Chapter Three - A Corrupt Settlement Proposal

Legal Abuse in arbitration and exposing crime and corruption within those arbitrations has been a costly process. Heinous, scandalous vile and mischievous crimes were committed by those who controlled the arbitrations. Absent Justice.com is about exposing this corruption. 

TIO Evidence File No 3-A is an internal Telstra email (FOI folio A05993) dated 10 November 1993, from Chris Vonwiller to Telstra’s corporate secretary Jim Holmes, CEO Frank Blount, group general manager of commercial Ian Campbell and other important members of the then-government owned corporation. The subject is Warwick Smith – COT cases and it is marked as CONFIDENTIAL:

“Warwick Smith contacted me in confidence to brief me on discussions he has had in the last two days with a senior member of the parliamentary National Party in relation to Senator Boswell’s call for a Senate Inquiry into COT Cases.

“Advice from Warwick is:

Boswell has not yet taken the trouble to raise the COT Cases issue in the Party Room.
Any proposal to call for a Senate inquiry would require, firstly, endorsement in the Party Room and, secondly, approval by the Shadow Cabinet. …
The intermediary will raise the matter with Boswell, and suggest that Boswell discuss the issue with Warwick. The TIO sees no merit in a Senate Inquiry.

“He has undertaken to keep me informed, and confirmed his view that Senator Alston will not be pressing a Senate Inquiry, at least until after the AUSTEL report is tabled.

“Could you please protect this information as confidential.”

Exhibit TIO Evidence File No 3-A confirms that two weeks before the TIO was officially appointed as the administrator of the Fast Track Settlement Proposal FTSP, which became the Fast-Track Arbitration Procedure (FTAP) he was providing the soon-to-be defendants (Telstra) of that process with privileged, government party room information about the COT cases. Not only did the TIO breach his duty of care to the COT claimants, he compromised his own future position as the official independent administrator of the process.

It is highly likely the advice the TIO gave to Telstra’s senior executive, in confidence, (that Senator Ron Boswell’s National Party Room was not keen on holding a Senate enquiry) later prompted Telstra to have the FTSP non-legalistic commercial assessment process turned into Telstra’s preferred legalistic arbitration procedure, because they now had inside government privileged information: there was no longer a major threat of a Senate enquiry.

Was this secret government party-room information passed on to Telstra by the administrator to our arbitrations have anything to do with the Child Sexual Abuse and the cover-up of the paedophile activities by a former Senator who had been dealing with the four COT Cases? The fact that Warwick Smith, the soon-be administrator of the COT settlement/arbitrations, provided confidential government in-house information to the defendants (Telstra) was a very serious matter. 

18th November, 1993:  By signing the FTSP, Mr Holmes agreed that Graham Schorer’s matters were to be settled through a non-legal commercial assessment process.  This document concludes by stating:-

“This proposal constitutes an offer to all or any of the COT Cases referred to in Clause (1)(a), which will lapse at 5pm on Tuesday 23 November 1993. This offer may be accepted by signature below and sending advice of such signature to AUSTEL or the Telstra Corporate Secretary before that time.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 121)

23rd November, 1993:  Graham Schorer and Alan Smith sign the AUSTEL-facilitated FTSP. (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 122)

AUSTEL’s COT CASES REPORT:

At points 5.30, 5.31 and 5.32 in this government public COT Cases report, Robin Davey, chair of AUSTEL, states:-

5.30     “…Understandably the original COT Cases, having reached an initial ‘settlement’ involving –

• compensation for past losses
• restoration of an adequate telephone service

expected that they might be able to resume their businesses activities afresh.”

• “…Unfortunately that did not prove to be the case. Soon after his initial ‘settlement’ Mr Smith reported continuing problems to AUSTEL.  Even prior to her settlement, Mrs Garms reported continuing faults to AUSTEL.  The decision by Mrs Garms and Mrs Gillan not to report faults to Telecom in order to hasten a financial settlement is noted above.  Mr Schorer continued to report faults to AUSTEL throughout the period.”
• “…The fact that faults continued to impact upon the businesses in the period following the settlement shows a weakness in the procedures employed. That is, a standard of service should have been established and signed off by each party.  It is a necessary procedure of which all parties are now fully conscious and is dealt with elsewhere in this report. Its omission as far as the initial ‘settlement’ of the original COT Cases were concerned meant that there was continued dissatisfaction with the service provided without any steps being taken to rectify it.  This inevitably led to a dissatisfaction with the initial ‘settlement’ and to further demands for compensation.  To avoid this sort of problem in the future, AUSTEL is, in consultation with Telecom, developing –
• a standard of service against which Telecom’s performance may be effectively measured
• a relevant service quality verification tests."

25th November, 1993:  A Telstra memo, regarding short-duration calls, states:-

“The following is an assessment of the individual disputes highlighted by Mr Smith. From the information given, little more can be offered for explanation than ‘This is not the way it should work, we need to investigate to find cause’. …”

Calls to Traralgon, being charged on busy.

“This situation should not have occurred.” …

Calls to RVA. …

“being charged for RVA is not a correct operation…” (AS-CAV Exhibit 1 to 47 - See AS – CAV 46A)

30th November, 1993:  This Telstra internal memo, FOI document folio D01248, is from Telstra’s Group Manager of Customer Affairs and TIO Council Member to Ian Campbell, Customer Projects, Executive Office.  With the subject TIO AND COT, this was written seven days after Graham signed the TIO-administered FTSP.  In this memo, Mr Benjamin states:-

“At todays [sic] Council Meeting the TIO reported on his involvement with the COT settlement processes – it was agreed that any financial contributions made by Telecom to the COT arbitration process was not a matter for Council but was a private matter between Telecom, AUSTEL and the TIO.”

“I hope you agree with this.”

At the bottom of this memo, Ian Campbell has added a handwritten comment:-

“Don Pinel … Seems ok to me. When I spoke to Warwick [Smith] I suggested that at least for the first group…” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 124-A)

Senate Hansard information dated 26th September, 1997 (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 124-B) confirms that:-

1. Ted Benjamin, Telstra’s main arbitration defence liaison officer in Graham and Alan’s arbitrations, was also a member of the TIO Council; and
2. During a Senate hearing into COT issues, the then-new TIO, John Pinnock, agreed that Mr Benjamin had not removed himself from council discussions of COT matters:-

Senator SCHACHT – “Mr Benjamin, you may think that you have drawn the short straw in Telstra, because you have been designated to handle the CoT cases and so on. Are you also a member of the TIO Board?”

Mr Benjamin – “I am a member of the TIO council.”

Senator SCHACHT – “Were any CoT complaints or issues discussed at the council while you were present?”

Mr Benjamin – “There are regular reports from the TIO on the progress of the CoT claims.”

Senator SCHACHT – “Did the council make any decision about CoT cases or express any opinion?”

Mr Benjamin – “I might be assisted by Mr Pinnock.”

Mr Pinnock – “Yes.”

Senator SCHACHT – “Did it? Mr Benjamin, did you declare your potential conflict of interest at the council meeting, given that as a Telstra employee you were dealing with CoT cases?”

Mr Benjamin – “My involvement in CoT cases, I believe, was known to the TIO council.”

Senator SCHACHT – “No, did you declare your interest?”

Mr Benjamin – “There was no formal declaration, but my involvement was known to the other members of the council.”

Senator SCHACHT – “You did not put it on the record at the council meeting that you were dealing specifically with CoT cases and trying to beat them down in their complaints, or reduce their position; is that correct?”

Mr Benjamin – “I did not make a formal declaration to the TIO.”

Exhibit (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 124-C) is page 19 from the in-camera Senate Hansard dated 9 July, 1998, where Senator Schacht asks Ted Benjamin the following question:-

Senator SCHACHT – “Mr Benjamin, when did you first get involved in dealing with CoT cases?”

Mr Benjamin – “In 1994.”

As shown above (see the date of 26th September, 1992) Mr Benjamin has been involved in dealing with the COT cases since 1992, not 1994.

The above information shows a TRULY independent person should have administered the COT arbitrations and, if that had been the case, it is most likely that the COT arbitrations would have been carried out in an appropriately democratic manner.

In the immediate segment below, it is clear that Telstra favoured the Telstra-funded TIO in preference to the Government-funded Regulator, AUSTEL, when dealing with the COT case issues.  When we combine these two documents, dated 30th November and 3rd December 1993, the reasons why become clear.

3rd December, 1993:  This internal Telstra email, FOI folio A01924, states:-

“Now that the TIO has been officially ‘launched’ it would be appropriate for Austel to change its approach to customer complaints and start referring them to the TIO rather than dealing with them in AUSTEL. …”

“Rather than writing to Davey on this it might be better handled either by a phone call or alternatively a phone call or letter from the TIO to Davey.”

“It is desirable that the growing stream of complaint to AUSTEL, followed by request for files and other records is stopped.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 125)

On the surface, this seems to be quite a harmless proposal, but there is an underside to the suggestion that the TIO should investigate customer complaints, rather than AUSTEL. Consider the Telstra email of 10th November, 1993 (above) from Telstra’s Chris Vonwilla to Telstra’s hierarchy, confirming that TIO Warwick Smith discussed, with Mr Vonwilla, in-confidence government issues regarding the COT claimants.  It is important to highlight the fact that the TIO Board, which included Chris Vonwilla and Telstra’s Corporate Secretary, Jim Holmes, dominated Warwick Smith, and Warwick Smith was nominated as the administrator of the COT arbitrations even though Telstra were the defendants in the COT arbitrations.  Throughout, this website Alan discusses Telstra file notes that show Telstra wanted the TIO to become involved in the continuing phone problems at Cape Bridgewater which, they hoped, would take Senator Alston (then the Communications Minister) and David Hawker MP out of the equation.  The TIO appears to have favoured Telstra throughout all the COT arbitrations, with little or no regard for the principles of justice.

AUSTEL (now ACMA) is a fully Federal Government-funded organisation and, until Robin Davey retired as Chair, it was almost 100 per cent independent.  The TIO is, on the other hand, funded by the carriers and, during the COT arbitrations, Telstra, Optus and Vodafone were the only carriers on the Board and Council.  How can an administrator be truly independent when he is paid by the organisation on trial (Telstra) in the case he is administrating?  Telstra was certainly on trial in the COT arbitrations and the COT claimants were the plaintiffs.

Please observe the Golden Messenger – CAN Measurement FOI document, folio K34734, discussed below at 25th January, 1994 which states:-

“[F]ollowing the measurements taken on the CAN for Golden Messenger today, two potential problems have been located.

1. They are: 329 7009 has a probable high resistance joint or similar problem.
2. 329 7734 has a double jumper on the main frame cable pair side (cable 6 pair 1666).”

Question: Were the 4th December, 1993 and 25th January, 1994 CAN/cable pair documents related to the continuing problems experienced by Golden Messenger?

Answer: Because Telstra concealed numerous non-legal Golden Messenger issues under LPP, the CAN/cable pair issues could not be investigated – even under a Federal Government facilitated Arbitration Process.

In the AUSTEL government public COT Cases report dated April 1994, on page 243, at point 11.8), AUSTEL states:-

“Prior to receiving Telecom’s response to the Bell Canada International report as outlined in paragraph 11.6 above, AUSTEL had written to Telecom informing it that the claim in the Bell Canada International report to the effect that Telecom’s customers received a grade of service that meets global standards goes too far because the study was an inter-exchange study and did not extend to the customer access network – AUSTEL had agreed to the study being so limited on the basis that other monitoring it had requested Telecom to undertake on AUSTEL’s behalf should provide AUSTEL with the data on the efficacy of the customer access network [CAN].”

Also note, on page 246, point 11.18, in the AUSTEL COT Cases Government Report, AUSTEL states:-

“Telecom responded to AUSTEL’s letter 16 December, 1993 referred to in paragraph 11.10 above in the following terms – As you may be aware, Telecom has extensively tested the CAN.  These results indicated a satisfactory level of performance.”

6th December, 1993:  This internal Telstra memo from Ted Benjamin to Mr H Parker, Group Managing Director of Commercial and Consumer, states:-

“The survey found that 4% of the 2644 small business (ie. Commercial) customers surveyed perceive that they have experienced incoming call problems over the past month which they regard as Significantly or Very significantly affecting their business.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 126)

Comment:

As shown above, Mr Benjamin was a TIO Council member as well as a very Senior Telstra Executive, therefore, he should have been neutral when providing the survey statistics to Mr Parker.  Numerous Telstra FOI documents show that the word perceive was consistently used by Telstra employees to suggest it was the customer’s equipment at fault, and not Telstra’s network.  On 23rd March, 1999 after a two-year investigation by a Senate Estimates committee, Senator Alan Eggleston advised the Australian Financial Review that, where the COT cases FOI issues were concerned, Telstra acted as a law unto themselves.

7th December, 1993:  Telstra’s Ian Campbell writes to Warwick Smith TIO and administrator to the FTSP stating:-

“The person within Telecom responsible for the final decisions on resourcing procedural arrangements, assessor/s and access to material is myself…”

There is no mention in this letter of arrangements concerning an arbitrator/s. (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 127)

16th December, 1993:  This letter, from Denise McBurnie (Freehills) to Alan Smith, states:

“I refer to your letter of 6 December 1993 and our subsequent telephone conversation. …”

“With respect to your comment concerning a customer from Mount Gambier, South Australia, who has reported to you that he had difficulty contacting you on your 008 service, if you are able to provide our client with more details (such as the caller’s telephone number) our client may be able to investigate and comment further on the problem which this customer reported to you.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 128)

Telstra never explained why this Mt Gambier customer, and numerous other customers, were all experiencing the same problems, and neither did Freehills.  What this document does confirm is that, in the case of Alan Smith (where his telephone problems and faults were concerned), he had to deal directly with Freehills’ before a resolution was reached.

17th December, 1993:  Len Budge, Manager of TELCATS (Telstra’s Office of Customer Affairs) sends an internal memo to Harvey Parker, Group General Manager of Commercial and Consumer, stating:-

“For your information please find enclosed the final Cot market research report which was delivered to Austel this week. As indicated in the draft, 4% of the small business customers surveyed indicated that they were experiencing incoming call difficulties which they judge as significantly, adversely affecting their business.”
(GS-CAV Exhibit 89 to 154(b) - See GS-CAV 130)

This four per cent of small business customers experiencing incoming call difficulties is addressed below, at 11th April, 1994.

21st December, 1993:  Ian Campbell’s letter to Warwick Smith, TIO and administrator to the FTSP, confirms the proposal is an assessment and discusses the appointment of an assessor. (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 131)

Ian Campbell is the same person referred to in the AUSTEL COT Cases Government Report, at point 5.7. He wrote to Mr Schorer, on 23rd September 1992, stating:-

“The key problem is that discussion on possible settlement cannot proceed until the reported faults are positively identified and the performance of your members’ services is agreed to be normal. As I explained at our meeting, we cannot move to settlement discussions or arbitrations while we are unable to identify faults which are affecting these services.”

Telstra writes to Warwick Smith TIO Re FTSP

Also on 21st December, 1993:  Telstra and Warwick Smith discuss the Fast Track Settlement Proposal (FTSP).  Please note: there is no mention in this letter of an arbitrator being appointed, only the appointment of an assessor because the process “is a flexible, quasi-judicial process”. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 48-E)

Alan submits his first FTSP FOI request (AS-CAV Exhibit 48-A to 91 - See AS-CAV 48-E):-

“Dear Mr Holmes

“As you are aware of the Fast Track Settlement, you will understand this request. I am applying directly to yourself for All documentation, files and records relating to my business, the Cape Bridgewater Holiday Camp.”

“This request is made under FOI. …”

“These documents are required within 14 days, to enable the Cape Bridgewater Holiday Camp to present our settlement submission.”

Please note: this letter was copied to Mr Robin Davey, chair of AUSTEL (who facilitated the FTSP), and Senators Richard Alston and Ron Boswell, who both advised me, through Graham Schorer, to enter into the FTSP settlement arrangement.

7th January, 1994:  This letter from Warwick Smith to Graham Schorer, mentions only an assessor, not an arbitrator. (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 132)

And, this internal Federal Government memo from Tom Dale, of Minister Lee’s office, states:-

“I spoke with Warwick Smith in light of today’s press reports that he is investigating the telephone monitoring allegations. …”

“He also mentioned that the fast-track claim settlement process was not getting anywhere due to the COT cases knocking back the TIO’s proposals for people to determine their claims. We should not give the Minister the impression that the fast-track would fix things: it is far from certain.” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 48-F)

The issue being discussed, whether the “fast-track” would fix these matters should have, in Alan’s case, been addressed before he went into the FTSP.  Robin Davey, AUSTEL Chair, had already explained to the previous Minister, the Hon David Beddall MP, on 26th August, 1993 advising him that Telstra were aware of faults still affecting Cape Bridgewater.

AS-CAV Exhibit 48-A to 91 - See AS-CAV 48-G to 91 states:-

“Cape Bridgewater

Telecom has admitted existence of unidentified faults to AUSTEL.”

Alan’s questions to the Telecommunication Industry Ombudsman, John Pinnock, have always been:-

• Why was this admission by Telstra to the Government Regulator, AUSTEL, and the advice given by AUSTEL to the Minister regarding these unidentified faults in existence in Cape Bridgewater, hidden from Alan and his technical advisors during his arbitration?
• Why did AUSTEL and the Government allow Telstra to submit, under oath, in their arbitration defence of Alan’s claims, that, during Telecom’s fault investigations at Cape Bridgewater in 1993 and 1994, they found no faults that would affect Alan’s business endeavours?

10th January, 1994:  This letter from Telstra’s Steve Black to Warwick Smith, TIO, had a copy of Telstra’s Preferred Rules of Arbitration attached that was faxed to Telstra on the same day by Freehills. The letter included the comment:-

“You no doubt appreciate that there is a need for such rules and procedures to be set before any ‘Fast Track’ review is commenced.  That is because the ‘Fast Track’ agreements signed by Mr Schorer, Mrs Garms, Mrs Gillan and Mr Smith, only constitutes agreements to enter into an arbitration process.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 133)

Whoever persuaded Steve Black to write this statement (that the agreement only constitutes agreement to enter arbitration), did so, knowing they were misleading Warwick Smith, at the detriment of the COT cases.

When Warwick Smith met the COT cases, on 11th January,1994 (see below), he was made aware of the previous commitment given to Mr Schorer, by Ian Campbell, that the FTSP cannot fully proceed until Telstra positively identified the problems and faults affecting the COT cases’ businesses.  Warwick Smith was adamant that any continuing problems and faults raised by the claimants would be investigated prior to the assessor and/or arbitrator making his decision. The CAV Chronology – LGE Alan Smith file confirms neither Warwick Smith nor Telstra abided by this commitment.

11th January, 1994:  This letter from Steve Black to Warwick Smith refers to an assessor being appointed to provide an independent and impartial perspective.  This letter confirms Mr Black’s personal preference was for one assessor.  The process was only ever intended to be an assessment. (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 134)

The COT cases alerted Warwick Smith, (TIO) and administrator of the FTSP, during January 1994, that AUSTEL’s chair Robin Davey had assured them that Freehill Hollingdale & Page, would no longer be involved in their Fast Track Settlement Proposal as he instructed Telstra, on 3 October, 1993 that Freehills were not to be involved.  Yet, in January 1994, Telstra appointed Freehills as their arbitration defence lawyers to Alan and Graham’s arbitration under the nose of Warwick Smith.  In fact, Simon Chalmers of Freehills was seconded by Telstra in January 1994 as their official FOI co-ordinator (scrutineer) of what FOI documents should be provided to the COT cases and which ones should be withheld.

COT requested documents vetted prior to delivery

11th January, 1994:  Warwick Smith, (who was supposed to be independent of Telstra during the FTSP COT process) receives a letter from Telstra’s Steve Black, which states:-

“It was agreed at a meeting between Mr Graeme Ward and Mr Steve Black of Telecom and Dr Bob Horton and Mr Neil Tuckwell of AUSTEL on 7th January 1994 that:

• Information obtained from Telecom, in the course of AUSTEL’s regulatory functions, and relevant to any parties involved in a formal arbitration process with Telecom under the control of the Telecommunications Industry Ombudsman (TIO) will only be released after consultation with the TIO and Telecom.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 135)

Clearly the TIO, although officially acting as the administrator of the COT arbitrations, were working with Telstra and the Australian Regulator to ensure ONLY material that was first scrutinised by Telecom and the TIO would be passed on to the COT members.

A further alarming document, relating to the vetting of COT information, from Steve Black to Warwick Smith and dated 11th July, 1994, states:-

“Telecom will also make available to the arbitrator a summarised list of information which is available, some of which may be relevant to the arbitration.  This information will be available for the resource unit to peruse. If the resource unit forms the view that this information should be proved to the arbitrator, then Telecom would accede to this request.” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 62-B)

Please note: None of the COT cases were advised that the TIO-appointed Resource Unit would be allowed to vet what arbitration documentation they thought were relevant to the process before introducing it to the arbitration process.

In Alan Smith’s case, the TIO-appointed arbitration Resource Unit, Ferrier Hodgson Corporate Advisory (FHCA), withheld regulatory information and arbitration material that should have been provided to the arbitrator and Alan Smith.  FHCA has since admitted (2nd August, 1996) to withholding AUSTEL regulatory letters, exchanged between AUSTEL, Telstra and the arbitrator during October and December 1994, which were all relevant to Telstra’s defence and Mr Smith’s claim.

11th January, 1994:  Telstra’s Paul Rizzo, writes a similar letter to AUSTEL’s acting Chair, Mr Bob Horton. He states:-

“Information obtained from Telecom, in the course of AUSTEL’s regulatory functions, and relevant to any parties involved in a formal arbitration process with Telecom under the control of the Telecommunication Industry Ombudsman (TIO) will only be released after consultation with the TIO and Telecom.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 136)

12th January, 1994:  A further letter from Steve Black to AUSTEL’s John MacMahon states:-

“In accordance with our agreement reached in the meeting with yourself and your Chairman, these documents will be released through the TIO at the appropriate stage of the arbitration process.”

“It is my view that the appropriate time for release is after the assessor is appointed and the procedural rules for the arbitration process have been agreed by all parties.”

“However, as indicated in our agreement, this decision will be taken in consultation with the TIO.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 137)

Alan and Graham attend the first COT FTAP meeting

12th January, 1994:  Alan and Graham attend the Melbourne office of the TIO, Warwick Smith.  At this meeting, Peter Bartlett confirms the arbitrator can only make a final determination based on documents provided to him, in accordance with the Arbitration Agreement.  This confirms the COTs’ understanding that only through an arbitration process could they obtain all the documents needed to submit their claims. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 65)

Numerous documents attached to this website download confirm the continuing problems with Alan’s fax line and show how this affected the submission of his claim at the time of the FTSP and FTAP, including raising the question of how his business losses could be commercially assessed if the phone and fax problems were still apparent.  It was a futile exercise until Telstra fixed the problems and faults.

Because of the complexity of the issues the arbitrator was to address, it was agreed to base the arbitration rules on the original commercial FTSP; the rules of the arbitration agreement (FTAP) would incorporate the rules of the original FTSP.

When Robin Davey, then AUSTEL Chair, assisted with drafting the original FTSP rules, he was fully aware of Telstra’s unethical behaviour, during Alan’s settlement of 11th December, 1992 and of their conduct towards Graham Schorer.  He was also aware of the allegations regarding Telstra’s phone bugging and misleading conduct and he knew these issues were independent parts of Graham and Alan’s overall complaints.  Mr Davey, therefore, wanted the FTSP rules to be drafted to allow for all these individual issues, including Graham’s problems and Alan’s commercial settlement process, to be properly and separately assessed under the FTSP.  This was achieved by including clause 10.2.2, which covered the way the claimants could present their claims.  This clause initially referred to “each of the Claimants’ claims” and was twofold in meaning:  it allowed claimants to present separate and different causal links between the alleged service’s difficulties, problems and faults (such as billing errors, phone bugging etcetera).  These were to be assessed separately, based on the evidence each COT case presented.  In this way, the FTSP assessor could also look at the evidence regarding the way Telstra previously misled the COT four in their individual settlements.

Alan later followed these guidelines when preparing his claim but was surprised to find Dr Hughes did not cover the individual sections in his award – nor did he prepare any written findings on these separate issues.  Alan later discovered that clause 10.2.2 was removed from the arbitration rules, without the permission or knowledge of the claimants.  There is no correspondence in existence, from either the TIO or the arbitrator, to indicate that COTs ever agreed to the removal of this important clause.

12th January, 1994:  Telstra file note FOI folio K00269 – Legal and Professional Privilege –states:-

“Ted Benjamin called. He wants us to collect information together for Golden Messengers in a similar fashion to what is being done for Cape Bridgewater under FOI.  The assumption is that either the arbitrator or Mr Schorer will be looking for the information soon as a result of the fast track arbitration process.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 138)

We have shown in Chapter Four Conflict of Interest page Compare that technical documents were labelled Legal Professional Privilege when they were not LPP documents at all. Ted Benjamin provided confidential TIO-council information to Telstra employees, on 30th November, 1993 and he later admitted to John Pinnock TIO, on 7th September, 1995, that Telstra withheld 40 per cent of the requested FOI documents from Alan Smith and the arbitrator (see CAV John Pinnock Target file).  It appears the same withholding of documents was about to happen to Mr Schorer.

12th January, 1994:  John Rundell, of FHCA (the newly appointed FTSP Resource Unit), provides Graham Schorer with curricula vitae for:

• 3. Paul Howell, DMR Group Inc – Corporate, Montreal
• 4. Jan Blaha, DMR Group Australia Pty Ltd (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 139)

In the draft of Alan Smith’s Arbitrator’s Award at point (i), Dr Hughes states:-

“[P]ursuant to paragraph 8 of the arbitration agreement, I had power to require a ‘Resource Unit’, comprising Ferrier Hodgson, Chartered Accountants, and DMR Group Australia Pty Ltd, to conduct such inquiries or research as I saw fit.”

In the final version of the Arbitrator’s Award (see CAV Relevant Information File), Dr Hughes had added to point (i) so it now reads:-

“[P]ursuant to paragraph 8 of the arbitration agreement, I had power to require a ‘Resource Unit’, comprising Ferrier Hodgson, Chartered Accountants, and DMR Group Australia Pty Ltd, to conduct such inquiries or research as I saw fit. By consent of the parties, the role of DMR Group Australia Pty Ltd was subsequently performed jointly by DMR Group Inc. and Lane Telecommunications Pty Ltd.”

On 24th May, 1994 Peter Bartlett provided Graham Schorer with a copy of the Confidentiality Undertaking, signed by Jan Blaha, DMR Group Australia Pty Ltd, but it was not until late February 1995 that Warwick Smith, TIO, told the COT claimants DMR Group Australia Pty Ltd pulled out of the arbitration procedure because of a conflict of interest.  The TIO never explained when this conflict of interest was discovered. The claimants were then forced to accept Paul Howell, DMR Group Inc. (Canada) as the substitute TIO-appointed Principal Technical Consultants, with Lane Telecommunications Pty Ltd as their assistants.

Questions:

1. Did DMR Group Australia Pty Ltd want to change their corporate identity to DMR Inc. on 12th April 1994 because, right from the outset, they believed that, as DMR Inc. (Canada) was offshore and not affiliated financially with the Australian arm of DMR, there would be no liability problems if Telstra issued a court injunction in relation to DMR’s technical findings? If they did change their corporate identity so they could work with DMR Inc. (Canada) and thereby avoid the risk of a messy Australian legal challenge by Telstra, then Jan Blaha should never have signed the Confidentiality Agreement.
2. Why was Graham Schorer given the CV of Paul Howell, of DMR Group Inc., on 12th January, 1994 before Graham and Alan even signed the FTAP but after they had accepted DMR Group Australia Pty Ltd, on 9th March 1995?
3. Why did DMR Group Australia Pty Ltd ask, through Ferrier Hodgson, for their business name to be changed to DMR Group Inc. before signing the Arbitration Confidentiality Agreement?

These points suggest that all the parties to the arbitration, except the claimants, were aware of a link between DMR (Australia) and DMR (Canada), before we signed the FTAP.

14th January, 1994:  This letter to Graham Schorer, from Warwick Smith, advises Dr Hughes is to be the assessor to the FTSP. (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 140)

Telstra FOI document K00604, subject Voice monitoring of Priority Investigation Services, confirms the local Portland Technical Officer was tapping Alan’s telephone conversations from at least June to August 1993.  The local Portland Technical Officer during this period was Gordon Stokes. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 48-H)

The phone bugging and privacy issues were issues Alan raised with Warwick Smith, during the FTSP.

17th January, 1994:  Warwick Smith sends out a media release confirming Dr Gordon Hughes is the assessor to the FTSP. (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 141)

18th January, 1994:  Telstra internal memo, FOI folio R11698, marked Telecom Confidential, from David Stockdale to Simon Chalmers, who was seconded from Freehills, states:-

“I feel obliged to voice concerns I have regarding the information being provided regarding the investigations of Cape Bridgewater and Golden Messengers courier service.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 142)

AUSTEL acting Chair, Bob Horton, writes a scathing letter to Mr Schorer, stating:-

“As the TIO Fast Track concept does not challenge nor change any of the parties’ rights and responsibilities, the implication that there has been a deal done between Telecom and AUSTEL to the detriment of the COT case members or that Telecom has imposed ‘an instruction’ on AUSTEL is clearly nonsense.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 143)

This letter from Dr Hughes, to Graham Schorer notes:-

“I have been provided by the TIO with a document entitled ‘Telstra Corporation Limited – “Fast Track” Proposed Rules of Arbitration.’ I have not yet formed a view as to the suitability of this proposal.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 144)

Minutes taken during an Arbitration Meeting, on 17th February, 1994 (see below) records, on page 3:

“Mr Schorer was disturbed that once Mr W Smith was in place, there was a document prepared by Telecom of proposed rules for the arbitration. Mr Schorer considered Telecom was already moving away from the spirit of the FTSP, Mr Bartlett and Mr Hughes both stated they had not received this document [the FTAP] and had not read it and that it was irrelevant.”

The letter Dr Hughes received from the TIO on 10th January, 1994 one month before this meeting (see above), proves that Dr Hughes had already been provided with Telstra’s proposed Rules of Arbitration, so why did he tell this meeting the exact opposite?

Why would an independent assessor assess the defendant’s suggestions before reading the rules of the FTSP process, which the independent regulator, AUSTEL, drafted and which were already signed by both parties to the process as the rules to be used by the assessor?

COMMENTARY:

1. Dr Hughes was appointed as the assessor.
2. The FTSP rules regarding a review of the commercial assessment process were already modified, in conjunction with AUSTEL, to ensure the document and process would be workable. A mutually accepted, modified version of the settlement agreement was already signed and was a non-legalistic process that both parties agreed to as a one-off agreement.  It was not the same as the TIO/Telstra proposed method of arbitration.
3. Dr Hughes did not provide any written comments on his views regarding the Arbitration Agreement until after he had finalised the first arbitration – Alan Smith’s. At this point, in his letter of 12th May, 1995 to Warwick Smith, Dr Hughes advised that the Arbitration Agreement was not credible and needed revising for the remaining COT claimants.

19th January, 1994:  AUSTEL’s Dr Bob Horton writes to Telstra’s Steve Black stating:

“Your letter of 17 January asked AUSTEL to seek in formal terms Telecom’s provision of all voice monitoring tapes in its possession relating to the COT Cases. …”

“Please ensure that all relevant tapes are provided to AUSTEL as a matter of urgency, as we believe they may be of relevance to AUSTEL’s review which is proceeding apace [sic], as we have previously indicated.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 145)

As shown in Dr Hughes letter to Mr Schorer, dated 10th November, 1994 (see later), Telstra is:-

“therefore, prepared to classify the allegations of unauthorised telephone tapping as falling within the description of ‘alleged service difficulties and faults’.”

Neither Telstra nor Dr Hughes addressed the unauthorised telephone tapping issues in Graham’s arbitration.

Graham Schorer writes to Ms Jill Cardiff, Commonwealth Ombudsman’s Office, raising his concerns about the release-of-documentation deal stating:-

“We view this as an extremely serious matter and ask that you

intervene on our behalf”… (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 146)

20th January, 1994:  This Telstra internal memo from Trevor Hill to Alan Humrich, FOI folios B00421, B00424 and B00425, discuss the same type of lock-up problems with the RAM relays, which Graham Schorer previously brought to AUSTELs attention in early 1994.  This document entitled “Summary statement on PBX groups for BCI report ‘Rotary Hunting Group Study’ ”, states:-

“The resultant investigations revealed that relay armatures were sticking due to a phenomena termed ‘wear frit’ or ‘fretting’ where airborne oil and dust and/or ferric oxide particles combined with moisture are attracted to the magnetic zone. … This paste tends to grasp the armature backstop as an anchoring point, the relay armature being held un-opened by the paste.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 146-A)

When Bell Canada International (BCI) carried out their PBX study on 14th December, 1993, at the North Melbourne exchange that serviced Golden Messenger, it appears Telstra failed to provide BCI with document B00219/220.  In Telstra’s CAN FOI document folio K34734, dated 25th January, 1994 (discussed below), it is confirmed that five auxiliary lines to Golden Messenger all had potential problems (i.e., 329 7009 – 329 7734 – 3329 0331 – 329 0731 and 329 0056). However, what is most important about exhibit GS 146-b is that, on page 41 of the BCI PBX Rotary Hunting Group Study, BCI listed the same five lines referred to in folio K34734 as all being workable PBX auxiliaries.  There is no mention of the potential problems associated with these five lines, which suggests BCI did not test the Customer Access Network (CAN) after all.

This Chronology of Events shows Mr Schorer and Alan Smith had valid reasons to challenge the authenticity of the BCI and Telstra’s SVT processes.

Ms Cardiff responds to Graham’s letter of the 19th January, 1994 stating:-

“I am seeking Austel’s comments on the substance of your complaint and I shall contact you again as soon as we have considered its response.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 147)

The TIO Warwick Smith, administrator to the FTSP, AUSTEL’s Robin Davey, author of the FTSP, and a number of Senior Government Ministers from both sides of Parliament, were assured by Telstra that they would provide the original COT four cases all the material they requested under FOI, in support of their claims to be lodged under the FTSP.  However, by now Telstra had threatened the COT cases that unless they sign a new Arbitration Agreement, they will not get the documents to support their individual settlement claims. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 51)

AUSTEL’s Cliff Mathieson and Michael Elsegood countersign a very important letter, regarding the SVT tests, to Telstra’s Mr A Humrich, general manager of central region network operations. The letter states:

“As discussed late last year with Mr J Gitsham, the following comments are offered on your draft set of verification test for public switched telephone services with recurring service difficulties. …”

“Where test results do not meet the essential outcome, remedial action should be taken and the relevant tests repeated to confirm correct network operation.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 149)

This confirms what Robin Davey promised the COT four, before they signed the FTSP.  Would AUSTEL and the Federal Government be in a position to force Telstra to test a service, again, if the SVT tests proved negative?  In my case the answer was NO.

21st January, 1994:  AUSTEL’s Bob Horton writes to Telstra’s Paul Rizzo, Group Managing Director, stating:-

“In my letter of 13 January, 1994 I questioned the existence of an integral formal agreement on the distribution of material relevant to the COT cases. The purported existence of such an agreement was brought to my attention by Mr Black at our meeting on 7 January, 1994 as a mechanism by which documentation could be released, where it was relevant to the arbitration process associated with the TIO. …”

“I can only conclude that any such formal agreement was only a developing idea on the part of Mr Black.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 150)

This internal Telstra memo Folio R15696 states:-

“Simon Chalmers, is from Freehill Hollingdale & Page, Telecom’s solicitors.  I suggest that you action this request not just for the two customers mentioned but also for Mr G Schorer and Mr A Smith. Information that has previously been sent to the Viewing Room will be accessed from there.” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 151)

FOI document folio K00094 is an email discussing CCAS connections and includes the statement:-

“several faults have been reported as originating from this number.”

“312 3796 is the Operations Manager for Golden Messengers they have reported difficulties in getting thru to G.M. frequently [sic].” (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 152)

24th January, 1994:  This letter from Frank Shelton of Minter Ellison to Dr Hughes, confirms Mr Shelton’s involvement in changing the original AUSTEL-facilitated commercial FTSP document into an Arbitration Agreement, which eventually became a highly legalistic process.  At this time, Mr Shelton was also president of the Institute of Arbitrators Australia. (GS-CAV Exhibit 89 to 154(b) - See GS-CAV 153)

In his letter of 12th May, 1995 (see below) to Warwick Smith, Dr Hughes writes they “did not allow sufficient time in the Arbitration Agreement”.  He was referring to Frank Shelton’s revised version of the AUSTEL-facilitated FTSP, which became the FTAP Arbitration Agreement.  Obviously, Dr Hughes believed the mistakes in the Arbitration Agreement document meant the arbitration itself lacked credibility and he blamed those who prepared the document for this situation.  Dr Hughes’ letter of 12th May, 1995 was concealed from Graham Schorer during his arbitration and, before that, from Alan Smith during his arbitration appeal period and neither was it provided, by Mr Pinnock, on 26th September, 1997 when he advised the Senate that Dr Hughes had no control over the arbitration procedures (discussed later).

Warwick Smith writes to Ms Fay Holthyuzen, Assistant Secretary, Regulatory Branch, Parliament House, attaching a public media release stating Dr Gordon Hughes had been appointed as the assessor to the COT FTSP.  Please note:  There is NO mention in this media release of an arbitration process. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 49-B)

25th January, 1994:  The following Telstra internal email FOI folio K34734, from Peter Gamble to Alan Humrich, exposes some of the CAN problems experienced by Golden Messenger:-

“Following the measurements taken on the CAN for Golden Messenger today, two potential problems have been located. …

329 7009 has a probable high resistance joint or similar problem.
329 7734 has a double jumper on the main frame cable pair side (cable 6 pair 1666)”.

“Would you please arrange for these to be followed up urgently.”

“There are also three errors in FACS – the cable pairs listed are incorrect – as follows:

• 329 0331
• 329 0731
• 329 0065”

“An attempt to locate the correct data was made, but without success. Accordingly, measurements were not taken on these three pairs.”

This confirms Peter Gamble was aware of the CAN problems affecting Golden Messenger services, yet Telstra’s briefing B003 report page 12 p-d, for 1 January, 1994 to April 1995 records no CAN problems, affecting 03 329 7009 or 03 329-7734. This is a further example of Telstra being selective when documenting facts.

Question:

Why does Telstra’s briefing B003 paper only refer to two phone auxiliary potential problems, when FOI folio K34734 states:-

“There are also three errors in FACS – the cable pairs listed are incorrect – as follows – 329 0331 – 329 0731- 329 0065. An attempt to locate the correct data was made, but without success,”?

Comment:

In the AUSTEL COT Cases Report at point 5.32, on page 91 AUSTEL states:-

“The fact that faults continued to impact upon the businesses in the period following the settlement shows a weakness in the procedure employed.”  

The following condensed sample of fault complaints lodged by Mr Schorer and staff confirm the “weakness in the procedure employed” were still there during the Fast Track Arbitration Procedure.

Telstra’s fault records show:

• 20/1/94: Telstra FOI folio P37898 (Golden Messenger) “Caller received RVA from Sth Yarra to 2860055.”
• 20/1/94: Telstra FOI folio R37898 (Golden Messenger) “Not receiving ring on 2860055.”
• 21/1/94 to 7/2/94: Telstra’s FOI folio R37897, R37896, and R37895 confirm six different fault complaints were lodged with Telstra, by Graham or a staff member, during this period.
• 7/2/94: Telstra FOI folio R37894 (Golden Messenger) states: “No dial tone on 3292896, has been tested and appears to be open one side in the exchange. NDT – No Dial Tone.”
• 22/3/94: Telstra FOI folio K00047 (GM Holdings) states, “the originating caller will not receive ring tone from the network untill [sic] the network receives a ‘call-confirmation’ or ‘call alert message’ from the PABX. If this tone/message is not received then the caller would receive either RVA or Busy tone.”
• Telstra fault document dated 2nd May, 1994 – SVC03 states: “Mr Schorer rang to say all 68 lines are out; has to be Telecom. Exchange tested again and proved to be in the CPE.”
• 19/4/94: Telstra FOI folio K00028 (Golden Messenger) author states: [redacted] requested me to ring both numbers which I did at 1530 and also received eng[aged] signal. NRR – Not Receiving Ring.”
• 2/5/94: Telstra fault record SVC03 states: 30/04/94 18:18 Mr Schorer rang to say all 68 lines are out.”
• 21/3/94 to 29/6/94: Telstra FOI documents folio R37884 to R37893, confirm Mr Schorer and/or his staff lodged a further 19 fault complaints between these dates. (GS-CAV Exhibit 89 to 154(b) - See GS 154-b)

The above dates and quotes are derived from Telstra’s own fault documentation and can be supplied on request.

Please compare the above CAN issues with the AUSTEL information directly shown below.

In the AUSTEL COT Cases Report (dated April 1994) AUSTEL states:-

“Prior to receiving Telecom’s response to the Bell Canada International report as outlined in paragraph 11.6 above, AUSTEL had written to Telecom informing it that the claim in the Bell Canada International report to the effect that Telecom’s customers received a grade of service that meets global standards goes too far because the study was an inter-exchange study and did not extend to the customer access network – AUSTEL had agreed to the study being so limited on the basis that other monitoring it had requested Telecom to undertake on AUSTEL’s behalf should provide AUSTEL with the data on the efficacy of the customer access network (CAN).” (See page 243, point 11.8)

Comment:

Even as late as November 2007, Telstra had still not tested Golden Messenger’s CAN as they should have, according to the agreement between Telstra and AUSTEL that allowed BCI to limit their testing in regards to Golden Messengers’ business phone lines.

Graham originally agreed to the Service Verification Testing (SVT) on the condition Telstra provide “Call Line Identification” on all answered test calls: this process alleviated possible tampering with the test results.  Telstra, however, refused to comply with this request.

As shown in Chapter 1, under the heading “Broken Promise”, there were serious deficiencies in the SVT process at Alan Smith’s business; yet Telstra still used the corrupt test results to support their arbitration defence claims that the lines into Alan’s business were operating correctly.  In his CAV LGE information for 29th September, 1994, in relation to these SVTs, Alan Smith proves, using Telstra’s own Call Charge Analysis System (CCAS) data, the tests carried out on all three of his business lines were, beyond any doubt, fundamentally flawed.  The only conclusion can be that Telstra refused to carry out the SVT calls at Golden Messenger, with Call Line Identification operating for each test call, because they did not want to risk introducing a microscope into the process lest it reveal the same problems Telstra experienced when testing Alan’s business.

Please note:  on 27th July, 2007 Brian Hodge, B Tech, MBA (B.C. Telecommunications), assessed the November 1993 Bell Canada International (BCI) Addendum Cape Bridgewater tests and the 29th September 1994 SVT Cape Bridgewater tests, including the CCAS data report.  He concluded both the BCI and Verification Testing processes conducted at Cape Bridgewater were fundamentally flawed.  Mr Hodge held a number of senior positions during his 28 years as a Telstra employee, including assessing CCAS data.

LIVE VOICE MONITORING OF PHONE CALLS

1992 to 1994

From mid-1992 until January 1994, Peter Turner from the Australian Social Centre (ASC) in Hartwell, Victoria, acted as Alan’s agent for the over-40s singles-club weekends away due to the number of complaints registered by hopeful holiday weekenders regarding the difficulties of reaching Alan by phone, see document (AS-CAV Exhibit 1 to 47 - See AS – CAV 21).

During two separate periods from May to July 1993, two different ladies told Alan they left messages on Alan’s answering machine regarding their intended travel to Cape Bridgewater.  Both these women remarked on the female voice on the answering machine, while the voice on the camp’s answering machine was Alan’s.  One of these women particularly asked if Alan ever gave out client details or passed details of female clients to men clients?  He reassured her that this certainly would never happen, without seeking her permission first.  She said, since speaking to Alan, she had received strange and vaguely suggestive phone calls and the caller clearly knew she was single.  Alan suspected, from discussions with other clients who also mentioned leaving a message with a female, that Telstra was live monitoring some of his phone calls.

Documentary Proof of Voice Monitoring

Telstra documentation provided by Alan Smith, to the Australian Federal Police (AFP) confirms Telstra admitted to live-voice monitoring of Alan’s phone conversations.  The AFP were advised Telstra only listened to Alan’s telephone conversations from June to August 1993.  Questions raised on page 6 of the AFP transcript taken during Alan’s interview on 26th September, 1994 shows the AFP were amazed that:

Telstra was able to document the actual name of the company (the O’Meara bus line) Alan was discussing work with a tender during 1992, before June and August 1993 (AS-CAV Exhibit 1 to 47 - See AS – CAV 23-B).
Telstra FOI document A10148 also confirms COT telephone conversations were taped (AS-CAV Exhibit 1 to 47 - See AS – CAV 23-C).
Arbitration document, DMR & Lane’s report, further confirms that a Malicious Call Trace (MCT) was placed on both Alan’s 055 267 267 and 055 267 230 services, late in May 1993. The MCT equipment is a totally different monitoring device than the phone interception device (the EOS) that Telstra admitted to using to listen to Alan’s telephone conversations.  The MCT equipment was disconnected on 19th August, 1993 and September 1993 (AS-CAV Exhibit 1 to 47 - See AS – CAV 23-D).

The MCT equipment locks the line for 90 seconds after each successful call and therefore no other call can ring through until this lock-up is released.  Documents, submitted to arbitration, show at least 81 calls connected to Alan’s 267 267 line during this MCT period, but, with the equipment in place, this is impossible.  This evidence was also provided to AUSTEL on 19th December, 1995. Alan wonders if some of these calls were actually diverted (and connecting) to some other location and if so, did these calls reached a female voice?  Karen Gladman was no longer living at Cape Bridgewater by this time and her voice was removed from Alan’s answering machine over Christmas of 1992.  Whose voice were these callers hearing?  Could someone have taken a copy of Karen’s voice when it was on Alan’s answering machine and used it somewhere else?

Gordon Stokes, Telstra’s Portland technician, admitted in a witness statement, on 12th December, 1994 that he used EOS listening equipment to intercept Alan’s calls. 

27th January, 1994:  With no official guidance from Warwick Smith (the administrator to the FTSP), on how the COT cases should submit their claims to the assessor, Alan submits an interim-type testament of the problems and faults his business is experiencing.  Alan states:-

“I present these summaries for your viewing. This should give an insight into some of the difficulties experienced during my years when trying to run a telephone dependant business.”

Exhibit (AS-CAV Exhibit 282 to 323 - See ​AS 322-A) shows this letter, with attachments, was addressed to Warwick Smith (administrator), Dr Hughes (assessor), Peter Bartlett (special counsel to Warwick Smith) and John Rundell (FHCA).  Although this letter is addressed in more detail, below it is important to point out the following:-

Neither the administrator, assessor, nor the resource unit passed any of the claim material Alan provided, on 27th January, 1994 during the FTSP, into the Fast Track Arbitration Procedure. Furthermore, in Alan’s letter of claim, dated 15th June, 1994, Alan’s advisor, Garry Ellicott, reminded Dr Hughes of Alan’s interim claim supplied to him in his letter of 27th January, 1994. (AS-CAV Exhibit 282 to 323 - See ​AS 322-A).

As Warwick Smith, Peter Bartlett and Dr Hughes forced the COT four to abandon the already-signed FTSP and agree to the new Fast Track Arbitration Procedure, it was their responsibility to carry over my interim claim material from the previous settlement process to the arbitration procedure.  They did not do so. (AS-CAV Exhibit 282 to 323 - See ​AS 322-A).

28th January, 1994:  From mid-1993 until January 1994, Telstra Senior Management instructed Alan to document all his complaints directly to Denise McBurnie, of Freehill Hollingdale & Page, Telstra’s solicitors.  In one letter from Ms McBurnie, dated 28th January, 1994 and sent in response to Alan’s complaints regarding the ongoing telephone problems, she states:-

“As the information provided originally in your letter dated 12 November 1993 was of a limited nature, no specific response was possible to your allegations concerning over charging and short duration calls.”

In closing, she adds,

“As noted above in Telecom’s response to the questions raised in your paragraph 2, Telecom has not found any evidence of network faults applicable to and which could affect your service during the period to which you refer.” (AS-CAV Exhibit 48-A to 91 - See AS 59)

The attached Telstra documents, AS-CAV Exhibit 1 to 47 - See AS – CAV 35, 36, 37 and 38, show either Telstra misled Freehills regarding the 1800 national billing software problem, or Freehills misled Alan.  It is evident the information Freehills supplied Alan, via their client Telstra, does not match Telstra’s archival billing evidence.

Robin Davey prepared the AUSTEL draft FTSP document, dated 5th October, 1993 for Ian Campbell of Telstra.  At point 40 in this document, Mr Davey makes his concerns regarding Freehills having any involvement with the Fast Track Settlement Procedure clear.  He states:-

“If the attached letter dated 7th July 1993, from Freehill Hollingdale & Page to one of the COT cases solicitors is indicative of the way Freehill Hollingdale & Page have approached the COT cases in the past, I would be more than a little concerned if they were to have a continuing role.”

During the process of drafting the FTSP rules, and right up to the time Warwick Smith (TIO) became involved in the FTSP, AUSTEL was very concerned at the requirement for Alan and Graham to report their phone complaints to Ms McBurnie, before Telstra did anything about fixing the ongoing problems.  It seems that an important point has been lost here:  AUSTEL was a government-funded regulator and they made it clear Freehills should not be used in COT matters, yet this made no difference: Warwick Smith allowed Telstra to continue to use Freehills anyway.

Also, during the early negotiation FTSP period, Ms McBurnie wrote to Ian Row, Telstra’s Corporate Solicitor, on 10th September, 1993, (FOI document N00749) re COT cases Ann Garms, Maureen Gillan, Graham Schorer and Alan Smith.  She instructed him on how to hide documents under Legal Professional Privilege.  This certainly supports Robin Davey’s concerns about Freehills.  Remember, renowned legal professional privilege researcher Suzanne McNicol’s legal opinion, dated 30 June, 2000 on page 17 states that Freehills (4) knowingly made false or spurious claims to privilege. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 61)

As mentioned above, one of the conditions of the agreement was that Telstra would provide the COTs with any discovery documents needed to support our claims. Because there were no court guidelines regarding discovery documents within the FTSP, they were to be supplied under the Freedom of Information Act.  Both AUSTEL and the Commonwealth Ombudsman’s office agreed this was the only way the COT four could successfully present their claims.  Senate Hansard records of February 1994 show, however, Telstra at first refused to comply with this arrangement, unless the COTs paid fees amounting to thousands of dollars.  The government opposition and AUSTEL applied pressure to Telstra, on behalf of the COTs, and, finally, they agreed to provide the COTs with the documents they needed, free of charge.

30th January, 1994:  Telstra FOI document K01398 confirms that Telstra’s Tony Watson knew a RCM fault was the cause of the lock-up problem Alan complained of, but Telstra’s Bruce Pendlebury told him not to investigate this fault. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 58)

31st January, 1994:  A copy of Alan’s phone/fax account for 055 267230, when compared with these two Telstra CCAS documents, FOI number K01410 and K01411, confirm someone within Telstra handwrote the names of people Alan spoke to or faxed at this particular time.  Transcripts from Alan’s interview with the AFP, on 26th September, 1994 (AS-CAV Exhibit 48-A to 91 - See AS-CAV 50-B), show the AFP were alarmed Telstra gathered private information about Alan including documenting the names of people Alan rang on a daily basis.  This CCAS data information was supplied to Warwick Smith and the Commonwealth Ombudsman’s office.

3rd February, 1994:  This Telstra facsimile header sheet from network operations to Bruce Pendlebury, subject Golden Messenger, states:-

“No known reason for double jumper. …”

“We can speculate – T’fers

          – old customer on tie pair some-time ago

          – pair change whatever”

“The important point is the other end was vacant.”

“THE JUMPER HAS BEEN REMOVED.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 155)

Graham suspects the reason the double jumper “end was vacant” was because the open end had been connected to an interception listening device – a device that was removed during the AFP enquiry in Graham’s interception allegations.

Alan writes to the Minister for Communications, Minister Lee, stating:-

“To date these past days, I have registered a statutory declaration and sent it to both Telecom and Austel.  This was written in relation to my experience of getting an engaged signal from Golden Messenger courier services in-coming telephone service.  This service has 30 in-coming lines.  If this service had been fully engaged due to customer demand, Mr Schorer, spokesperson for C.O.T. would be dancing with joy.  However, this is not the case.  His customers are repeatedly complaining about his lines being engaged.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 156)

This letter from Dr Hughes, to Mr Schorer, advises:

“I am enclosing my proposal as to the “fast-track” arbitration procedure.

This procedure has been devised in consultation with Messrs Minter Ellison Morris Fletcher, solicitors for the Telecommunications Industry Ombudsman. The proposed procedure is acceptable to the Ombudsman and members of the Resource Unit.”

“I would be grateful if you would let me have your comments on the proposal as soon as possible.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 157)

Comment:

At this point, we have Telstra’s lawyers, Freehills (the company the Regulator advised Telstra should no longer be involved in COT matters), the TIO’s Solicitors and the Resource Unit, all devising the rules for and arbitration process after both Telstra and COT claimants signed a binding assessment review.

This letter from Graham Schorer to his legal advisor, William Hunt, refers to a letter Mr Hunt received from Dr Hughes regarding Frank Shelton’s Arbitration Agreement, supposedly revised from the initial commercial agreement.  Graham states he is:-

“personally rejecting the document in total, as this is not an arbitration procedure and I do not intend to be part of an arbitration procedure and I am also informed that the other C.O.T. Case Members do not intend and never agreed to be involved in an arbitration procedure. …”

“We were all advised by Austel that we were entering into an assessment process which was vastly different to an arbitration procedure.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 158)

7th February, 1994:  Robin Davey, AUSTEL chair, writes to Ann Garms stating:-

“The thrust of the Fast Track Settlement Proposal was review and assessment. This may be seen by contrasting the words in the Fast Track Settlement Proposal with their emphasis on ‘a review’ and on ‘an assessor…’” (GS-CAV Exhibit 155 to 215 - See GS-CAV 159)

8th February, 1994:  Warwick Smith writes to Graham Schorer stating:-

“Now that we have settled the appointments of assessor and resource unit…”

There is NO mention of the appointment of arbitrator in this two-page letter. (GS-CAV Exhibit 155 to 215 - See GS-CAV 160)

The Hon Michael Lee Minister for Communications writes to the Minister for Justice, the Hon Duncan Kerr:-

“I am writing to inform you that members of the group known as the Casualties of Telecom (COT) have contacted my Office regarding the Australian Federal Police inquiries into voice monitoring by Telstra of their telephones.”

“Both Mr Graham Schorer and Mr Alan Smith of CoT have informed my Office that they have information on Telstra’s activities in relation to these matters.” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 52-A)

Australian Federal Police are provided with the interception tapes

9th February, 1994:  Ms Jill Cardiff, Commonwealth Ombudsman’s Office, writes to Graham Schorer concerning his complaint that Telstra, AUSTEL and the TIO brokered a document-clearance arrangement regarding the release of documents to the COT cases.  In this letter, Ms Cardiff states:-

“The TIO recalls that he received a call from Mr Black to seek his views. The call was received at his home around mid-morning on 7 January. While the TIO gained the impression from the conversation that the call was being made during a meeting with Austel, he did not actually hear or speak to any other person during the call.”

“Of more significance, however, I have established that the meeting between Telecom and Austel did not take place until the afternoon of 7 January, which was some hours after the conversation between Mr Black and the TIO was conducted.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 160)

What is established, from a letter from Steve Black to Warwick Smith, dated 11th July, 1994 (see below), is the TIO-appointed Resource Unit was given authority to filter arbitration documents, provided by Telstra (during the arbitration process), before passing material to the arbitrator and claimants.

10th February, 1994:  AUSTEL’s John MacMahon writes to Telstra’s Steve Black, stating:-

“Yesterday we were called upon by officers of the Australian Federal Police in relation to the taping of the telephone services of COT Cases.”

“Given the investigation now being conducted by that agency and the responsibilities imposed on AUSTEL by section 47 of the Telecommunications Act 1991, the nine tapes previously supplied by Telecom to AUSTEL were made available for the attention of the Commissioner of Police.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 162)

15th February, 1994:  Dr Hughes’ letter to John Rundell, TIO-appointed Arbitration Project Manager from Ferrier Hodgson Corporate Advisory (FHCA), states:-

“I refer to our conference on 11 February and confirm I am agreeable in principle to the following amendments to the draft ‘Fast-Track’ Arbitration Procedure.” Please note: when reading this document the words “each of the Claimant’s claims” at clause 10.2.2, are still present in the agreement. (GS-CAV Exhibit 155 to 215 - See GS-CAV 163)

Comment:

1. Graham Schorer and Alan Smith did not attend the conference on 11th The COT claimants, or their representatives, were not invited.
2. In this letter, Dr Hughes is already agreeing to an amendment to the FTAP without even looking at the already agreed and signed FTSP.

17th February, 1994:  Robin Davey, AUSTEL Chair, writes to Telstra’s Steve Black, stating:-

“The thrust of the Fast Track Settlement Proposal was review and assessment. This may be seen by contrasting the words in the Fast Track Settlement Proposal with their emphasis on “…a review…”and on “…an assessor…”with the words in the Proposed Arbitration Procedure which was attached to the Fast Track Settlement Proposal.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 164) 

Graham Schorer, Telstra, Peter Bartlett and Dr Hughes meet to discuss the settlement arbitration process.  Telstra’s transcript of this meeting confirms the COT claimants still wanted a commercial settlement process – not an arbitration procedure.  On page three of the transcript, Dr Hughes states arbitration would be more effective and that, as arbitrator, he could give “appropriate directions for the production of documents” and he “would not make a determination on incomplete information”. (GS-CAV Exhibit 155 to 215 - See GS-CAV 165)

Comment:

In Alan Smith’s case, Dr Hughes DID make his determination on incomplete information when he handed down his award, even though Dr Hughes’ own Technical Consultants, DMR and Lane, asked for extra weeks to complete their findings – a request Dr Hughes denied.  Dr Hughes also did not access documents for Alan Smith, under the discovery process, despite being aware Telstra did not provide this information under FOI.  This is a complete about-face from the statement he made to the COT claimants in this meeting.

It was not until 1998, three years after the arbitrator deliberated on Alan’s case, that he received the FOI documents from Telstra that recorded this clandestine gathering. Telstra, their lawyers, Dr Hughes and the TIO’s office all attended this meeting, without ANY representative of the COTs present, therefore the meeting was unlawful. Graham and Alan had no opportunity to contribute to whatever discussions took place at this meeting and will never know how accurate (or otherwise) the minutes were. They will never even know if a second set of minutes exists somewhere.  The FTAP rules were changed to exclude the words “each of the Claimant’s claims” and clauses 25 and 26 were removed and alterations made to clause 24.  The secret changes to this legal document, the Arbitration Agreement, probably occurred at this clandestine meeting.  Dr Hughes attended this meeting, while COT claimants were in preliminary negotiations regarding the forthcoming arbitrations:  this is no different to a judge meeting in his chambers with the defence team, but, without the presence of the plaintiff in the matter, and planning how the judge will conduct the trial.

This meeting, when coupled with Telstra’s letters of 11th January and 11th July, 1994 to Warwick Smith, indicates the COT claimants had absolutely no chance of success, from the moment they were forced to abandon the FTSP.  It is of great concern that the TIO apparently agreed to COT-requested documents being first vetted by AUSTEL and the Resource Unit before they were passed onto the COT claimants (AS-CAV Exhibit 48-A to 91 - See AS 62 and AS 63).  Fancy the defendants (Telstra) discussing what documents were relevant with the administrator of the process (the TIO)!

What is interesting to note from the author of these minutes is the statement:-

“Mr Smith stated that he would not endorse the rules as fair unless clause 10.2.2 repeated clause 2(f) of the Fast Track Settlement Proposal.”

See last paragraph p1.  Are the COTs to assume that because the words from the Arbitration Agreement at clause 10.2.2 “each of the Claimant’s claims”, which were derived from clause 2(f) of the Fast Track Settlement Proposal, Warwick Smith would not have endorsed our arbitration process had he been alerted to this removal?

In Graham Schorer’s case, Dr Hughes continued to arbitrate on his matters after 12th May, 1995, after he wrote to Warwick Smith and declared the Arbitration Agreement not credible.

Please note Robert McGregor of Freehills signed off these Minutes, on behalf of Telstra.

Telstra’s Steve Black writes to Dr Hughes, stating:-

“Telecom agrees with the general spirit of our proposal procedure, but disagrees with the specific clauses set out below.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 166)

Dr Hughes and Warwick Smith seemed to forget this wasn’t Telstra’s proposal.  It was not Telstra’s kindness that brought COT claimants to the negotiation table: it was an unwritten agreement that the COT claimants would not push for a Senate inquiry into their allegations of Telstra’s misleading, unconscionable conduct, and the reasons why COT claimants were still experiencing phone problems after previous settlements and court actions.

During 1993, Telstra was forced to admit to the Senate that they had lost more than 1.2 billion dollars’ worth of cabling and conduit infrastructure that was supposedly somewhere ‘in the ground’ but which was suspected to have never been installed.  This was touted as part of the reason the COT claimants and others were still experiencing phone problems.  Even today, this missing 1.2 billion dollars’ worth of infrastructure is still unaccounted for, an expense that, in the 1980s, came out of the purses of Australian taxpayers.

Over the years, a number of sources have suggested the spiralling costs in the late-1990s occurred because the copper wire was simply not in the ground.  Even if the original copper wire was obsolete, the conduit could have been used to thread optic fibre cable through this already installed infrastructure, instead of Telstra having to dig new trenches.  All the additional costs came as a direct result of the ‘missing’ cabling/infrastructure not being put in place in the late-1980s.  Furthermore, Telstra admitted (see 17th December, 1993 above), that four per cent of all their customers complained of COT-like problems.  Perhaps all those problems were caused by ‘missing’ conduit infrastructure.

During late 1993 and early 1994, the COTs had the momentum to have many different issues investigated by the Senate.  If the claimants had continued down this road, instead of accepting the FTSP, the missing infrastructure would have been addressed in the public domain, along with solving the continuing phone problems experienced by the COT cases, instead of being addressed in camera.  All these issues would have created serious embarrassment for Telstra.

By 17th February, 1994 with the momentum for a Senate enquiry lost, and with the TIO, Warwick Smith, feeding secret, in-confidence coalition party-room information to Telstra (see 10th November, 1993 above), including advice that the proposed Senate investigation into COT matters appears unlikely, Telstra was enabled to manipulate the Australian justice system for their own benefit and to the detriment of the COT claimants.

FOI document folio D01248 confirms Telstra’s Ted Benjamin, also a TIO Council member, supplied Telstra’s hierarchy with in-confidence, TIO-COT-related information he acquired during a TIO council meeting.  Mr Benjamin was Telstra’s Arbitration Liaison Officer for most of the COT arbitration process.  It is now obvious the only chance the COT claimants ever had of getting a fair assessment of their losses or getting their phone problems fixed would have been via a Senate enquiry. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 48-C)

The COT claimants were only looking for a fair chance at an independent review of their past problems and an end to the continuing phone and fax problems they battled with every day, but since they took the wrong road – the FTSP and not a Senate enquiry – this did not occur.

At point 1.6 on page 2 in the AUSTEL COT Cases Report, AUSTEL states:-

“Until recently, Telecom’s approach to the COT Cases might reasonably have been perceived by the COT Cases as one of indifference. But, more recently, the COT’s persistence, AUSTEL intervention, Ministerial involvement, the threat of a Senate inquiry and adverse publicity has resulted in Telecom adopting a more positive, conciliatory approach.”

At point 1.18 on page 6 in the AUSTEL COT Cases Report, AUSTEL states:-

“When the initial settlements were reached with the original COT Cases, the standard of service then applicable was not objectively established and there is a reason to believe that difficult network faults may have continued to affect their services.”

Telstra FOI document folio 902905, thought to be dated around this period, states:-

“Experience with Crossbar common control equipment has shown that the operational life, before major upgrades are required, is closer to 20 years that 40 years due to :-

• Increasing and higher traffic rates than expected.
• Low maintenance effort.
• Under dimensioning of some ranks of equipment. …”

“Also a number of relays have been found to have a short operational life due to factors such as:

• Number of Operations per year.
• Sequence of springsets and contacts.
• Design problems causing contact erosion. …”

“The following conditions have been observed when an exchange reaches a relay wear crisis point:

• Service to customer is degraded.
• Current indicators do not highlight the problem area.
• Existing resources, using normal maintenance practices cannot rectify all
• faults and problems.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 167)

21st February, 1994:  Dr Hughes writes to Graham Schorer, attaching the agreed changes to the Arbitration Agreement.  This letter documents changes to the FTAP but makes no comment on the removal of the words of “each of the Claimant’s claims” from clause 10.2.2. (GS-CAV Exhibit 155 to 215 - See GS-CAV 168)

Please note Dr Hughes states on page 4, Clause 24, of this letter:-

“The Special Counsel and members of the Resource Unit seek an exclusion from liability for any act or omission, to the same extent as the arbitrator.”

23rd February, 1994:  This letter from Mr Black to Dr Hughes refers to Dr Hughes’ recommended amendments on 21st February 1994.  The letter also documents changes to the FTAP but also makes no comment on the removal of the words “each of the Claimant’s claims” from clause 10.2.2.  Graham and Alan were not advised that clause 10.2. 2 was altered.

Please note, Steve Black states, in this letter:-

“Telecom is of the view that Special Counsel and the Resource Unit should be accountable for any negligence on their part in relation to the arbitration process, given that these parties are acting in their capacity as experts. Therefore, this clause should not be amended so as to include an exclusion from liability for Special Counsel and the Resource Unit.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 169)

Graham and Alan believed the Special Counsel, Ferrier Hodgson Corporate Advisory, and DMR Group Australia would be held accountable for any negligence on their part in relation to the arbitration process.

It is also confirmed, for the dates of 19th April, 1994 (see below), Dr Hughes’ office was still of the opinion that the Special Counsel, and the Resource Unit would not be excluded from liability.

24th February, 1994:  In this Telstra internal email, FOI folio A13980, Kevin Dwyer responds to Peter Gamble’s statement of:-

“Ericssons are said to have suggested that call loss could be up to 15%.”

Mr Dwyer states:-

“You are quite correct in your thought that the anecdotal reference applies more to AXE than ARE-11. ‘Lockup’s are generally well-known as a problem in AXE exchanges, not only in Australia but in overseas countries as well.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 170)

The reference, in this document, regarding the known lock-up problems with the AXE exchange is most important, as both Graham and Alan’s businesses were routed through an Ericsson AXE.  As shown below, during the COT arbitrations, Ericsson (Australia) purchased Lane Telecommunications, the TIO-appointed Technical Arbitration Resource Unit.

25th February, 1994:  Frank Shelton, Minter Ellison Morris Fletcher, writes to Dr Hughes, enclosing two separate variations to the proposed Fast Track Arbitration Procedure.  The two individual versions of the FTAP referred to in Mr Shelton’s letter (171) discussed throughout this website. .

The Communications Minister’s Office writes to Telstra’s Jim Holmes:-

“Attached are copies of correspondence received by the Hon Michael Lee MP from Mr Alan Smith of Cape Bridgewater Holiday Camp, Victoria, outlining further difficulties he is having with his telephone and facsimile service.”

“I ask that you investigate Mr Smith’s allegations and take all appropriate steps to resolve his problems.” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 54-A)

Why didn’t Telstra’s Corporate Secretary, Jim Holmes, (who was also a TIO Board member), alert Minister Lee that Telstra had advised AUSTEL, on 26th August, 1993 of the existence of unidentified faults affecting Mr Smith’s service? (AS-CAV Exhibit 48-A to 91 - See AS-CAV 48-G)

This Government internal minute to the Communications Minister, regarding complaints by Alan Smith, says:-

“The Australian Federal Police has been asked to investigate possible breaches of the Telecommunications (Interception) Act 1979 and it would be inappropriate for you to make any further comments of details of the allegations while the matter is before the Federal Police.”

“A draft letter to Mr Smith has been cleared by Legal and General Branch of the Department. …”

“We have provided both Telecom and AUSTEL with copies of Mr Smith’s letters requesting that they investigate his allegations…” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 54-B)

In March 1994, during this negotiation period, a number of documents faxed from Peter Bartlett at Minter Ellison (the TIO’s legal counsel) did not arrive at Alan’s office.  Page 33 of Alan’s claim document, CBHC (Cape Bridgewater Holiday Camp) Part 1, shows he advised the arbitrator of at least three businesses who complained of not receiving faxes from Alan during the FTSP negotiation period. CBHC Part 1 was an 80-page, bound document Alan submitted to the FTSP, but Ferrier Hodgson Corporate Advisory (FHCA) did not pass it on to DMR and Lanes for their assessment. (AS-CAV Exhibit 48-A to 91 - See AS-CAV 66)

3rd March, 1994:  Steve Black emails David Krasnostein, and copies to Telstra’s CEO Frank Blount, stating:-

“As discussed it appears that Gordon Hughes and Peter Bartlett are ignoring out joint and consistent message to them to rule that our preferred rules of arbitration are fair and stop trying to devise a set of rules which meet all the COTs requirements. …”

“My course therefore is to force Gordon Hughes to rule on our preferred rules of arbitration.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 172)

Comment:

Clearly, at this stage, Dr Hughes and Peter Bartlett were not happy with the FTAP rules: so, what made them later change their minds and agree that the Telstra-designed FTAP was a fair process?  What pressure was applied to Dr Hughes to force him to rule on Telstra’s preferred Rules of Arbitration?  What made Dr Hughes agree to Frank Shelton’s revised FTAP?

3rd March, 1994:  Confirmation from AUSTEL to Steve Black, that the Regulator was adamant that:-

“if the Fast Track Settlement Proposal is to be effective then the COT members must be given access to the documentation in Telecom’s possession necessary for them to prepare their cases”. (GS-CAV Exhibit 155 to 215 - See 

GS-CAV 173)

AUSTEL’s COT INVESTIGATION

On 21st November 2007, Alan Smith received from the ACMA, under FOI, a copy of AUSTEL’s original draft findings regarding the telephone problems experienced by the Cape Bridgewater Holiday Camp during 1988 to 1994.  Copied below are some of the page numbers and points in the report.  If AUSTEL (the Government Regulator) could not gain access to documents from a fully owned Government Corporation, such as Telstra was during this official, Government-funded investigation, then what hope did the COT claimants ever have?  Did AUSTEL have a regulatory obligation, as the facilitators of the FTAP, to abandon the signing of the agreement until Graham and Alan received the documentation they were promised they would receive if they signed the FTAP?  The following list identifies some areas where AUSTEL had problems accessing Telstra records on Alan’s service:

Point 43 on page 20 notes:-

“As no fault report records remain in existence from Cape Bridgewater residents prior to this period, or these records have not been provided to AUSTEL, it is difficult to gauge the level of problems in the area which should have been to [sic] known to Telecom based on their own routing reporting data.”

Point 48 on page 22 notes:-

“AUSTEL has been hampered in assessing Telecom’s dealings with Mr Smith by Telecom’s failure to provide files relating to Mr Smith’s complaints.”

Point 71 on pages 28 and 29 notes:-

“AUSTEL has not been provided with the documents on which the conclusions in this briefing summary were reached, such as fault reports from other Cape Bridgewater subscribers over this period or the details of the final selector fault. It would have been expected that these documents would have been retained on file as background to the summary. It can only be assumed that they are contained within the documentation not provided to AUSTEL.”

Point 140 on page 49 notes:-

“It should be noted that AUSTEL’s investigation of matters relating to the RCM problem has been hampered by Telecom’s failure to make available to AUSTEL a file specifically relating to the Pairs Gains Support investigation of the RCM. The file was requested by AUSTEL on 9 February 1994.”

Point 160 on page 55 notes:-

“It should be noted that it is hoped that a number of issues in regard to the Cape Bridgewater RCM will be clarified when Telecom provides the documentation requested by AUSTEL.”

Point 5.46 on page 95 in the final AUSTEL COT Cases Report notes:-

“Where, as part of its direction, AUSTEL sought to obtain detailed information on each of the exchanges involved in terms of performance standards, actual performance, maintenance requirements and achievements, Telecom initially responded with advice in terms of a few generalisations. Very specific requests were necessary to obtain data which a co-operative approach may well have been expected to deliver. Indeed, throughout this inquiry it has been apparent that Telecom has chosen to interpret AUSTEL’s request for information in the narrowest possible terms. The net effect of this was to minimise the amount of relevant data it put before AUSTEL and lengthen the process necessary to extract it.”

3rd March 1994:  Telstra was now ignoring the signed FTSP.

This Telstra internal email FOI D01166, states:-

“As discussed it appears that Gordon Hughes and Peter Bartlett are ignoring our joint and consistent message to them to rule that our preferred rules of arbitration are fair.…”

“My course therefore is to force Gordon Hughes torule our preferred rules of arbitration.” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 55)

BCI tests

Prior to the COT four signing the FTSP, Telstra called in Bell Canada International Inc. (BCI) to study a number of the service lines and exchanges that were allegedly causing the problems the COT’s businesses experienced.  After the completion of the BCI tests, AUSTEL and the COT cases argued the actual faults and problems they complained of were not highlighted correctly in the testing process.  The problem was that, if BCI found a fault while they were testing they halted the test at once and fixed the problem before they re-tested.  Therefore, even though they found faults along the way, their final report specified that the Telstra network had a clean bill of health and there was NO RECORD OF THE FAULTS THEY FIXED DURING THE TESTING PROCESS.

The COT members asked how, in the name of justice, could they use this report in support of their claims, when it showed the Telstra network operating up to network standard when, for up to eight years BEFORE the BCI tests, they had been forced to operate their businesses with phone systems suffering from major faults?  Even though Telstra knew of the COT protests in relation to the BCI report, it was still used to support Telstra’s defence of a number of the COT cases.

10th March, 1994:  A Federal Government handwritten memo by Julie Martinsen, titled Commercial-in-Confidence and Size of the complaints problems, states:-

“I raised the telephone business survey with Rob Davey referred to in Hansard (Senate Estimates Committee 25/3/94) with John MacMahon (AUSTEL)

• it was apparently run by (T) at AUSTEL’s request in an attempt to see how widespread the problems are
• (T) provided the results to AUSTEL as ‘Commercial-in Confidence’
• They will be covered in AUSTEL’s report.
• 10% of those surveyed said they had experienced the same sorts of problems (as the Cot people)
• 4% (I’m not sure if this is the total or of the 10% said they had been affected seriously or very seriously.”

“This is the basis for AUSTEL’s view that the size of the problem is significantly greater that (T)’s claim of 50.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 174)

23rd March, 1994:  The Hon Minister Lee MP writes to Alan:-

“Thank you for your letters of 3 February 1994, concerning problems with your telephone and facsimile service. …”

“I have also arranged for your letters to be sent to senior management in Telecom with a request that they fully investigate your allegations. …”

“It would be inappropriate for me to comment on any allegations of improper monitoring while the matter is under investigation by the Federal Police.”
(AS-CAV Exhibit 48-A to 91 - See AS-CAV 63-A)

25th March, 1994:  The Commonwealth Ombudsman, Ms Philippa Smith writes to Telstra’s CEO Frank Blount, concerning the complaints raised by Graham Schorer and Alan Smith. Ms Smith advises Mr Blount of her concerns that Telstra had stated to John Wynack, Director of Investigations:-

“that they were concerned at the publicity and significant diversion of Telecom resources caused by the recent release of certain information by Mr Smith and that the delay in release of documents was due to the need for Telecom to check all documents prior to release so that Telecom is alert to the possible use/misuse of sensitive information.”

Ms Smith later says:-

“It is unreasonable for Telecom to require the participants to make further assurances while Telecom was considering the Agreement and thereby denying the participants the opportunity to consider the rules that Telecom wished to have included in the Agreement.” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 64)  

The Commonwealth Ombudsman’s Office can confirm the first (limited) bundle of FOI documents Alan received, in February 1994, were heavily censored, many with large sections blacked out and others supplied without a covering schedule, making it incredibly difficult for lay people to understand the significance of the information. Again, it appears this information was censored in agreement between AUSTEL, the TIO and Telstra in an attempt to minimise Telstra’s liability.

On 5th January, 1995 Ms Philippa Smith, conducted an official investigation into Mr Schorer’s complaint that Telstra acted unreasonably regarding his November 1993 FOI applications (see below).

January/March 1994 – still no relevant FOI documents to support Cot claims

According to Graham and Alan’s memory of the FOI situation between January and March 1994, the TIO advised them the only way for them to proceed was to sign for arbitration.  Why didn’t the TIO show the same concerns as Ms Philippa Smith (AS-CAV Exhibit 48-A to 91 - See AS-CAV 64) and condemn Telstra for threatening four small businesses that if they didn’t sign the new preferred Rules of Arbitration, then Telstra would not supply the documents they needed to support their claims?

Was the TIO siding with Telstra from the outset?  Was the TIO mischievously involved in allowing Telstra to withhold COT-requested FOI documents until the COT cases signed for the FTAP?  How many documents were destroyed (or simply not provided to the COTs) under this clandestine operation?  Of all the breaches of law, so far uncovered during the COT arbitrations, this is probably the worst one, alongside the altering of the clause in the agreement.  It is alarming that the defendants, the administrator, the administrator’s Resource Unit and the Telecommunications Regulator all appear to be party to this secret agreement of vetting what documents the claimants receive and what should be withheld from them AND the arbitrator!

No one was prepared to listen to Graham and Alan’s argument that they had already signed a Commercial Assessment Agreement on 22nd November, 1993 (AS-CAV Exhibit 48-A to 91 - See AS-CAV 51).  At first Graham and Alan flatly refused to be a party to Telstra’s preferred Rules of Arbitration, as it was evident Telstra was attempting to force the COT four down the legal track so that their cases would not be commercially assessed.

Other details of these meeting minutes show Dr Hughes

“stated that he was aware of a dispute between the parties but did not have any idea as to the nature, and indicated that, from this point in time, there were two ways to proceed in relation to the problem of outstanding documents.

1. the procedure is put on hold until all the documents are exchanged in accordance with the FOI procedure; or
2. the arbitration procedure commences and then the arbitrator gives appropriate productions of documents.”

Point 2 was Alan’s main reason for finally agreeing to sign for arbitration, because Telstra had only provided him with a very limited quantity of documents.  But, as can be seen from the arbitration process itself, Dr Hughes went back on his commitment to access documents from Telstra.

7th April, 1994:  This Telstra Internal FOI Schedule Review Decision: Schorer confirm Telstra withheld two technical documents both dated 7.4.94 under Legal Professional Privilege, i.e:-

Internal Fax to St Albans Exchange Management Group from Telecom Australia Solicitor.
Fax Transmission duplicating test of Internal Fax of 7.4.94 to St Albans Exchange Management Group from Telecom Australia Solicitor records substance of D03767. (GS-CAV Exhibit 155 to 215 - See GS-CAV 177)

Telstra’s Steve Black writes to David Krasnostein, saying:-

“I have told Mr Bartlett that the only basis on which Telecom would attend a meeting is to formally sign the rules – no further discussion or negotiation to be entered into.”

This suggests Bartlett expressed a view that the FTAP rules were not fair. (GS-CAV Exhibit 155 to 215 - See GS-CAV 178)

Did both Peter Bartlett and Dr Hughes know that clause 10.2.2 was altered to favour Telstra’s defence?

In an internal memo R11908 Steve Black states:-

“Peter Bartlett tells me that Graham Schorer is putting pressure on Gordon Hughes to read the AUSTEL Report and see if it contains anything which would necessitate a change in the Arbitration Rules. I told Mr Bartlett to tell Dr Hughes that Telecom would seriously object to such a course of action.” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 68)

It appears Mr Black was concerned at Graham pushing Dr Hughes to read the AUSTEL Report, because the report states the first four COTs’ matters were to be heard under a review/settlement process and only the remaining COT claimants were to have their matters heard in a yet to be devised special TIO Arbitration Agreement. . If Dr Hughes had read the AUSTEL Report, he would have known the four COT’s were never intended to go into arbitration.

8th April, 1994:  The fax header accompanying the following letter was from Simon Chalmers, seconded from Freehill Hollingdale & Page by Telstra, on 12th November, 1993.  This fax header sheet confirms he faxed the two following letters to both Russell Berry and Denise McBurnie of Freehills.  This and the letter following, dated 9th April, 1994 suggest AUSTEL, the Australian Communications Regulator, was far from truly independent but rather could be convinced to alter their official findings, as Steve Black has requested in many of the points in this first letter. For example, at point 4 (on page 3), Mr Black writes:-

“The Report, when commenting on the number of customers with Cot-type problems, refers to a research study undertaken by Telecom at Austel’s request. The Report extrapolates from those results and infers that the number of customers so affected could be as high as 120,000.”

At point 2.68 in the AUSTEL Cot report, the 120 thousand COT-type complaints was changed to read 50 or more, therefore the official AUSTEL COT report, provided to the minister, says 50 or more. (GS-CAV Exhibit 155 to 215 - See GS-CAV 179)

9th April, 1994:  In this letter Mr Black states:-

“In relation to point 4, you have agreed to withdraw the reference in the Report to the potential existence of 120,000 COT-type customers and replace it with a reference to the potential existence of ‘some hundreds’ of COT-type customers.”

As noted immediately above, the official report refers to 50 or more COT-type faults, confirming that Mr Davey was further pressured to change his real findings. (GS-CAV Exhibit 155 to 215 - See GS-CAV 180-A)

Telstra FOI folio 101115 to 101117 states:-

“A total of 8% of all businesses stated they had experienced problems themselves; 5% had, by inference from comments made by callers assumed they had problems; and 8% claimed they had both experienced problems themselves and also received comments from callers regarding difficulties in getting through to the business. …

73% of customers who felt the problems associated with incoming calls has seriously affected their business had reported the problems to Telecom with varying degrees of success regarding resolution.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 180-C )

On 6th December, 1993 (see above), Telstra’s Ted Benjamin warned Telstra’s Group Managing Director, Harvey Parker, that 4 per cent of the 2,644 commercial business customers surveyed by TELCATS (on behalf of Telstra) reported experiencing significant phone problems that affected their businesses.

Four per cent of 2,644 means 106 businesses experienced COT-type problems – a significant number.  Four per cent of all Telstra’s commercial business customers, nationwide, would be well over 120,000 – the number that AUSTEL’s chair, Robin Davey, wanted to include in the AUSTEL COT report, rather than the 50 or more customers Telstra insisted on.  Robin Davey’s original calculations were correct.

IMPORTANT

Graham and Alan’s Technical Advisor, Mr George Close, was forced to use the AUSTEL COT report findings during Graham and Alan’s arbitrations because Telstra was not supplying the documents they had requested under FOI.  Therefore, Mr Close’s technical findings were based on flawed information and were therefore incorrect.  Letters dated 16th and 25th August, 1994 (see below) confirm that, on behalf of Alan and Graham, Mr Close asked the arbitrator, under the Arbitration Agreement discovery process, to seek from Telstra all the relevant BCI information Telstra used to arrive at their findings.  Even though Dr Hughes accepted the BCI report into evidence (see 2nd May, 1994 below), he did not ask Telstra for any BCI discovery documents on behalf of Alan or Graham.

13th April, 1994:  AUSTEL Chair Robin Davey advises the Hon Michael Lee, Minister for Communications:-

“AUSTEL had agreed to the study being so limited on the basis that other monitoring it had requested Telecom to undertake on AUSTEL’s behalf should provide AUSTEL with the data on the efficacy of the customer access network.” (AS-CAV Exhibit 48-A to 91 - See AS-CAV 57)

Please note:  prior to Graham Schorer and Alan signing the FTSP, they alerted AUSTEL that they were still experiencing phone and fax problems.  Alan was adamant the RVA message faults, which wrongly advised customers calling his 008/1800 number that the line was disconnected, was crippling the singles club side of his business.  Alan’s arbitration reply to Telstra’s interrogatories confirms he received 80-plus letters, from clients and tradespersons, all documenting their experiences when trying to contact him.  The RVA billing problem was threefold: First Alan lost the incoming call.  Second, he was charged for the non-connected call.  Third, Telstra allowed Alan to continue to promote his business using the 008/1800 service (wasted advertisement costs) while aware the RVA post-dialling problems would not bring Mr Smith any business.

14th April, 1994:  Ann Garms writes two letters to Warwick Smith, one handwritten, the other typed.  It is clear from both letters that Ms Garms, Alan Smith and Mr Schorer, did not want to abandon the FTSP and enter into an arbitration process. (GS-CAV Exhibit 155 to 215 - See GS-CAV 181 and 182).

AUSTEL’s General Manager for Consumer Affairs, John MacMahon writes to Ann Garms stating:-

“This letter is to confirm that the Fast Track Settlement Proposal drafted by AUSTEL and signed by Telecom on 18 November 1993 and by you 23 March 1993, refers to an assessment” process and an “assessor” and makes no reference to “arbitration” or to an “arbitrator”. (GS-CAV Exhibit 155 to 215 - See GS-CAV 183)

Ann Garms also writes to Warwick Smith, with the three signatures of Graham Schorer, Alan Smith and herself. She states:-

“We are all in agreement that we wish to be assessed by Dr Gordon Hughes under the Fast Track Settlement Proposal authorised by AUSTEL and signed by Mr Jim Holmes, Corporate Secretary of Telecom on 18 November 1993, and by COT members on 23 November 1993.”

“We acknowledge the confirmation by AUSTEL on 14 April 1994, that the Fast Track Settlement Proposal confirms the assessment process for COT members. (Copy enclosed.)” (GS-CAV Exhibit 155 to 215 - See GS-CAV 184)

Warwick Smith responds to Ann Garms:-

“I am not sure where Alan Smith or Graham Schorer are with regard to proceeding. They have been in regular contact with Peter Bartlett, but I still hope the matter can proceed and am of the view the Procedure endorses the ‘Fast Track’ Agreement and is important for the arbitrator in his role.” (GS-CAV Exhibit 155 to 215 - See GS 184)

It is quite clear from Warwick Smith’s comments in this letter that he dismissed Mr Schorer and Alan Smith’s signatures in the letter he is now responding to.

15th April, 1994:  Warwick Smith writes to Mr Schorer, stating:-

“I met with Mr Bartlett last evening. He will arrange a meeting with Dr Hughes on his return to seek his position on what I understand to be the desire of ‘COTS’ on the Procedure and ‘Fast Track Settlement’.” (GS-CAV Exhibit 155 to 215 - See GS-CAV 185)

19th April 1994:  This is a three-page brief to Mr A H Goldberg, Q.C., from William Hunt, on behalf of Graham Schorer. According to a hand-written note in the top right-hand corner, Mr Goldberg’s office was contacted by Hunt Solicitors at 2.43 pm.
Open letter File No 54-C - See page 12, GS-CAV Exhibit 155 to 215 - See file 186-A and 186-B

It is clear from the fax imprint on these two documents from Dr Hughes’ secretary, Caroline Friend, to Mr Goldberg and William Hunt, that they were faxed between 1:20 and 2:00 pm on 19th April, 1994.  Each fax included an unsigned copy of the Arbitration Agreement, ( GS-CAV Exhibit 490 to 521 - See GS-CAV 514 file, GS-CAV 490 to 521 - See GS-CAV 490 to 521, GS-CAV Exhibit 155 to 215 - See GS-CAV 186-A and GS-CAV 186-B).  Ms Friend sent the faxes from her office after Graham Schorer asked his solicitor, William Hunt, for advice in relation to signing the Arbitration Agreement that was drawn up by Frank Shelton of Minter Ellison.  Mr Hunt contacted Dr Hughes’ office and asked Ms Friend to send one copy to Mr Goldberg and one to Mr Hunt, for assessment.  On 21st April, however, before Graham received any information from Mr Goldberg or Mr Hunt, Graham and Alan met Peter Bartlett (the TIO’s Legal Counsel) in the Minter Ellison offices.  Mr Bartlett informed them the TIO would withdraw from administering the already-signed Fast Track Settlement Proposal if Graham and Alan did not sign the Arbitration Agreement by close of business that day.  Had Peter Bartlett provided Graham and Alan with a copy of the altered agreement earlier in the day, and allowed them to take it away for discussion, a comparison between the altered version and the version faxed to Mr Goldberg and Mr Hunt would have uncovered the secret alterations to the agreement Graham and Alan were being pressured to sign.  This was not the agreement that Caroline Friend faxed to Mr Goldberg and Mr Hunt 36 hours earlier GS-CAV Exhibit 490 to 521 - See GS-CAV 514 

Continued on: Consumer Affairs Victoria Part-2

Please note: the following exhibits (which we might have missed in the text of the chronology of events above) can be accessed by placing the cursor over the relevant number range in order to access that exhibit.

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