The evidence is firming that the Government spent $80 million buying air, not water. Michael West reports.
Serious questions have been aired by Channel Ten’s The Project that the Queensland government failed to decommission dams on the two farms at the centre of the Watergate scandal.
There has long between acrimony between the states and the Commonwealth over water. Yet the blame-fest is likely to ratchet up. It was the state of Queensland’s duty to police the decommissioning of the dams and levies, to enforce the water rights deals, and they seem to have failed.
The stream of financial accountability however leads squarely back to the Commonwealth and what was then the department under the stewardship of Barnaby Joyce.
What did the Government actually buy?
What did the government actually buy with that $80 million of taxpayers’ money? It bought a right. In crude terms, it bought a right to tear down a wall so water flowed to the environment.
That right does not appear to have been exercised, The Project has demonstrated. What then did the Commonwealth do to ensure the Queensland government and the counter-parties to its $80 million transaction did their bit? Or did they just give $80 million away and take no security, no assurance there would be action for the environment?
There are two scenarios:
- Barnaby gave $80 million to people (he says he didn’t know) from a company in the Cayman Islands or,
- He got something in return for that $80 million; a security, something in the contract which ensured that he could enforce the right he had purchased.
If elementary legal process was followed, and it is reasonable to assume that it was, Barnaby would have taken either:
- Security, such as charge over the two properties Kia Ora and Clyde or
- He would have held back some of the proceeds of the sale as security, let’s say $10 million of the $80 million, to ensure that he could enforce his right.
If he took no security via the contract with the vendor, Eastern Australian Agriculture, that would mean he has given away $80 million to people he claims he doesn’t know. To nobody … and quite possibly for nothing.
It’s the story that just won’t go away: the murky, taxpayer-funded water buyback that’s raised a lot of questions.
— The Project (@theprojecttv) May 5, 2019
The people who now control the farms, Kia Ora and Clyde, are from Canada and Switzerland. In January this year, the Cayman Islands entity, Eastern Australia Irrigation (EAI), which controlled EAA, sold to a company called Eastern Australia Cropping (EAC). So EAC bought 100 per cent of the shares in EAA from EAI and now owns the farms. Price is rumoured at $70 million to $80 million.
These people from EAC certainly don’t look silly enough to have done a deal to buy these properties without taking security of their own. The sole shareholder is now Fiera Comox Global Agriculture, an international private equity fund.
Let’s assume they protected themselves in the conventional legal manner with a claw-back clause in their contract with EAI, so that, in the event that some people from a government agency came knocking and told them they had to spend $10 million on bulldozers to bust up some levees, they could claw back some money from the deal which had suddenly turned sour on them.
They, the Canadian financiers, could protect their new investment either by:
- Withholding money from the deal, whatever they had agreed to pay EAI, the Caymans crew.
- Or they could have a clause in their contract ensuring that somebody from EAI was on the hook for their unexpected costs.
These are normal arrangements. It is highly unlikely that EAC’s lawyers would not have advised them to either take security, or not pay the lot upfront. It should have been the same for Barnaby and his department.
Suing the Caymans
As canvassed in previous #Watergate coverage, the point of being in the Cayman Islands is not just for its zero corporate tax rate. It is also for the secrecy. This is why we still don’t know who got the $80 million. We don’t know who is behind EAI because the Government continues to hide the documentation.
The other reason however for setting up in the Caymans is because you are very unlikely to be sued.
Besides the profusion of registered addresses and palm trees, there is a court in Georgetown, Gran Cayman, but the judge would laugh if you filed a suit demanding to claw back $10 million from an $80 million deal between people who lived in other countries.
Who could EAC sue then, who could Barnaby sue? Whoever it is who sold them the shares would probably have sent the money back to London quick-smart, or elsewhere, if in fact the money was even there in the Caymans in the first place.
How do you enforce your rights against nobody then? Or somebody who is in London or Vancouver?
Let’s assume then that authorities here were to insist that the new owners EAC had to spend millions of dollars arising from a faulty deal done between the previous owners, EAI, and the Australian government. What could the new owners do?
They could enforce their rights. The Canadians from EAC would already know that there is nothing to sue in the Caymans so they would have struck their security arrangements with whoever is behind EAI.
There would be a contract, with names and entities in it, probably some investors here in Australia. Hopefully, Barnaby’s department would also have this contract as part of its security, assuming it bothered to take any security.
From Barnaby’s point of view, the question is, did he keep any money aside for decommissioning the levies at Clyde and Kia Ora when he struck the deal? Money to bring in bulldozers and knock down those walls?
What precautions did Barnaby, as steward of all taxpayers’ money, take to make sure this deal was enforceable? What security did he and his department take to ensure the performance of the obligation to destroy the levies, or do other earthworks?
Surely no businessman in his right mind, if this was the central right under the contract, would do a deal where he or she did not have access to the land?
And what rights does the Queensland Government have? Can it send in the bulldozers and the police onto properties owned by these guys from Canada?
Barnaby’s claim, as so elegantly put by @LubiePhil on Twitter: “I did not have financial relations with that water” is thin.
A couple more points. According to documents lodged with the London Stock Exchange by a 9.6 per cent shareholder in EAI, “Australian authorities” dealt directly with EAI to strike the $80 million. This is bizarre, particularly given the legal risks discussed earlier.
What security did Barnaby have if the deal turned awry? Is his only recourse to sue in the Caymans or is there security with other parties?
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