Posted on August 7, 2014 by Sue Puckeridge

Determining ‘corrupt conduct’ – Who and what must be identified?

The recent decision of the Supreme Court in Duncan v ICAC  McGuigan v ICAC Kinghorn v ICAC and Cascade Coal v ICAC  [2014] NSWSC 1018 provides a useful analysis of the elements of ‘corrupt conduct’ under ss 8 and 9 of the Independent Commission Against Corruption Act 1988(NSW)  (ICAC Act) and what constitutes the ‘public interest’ under s8B of the Environmental Planning and Assessment Regulation 2000 (EPA Regulations) .  Its findings are of interest to all who work with or in government.

Background

In 2013, the Independent Commission Against Corruption (ICAC) issued findings that two mining licences issued to Cascade Coal Pty Ltd (Cascade Coal) by Minister MacDonald in relation to the creation of mining tenements over the Mount Penny Mine, owned by Mr Obeid  were obtained by corrupt conduct of Messrs MacDonald and Obeid.

White Energy Company Ltd (White Energy) had obtained an option to purchase the issued shares in Cascade Coal and it subsequently exercised that option.  The ICAC found, amongst other things, that several of the directors of White Energy (Plaintiffs), who were also directors and shareholders in Cascade Coal, were guilty of corrupt conduct as defined under the ICAC Act  arising out of the negotiation of the purchase of these shares:

• By deliberately failing to disclose to White Energy’s independent board, their knowledge of the Obeid family involvement in the Mount Penny tenement, when they knew that the Chairman of the independent board and the independent board were concerned about such involvement; and
• By authorising the Obeid’s removal from the Cascade Coal joint venture.

Challenge to the ICAC’s Report

The Plaintiffs challenged the ICAC’s findings on several bases.  This article focuses on the first group of issues relating to the construction of s8 of the ICAC Act, which sets out the first step in determining if  conduct is corrupt under the ICAC Act.  That is, that the conduct must be conduct that “adversely affects or that could adversely affect, either directly or indirectly, the exercise of official functions by any public official…” (s8 of the ICAC Act).

The Court found that ‘official functions’ must be those functions that are lawfully exercisable by a public official.  For either ss8(1) or 8(2) to be satisfied, it is not necessary to identify those functions with precision by reference to the legislative provisions,  the officials who exercise the functions or the official functions, the exercise of which might be effected.  However, in determining whether the conduct has or could have an adverse affect on an official and official function, there must be some rational link between the conduct and the officials and functions concerned.

One of the categories identified was a public official considering whether to grant a mining lease of the Mount Penny tenement.  The Court held that it was open to the ICAC to conclude that the disclosure of the information could have adversely affected the exercise by a public official of an official function in considering whether to grant a mining lease.  This was because it was likely that if the facts now known had come out at the relevant time, no mining lease would have been granted.

The plaintiffs argued that the Obeid link was immaterial because the government could only refuse to issue a development consent, being a precondition to a mining lease, on environmental grounds and therefore knowledge of corrupt conduct would be an irrelevant consideration to the exercise of such a function.

The Court found that the EPA Regulations required consideration not just of the ‘public interest’ but of ‘any aspect of the public interest relevant to the project’.  If the concept of public interest was limited to environmental concerns then, those issues would be expected to have been canvassed in the reports leading up to the Director-General’s report.

 “The idea that a senior public servant and Minister of the Crown must shut their eyes to clear evidence of corruption, and must ( in the case of the former) recommend and (in the case of the latter) decide, only on the basis of environmental considerations, would come as a surprise to many citizens of this State.”

This case illustrates the potential scope of the meaning of the term ‘corrupt conduct’ and the fact that the ICAC and the Court is prepared to adopt a purposive approach to the interpretation of this term under the ICAC Act.