It's not as if anybody died, right?


In 2011 and 2016 the Minister of Internal Affairs made decisions about pokie venues that were clearly unlawful. No big deal, it's not as if anybody died, right?


This story is about the decisions ministers make, and the advice they get from officials before making those decisions.

It's about who should be held accountable if the decisions are unlawful, and advice is inaccurate, insufficient, or just plain wrong.  It's also about whether anybody can be held properly accountable, when that happens, in the New Zealand public sector today.

Club Venue Mergers

This story begins with three Class 4 (pokie) venues, in the South Waikato towns of Tokoroa and Putaruru, which proposed to merge and create one venue with 30 pokie machines.

Before they could do that, the Minister of Internal Affairs had to use a power under section 95 of the Gambling Act 2003, to permit two or more "club" venues to merge, and have 30 pokie machines.

This power is a special exception to the general rule in the gambling act which, when it was passed, allowed:
  • No existing venue to have more than 18 machines (s.92).
  • No new venue to have more than 9 machines (s. 94)
However club venues can have a special exception to those rules if:
  • The local council allows it in their Class 4 venue policy (s.101, and s.95(1)(f)), and
  • The Minister of Internal Affairs is satisfied that the merger meets all the conditions set down in section 95(1) of the Act.
One of those conditions is key to this story - section 95(1)(c), which says the Minister must be satisfied that:
(the clubs) can each demonstrate that they intend to merge into a single club operating at a single class 4 venue;
The law is abundantly clear: "...operating at a single Class 4 venue..." doesn't leave any room for confusion or misinterpretation. Does it?

The Pockets 8-Ball Club Merger

On 4 December 2015 the presidents of the three clubs involved in the Tokoroa merger sent an application for ministerial approval to the Minister of Internal Affairs, the Hon. Peter Dunne MP.

In that letter they acknowledge that, after the merger, they would be operating two Class 4 venues in Tokoroa, and another non-gambling site in Putaruru. They proposed to get around this issue by surrendering one of their licences, then re-applying for it when the merger is complete, so that:
At the time the 30 machine licence is granted, the clubs will be operating as a single club at a single class 4 venue.

The applicants say they have "discussed" their temporary surrender scheme with a departmental official (but without saying he suggested the scheme, or approved it).

The Department takes a while to process that request. Just over a year later, on 8 December 2016, it sends a briefing paper to the Minister, advising him to approve the merger.

The Ministerial briefing paper openly acknowledges that the merger is "problematic" and that a "plain language interpretation of section 95(1)(c) of the act would prevent the merger from going ahead":


This is all a bit nutty: the plain language interpretation of 95(1)(c) is the obvious and correct one. It does not "defeat the purpose" of section 95, because it is part of the purpose. As I explained above, parliament intended these 30-machine venues to be allowed as a special exception to the general rule, but only if they met all of the conditions set out in section 95(1).

The next paragraph is even more extraordinary:


The department's advice was that it could actually follow the dodgy scheme suggested by the applicants. It also suggests that section 7 of the Interpretation Act 1999 can just be ignored (that's the law which says an Act of parliament cannot have retrospective effect) .

And finally, it says the minister could get probably get away with it. I guess they thought nobody in Tokoroa or Putaruru would notice or, if they did, that they wouldn't have the resources to have the decision overturned by the High Court.

The Minister accepts this advice and gives his approval in a letter dated a few days later.

Make a mental note: the authors of the briefing paper were Trish Millward - Manager Licencing Compliance and Heather McShane - Manager Operational Policy. The paper was signed off by Raj Krisnan - General Manager Regulatory Services.

The Legal Advice

We wondered how the Department of Internal Affairs could provide advice to the Minister that was so obviously wrong, and why it thought the minister faced "little legal risk" by making a self-evidently unlawful decision.

So we went searching for that information and eventually got a very heavily redacted internal document, dated 20 October 2016, written for the Department's Outcomes Advisory Board. The redactions were made under section 9(2)(h) of the Official Information Act, which means they were deemed necessary to "maintain legal professional privilege"

We complained to the Ombudsman about that. Because we thought that, in this case, professional legal privilege was "...outweighed by other considerations which render it desirable, in the public interest, to make that information available." under section 9(1)of the Official Information Act.

But the Ombudsman disagreed, and we never saw the unredacted paper.

Bear with me, while I have a little rant here: The Official Information Act needs to be amended on this point.  It is a fundamental principle of the Rule of Law that the law should be applied on the basis of sound and reasonable interpretation; particularly when a minister exercises a power conferred by statute. Professional legal privilege should never provide cover for lawyers who interpret the law on behalf of ministers or other public officials. It should never provide cover for public officials who make questionable decisions based on those interpretations. The Official Information Act must always, and in every way, support the Rule of Law and never undermine it.  Rant over.

However, the last few paragraphs of that paper were not redacted, and they point to a "similar situation" that has arisen earlier regarding a merger of the Hastings RSA with the Heretanga Club (to create The Hastings Club). The author comments that:
The briefing to the Minister does not make any reference to the Hastings RSA intent to operate a commercial class 4 venue (at this time we were in receipt of the Elbow Room application) or take into account any implications that this may have in satisfying section 95 of the Act, more specifically: The briefing does not address section 95(1)(c) – Intent to operate as a single club at a single class 4 venue

Intrigued by this statement, we requested a copy of that briefing paper too.

The Hastings Club Merger

In due course, we got a copy of the ministerial briefing paper for the Hastings Club merger, dated 5 November 2011.

The relevant section of that briefing paper is reproduced below:


Incredible. The author/s simply skipped over any mention of section 95(1)(c).  They knew the merger wouldn't meet that condition, and so omitted it from the briefing paper.

Please make a mental note: the authors of that briefing paper were Josh Mitchell, Advisor - Operational Policy and Chris Thornborough, Acting Manager - Operational Policy. And the briefing paper was signed off by Maarten Quivooy - General Manager Regulatory Services (who we shall meet again, below).

Ministerial decisions and official advice

When a Minister makes this type of decision they don't go off and personally assess whether the merger satisfies the conditions set down in the Act. Of course not. They rely on their departmental officials to make that assessment and provide them with appropriate advice.

For a definition of "appropriate advice" we must refer first to the Cabinet Manual, which has a section devoted to Integrity and conduct throughout the state sector. And under that section we find the following Principles of Public Service:
3.58   New Zealand's state sector is founded on the principle of political neutrality. Officials must perform their jobs professionally, without bias towards one political party or another. Officials are expected to act in such a way that their agency maintains the confidence of its current Minister and of future Ministers. This principle is a key element of impartial conduct. It provides the basis on which officials support the continuing process of government by successive administrations. 
3.59   Advice given to Ministers must be honest and impartial, and include all relevant information. It must also be responsive to the priorities determined by the government of the day. Advice must be free and frank, and acknowledge any key information gaps, assumptions, risks, or connections to other matters. This will allow Ministers to take decisions based on the best available evidence and an appreciation of all the options and issues (emphasis added).

Those statements in the Cabinet Manual are supported by the State Services Commission's standards for Integrity and Conduct expected of our public servants, and within that the standard for Free and Frank Advice and Policy Stewardship, which says:
Free and frank advice is expected to be in full and in written form. A record of key points and decisions should be made of any advice given orally, in keeping with the Public Records Act 2005 that states every public office “must create and maintain full and accurate records of its affairs, in accordance with normal, prudent business practice” (s 17(1)). This enables Ministers and the Public Service to be held to account.

In short, when a department gives advice to a Minister, it should be provided in a written briefing paper. Otherwise, how can Ministers and their advisers be held to account?

But how are they held to account?  The State Sector Act 1988 used to have a section titled "Breaches of Minimum Standards" (57B), but that was repealed on 31 October 2018. And anyway, all it said was:
The Commissioner may advise the responsible Minister if, in the opinion of the Commissioner, a serious breach of any minimum standard applied to an agency under section 57 has occurred, or is likely to occur.

So my understanding is that: if (say) a minister had asked their department to give them inaccurate or insufficient advice, so they could make an unlawful decision, but that advice constituted a breach of minimums standards set by the State Services Commissioner then...  the Commissioner should report that breach to the minister?  But, since 2018, the Commissioner doesn't even need to do that?

Seeking Accountability

The Tokoroa merger was still going ahead when we got the first briefing paper, and we had started arranging to apply to the High Court for a judicial review of the minister's decision. 

We approached Gareth Morgan for financial support, and he provided a very generous donation. We also approached law firm DLA Piper to take the case on a pro bono basis, which they agreed to do.

We also kept writing to the Department of Internal Affairs with Official Information Act requests, to build up our evidence base, and wrote several "lawyers letters" to the Secretary of Internal Affairs (first Colin McDonald, and then Paul James), to put them on notice that a court action was in the pipeline. 

The department took a very long time to process the licence application, and we hope our continued pressure and threats of legal action contributed to that delay.

In November 2018 the Pockets 8-Ball club announced that the merger was off, blaming the department's delay in processing the application. A month later we found out that Pockets had been placed in liquidation by the Inland Revenue Department for non-payment of taxes.

We had won that battle. But we also wanted to address the issue of these ministerial consents.

This whole drama was unnecessary. It should never have happened. The Pockets merger proposal was clearly unlawful: the department should not have advised the minister to approve it, and the minister should not have done so.

So we complained to the Ombudsman, which seemed the most appropriate course of action.

Ombudsman Complaint

If parliament passes a law and the executive arm of government makes a decision contrary to that law then, we thought, the Ombudsman should investigate the matter and report it to Parliament.

By the this time the Honourable Peter Dunne, MP, had left parliament and could not be held accountable for his decisions. But the advice given to the minister by his department could still be investigated - especially, we thought, because section 13(2) of the Ombudsmen Act 1975 says that ombudsmen have the power to:
...investigate a recommendation made, whether before or after the passing of this Act, by any such department, organisation, committee, subcommittee, officer, employee, or member to a Minister of the Crown...

And that seemed to go right to the heart of the matter. So on 24 January 2019 we wrote a thorough and detailed statement of complaint and sent that off. The Ombudsman replied on 8 February 2019 saying that:
the Chief Ombudsman generally expects complainants to have raised their complaint with the Chief Executive of the agency concerned in the first instance. If the complainant is not satisfied with the response they receive, then it open to the complainant to provide this Office with copies of that correspondence and explain why they remain concerned.

We have the greatest respect for the office of the Ombudsman, and wanted to do the right thing, so on 7 May 2019, we sent off a detailed and thorough letter to the Secretary of Internal Affairs, attaching a copy of the thorough and detailed statement of complaint to the Ombudsman.


Departmental Investigation

On 5 June 2019 we received a very polite letter from the Secretary of Internal Affairs, saying that the department had launched an "operational review":
You have expressed concern that the Department's briefing papers to the Ministers dated 8 December 2016 and 5 November 2015 did not reflect the high standards required of state sector officials, especially standards to act responsibly, honestly and include all relevant information. 
The Department is currently undertaking an operational review of the Pockets merger process, which will include consideration of aspects of the Hastings RSA club merger. It is therefore premature to comment on your complaints and concerns. 
A copy of the terms of reference for the review of the Pockets merger is attached for your information. As indicated by this document, the review will enable the Department to distil the lessons learned from the way this case was handled so it can improve on how club mergers are dealt with in future. 
I expect that the review will be complete by the end of July 2019 or early August 2019. I will be able to share with you the outcome of the review once the review process is complete. 

Attached to that letter was a copy of the terms of reference. There were a few wee things that concerned us:
  • The Terms of Reference do not specifically mention the ministerial briefings
  • There was no external, independent, reviewer
  • The two reviewers named in the ToR did not appear to be from the Chief Executive's office, the Legal Department or the Internal Risk and Assurance office
But our biggest surprise was that the Department had launched this review at all, because it had already undertaken a review.

Nearly a year before, on 18 July 2018, we had met with Artie McClelland and Martin Greentree ("Artie and Marty" to us), Senior Investigators in the Department.  They had seemed to be doing a careful and thorough review of the issues we had previously raised about the Tokoroa club merger.

We had never seen a copy of their report and now, nearly a year later, we wondered where it was.  So we sent a letter to the CEO about that.

On 26 June we got this response from the Chief Executive, including the statement that:
I have asked Maarten Quivooy (General Manager, Regulatory Services) to keep a watching brief on the operational review and to keep me informed of progress. Maarten will also respond to Mr Bridle's complaints and concerns once the review is completed, which is expected to occur by the end of July 2019 or early August.

Remember Maarten Quivooy?

He was the senior manager who signed off the ministerial briefing paper for the Hastings Club merger. The paper that skipped over any mention that the merged club would not be operating "...at a single class 4 venue...".  One of the two briefing papers we had specifically complained to the Ombudsman about, which the department was supposed to be investigating.

After receiving that letter, it became my very firmly held opinion that the Secretary of Internal Affairs is taking the piss, and that this review had no other purpose than to forestall a proper investigation by the Ombudsman.

The review was supposed to be completed by July or August last year, but we have yet to see it.  When I publish this blog post, it will be a few days short of 1 year since we made our complaint to the Secretary of Internal Affairs.

A proper investigation

If a proper investigation were undertaken, there are some questions I would expect to be asked and answered:
  • Why didn't DIA officials just say "No, Minister", as they should have?
  • Why did two pokie operators in provincial towns get such special treatment when they applied to merge and create 30-machine pokie venues?
  • Did the departmental officials who wrote and signed-off those two briefing papers do so on instruction, or under pressure, from above (i.e. the CEO or the Minister)? 
  • And if so, from whom was that pressure applied, and by what means?
  • And did any of them raise objections, make a protected disclosure, or request that the instructions be given to them in writing? If not, why not?
  • If they did NOT provide those briefing papers under instruction or pressure from above, why did they do it?  What advantage did they seek to obtain, or disadvantage to avoid? 
But even if these questions were asked by the Ombudsman, and properly answered, and the Ombudsman agreed with our assertion that the ministers decisions were unlawful and based on a mistake of law or fact, what would happen?  Please turn to section 22 of the Ombudsman Act 1975.
...the Ombudsman shall report his opinion, and his reasons therefore, to the appropriate department or organisation, and may make such recommendations as he thinks fit (and then) 
If within a reasonable time after the report is made no action is taken... (he) may send a copy of the report and recommendations to the Prime Minister, and may thereafter make such report to the House of Representatives on the matter as he thinks fit. 

Well, it's better than nothing.  It might take another year or two for the people involved to suffer any real consequences.

Why even bother?

You may wonder whether an investigation is even warranted. After all, it was just two decisions about provincial pokie clubs, a few years ago, and one of them came to nothing. The minister who made them has left parliament. The CEO at that time has left the Department. There's a different government in charge, and a new Minister of Internal Affairs. And it's not as if anybody died, right?

On the other hand, what now happens if nobody were held accountable? Will current and future ministers simply be allowed to get away with it?  Will their public servants come to understand they can provide poor quality advice to ministers and suffer no consequences at all? What if these two decisions were symptomatic of behaviour involving other public servants, or other government departments?

And what if people had died, but nobody was ever held responsible?  As happened with the Pike River Coal Mine disaster, for instance.

We will get to that in due course.
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