above mr-nt.ion ed made by Lh o

( \yrn 111 o.n wNtH.h Oovennnent, from on e .J ame_ s of

So11 ra.baya , .T ava, a, brok eT a.nd d ca.l er . Jn

prod nets, including sugar- wluch 1s t h e ma.n1,

or at least one· of the most important, products of Java The pn•·ehase.s refe.rrecl to were t hree· in number- t he fir st-. o f 1,000 ton[;, made on or ab011t. t h e 8th Septe,mber, aL price o f £ 12 1 2s. _ GeL ton- based

LhC' exeha.n ge ra.te of tho flonn he m g 10.8'2 p{'r £ 1 :

l0ft llw at hn y0 r ;:;'s ri sk

The se·conJ , c·f G,OOO ton s. on or about i.h e 1st.

dav o f Oct.Gber , 1920, at .£63 JOs. J'l€r ton- excha11g e l1 f; ing a!'. hnycr' s risk

Tho Lhird, o f 10,000 tons, m ade on or about 11 th

Od.eher. 1920, --at Lh e price of £54 per ton- the ex­

d;;Hl£0 in t-his case alon e being at seller'sJ ·i.e. 1 ri ,'k. "

In each of the three t ransaction s, William Edward Davies, agent, of :Melbourne, acted as an intermediary between the Commonwealth Gove·r·nme.nt and Nash , and one of the diffi cult, matters that I have had to deal with

in t his case has been to ascertain what was the real

position occupi ed by navies in the carrying out of these purchases, in particular wh eth er h e was simply an agent for Nash or a. pa.rtne r wit.h him ; and, if the. latter,

from when and upon wha.t t-.erms-my interpretation of clause (a) uf t h e Commission being t hat the duty uf

determining su ch a rnatter was included in J;h e expres­ sion (rt) the co urse. of t h e, negotiations. . In a. settle ­ m e nt. afterwards made in or about the month of No-­ vemb€r, 1920, in Java, between Davies and Nash­ navies rece ived a large sum in respect of his share of

t.h e proftts made by Nash on the transaction far exceed­ ing any com missio n h e would he en t. iU ed to in any

as pE ·ci. - i f h e wer e mere ly a broker or ager1t for Nash ; iJ. Hngeth er h e eiL her re.miLt.ccl t.o Ansl·,raJia when in J ava

- - OJ" htc. 11 g h L back wiih hirn in drafls--or

remitt-ed hy Na.h , a sum aggregat.in g £24,,797.

Nash r etain ed for himself twice t ha t snm , ou t of which he paid com;ide•rahle a.n Jollnt.:s to mw 1, Mathieu- a broke r: occ 11py in g an office in tbe same building as Nash. A cen rding l o on e arcDl m t rr nd< !rcd by Nash t.o Davies early in 19:2 1 un t. h e basis thaL l\ l aJh ieu 's i11 terest in

t.h 0 t ransa <.; Lion was I hat of broke•· l1l er ely- a lt h ou gh t. h e sums sta.tcd to be paid to bim far exceeded th e n sual

brok erage . In a later account r endered by Nash to

Davi r s in 1922, Mathieu was treat-€d as intere t-.ed as a pa1'11n e r wi t h eCJua l ri ghts and liabilities to Nash and Da.vi es . Mr. Davies' evidence before m e did not en ­

a. ble me· io com e to a n y d termi n al ion wh ether e ither

k1. sis right. 'J'he secon 1 ac 01 1n t was nmden' d not

ICJ·ng befor e N a.sl1 commen ce d pro ·eedings in t b e

Su prem e Court of Vi t-,oria. , bein g action N o. 281 of

1922 , t-.o recover from navi es n e-t-hird of t h amoun t

tha li N asll had lo I ay rh 'omlllOllW eaH.h by way o-f

r efnn d for exch a nge on t he thi rd . al e . The _pleadings in that-, case were r emarkable- -as r egards t h e a ll ega ­ tions on of Nash a, ncl Davies respecti ely as to

what thr partner ship agreement betwen t hem was : a partner sh ip agreement is .by t? b een

made ve riJally in Augu st,. 1920, an 1mposs1bihty, a n.d this was a dmitted by Davies, •as appears by an affidavit fil ed by him to obtain for

The action was settled, according to Davws evidence, by his paying N·ash £2,000-about £700 to £900 less than \vh a.t Nash claimed. I interpreted clauses (b) and (c) of the Commission as imposing on me the· duty of asoor­ taining vvlia.t Davies did with those in s:o far

a 3 their disposition was in any way pertment to the

interests of t he Cmnmonwealth. Clause (d) of the

Commission specifically imposed upon the. duty of ascertaining whether any O·r consideratiOn was

" offered or given t o o·r received by any person or per­ sons employed by the Commonwealth or any o:ther per3on or persons." The powers of investiga.tion conferred Royal

Commissioners by the Royal 001nmtsswns A_ct

1902-12 of a far-reaching nature, and the Commis­ sioner is given very drastic of insisting upon

compliance with those powers. S1ttmg a.s a Royal mission I felt it might be my duty to assume the vali­ dity of all the powers conferr.ed, but I. sta.ted at commencement of t h e proceedmgs If. an. occaswn arose when I would have to make mvestigatwns such a.s is usually termed in a " fishing inquiry,"

that is one ·which might or might not to ascer­

taining facts t h at relevant to t he subJect-_ma.tter

of the Royal Comnnsswn, that I my

discretion, jf I thought fit, by t.he

first of all in ca-mera, and theil makmg so much of 1t p ublic as I t hought was relevant proper to be

known. My object to prottJ!ct the. of out­

side par ties- who might de.a.lmgs with

wh os e conduct in connexwn with the sugar transactions in question was und?r i1:ves.tigaticm, but which trans­ action 1 might afte.r mqmry t urn out to .ha,ve n? cohnexion "\.vith the subject-matter of the CommiSSIOn. It appe·a.red to· me that unless the wi.de drastic

powers conferred upon me were exercised _with. some such ]imitation, there might be a, very ser:wus mter­ ferm1Ce vvith t he rights of subjeds which could ha.rdly have been intended by Parliament. ·

I commenced my sittings as a Commissioner on Mon­ d a.y, lO t h 8eptember, .and sat on. all

,veek days until Friday, 21st September, adJOUrnmg, however on the 14th September, out of respect to the }ate E. D . Millen, who had died the night

before. The greater par t ·of t he• evidence _was. taken up in unra.velh1ig t he affairs of vV. E_. Davies m con­ ne.xion ""'ith h is entering into and carrying out the sugar t rans.a.ctions in question and t he disposal by hm of

the large share of p r ofits whch he from as1h.

Vario•us persons appea.red to h a.ve cla1med to be .entitled to r ·eceive a share o·f those profits from Davies, one Alfred vV a.Ua.ce Ba,rcla.y Ma.t h er, as being hj s pa.rtner ) o'rle B enjamin J os:eph Lee, as having anoth?r agreemer:t by which lVfr . Davie:; was t o act exclusively on hu:

behalf in effecting sales of Jav.a sugar to the Common­ wealth and also as being a, partner; and one· Oswald Marti1{ Parsons as hav.ing a pa.rtnership with Davies and with his· f.ather-in-la.w, F. J. Funston, which covered the same sugar -transactions. Parsons. had in fact re­ cently ob tained a judgment from . H:ts Honour M_r. Justice \¥-eigall, decla.ring him entitled to a-ccounts on t he basis of his being a partner w1th Davies and with Funston. I t hink t he efforts clearly made by Da.vies aft18,r his re•t urn from J ava.--to conceal from some ·on e or more of the pers-ons j11st mentioned the share o.f profi ts t-hat he h ad received from Nash­

has been the cause of a great deal o·f t h e difficulty of arriving a.t t h e :re-a,l sta.te· o·f facts in conn·exion with th e mat ters which I had to investigate. The only member of the Commonwealth Service resp ect to whom there was any evidence

of --circumstances which made it necessa,ry for me to copsider whether any or gift was likely

4

to have been offered or made was Mr. P ercival Edgar Deane, who had been a.cting for about six yeaTs as Priva.te Secreta,ry to t h e Right Honorable, William Morris Hughes, then the Prime Minister. Towards the end of the month of F ebruary, 1921, Mr. De

Depa.rtment. 1\ir. · Deane was represented by counsel throughout th e inquiry-Mr . Leo Cussen and Mr. W. K. Fullagar. Mr. Da.vies was represented by counsel, Mr. R. G. Menzies.

Mr. Dixon H earder had been appointed as counsel to assist me as Commissioner, and I desire to acknowledge my indehtedness to him fo r the ability and impartiality he displayed in presenting the facts to me for investi­ gation. These particula,r sales had been previously, to

some extent, investiga.ted by the Pa.rliamentary Joint . Committee of Public Accounts in the months of August and September, when the Hon. Walter Massy

Greene, M.P., then Commonwealth Minister of Sta.te for De,fence and Health, Messrs. P. E. Deane, W. E . Davies, B; J. Lee, and A. W. B. Mather, all of whom 'Vve.re a.lso ca.lled before me, had given evidence. Such

Joint Committee was inquiring into the Australian sugar industry gene·ra.lly, but, while it was sitting, some of the peculia.r bets connected with the

transa.ctions I had to investiga.t,e were communicated by Mr. B. J. Lee to Dr. Ea.rle Page, then the Leader of the Country pa.rty in the Commonwealth Parliament, and were by him bra.ught before Parliament h1 the course of a. speech, with a result tha.t the Joint Com­ mittee were deputed to inquire into the purchases o:f sugar through Davies; In fact, the majority of that Joint Committee adopted t he following a.s the report o·f the Committee:-

Owing to the. limited time at disposal of the

Committee, and the· difficult,y obtaining reEable records, no findings of any value can ·' l,e a.rrived at, and the evidence which ha.s been taken 1 s

handed in herewith. There was, however, a. repo'I't by the mjnority in which ce.rtain of the fa.cts connected with the three purchases of sugar through Davies were. . referred to

and dealt with, to some extent; but I have not in any way- relied upon that. report in coming to the con­ clusions that I have. I had a, la.:rge. body of evidence before me which the Public Accounts Committee

did no:t ha.ve. I ha,ve also de-alt with the evidence before me. without regard to t ha,t given before the J oi'nt Committee, except whe.re a witness has be:en called before me who had given evidence before that and I have asked

tha.t t he previous sworn e·v:idence shoula be read over to him and then put in. I ha.ve also referred to t he

evidence previously given by the Hon. \Valte'r Massy Greene1 , which was nqt formally put in before me, fo r useful gene·ra1 informa.tion, which he gave. as to the course of the sugar market, &c., during .191 9 and 1920. A great deal of evidence not given before the Joint .

Committee was put in before me, and I had, as above sta,ted, far greOt,ter powers of maKing a thorough investigation than that possessed by t he Joint

Committee. -The transactions I had to investigate arose out of the fa.ct t hat, during t h e yea.rs 1919 and 1920, t here h ad been a great shortage in t he production of sugar in the Com:monwe>a.lth, maJiing large importations necessary to satisfy t he re.quirements of the people, bo.th for consumption a.nd fo!l' ma,nufacturing purposes.

The Commonwealth made almost the whole of it purchases through and under the advice of the Colonial Sugar Refining Company, who themselves bought through brokers in the different sugar-producing coun­ tries- wit hout any further r emuneration than that pa:id t o t hem under its main agreement with the ·common­ so that t he Colonial Sugar R efining Company

wer e not pecuniarily intere ted in the r.a te paid, and were in a position to giv quite independent_ advice.

As the sums expended on the purchase of such

foreign sugar ran into very large• figures, it was natural that many persons should endeavour to get a cut into the business, and according to the Honorable vV. Massy Greene, there were many who applied, while he was

Minister for Customs, and as such in control of sugar transactions, to effect sale's . to the Commonwealth. In fact, no one in Austral,ia outside the Colonial Sugar Refining Company, Mr. \V. E . . Davies, was

successful during the year 1920 in effecting a single sale. Apart from the f act o.f his being a very old

friend of Mr. P. E. Deane, he was a person who, from his position, I would infer , had little or no influence.

5

l\!Ir. \V. E. Davies had been in t he employment of Henry Berry and Company, of which company his father-in-law, Mr. F. J. Funston, was secre•tary. Some · time in 1919 JYir. Davies left tha.t company's employ­ ment and went on a visit to England, via America,

seeking t o obtain agencies. He re,turned to Melbourne towards t h e end of 1919 without h a.ving achieved much success, and sought to establish himseJf in business as an agent . About November, 1919, he was brought

into touch with one Johannes Van der Beek, who had recently returned from a visit to J a.va, where· he had lived for some time, and a, proposed scheme was con­ sidered at a meeting between Mr. W. E. Davies, his

father-in-law, F. J. Funston,. and 0. JYI. Parsons, by which they would co,-ope,ra,te · in sending Mr. Van der Beek to Java at their joint expense, and all (including Van der Beek) to share in the benefits of any business enterprise tha.t might re,sult from his visit. Mr. Van der Beek a.t first wanted the sum of £200, but ulti­

mately agreed to go for the, sum of £100, which was advanced by lv1r. Funston, according to his sta.tement, as a loan to Parsons and Davies. The arrangement

made at this interview formed the principal fact for dete,rmination by His Honour Mr. Justice vVeigall, in a suit recently brought by Parsons against Funston and Davie-s, which resulted in the plaintiff obtaining

a judgment for partnership accounts. Mr. Van der Beek's evidence would support this claim by 11r.

P arsons. I was myself ve•ry fa.vorably impressed with Mr. Van der Bee.k as an apparently witness,

but it is unnecessary for -m e to determine what was

the real arrangement then made.

lVIr . Van cler Beek went t o J a.va, and the, principal r esult of his visit, was that he made,, in the name .of Mr. Davies, an arrangemen t with one Jas. Nash, whom he de,scrihed as a broker and de,aler in a large way of

business, and of good financial stanaing. · Mr. Nash was described by Mr. Da.vies in h is evidence be,fore· me as a coloured man, cunning and ha,r d-fisted in the sense of being hard to get money out of; he was_ an

Eurasian, his father being a Dutchman who had hved in Java for many years, and was s.tated to ha.ve owned large properties there.

l'.'Ir. Van der Beek brought back a letter confirming verbal negotiations arranged between on behalf

of Davies and Nash. This letter, dated 23rd February, 1920 contains no special reference to sugar, nor has it, as I' read it, any definite statement as to wh at t_lw

remuneration was to b e as be,tween Nash and Davies with respect to t.he .sal e by Nash of Australian produce for l\1r. Davies or his client.

In the meantime, be.fore Van d er Beek's return, Mr. Davies , 'Yho (according to his evidence before Hjs Honour lVIr . .T ustice W eigall) was h a.rd pressed for

had ent ered into a new ·arrangement with Mr.

A. W. B. }.{ather, whose acquaintance h e had made 011 his pre·vious visit to England. The

ultimately m ade took the form of a m a

motor business carried on by Mather, Mr. Davies also carrying on such agencies as had obtajned, and

paying £500 to Mr. J:I!Iather. This states, he

obtained from his own father, and r epaid him by mort­ gaging some property he had. - F:5304.-2

1651

Upon Van der Beek' s return the posi twn was dis­ cussed between Davies, Parsons, and Funston. Van der Beek explained what he had done, but desired to. have nothing further to do with the proposed business

transactions in Eastern produce, but asked for a further sum of £30 to provide for what he had spent, which sum Parsons, in fact, provided. At :that stage sugar did not occupy a prominent position in the discussions.

l\Ir . Davies and Mr. P . E. Dea.n e had known each

other as schoolboys, and had ibeen for long time on very f r iendly terms. In May, 1920, Mr. Davies to l\'Ir. J as. Nash in J a.va, stating tha,t l\!I:r. Van der

Beek had just arrived back to Au str.alia, and h ad

handed him a letter of the 23 rd Februa.ry, and, after referring to a va.rie,ty of suggest,ed Java. export, business, ma.de the following stat.ement :---=-S u GAR .

I happen to he in close touch with infiuent,ial Government officials controlling this line in Aus­ tralia., and, if I could give a sat isfactory quot.e,

could secure orders on a large scale, say, up to

20,000 tons. If possible, I should like a cabled

quote on receipt of this lett.er stat.ing grade. Mr. Davies was pressed as to who the "in­

fluential Government officials controlling this line in Australia'' were, and I have no doubt, after

considering his evidence, that he referred to

Mr. P. E. Deane. At the d·ate of this letter all

sorts of persons were, as l\1:r. l\!Iassy Greene sa,ys, see,king to do business with the, Commonwealth in sugar. The Prime l\1:inister wa'l in t he ultimate cont,rol of any operation in suga,r sales, and I feel litt,le doubt, although there is no dired evidence of it,, that Mr. Davies had discussed with Deane the possibility of his be,ing able to do business with the Commonwealth , and that Mr.

Deane had told him something to the effect that

if he were in the posit.ion to quote lower than tlhe

quot,ations through the ordinary channels of t.he Cocm­ m o:n>ye,alth Suga.r Refining Company, L ·hat he could n o doubt be able to sen t.o the Gove.r nment. Possibly Mr. Deane did not pay muoh importance to what. h e was

thml s

to l\'lr. D avies' .leUer of Ma:y by a let,t.er dated June 22nd, 1920-[Exhibit T12] - in which, after dealing with other he made the following statement:-

Sugar. This business is a special line from all othe,r Java produce, and must be treated accord­ ingly. Before any buying can take · pla.ce a

banker's guarantee h as to be submitted to shovv· parties that the buye·r i:o financia.lly st,rong. This gu arantee to last until the sugar is r eceived and paid for . These may be over an of a couple

of months, or a year, according to circumstances. When the sugar is about to be shipped, a, confirmed banker's credit without r ecourse is raised for m e t o draw upon. Then followed a number of particulars a.bout how sugar was bought and sold in Java, and then made the f al­ lowing statements:-

The guarantee to be arranged well in time, u.s no buying can be done before this is established. If your profit h as to be included, please cable h ow much his has to amount to per picul, and , in

your cal culation, do not forget the bank interest en drafts has to b e taken into account by you unless I have separate instructions through the bank

here. In case I cabl e a quotation on sugar thi s

will be f.o.b. or c.i .f. as th e case may be, plus my commission only. Ther e is not.hing to show t hat Mr. Davies ever did carry out the suggestion about cabling. any profit for­ himself to be included in t he price, and, in fact, h e wa-= n ot in a. position to himself arrange f o-r a Bank

guaranteEl'. All these• were, in fact,

out by t;h,e Commonw:ea.lth arranging to a.n

irrevo1cable credit. in favour of Nash, under which he beca.n1e entitled to b.e upon shipme.nt. The effect ·of .such a t.ransa.ction, carried out in that was that in a falling market, such as existed in September apd October, 1920, Mr. Nash warS put in a position t,o make

]arge profits by putt.ing off buying until just beforre shipment. These cr edits, however , were, aocording to the evidence, simila.r to those. which would ha.ve been firranged with seller s in Java, if the purchases had

been made through t.he, Colonia.l Suga.r Refining Com­ pany. vVhether, if the market had gone up instead of down, lYir. Nash could have carried out the contr·acts as well as the old-established brokers' firms with whom th e Colonial Sugar Company usually dealt

may be open to question. But, upon evidence, it

1vould seem that Nash could; the contmgency, how­ ever, neye.r atro-se. Apparently, a.fte,r the receipt o•f that letter, Mr. Davies a.ttempt·ed to get into touch with those con­ trolEng the suga.r opera.tions in the . Commonwealth Government in l\1elbourne, and he rece• Ived a. let.ter of in traduction from Mr. Deane• to Colonel Olders.haw,

who a.t time was controlling sugar operG!o.tions

subject to . he migpt ;reC;e,iv.e fron). tpe

th en 1\tfinist.e,r of M:r. 1\fassy Gre•en,e, ,oif frqm the Prime Minister. · .

Colonel C>ldersha,w'.s view was that it. was best in the interests of the Commonwealth that there should be only ·one buye1 r for jt, viz., the. Co,Joni.al Ltd., who ha.d very ,great m busi­

nes!?, and dealt with long-,est.ablish.e. <;l firms o•f pf good importct.nt ma.tte1 r if the ma.r}re•t

'!QOO instead of fallipg. His view was tp11t the

ma.r]mt was falling, and that the t;hey could

put off the purchase of sugar the l:;>et.ter financia.l would be ij:e1 1turned M"r.

Davies' as he apJ?.aren,tly dq_wn

the applications of any others wh1ch eaiJle 'Qefor.e him. N o.t long before the da.te of that letter of introduc­ tion, Mr. Da.vies a.lso be,ca.me associated with l\1r. B. J. Lee, a merchant with experience in J a.va t.ra1 de. Lee sa.ys a.bout May or June Da.vies had a, talk with him: a.nd. suggested tha.t as he· wa.s going to Ja.va he :might be able to a.rrange some sales of suga! to the ment. Mr. Lee told · Davies that he did not

believe it1 p008iblel to do business. in in Aus­

t.ralia--believing, as he sa.ys , tha.t all hu!?m.ess would ·be done through the Co1 loniaJ l\tlr. Davies s.ta.ted, in effeot, tha.t 1f Lee1 got mto a p ositio.n to: quote' lowe'r than that. company, he was

sure he could do business with the Goverm;nent, and referred to his · friendship wit:h Mr. De.ane1 , the1 Seore­ t ary to t he1 Prime Ministeif'. Mr. Lee wou.ld not .b e· s_ absfied as to the possibility of do[ng with

the· Commonwea.lth Government without se·emg Mr. Deane himself 1\IIr. Da.vies a.cco,rdingly introduced hi1Tl to De•aue1 in t.he Prime Minister's ro10m, and Dea.ne told him tha.t, if he• cuuld quote: sugar a.t a. lowe1 r price than his competitors ther e was no· reason why he should no't get th e business.

Mr. Deane a.dmitt.ed in his e•vidence be.fo·re the Joint Committee put in be,fore me1 , that he. Lee .was a. pa.nner of Da.vie·s, a.nd such partnership was., . my opinion, in connexion with Lee's intenlded VISit to J a.va, to a.rra.ngel for the orf .sugar to

the Commonwealth. I ha.ve httle difficulty m mfer­ rincr tha,t Deane kne1 w the inqu!ries ma.de by L e:e1 to were for t he purpose of sa.tisfying himseH that · h e

would be a.ble to' submi his quotatio·ns to t he wealth Governmoot. Lee wa.s n ot asked any questwns by Davies' counsel to suggest any ina: ccuracy in L ee's evidence, a,bove referred to.

The opinion I h ave formed is that if Mr. Davies

had not been an old friend of Mr. Deane's, h e! would J1ever have succeeded in his attempt to sell sugar to

.r.h,e . Commonwealth. In some way, he was

epabled ip. t·o get into touch with and put

hi .;; ·proposition before the Ministers, Mr. Massy Greene alJd the Prime Minister, while Colonel Oldershaw was in Sydney. :Mr. :Massy Greene and the Prime Minis­ ter both r egarded the very difficult f' sugar shortage " position that existed from a different point ·of view to that which Colonel Older shaw did. They were, I think, both much more concerned to see that there was no actual danger ·of shortage to the Australian consumer and manufacturer than they were with a possible gain nr loss by the chance of the n;tarket failing or rising. I think that as responsible Ministers they considered their primary duty was to make sure of Australia's requirements, and not risk a actual shortage

by holding off from buying too long. They therefore made up their minds in September and in October to buy more foreign sug.ar; and come to that de­

termination, they considered, and, I think, correctly, that the quotations submitted by Mr. Davies on each of the three occasions when they accepted them were lower than those submitt.ed . by the Colonial Sugar Re­ Company at such dates were. accord­

ingly aut:P.orized the t;rap.s11ctio:Q.,S which I have be_ en in- , saved .the :Coml;nonwealth. a

considerable sum of by so doing. I .;;ay " pro­

haply" be_ca,use I am not s.atisfied that Colonel Older­ shaw's p.oJicy of holiding off from buying would not have resulted ·ultimately advantageously to the

.CommoJ;I.wealth, having regard .to the falling in mar­ ket prices which continued; hut I do not consider it my duty to determine whether the responsible Minis­ -te·rs did or did not exercise a wise discretion. I am satisfied that neither of them was actuated in author­ izing those transactions ''by ' any desire to benefit Mr. Davies, but entered into the pU:rcl?.ases bec11use, having made up their minds to buy as a matter of policy, they thought the prices submitted by Davies were · lower than those submitted through the Colonial Re­

fining Company. is nQ .evidence _ to suggest that the suga! supplied by N !,lOt up to the stall­

dard bought. Ther.e is httle e:VIdence as to the exact part pll;lyed by ¥:r. Dea;ne in e;napling Davies to o·et his quotation on behalf of N ;:tsh directly before Massy Greene and the Prime Minister, but I d_o

not think it would be difficult for a clever and expen­ enced Priv·ate Secretary, who had gained thB complete confidence of the Prime Minister, to do so, especially when Colonel Oldershaw was ip. Sydney. The only transaction of the three in which Deane's name actually appears is the first one, consummated on the 8th Sep­ tember 1920 for the sale of 1,000 tons of sugar for £'72 J '6d. "per ton f.o.b. Java ports. On the letter

of the 8th September, by which Mr. Davies st;:tted· he \Yas able to quote at that which was a lower

nrice than what had been practically arranged for on the previous .day-ther e is an indorsement initialed by Mr. Deane as follows :-" Accepted at this price, £72 12s. 6d. 8th Sep­

tember, 1920.-P.E.D."

!1r Deane was very properly sever ely pressed by Mr. H earder as to how he came to indorse such an ceptance, and particularly how in face of that In­ dorsement he came to prepare a. prectS of pur­

porting to describe that transactiOn as appeanng m the :fj] es of the D epartment without any r ef erence to the fact that he personally purported to accept the. offer contained in that letter. At page 44 of the Mmutes of E vidence, taken before the Joint Committee (Que. ­ tion 1919), Mr. J)eane was .asked Senator . J. D.

:MiJlfm, "Will you please take the offiCial fil e and t]1e particulars of the first ·order," and answered, I will read a precis which I attached to the file a fol­ lows.''-[reads precis ] and added, ''There .are th par­

ticulars of the first order."

As the questions of the members of the J ·oint Com~ · _mittee were directed to the very pclnt of determining what connexion, if any, Mr. Deane had with those transactions, it is obvious that the precis put 1:)efore

them was very misleading, particularly as Mr. Deane . stated in answer to other questions to the effect that ._ he had nothing whatever to do with the transaction.

I for a long time took a strong view of this particular matter, but. after hearing Mr. Dea.ne's explan~tion that when he prepared the precis for use by the late :Prime Minister in Pa.rliament, the file to which he had re-

7

., sorted did not contain the original letter of the 8th

September with h~~ initials on it (which had boon, in fact, sent on to, and was upon ,a file at the Customs

Department), but mereily a typed copy from which, for . some reason, his initials had been omitted, I did not s-ee · anything _sinister in what he did, , and was more pre­ _par-ed to accept his explanation ·that in any eveut he

would not have regarded the fact of his initic3rlli:Q.g the acceptance as of. much importa.nce1 , because, ~s he -s~atep., it Vf

~he fact of liis acceptance to t}l.e Cµ;,to:rp.§ Pep~rt:inent . ~~~ _!)thers by ~µ.ch an i:µdorseme:Q.t. There is no evidence that Mr. Deane took any direct _part in the negotiations for the second or third sales

which Mr. Davies effected. So what Deane had done, . I think, amounted to this-that he had boon the means w4e;r~by 1VI.r. Pa vies hd got into clirect touch with the Ministers aft~ Colonel Oldersha.w had turned him

-4iwii; ~q.er_~~y p _ avi.~~ .. h~ Q~n <}ple t.o e.tiect ~~l~ pn t.4eir :rr;i~rit~ w p._ ic4 M:r. JI llghes ~nq. lvfr. M~.S:Sy Green.e ~nd 1,4-. Pea.ne ~ll tli.o.ugbt wer~ !;>~p~4j,~ial to the Commonwealth. A._t the SaJn,e thn~, I' l.!~v.e µo . . 49ubt. but that ivir. Deane w~ ve-r.y w~ll_ pl~.

he h~d b.~n ~bJe t,o. dp 1:!UCb a r-e,:r:q.ar~~ply gqQ:d tw-n f°qr 3.;Jl . ptd friend,. ·~J i.s P..

_i~titors, but th~re ~as, in my op~nio:µ~ nothing re_ a,lly r~prehensil>le in 1,\1:r. Deane's (?Onduct in this matt~r:-­ µnless, in fact, , he acted in ,con~e!llpl,~~~pn of receiv~~g .re:muµ~~tion or' a gift from Mr . . D~vi~, Cff unless he

t?~~~ly p~ceiv~4 subsequently §lorn,.~ S'9,

£_900~0QO, wp.ich amount, even at the i per cent. .commission stated. in Mr. Nash's letter to him, would· Kave amounted to a sum of over . £4,000. He had t4erelfr overco~t:' };tis financial wea~ness, . but his

t rouWes of a diffe:rer;tt kind were only b~ginning. Certainly the ~eri.es of t;r;µi.sactions whi~h he then .initiated and subsequently pursued have given :rp.yself . ~ · Commissioner gr~~t difficulty 'in unravelling . They

.h~v.~ rai1 sed ·well-foun<;Ied su.~pioions, against t he in­ tegrity of · his own conduct, and· have to some_ ~xtent .involved Mr. Deane in the same cloud of suspicion. According to the let~ers between ~ ~h and Davies

. that have been put in evldence-{ Exhibits Vl to V6] ­ l am unable to see that Mr. D avies had any legal claim . a.s against Nash to receive anything out of t he profits he would receive from the Comm~nwealth on the sales

of sugar, except ! . per cent. But for some reason

N ash sent Davies a draft in t he beginning of October for £ 1,063, r epresenting his share of t he profits of the sale of the fi rst 1,000 tons. This was about three times as much as his i per cent. commissi on would amount to.

I should infer that Nash t hought it good business to be generous--having regard to t he large orders then in · course of fulfilm ent,• and the possibility of still further orders; but, whatever t,he cause of it was, in my

-opin ion it helped to make Mr. Davies determine to proceed, to Java himself and make a ~efinite bargain with Nash on the spot as to what his share· of the

;p r?':fits ip, the .othe.r transactions should be. Before

}65l

doing so, however, he det~rmined to get rid of ~ssible claims on the part of A. W. B. lVla.ther to any profits he might secure over the i per oont. commission, and also any possible claims hy 0. lV.L Parsons. As regards

M~ther, he succeeded in ma.png a settlement with him; according to Dayies' own; account, on the basis that his share' of the commis~ion at ! per cent. would be £4,000, of which Mather would be entitled to o:i;ie­

half. . As regarq.s Parsons, he paid him .the sum of

£125, treating what he had subscribed towards the Van der Beek adventure as a loan, and adding some­ thing for interest, &c: He did not at that time, I

think, anticipate · any legal clai~s by Lee, his view of the arrangement . with him being very different to Lee's. ·· ·

I have had the greatest di:fficul ty in arriving at any de.finite determination as to what was the real nature of the · settlement made between Davies and Nash in · J~va. In his evidence before the Joint Committee,

Mr. Davies' reiterated statements were that he was merely a broker .for N ash, ~~d was entitled legally to ;nothing except his oommission of i per cent. ( See Questions ltr92; 1962, 1963, 1964, 1965, 2018, 2019,

2020, 2144, and 2145, as well as many others).

In answer to question 2035 his statement was-As a matter o~ fact, when I went to Nash I

discover~d that he had made more t~an 1 per cent . out of sugar business through the :financial

assistance that he could obtain, and although he only wanted t-0 pay me i per cent., eventually he paid me half of his profit that he made. A very

lo:µg controversy occurred aver this, and it was through M;r. ·cha:mbers . tliat I wa~ s~~G,0S~fq1 in o btai:µing . ~11lf the pro.fit that N a;;h p~itjed . ...

Mr. Chambers was described before me as the mana­ ger for Burn~, Bhilp, ,and o ·ompany at Sourabaya. but I could obtain no satisfactory information from Mr. · Davies as to what part, if any, Chamber!, took in

effecting the settlement, and Mr. D;avies' account befor~ me in the first instance was to the effect that the

whole matter was settled up with Mr. Nash -0n the da.Y of his arriv~.1-pa:rtly in the afternoon, ~:p.d partly in the evening_:_and, apparently, largely with the assist-ance of. :Mr. Mathieu. . .

I have therefore had tq arrive at my own oonclusions from the surrounding circumstances, the probabiiities, and what Mr. Davies did and wrote after his return to Aust ralia. I h ~ve, after careful consideration of

:Mr. ·Davies' evidence both before the Joint Committ ee an'd ·before mys~lf, iarrived at the conclusion that I cannot treat him as a witness entitled to credence ex­ cept wh.en he is corroboratea" by the documents or ~y

their prob~bi lit ies. Wh~tever the r epresentations made by Mr. Davies were in order to effect a settle­ ment with Mr. Nash, I feel no doubt he was out to

get as ;much as he could, and used for all it was worth his friendship and .alleged i nfluence with Mr. Deane, the Private Secr etary to the Prime .:Minister. I feel equally clear that he used as an inducement the pros­ pect of effecting further sales of sugar to the Coonmon­ wealth through Mr. Deane's ~ssistance.

Upon 29th January, 1921, Mr. Davies, after his return from J ava, dictated to a shorthand writer, a son of his old partner, Mr.i Mather, a letter to Mr. Nash, in which the following passage occurred:-

Future Policy of Government Buying.-! re­ gret to say that Mr. Deane has now been drafted into another Department, which leaves the Sugar Board now in control of all buying. Quotes and market conditions which please forward me from time to time, as all I can do is to place them

before the Chairman of the Board, and when they are in the market to buy, business will go on merit as her etofore.

That is an exact transcription of what Davies dic­ tated to Mather, junior, but, in accordance with what Mr. Davies says was not unusual, he had the letter re­ typed, and this clause then read as follows:-

Future 'P10licy of Gov ernment Buying.-I have to inform you that Mr. Deane is now drafted into another D epartment, and is leaving f or Europe at an early date to attend the Confer ence. A

Sugar , Board has been appointed to report on stocks and requirements wanted in the various States of the Commonwealth, and also to buy. I · . would advise you to keep me posted as to market

conditions so that I can impress the Cha irman of the Board accordingly.

In both letters the passages quoted we-re followed by the following sta.t.ements: -In the letter as

originally dictated it was-It is a lamenta.ble . fa.ct, and a great disappoint­ ment to me, that. you did not confirm the 20,000-ton order a,t £45 f. o. b. which I ca.bled you. How­

ever, I look forwa.rd to further good business,

which I t·rust will her as remunera,tive as our

previous co-operative deals. In the re-typed letter that pa.ragraph ran-It is lamentahle and a grerat disappointment to me tha.t you did nort co1 nfirm ther 20,000-ton order

at £45 f .o. b. which I ea.bled you before I left fo.r J a.va. Ho;wever, I look forwa.rd to further good business, which I trust will be• as remunerative as our previous deals.

At the time that· letter was written, 29.1.21, Mr. Da,vie·s had arranged to opera.te on sugar from J a.va in partnership with Lee. Both letters contained mis­ sta.tements o•f fa,ct a.s regards Ivlr. Deane, and the second letteT a. further missta.teme,nt by implication,

because the Sugar Board had been appointed some months previous to the letter . being writ.t,en. am

sa.tis:fie d t,hat tha.t le.tt·e•r was wntten by Mr. Dames to prepare Mr. N a, oessation. bus.iness which, . in

fact., \Vould a.ns.e ?rwrng to Dames . arrangement with Lee but tha.t Dav1es preferred t O' g1ve• t.he r eason tha.t would be. no lo[lger availa.ble with his frie.ndly

o:fl:ices. At any rate, to my mind, it affords cogent

evidence of t he kind oif r epresenta,tions made by D avies t o N ash to serc:ur e the settlemen t, in J a.va. tha,t h e did .

:Thff.r. Da,vies, in fa.ct, a.fterr his return to Melbourne,

took ste,ps t o' hide a,way part of his profits secretly, so· tha.t e·ven his o;wn solicitor sh ould not know t he extent of t horn , and I t hink that his just ifioa,tion t o himself for doing so wa.s his feeling t ha,t t he' ext .. ra, am ount.

whieh he had wrung out of N ash to

ma.t.tE- r s peculia.r to h imself and t o his pe,rsonal effmts in Java,, which n eit·her Mather n or any ot h er was, h e consiciered , entitled tor sharer in .

A lthough Mr. D a.vi es. ma.y . have used st·rong sentatiorn s a.s to t h e ben efimal t o Nash and

himself of Deane1's p osition a.nd friendship , and his past and p r obable fut ure efforts on behalf, would, of courser, not justify m er m. assummg as ag a.m st Mr. Deane tha.t h oser repre•sen t.at wns were• weU fou n ded.

l\1 v view is tha,t I would not be justified in reporting t o any. by eviden ce

which would b e properly admissible such per­

son in a Court of la,w, and t hat any mf€(f'en ce of fact I dr a.w sh ould be, in my opinion , reason ably capa.ble of being dra.wn by any judge of facts .

Upon th e 23 .11 .20 Mr . Da,vie:s, by a.rrangement with Nash, ca,bled a sum of £ 1,000 to M.r. an d a

furth er su m of £ 1,000 t o 1\:Ir. H opkms. This money was cabled to• the Union Bank, Melbourne'. I n h e

case o,f Mr. Hopkins, his addr ess was given, bu t no addre.ss was given in r espect o! 11r. P. E . Deane, but the bank officia l stated that h1s n ame would be looked

8

up ilt · the directory and a message sent to him by- ­

letter to call. Upon the same• date cables were sent by Davies, through Nash, to-(1 ) a. code address " Belting," which mea.nt Mr. Hopkins,

(2) to Mr. A. W . B. !viat her,

(3) Mrs. Davies, '

(4) Mr. P. E. Dea.ne, for which four cables 32. 94 :florins was paid by Nash , . the, r eceipt for the a.mount being produced before me . The cable t o Deane was ad dr essed , '' Deane, Secre­ t ary Prime Iviinister, Melbourne," and was in code, whjch, wh en t ransla,ted a,ccording to Bentley's Code Book (which was and is in common use in GOlTIIIJ e

On account myself, invest the money tele­

graphed to Union . Bank Australia as arranged with Ca.rroU. lYir. Deane was in Sydney when tha,t· oa,ble arrived, and it was forwarded to him with other letters in an e;nvelorpe from Me,lbourne. . The, evidence. of both Davies and Deane was to the effect that before Davies . left fo,r J a.va, he had become, grea.tly impressed wit h the prospe-cts of a tin mine. in Siam, which one Canoll had located and obta.ined leases for, and proposed to float a company to work.

l\fr. Davie·s' sta.tement, in e·ff ect, was that. he used t.o · t.ravel in the train with Carroll, and that, Ca.rroll had spoken of the great prospects of his mine, and had

expre.ssed depreciation o.f the Badak mine, whioh was . the subject oJ speculation in Melbourne. He states­ t.ha.t lv1r. Deane had, t.o his knowledge, some inte·rest in theo Badak mine and t hat, he saw D eane at. his · house, her t.hinks, be•fore. he went to Java Lo discuss the position, and sugge·sted that when he received his commission from ]\J ash in J-ava he would cable to D eane to invest wme money in the Carron mine1 . In answer to .leading . question s put by Mr. Cussen, as counsel for De·ane, Davies st ated that in discussing the ma,tt.er wit.h Deane t.he investment contemplated was about £ 100 or so, but Mr. D eane's own r ecollect.ion, in his evidence, was that no sum was ment,ioned. A ccmding to bot h versions of t.he conve·rsat.ion, ther.e was no suggest ion that Deane himself was to take an inter est ..

It was put to me by Mr . Cussen, on behalf of Dea.n e, that t,his cabling down of t,h e £1,000 was carried out by Davies, so as to impress Nash wjt h som.e ide·a. of th e· close relati onship be·twe.en Dean e and Davies , and as I

under stand t he argument, p ossibly to represent to N as h that Dean e would be inte.rested in t h e transaction , and that t h e words " on account myself, " with which the decoded cable begins, would be explained to Nash as som ething intended to decei ve any person who migh t

open the cable and decdde it if D eane wer e away. M r . Hearder put a som ewhat similar suggestion as r egards the use o.f t he words " on account. myself " being in ­ ser t ed in o·rder to deceive any person who might open the ca.bler at the P rime Minister 's office, in Mr. Deane's

abs ence. I have f ound myself unable to accept either suggestion. I . think that a clever man, su ch ·as D eane undoubtedly is, would n ever have been a pa.rty t o .so indiscreet an a.rrangement be.for ehand as have

o.f money cabled to him. If he had desired a, gift , 1t

would have been so easy: to •arrange it after Davie ' r e·t urn and before JYlr. Davies set ou t for J ava-Deane would 'ha.ve no idea that he would r eceive more than hi p er cent. commission. A r Mr. Cussen'

ges tion, I .am unable to th e mference that D avie

obtained his settlement wrth ash by any tat m e11t

to the eff ect that the m oney cableCl. down •a f or .eane person ally . I , at one tim , h eld h view tha the

personal cable to D ea:ue was s nt hrough N ash , but by Davi s direct, a view wh1 h both th a ount nt

by N ash to D ean e wo uld st.ron ly U} par bu ·h

pr od uction of t he receipt b N a h for ' ca ble as

well as the others--al1 ineluded in the one item of 32.94 florins, which is set out in both aCDounts--showed me that this supposition was errone.ous. Assuming Nash knew the contents of the personal cable, I do not think he would have pe.rmitted a bribe to be carried out in such a elumsy way. I have formed the opinion tha.t the

cable is ge11uine', and did relate to a personal investment by Davies in the Carroll mine flotat,ion-he having had his Driginal ideas as to the amount of investment largely expanded by the sudden acquisition of much more wealth

than he had thought. }JOSsible. I think that Mr. Deane, on receipt of the cable, r efrained from investing both because the sum cabled \Vas much larger than h e ex­ pected, and als.o because h e r ecognised the indiscTetion

of Davies in cabling so large a sum to him at all.

I have arrived at the conclusion, however, that some· of the money cabled do .. wn was, in some way, used by Davies to impress Nash with t.he idea that Davies had to part with a good deal of the money in :Melbourne

in connexion with the transa ction. The Hopkins transaction is2 in some re8pects, more peculiar from a business point of yiew than the sug­ gested investment in CanoE's tin mine. Mr. Hopkins

\\;as called as a witness before me- apparently a gentle­ man, comfortably off, and connected with a

substantial business in Melbourne, and only distantly connected with Mr. Davies by marriage. Mr. Hopkins, probably by Da-.;ties' inducement, had purchased a motor [rorri D avies' partner, J.\l[a thet, for about £900; and paid for it some little. time before.

He says that h e . ni.et. Davies casually in the st:reet before he, went to Java, and Davies told him he, was goin g to Java and e:· >-p.ecte·d i-o obtain s_omB mon.ey the:teJ that Hopkins th.en said to t he effeet, '' VJ e1l if you hav,e

l:J..ny to sp a-re, you might ca.ble m.e It would

btJ us.eful, though l can get. on all right," and

H.opkins' mode of what took pla.ee·

me with the idea that it was a mere1 casual suggest1m1. The next thing wa.s that he got a. cable remittanee for £ 1,000, which he, kept for some time·, .a.nd. ultimately repaid by differe•ut methods, but without interest.

Upon the 23rd November, 1920, l\!Ir. Davies aho to Mr. his late pa.rtner, the sum ,of

.£ 1,000 through Mr. Nash. This of money is

mnch 111ore· e·asily explained . Be.fore s_ eUiHg out for .Java., Ivir . Mather :anq. Mr. Da.vie·S had E.egotia.ted .a dissolution of their partnership. In t hose acco rding Mr. _Davies, t he· discussed the

three sales th.at h_ ad been effe cted to tne Cotrcmonwealth by Da.vies on behalf of Nash;. working on the

basis that pe·r cent. comm1s.swn would

about £4,000, they that, if paid £1 ,000

to Mather, it- woul.d settle, up pa.rtnetship between t hem, including Davies' tra.nsactioris in suga.r on the on.e ha!!d, and Ma.ther's lia;bility to a.ccount for the £500 put in by D

mot ori;ng business on the other. By cla:use 4 of proposed deed of dissolution it }l.ad b een pro.vtded t hat. , a.s soon a.s Da.vies should from Nash

co minission payable· to him in r esp ect of the .sale of 5 .000 tons of sugar, Davies -vvou1d pay to 3/[ather s{nn o·f £1 000. I entertain no doubt. but that Da.v1es the £1,000 so as to insure• tha t, 1\!Iather

would sign the of dissolution and so t h e

t 1-a.nsa.ction, wh1ch would have released huu from all furt her claims in relation (inter alia ) · to sugar

tra,nsa.ctions. Upon his a.rrival in Mr.

D avies learned th.a.t J¥Iather had r_ot ye.t .executed the transa.ction, and proceeded q,t once, to ?is

own a.ccoun-t, to hide a.wa.y £5,000 m nor . .es, wh1ch wo uld he saJe. as .a rese·rve w ha.te.ve.r .a.p:pun.t l:Vl ath er a. 11 d Lee might successfully claim a.gamst bim. Upon 29th Mr. Davies CJ.]sc, _ cable.cl

through N ash the sum of £1,000 to Funston, .h1s

fath e.r-in-l_a.w. Funston had befn.ended DaVIes, from his .fa.th;er-in-law,. t.h.e .e vjd ence

y\' f;\.S tp h-nn (.'lnC -yvay or

}655

an.?the r to some.thi.n.g under £500. Upon of

th1s money :1\!(r . Funston paid £500 into his own

a ooo-unt a:t his bank, which was o-verdra.wn t o a greater .than £500, a.nd put the other £50D 011 deposit

w1-th lus own firm. After Mr. Davies' arrival back in Melbourne, Funst on paid the £500 so deposited into ov;n account also., and proceeded to use the mone-y

for h1s own purposes. So f.ar as this is

rele·vant at all, my inference would be J.- ha.,.t Funston was uncert.ain until Da.vies' return whe.the·r the wholt:> £1 was for Funston - p.O:rsona-ny, and

therefore put one-half on deposit with his firm ra.ther iihan into his account, whe·re it would have

legally been utilized in paying off his .overdra.ft .to a larger extent. In addition to the moneys so cabled

down Mr. Da.vies received on 25th November 1920 a sight draft in his own favour from Nash fo./ £14,688 3s. 2d., _ and after Davies' return upon 6th J a.nua.ry Mr: Nash cable.d hih1 a further sum of £5,04G 13s. 6d.,

wh1ch a.ppa.tently concluded the actual transference o·f between them, e·xcept that, upon • the, E-ettlement

wh1ch I have referr.ed to .of the action in the

Supreme Co:urt, Davie·s paid Nash the sum of £2,000 .or .about the end of the· yea.r 1922. · Upon ,embarking

on the ste,amer for his re.turn to Me,lbourne, Mr. Da.vie·s found tha.t Mr. Le·e• waiting for him full of

indignation a.t his supposed wrongs, .and was, in fad, tc· be, his fellow-passenger down. During the voyage Mr. Lee insisted upon being paid the sum of £1,000 to comp.ensa,te him for the lia.bilities a.n d business whic_h he became involved in by reason

of Dav1e·s not ca.rrymg t}].rough a sale to the Common­ weaJth o.f 1,000 tons of sugar ea;rly in September. He also must have stated that he wa-s entitled to fur-ther da.ma.ges from Davies for hrea.ch of contn;td, b.eca.JJSe Davies assig:n s his apprehension of further proceedings by Lee-as weU as the fa.ilure of Ma.ther -to execute the deed of · disso-lution a.fter the £1 000 had bee.n

cabled to him-as the cause of his to hide

away money in the way I will presently refer to.

Mr. Deane ha.d gone to ·the Union Bank upon. his ret urn from Sydney t o Melbourne, and drawn the

necessary cheque to ca sh the remittance to him o·f

£1,000 from bavie3 , and that sum was paid into his own banking .accmmt a.t the Commonwealth Bank, Mel­ bourne, u pon 29t h November, 1920. That a.ccount was in cr edit, and r emained .in credit during the whole time

th.a.t £ 1,000 remain ed in his account. by an amount exce.ed ing £1,000. That is to say, the account would have been in credit though the £ 1,000

had not been paid that sum was .again d e­

bit ed to t h e u pon 8th January, 1921.

The eff ect of both l\Ir. Deane's and Mr. Davies' evi­ dence wh en the-y me:t some days after Mr. Davies'

arrival hack in Melbourne on 24th D ecember -vvas th at Mr. Dec:tn.e state-d tha.t be wo·uld not take t he respon­ sibility .o,f investing so kuge a sum in a tin· mine for Davies , and t hq.t i-f h e was dete-r mined to inve8t he

c.ould do jt himself, and drew a ch eque upon his account . at t h o Bank fo-r £ 1 ,ODO on 2-9th De­

oember, 192.0, in fayo-ur of ''vir . v\. E . Davies. Mr.

Davie did n ot pa.y in that cheq u e into his own account . LJ.ntil 7th J .anuary , .aud it wa not in fact debited t o

1\ir. Deane's acco"Lm :t until 8th J anuary. Mr . Davies says that th e delay was occa . ioned by changing his coat an.d leaving the ch eque in the pock et of t h e coat which h e h ad discarded for ev.e-ral days ; in fact, Lhe delay,

acco rding to t he il.g;ur es in 1r. Deane's pass-book, did not benBfi t D eane on p enny. 1r. Davies, who had previou ly banked with the

Bank of N ew South op n d an accoun with

the Union B ank of ustralia, wh i h vv as credited with £14,625 upon 29th D cern ber which r epr . en t d the

proce ds .of h e draft on ydn -, .given him by Na. h ,

[ess ex ch·ange b e" wen -yclne an l 'fe]bou rne, . and a

snm of moiley wbi ·h h e s ay h e . pent iu Sydn ey on

buying a present for hi wife. On 30th D ecember he

p, .cheque for £4 000 on -s elf in r spe -o{ whi h

he reee ived forty £ 100 11 o tes, .fl nd tb ese he stated

he. put into an envelope which he elo:-;ed, and then gave to his soli citors, MeLaugh lin Eaves and .Johnson, Lo put in their safe wilh other papers they h old o f his, not

marking the · of the contents npon the en vel opes,

nor i11 any way i11f o trnin g his so li citors what; it1 cou­ tailJecl.

Upon 5th J anwny hn (:a8he(l anothet; Ghe·qbe fur £1,000 dr-awn i11 favmir o f hii11 self, for which he r eceiveu ten £.l00 notes, and hi s statement is th:i.t l1 e took t hose Lo hi s soli citors' ofll ce, obt-,a .ined the e nvelope which h e ]ht d J:ir ev i,o_u sly d ep osited containing t he £4,000 in l1t1tP.·8, ojie ned it. , a1HI I h en pil t the £5,000 into a fi· es h enve1 oJ:ie w hi ch h e· aho cl nwd, and again d ep osited with

his a f··ain givinu ihem 110 indication as t o

what. it. coni u

The two a cti ve members of Lhe firm of suEd tors were called, Messr s . :Eaves and .Johm:on {l\l[r. McLaughlin admittedly took n o active part in the management of the busine ::;s, lv1r. Davies had no dealings with

him). The effect of .Messr s. Eaves' and Johnson's evi­ dence was tha.t there would be in the usual co·urse no record, and that they had no record of such a

action as he described; that their impression was that they had h eld for Davies for some time at least. one

elosed envelo pe, and thev corroborated his statement tha.t a honL August, 1022, they did in vest for him in

t emporary r-:ums anwtmLing to £3,000, which

were handed by D av ie.::; to one of them in £100 notes , although they had n either of them any recollectlon at any time of Davies taking a.ny £100 uotoo out of any envelope in their presence, nor had they any

tion of Da.vies at any time having access to a11y envelope in their possession , but said, as they wTould make no reco1·d (rf hi s havi1ig- don e so, they wonlcl not be likely 1 -o 1·ecoUect.

c·v1d enee was that h0 obt-ained ten £100

noL es, i. 1:., £ 1,000 from the. enve.lop.e prior Ln his going on a trip to the United States and ];::n gland, that he

was m1ahl e to get < l :: r ed it for more than £600 at the

tinw, a nd a eco·rdin gly tonk the TlOLCS instead , and

c;J.shed ihe1n as h e re·quircd them on hi s journey. The other £1 00 1H1te hr: stat es that- lw ahstradecl -from the envelope and paid into his own account upcn t.h e date when <1 paym ent. in o f J' 100 appeared in h .is pa:3s-hook.

1\rr. neane a lso produced his pass -books relat ing to his account in the Commonwealth Hank , a11d t h ey wen"\ pnt in evidence. I myself loolced at them for the

p11rpose of in formin g- m y mind as 1-o whether

we re any payments in whi ch wo uld a snsp1 c10n

in my mind that any n1aterial part or the money

which }\fr. Davies ha.d dra.wn ou t in £100 notes from the Union Bank had found their way into l\l[r. D ean e's aeconnt-.. Th er e was nothin g which created any r eason­ :lble gTotmd for su spi c io11, in m y opinion, _up on t)1e

face o f the pass-h ook, b11 t there were certam e n tncs

whi cll T f e l t 1 shonld inf111ire. int-,o. :i\'fr . n eal1e the n

requested that-. m 'f examination into the tran sar.hm1s shown in t.hoRe r)a ss - hook s should h e h i- ca-m. eta. I

stated t-. h a h T wmlld :L cePdt: l1o hi s reqnc·s t, hut cl etcrmi n c a fter T had h ea rd Ll1 e. '\vh olhe·r T wonlcl malw·

a ll or a ny o f iL pnblie or n ot-.. T did su clr

invP.sL ivaL.io n s as T enw;id e red in W'lll f' t·o, with

a. r esn!l. Lhat. 1 sat -,is:fi cd my own mind L}JaL Mr. n can e

was not d esiring t-o avoid an investigation in p11bli c

on his own a.ccount, bn tJ on a.cconn t of others. Th e

transad.ion s appearin g were not-. l arge in amom1t-, n or to m y mind sn spici on s, and there was, I though t, after h earincr the e vid e n c<', n o profJahility of a ny of Lh e

II O l C'S from 1Vfr . n av ic·s h a.vi n g l)eCll paid illto LhaL

a c,:ou n t.. 'I_ lw ;wrntii1L was, i11 fad, opcTal ed 11po n

by 1\h·. D ca 11 e n o t. o nl y fo r hi ::> o w11 p er so n a l a ff airs,

bnt. for the affai rs of some oth ers. -

Th e r esult of my investigation ·was Lh at I could

n o r easonabl e gr oullC:l for disbelieving_ t h e sworn . evl ­ clence• of both D e a n e. and M r. ThvJes t h ai-. 11 01Lh er

directly 110( indirect] y ll a-cl Dean e ve_d a-ny mon ey

from Davies in rt'R p ecL of su gar t r:m sach ons_

10

I have e n closed in a. separaLe envelope the sh or than, l 11otes of the quesLions to and answers by i\'lr·. D ean e wh ieh took place: in ramua , bnt for lilY own pa1·t T did not1 t hink 1 was justified, when once sat-isfied nf their irrelevancy 1 iu making public,

B ein g satisfi ed upon this j)(J.f1iL 3 H. tt; nlJI, perhaps. strictly 11 ecessary for m e Lo \\·h f't l1et OJ' JHJI.

l he.lieve 1\h, I story a.bont tlw delllwit. ot t.b e

£5,000 iil £ 100 with hh; alld his

1p1e n t wjthdt·awa ls f1'om time t-o I hold! how­

evet, a st-.1:ong i1i1ptessir!l1 tha t hi s . Stor y is corl'ed , in its riJain iiL i:tii y 1rlw ('it'ellmst,anceR a re,

I Lhirdc , uni qri H: 'i'hf• hWiives tllat ij1spi!'ed tlw

hidin g away of thi s large S tllll of liH':! n ey i.L eal'tJed

110 interest ai·e noL ve ry c r."{li t.ahle t.o .Mr. P a b1it

i t does - 11 ot, after fully i.liit1kin g d; over, appear t.o

m e to b e an in ve11ted story. H. pnt into wbal. was

probably a p erfedly safe hiding place this s um of

money, whi ch the solicitors t-.hemselves did 11ol: kllow they wer;c holding; not even possibly at a time when they might be compromising som e claims against Davies upon the assuri1ption that such sum of £ 5,000 had

never been r eceived. I

After -Mr. Davies return, h e a11d Mt·. L ee entel'ecl . into a part nership for Lhe purpose of se W ng

furU10r q nanti t :. ies of .T ava sngar to tihe Cmmr1onw<•alt.h Gove rnme11L , D av ies l.h e:n purpo rting_ lo ac L as age11L , vvit.lt Lee a s his princLpa J. In Lh n .a.JI appliea·

tion made to the Sugar Board to purchase· of sugar at a price· which seemed v ery favorable was turned down by the Board upon the g l'ound that t.he Board's settled poHcy was to 1mpoTt no i110re sugar.

·rherenpon Mr. Da.vies once more resorted to friend D ean(\ w ho · ina.de p encilled a lteralii on s in a

t.yped lettet whi eh L ee. had dt•awn llp, addressed io

the Prime l\lfin] ster, and snch p en cill ed aHeratiomi w el'A afterwar:ds embodied iii a ft·cs h1y t.yped let:le.i' abo pt 'r o pared by Mr. L ee, and sign ed by Davies, Excep t as conflnnaLld·1l oi' t-he view J have that 1\fr. D ea.ne.'s fri end ship wi t h Da.vics him a

pull which e:nabl od . him Lo get dir·ee:t access lo th<• Prime Minist.er, malte·r do e,g not see m to tn e to lw

J:e,l e-vant to the issues I have t o d etetmine . In fad .

:Mr. Lee did g-et comnntn'ications dircd t-o lh t•

Prime Minister, bu t ll o.t h)ng fnrth cr eve: n t uat.ed, at1< 1 Davi t>s ma.d e no ful'ih rr s< t.l es on :u1y one's hckl.l f oi' ;;ugar t o the Ca·mh1onwea1th.

I have stated m y reasons fo t' my de.tet·minat1 o n that n o gift (H' wa. <; made by Davies t-o D ea.n c .

or to any other m e mber of the CommonweaHh Public Service . · I a.lso a m o.f upinion t ha.t nO• gift. ofl"cr e.d

t o ))can e . I t hink th o . cabl e ahouil inv .. ,st.ing t lJ,.

.£1,000 in Can·oll 's company on h eh.aH of Davie.s wa" genuine , repres e nt ah on s Da.vi es ma.y ha.ve

mad e to: Na.sh a,bouL Uw maJtor ; 1)111-, I also t.hink I ha .i Deane probably Lold I >a vi es wlw n h c .. sa.w him·, return, t.hat h e di d 110<1-. wis h to b e, m -ixc,cJ up' 111 th e

matter a.t all. T Lhink if :D c:we ha.d at . thnJ stag<'

any d es ire, for a gifl- or lon. 11 from .na vies.

th e, latt-er would ha.vr.' b e·C>Jl unly t oo willing I n· g 1vP d ­ hn L ther e is 1w c:v idcn r t• ( lnl. l. an_y s nc.h a

1 think t:ha.t th e con clusio-n s T haYe• so far :.m s w C "T all the issu es s11 b n 1 i U e,c] to me' f orr r r. port-, so fnr ns t-.hor e js nny r, vid on rr, r clcYn.n t. f o r m r. In c·orl ­

sid er . I would a.d ci , iwwc:VC' I"', t o c·h ow lh a t j·.h c h ave. noL 1J 0.0n ovrrl oo-lw d , ihat. T d o 11 0.1 lhinl;: wh a t

was r e f e.rred t.o, during t ht• r·v itl cn ce , as th e " _ 1r1i_ss i fil r," 'Nhid1 c·o ns isfPd o f lr•ll f' l'S h lw rc·â€¢ll 1Vfr . 1-'l'lnwr . of Prime Mini. 1o1·'s l kpa r t n wnf in '\r('lbo.nrn e , and Colc·Hel Olders h aw in Sy dn ry, ronld in a.ny wa y ( h1· ccn r lus io11 S T h ave. :1 rri a t or ol h cnvi .'<' ass1s l

me. From Mr. 1\fa.s ·y G r e.c· 1r e a.nd o,f]J ·r wil n cssrs'

cvid r n ce, T would t-hink that I he· fi] i. nii Rs in g lw ­

ran sc somr. n nr .. tl1 o11 g h1- t.h a.t ·it, was of n o 11. r a. _a

cl Pp:lrtmcntn-1 Ill••, and rontflin r. cl m a1 t . 1' !h at . honll

not Lc 111WII a deparhneutal file. There was evidence of one mattct referred to in it. would be relevant,

but this was otherwise fully proved by other e.videuce.

11

[ would add tltat there wa,s a thoruuo·h investi.­

gation of a, number of ot h!"Cr large ;\ppear­

iHg in J\lr> J>a,:ic:s' pass-uvok as to whieh I 'lvas quite sa.bsfied, after_ hearing Davie·s' expJa.natim1, that they notlnng to do with .Mt. Deane or· any other

Issue wh1ch l had to report. upon. .

I ri1ight. furthe-r add that there wa.::; a final settle­ lnent b etween .Lee' and Davies on 24th November, UJ21, b,r whielt J..;ce a;eceptcJ £1,500 iu full settlement of _all his claims, a.l)d which contained a clause by

wh1ch Lee covenanted to hand over all pa.pers of everv kind in connexiun with every tra11sa.ction in which aud- Davies are or were interested; ;:,,nd that there were collateral to that settlement-but uot men­

t.lonwl in it- by which ther partie's had to I;1ake statu­ lory declarations respectively, which we1·e, in fact, rna.de . The statutory deda.raLio-n by Lee was to the

effect t ha.L lw handed over every E'Uch document, aud retaifl ed IIOil e of tltem. I aiJI quite satisfied that the

abuve clause, and very unusual aTrangeJneuts as

lo statutory declarations, had Jm re,fercncc to Deane tJ,(, all, atJd no relevance tv the jssues I have to report

upon. i11 fact. 1\'lr. Lee retained the draft letter o-f

3lhlt with Dealle's pencilled alteratious on

Jt - and af terwa.rds handed it to Dr. Earle Page, who used it in Parliament.

Before the ,Joint Coumtittee 011 Public J\ccotmts, 11r. A. \Y. H. l\Iather gave evidence tO> t.l:t.e effcet that

lh.t ·.ries had sold the sugar to the Governrnen t at a

ltigher than that at which he had boug}01L the

sugar for the Go,venHilt:nt.. I had Mr. Mather's

evidence- to him, and put in before me, but when

;;.sl<.ed by 111yseH whether he adhered to those state­ ments, h e s't.ated, in effect, that he had no knowledge of ;,my such 111atter. In fa,et, upnn the evidence, it

1s clear that Davies ::;uhnrit.t.ed qnotat,io JJS or o,ffers frun1 Naslt, a.s he received them, to tho CoHrntuuwca.Hh without any alteration. 1rr. A. \\T. H. aud hiH sou, :Mr. J,. G. :l\tlatlter,

:!1 ;-;o to tltc dlect t.l•ut in tleptmnbcr, J!)20,

J\lr. Davies !l:uJ f·on\'er::sations 'rviLh them during wl1ieh lw lltade suggPstious as to giving :Mr. De:we a present. of a motor enr in of the a ss ist. auce he was

givi11g iu <'OIIIlesioll wit.lt sugar sales. Tl10se eo11ver-· \Hlltld 11ot. ltr, against Deane HP'J"

11·hidJ J t''Jrild fed iu acting, hut 1 r)o

ltot. that anv g(•rious sng-gestiott of tltc kind

"';ts ('\'(•r made by ]) 1 avirs. · I both the :Mt:1Jhers

full of J'C.SCiltlllCIIt against ])avies to Ull

1\'hieh the reliabilit.y of their cvide11ce. In l1i s

<· v i.deace before the Joint Oomntittce, 1\fr. A. Vl. J3.

Mather said-[see Qtt es l-ion 96J, paqe 47 .-1- " vYhen I rdurned from a .trip to Adelaide on 1920,

Davies informed me at the offiee o£ our soh c1tor th;1t wns g-oi11g to detennine tltc :r. IVtlS

snrpriscd. He said there was only t l1 e sale o [ the

}657

J ,000 tons up to that dnte." Later on he said--[ Q nesl-icm DG7J --" When Davies came back from Ja\'a he had OYer £00,000 in hard cash." Question !J6U, by the

UhainuaJt, "How do you know that h e had over

as tho r es ult of his trip to J.\{ r.

Matl1cr, "He shvwed nte his b<:Ulk credits." Quest.iou \:170, l'.Y t l1c Uhaintwu, "If he had wan ted to keep

yon from the knowledge of his deals in sugar other

than the first order for 1,000 tous, is it reasonable that he would have sliowH y ou his b

he }l(l(l to J"ava. lie knew that I knew some­

thiug of his deals after we had parted. 1 ass mned

that he had entered ]nto various transactions, all(l had IHade all this money while in ;Java. Instead of that, I subsequently learucd from Colonel Oldcrsltaw that all his deals had bee n wade aud all tl1 is money earned

bcfo.re he had left for Java, and while h e was still my partner. I ku cw that he had collected £32,000 itL

Java." 'J'he deed of d i:-;solu Lio11 n !d -Mather

aud Davies in Ottoue r, J 920, showed that 1\fatlwr knew all a.l•ont the 5,000- ton t ransaet.ion, alt.hol\gh I believe lJavics c·oJteealud 1 0,000-ton transadio11 frolll him, u11d also that ltc had got far moi·e than 1 per

from Nash i11 resp ect of the 1,000-to,·l tnmsaetion.

But I disbelieve Mather's statem e ut (1) that he oHl,y knew of the 1,000-ton transaction h e agreed to

t.hc terms of settlement embodied in the deed of disso­ lution, (2) that Davies showed him hi s hauk ercdits for £::w,ooo or £:12,000. ln fad, Davirs got n111eh less t,it:.lll £;)(),()()(), :tud, :weo rding to his 0\Vll evideiJt'C, did J1is ltes t to coneea1 at any rate £G,OOO of that' sunt from

Mather. Thn stor,y as to t.lte snggus ted gift of a motor car is

on the face of j t improbable, a1Jcl I think that both the Matlwrs sltowf'd that th e] 1' rueollrctions were quite uu-iahJ<•. I do 110t hdicvc also the r ceolleetiou of

J\[r. G. Matlu:,: as tv alleged Ht.atemellt by Davies

rcp<"at,i ug alleged statemcuts '"by l'rinw -Minister and j\fr: :Massy G ree ue to the tlu1t they eould

110t lllld<·rHtnn

lo deal otth-:ide t.ltc ( Jo10IIia1 :::l11gar Hdiuiug Com­ pau.Y lltllc,«s ltc w;tf' gdting something out nf tkrt corn­ patty. I find tltat Sllelt < :o11ver satio tJ S did 11ot

Tlwrc w:u-: 110 to impugn the' lwuuur

:tlld i td r·g-ri ly of noiPII('l Old crslt

l s;tid, Colo11ial Compauy

J,, en 11cln sion , I desire t o rueonl w y apprceiatiou of th e zeal a1tcl ability (li sp]ayed lJ.Y J 'v(r. He11L".Y John MEw ­ d crso n a s m y Sf'erctary , both before, Juriug, and aftm· the hearing in carry ing out all I required to have donG.

(Rgd .) E. F. MITCHELl,,

Commisrio 1tcr.

Printed and Published r( r the ( }OVEHNMF:NT of the COMMONWEAJ.-TH of A STTIALIA by ALBERT J . . Government Printe!.' for the State of Victoria.

I Itt .,