In 2005, the Jenolan Caves House lessee experienced financial difficulty following a decision by the government to not reappoint the Jenolan Caves Reserve Trust (the Trust) Board. It meant the government breached the National Park and Wildlife Act; it was in breach of the Services Agreement. At the same time, St George Bank (the bank) recalled the lessee’s loan. The bank appointed Receivers and Managers and, on 6 June 2006, wrote to the lessee stating the lease had not been offered for sale nor had the government received any unsolicited offers.
Ten days later, on 16 June 2006, the lessee filed a complaint with St George Bank’s Chairman, Mr. John Thame. It noted the bank must comply with the 2003 Code of Banking Practice. This was an essential part of the lessee’s loan contract, setting out the rights of the bank’s customers. The clauses referred to the St George Bank’s Chair included 25.2. It required banks to “try to help customers overcome financial difficulties.” The Chair also referred to clause 35.3, stating the bank will “within 21 days … complete its investigation and inform the customer of the outcome.” These practices did not happen.
Instead of complying with this Code, the bank sold the property, with all furnishings in the hotel, to the government at 10% of the bank’s own valuation. As a result, many people like us working for the businesses suffered damages.
This is our story.
In 1990, a 99-year lease of Caves House was granted to Jenolan Caves Resort Pty Ltd (JCR), and there was a Jenolan Caves Reserve Trust (the Trust) Board set up by an earlier Liberal Government. JCR and the Trust were members of the NSW Public Private Partnership. The members were bound by conditions in three commercially defining documents: the Lease, the Service Agreement, and the Plan of Management.
In 1996, the Trust Board was restructured, removing most of its commercial members. The performance of the Trust suffered, and infrastructure maintenance backlogs occurred. From 2002, there were frequent and serious breaches to the Trust’s obligations to comply with the Plan of Management and to provide clean and potable water.
In July 2003, the Trust carried out a review of Jenolan Caves Water Supply, which noted “water failures cause severe constraints on the operation of Caves House”. In August, the Trust Chairman, Mr. Richard McKay stated the Trust’s infrastructure was aging and that he had requested funding from the Treasury to replace breaking pipes.
For the next three years, water problems at Jenolan Caves damaged all the businesses, and they could not operate profitably. The concerns were referred to the Trust, Office of Environment, Department of Premier and Cabinet, and government several ministers. These problems included an intermittent water supply, failure by the Trust to maintain and clean pipes, failure to replace lids on tanks, and failure to filter the water. As a result, the water was often muddy in colour and the hot water supply to the hotel failed frequently.
The most important consequence of the Trust’s water failures was the presence of E-coli and other contaminants which were revealed through independent water tests. Guests to the hotel were reporting stomach problems after drinking the water and the resort was required to provide bottled water to the hotel’s visitors.
In addition, tourist numbers at Jenolan Caves had fallen dramatically from 272,443 in 1996/97 to 214,453 in 2002/03. The decline in visitor numbers occurred following the restricting, by the new government, of the Trust Board with few commercial members. This greatly concerned the Jenolan Caves businesses. The businesses also expressed a view that declining visitor numbers were the result of increased ticket prices.
The businesses were suffering when the government undermined the relationship between the Lessee and the bank. There was unreliable water supply, water toxicity, and decreasing visitor numbers. The Lessee was removed from managing the property on 9 December 2005 and the bank appointed Receivers and Managers to take control. For the three years between 2004 and 2006, the businesses relied on expert reports calling on the Trust to install filtration so the water it provided to the staff and guests was not potable and safe. Neither the Government nor the Trust relied on the expert’s reports.
On 9 December 2005, St George Bank appointed Receivers and Managers without considering whether the government was still intending to acquire the lease and assets at a reduced cost. Without the Trust Board, owners of the lease could simply not refinance the property.
On 16 June 2006, the Receivers and Managers wrote to the lessee stating they did not offer the lease for sale, nor did they receive unsolicited offers. A hotel without a continuous supply of potable water was unsalable. On 30 June 2006, the Lessee’s bank sold the 99-year lease back to the government at a significant discount.
As a result of the government’s decision to provide unfiltered, toxic water to staff and guests for several years, everyone suffered except the government. When the government obtained the lease, it immediately installed filtration. Documents discovered several years later confirmed that the government, three months prior to acquiring the 99-years, had obtained quotes to install water filtration.
Government’s Attempt to Destroy Jenolan Businesses by Failing to Meet Contractual Agreements
On 3 September 2003, a review, approved by the government, stated that no public funds could be used to benefit the lessee of Caves House. The Trust was therefore unable to meet its duty to provide suitable water for human consumption, 24 hours a day.
The Trust’s Manager, Peter Austen, had written to the lessee regarding a complaint about disruption to the water supply. He stated, “the Trust has little control over unpredictable events such as this. The Trust has at all times operated in accordance with the Service Agreement”. There were times when the award-winning 4½-star hotel restaurant was preparing meals for a large group of guests and water had to be carried in buckets from taps located in the village.
The staff was desperate because they had to address these problems and deal with angry guests. The JMA Parties arranged for independent water tests, which found the water did contain E.coli and other pathogens. Sonic Healthcare supported these results, but the government and the Trust dismissed them claiming the water was safe. The Department of Health then found toxicity in the Trust’s water supply. Its results were kept from the lessee and the businesses for the next six months. The government simply continued to state, “the Trust denies your claim the water supplied to Caves House is unfit to drink”.
On 14 October 2011, Mr. Templeton wrote a letter and provided a chronology regarding the water problems at Jenolan Caves. He sent it to the Attorney General and Minister for Justice, the Minister for Health, the Minister for Environment, Member for the Blue Mountains, and Member for Bathurst. A further copy was sent to the then Premier Barry O’Farrell, who later admitted to having an unreliable memory.
On 28 March 2012, Mr. Paul Miller, General Counsel for the NSW Department of Premier and Cabinet, responded to Mr. Templeton on behalf of the Attorney General and the Minster for Justice replied. He stated:
The Government is satisfied that matters relating to water quality at Jenolan Caves were adequately addressed at the time and has formed the view that any further inquiry is not warranted.
On 10 May 2012, Ms. Rosemarie Bayne filed a Freedom of Information application under the GIPA Act regarding Mr. Miller’s reply. The documents provided by the government, maintained, at various intervals, that the water was adequately investigated. However, it claimed that neither the Government nor the Trust investigated all water problems between 2004 – 2006.
St George Bank’s Unfair Contract
The JMA Parties filed complaints with the bank for transferring the Jenolan lease to the Government without offering it for sale. This was shortly after banks were self-regulated and could breach contracts with impunity. JMA obtained a copy of the CCMC Association’s Constitution on 27 July 2012.
By May 2004, St George Bank invited the lessee to sign a new contract to replace the older one. Given the previous seven-year relationship between the lessee and the bank, there was no reason to expect the bank would have invited the Cave House Lessee to sign a deceitful loan contract without full disclosure. St George Bank claimed it was a model banker and, under the contract, would investigate all complaints free of charge within 21 days. The bank did not intend to meet its responsibilities under the contract.
Complaints to Bank and CCMC
On 16 June 2006, the lessee filed a complaint with St George Bank, which laid out concerns that the bank disregarded allegations of unlawful behaviour by it and the government suggesting they had both acted dishonestly.
The complaint referred to specific sections of the 2003 Code, alleging St George Bank had breached its contract. Clause 2.2 of this Code states the bank will act responsibly and ethically toward customers. Clause 25.2 states the bank “will try to help customers overcome financial difficulties with any credit facility it has with the bank”.
The bank’s directors did not comply with these clauses when they were dealing with the Lessee. Instead of helping to sell the hotel for a fair price, the bank took control of the property ten days before selling the lease at a discount. At no time did the directors comply with the dispute process in clause 35 of the Code.
On 30 June 2006, prior to amendments to the Act being assented to, the bank signed the Jenolan Deed that remained secret for a long time. On 3 October 2007, the lessee filed a complaint with the Code Compliance Monitoring Committee (CCMC). It responded by stating it could not investigate complaints lodged more than a year after the event or a year after the complaint was known. This was not included in the 2003 Code, but part of the 2004 Code. On 27 July 2012, Ms. Bayne obtained a copy of the CCMC’s constitution, which had been concealed since February 2004.
During this period, JMA Parties filed several complaints with the CCMC regarding the bank’s knowledge of the unlawful appointment of the Trust’s Administrator in February 2004, and the CCMC’s secret constitution. None of these allegations were carried out as required under the dispute resolution procedures in the 2003 Code.
Premier Barry O’Farrell and Minister Robin Parker.
In 2014, the lessee attended Sydney Local Court and attempted to require the government and the bank to comply with 2013 subpoenas. On 24 April 2014, the Crown Solicitor’s Office, acting for the Trust and the Department of Premier and Cabinet, attended the court without complying with subpoenas. On 24 April, the Premier was Mike Baird, and the proper Minister was Rob Stokes. Legal Aid suggested the government may have perverted the course of justice.
Alleged Invalid Appointment
On 2 December 2003, Premier Bob Carr signed recommendations that the government would replace the Trust board. When making the decision, Carr had access to the Special Review, which did not recommend the board be replaced. However, the following day, the Cabinet approved recommendations to replace the Trust Board.
On 12 December 2004, Shadow Minister for Environment issued a press release. The lease said, “there is a strong belief that the way the government is running the cave is illegal.” It also said, “the Minister can only appoint an administrator if he sacks the Trust.”
On 24 March 2011, retiring Members of Parliament, provided JMA copies of records in relation to Jenolan and Jenolan Caves Reserve Trust’s matters. They included a bundle of papers (more than 1000 pages) containing details of the Liberal and Nationals supporting documents for statements they made in Parliament in support of our allegations that the appointment of the administrator was invalid. The documents included advice by Robertson, T, SC, regarding the allegedly unlawful appointment, which was presented to the Members of Parliament that day.
The administrator’s appointment was an essential part of the government’s case. It allowed the government to acquire the Caves House at a discount. The appointment of the Trust’s administrator without removing the Trust Board meant that the government had acted unlawfully.
Court Date: 24 April 2014
There were several GIPA applications filed in 2013 and 2014 to determine whether the government acted lawfully. Regardless, the Trust, DPC, OEH, and the responsible ministers did not comply with subpoenas prior to attending court on 24 April 2014. Mr. Field was acting on behalf of his mother. However, she died on that day, and Field would then be acting on behalf of his mother’s estate.
Mr. Field, therefore, did not attend court, appointing a lawyer to represent him and his mother’s rights. He had commenced the action one year earlier to protect his mother’s interests because there was a considerable body of documents alleging the government did not act lawfully. This continued until the day that the lawyer attended the court. Field’s lawyer sought a ruling by the court that the government had not acted diligently when purchasing his family’s furnishings and assets in 2006.
On 24 April 2014, the Local Court, Small Claims Division found against Mr. Field, stating that he did not have to stand in the court to bring this case. This was not considered relevant by Magistrate Prowse when the Scone Court agreed, with the consent of the government, for the subpoenas to be filed in 2013. It was now, one year later, and the court in Sydney had completely changed its opinion.
When the matter was before the court on 24 April 2014, the Trust Administrator was Dianne Leeson, Assistant Director General, DPC, and the responsible minister was Premier Mike Baird. There is no evidence that the DPC rectified the conduct of Assistant Director General Leeson, nor did Premier O’Farrell follow the 24 April 2014 court case.
The JMA Parties believed the government’s decision not to investigate the ownership the late Jackeline Field’s furnishings, not owned by the company, introduced serious concerns that no reasonable person would have allowed happening. The decision by the Trust and the government was simply theft.
The government’s decision in 2013 to not investigate these allegations was not dealt with by the government when failing to comply with the court’s subpoenas. In 2014, without complying with subpoenas, Baird, Stokes, and Speakman appear to have acted unconscionably.
Prior to 2003, JMA businesses experienced good profits, however, they were unaware of the way the Council on the Cost and Quality of Government report was being created. It would be used to change the administrative structure of the Trust, and to demonstrate the government’s unwillingness to meet contractual obligations.
Since 2004, the Trust’s Administrator refused to accept the government acted dishonestly by not providing a continuous supply of potable water. It also meant there would be no intention by Premiers and members of government to address events that had destroyed families’ businesses and people’s lives since April 2003.
On 10 November 2005, The Hon Michael Baird had been NSW Premier for 18 months. He and his government’s ministers took no action when receiving advice from retired Court of Appeal Judge, The Hon RP Meagher AO QC, who stated:
There is, on the facts, no dispute that the Trust is in default of its obligations. The water it provides (when it does provide) is hopelessly far from potable. Noxious weeds abound, and nobody has cared to eradicate them. These facts are not only asserted by Jenolan Caves Resort but have been admitted by the Trust in a letter from its chairman.
The evidence suggests Baird’s government did not comply with the law. However, it could also be argued the deceitful practices of St George Bank allowed the NSW government to recover Caves House, rated superior by AAA Tourism at 4½ stars. The bank and Gail Kelly helped Mike Baird and his government to recover the $12.5M property for only a fraction of its value.
The bank’s directors played a significant role in allowing these events to happen. In 2021, the JMA Parties discovered the bank, by omitting ASIC Regulatory Guide 165 (2001) in the 2003 Code, had a clear intent to commit a crime. This is one of Australia’s greatest stories. The victims were people and businesses in the Jenolan village who did not suspect these deceitful practices by a leading bank and the NSW government.