Kevin Watters v Independent Commission Against Corruption

Cases Cited: Barclays Bank Ltd v Quistclose Investments Limited [1970] AC 567
Briginshaw v Briginshaw (1938) 60 CLR 336
Cunneen v Independent Commission Against Corruption [2014] NSWCA 421
D’Amore v Independent Commission Against Corruption (2013) 303 ALR 242; [2013] NSWCA 187
Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 197 ALR 389; [2003] HCA 26
Duncan v Independent Commission Against Corruption [2016] NSWCA 143
Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125
Independent Commission Against Corruption v Cunneen (2015) 256 CLR 1; [2015] HCA 14
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; [1992] HCA 66
Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Limited (2000) 200 CLR 591; [2000] HCA 11

Category: Principal judgment

Parties: Kevin Watters (Plaintiff)
Independent Commission Against Corruption (Defendant)

Representation: Counsel:
D Lloyd SC / M Kalyk (Plaintiff)
S Free SC / H Ryan (Defendant)
Solicitors:
Carmody Lawyers (Plaintiff)
Crown Solicitor’s Office (Defendant)

File Number(s): 2024/00333128

JUDGMENT

1. On 30 April 2024, the Independent Commission Against Corruption (“the Commission”) furnished a report entitled “Investigation into the awarding of Transport for NSW and Inner West Council contracts (Operation Hector)” (“the Report”) to the President of the New South Wales Legislative Council and the Speaker of the NSW Legislative Assembly by email.

2. On 30 April 2024 the President of the Legislative Council and Speaker of the Legislative Assembly sent emails to a solicitor for the Commission acknowledging receipt of the Report, and advising that it was authorised to be made public. On the same date the Report was published on the Commission’s website. It has remained available to access online at this website since. On 30 April 2024 the Commission also issued a media release about the findings made in the Report, and the availability of the Report on its website. On 7 May 2024 the Report was recorded in the NSW Hansard to have been tabled in the Legislative Assembly and Legislative Council. It is available online at websites associated with the NSW Parliament.

3. The Report followed a public inquiry. The plaintiff, Mr Watters, was one of 16 people to give evidence at the inquiry. In the Report, the Commission made factual findings about a wide variety of matters in controversy relevant to the investigation, including findings about Mr Watters’ conduct. Having resolved the factual controversy about what had occurred, the Commission proceeded to consider the legal significance of those findings; most importantly, by determining whether or not the conduct as found constituted corrupt conduct within the meaning of the Independent Commission Against Corruption Act 1988 (NSW) (“the Act”). The Commission did not find that Mr Watters had engaged in corrupt conduct.

4. By his final amended summons, the plaintiff seeks relief in the form of: (a) a declaration that the Commission acted unlawfully in relation to the Report by reason of including in it (and furnishing the Report to Parliament, and/or publishing it on its website) the matters identified in Schedule A to the summons; and (b) orders for the Commission to take certain steps to “undo the damage” said to be caused by this action, namely removing the Report from its website in its current form and/or redacting or removing the relevant inclusions from any report the Commission chooses to publish or make available on its website or to any other person.

5. The primary question raised by the proceedings is whether, in circumstances such as arose in this case, the Commission, in a report presented to Parliament following a public inquiry held as part of an investigation, may make findings in respect of a person it ultimately does not find has engaged in corrupt conduct.

Brief outline of facts

6. The evidence before the Court was a body of documentary material exhibited to an affidavit affirmed by a solicitor for the plaintiff. This included relevant chapters of the Report, select parts of the opening statement and submissions of Counsel Assisting, relevant parts of the closing submissions of Counsel Assisting, and the closing submissions for Mr Watters. The evidence adduced in the inquiry is not before me. The parties prepared an agreed statement of facts and chronology. In outlining various aspects of the factual background of this investigation and the Report I have been assisted by the summaries of the same in the parties’ written submissions.

7. By summons dated 28 February 2023, Mr Watters was required to appear before the Commission to give evidence at the public inquiry. He was advised that the public inquiry was being conducted for the purposes of an investigation of allegations or complaints of an identified nature, whereupon seven allegations were set out. The fourth of these was:

“Since 1 January 2017, certain employees of Downer have dishonestly obtained a benefit for themselves by favouring certain subcontractors when awarding work arising from contracts that TfNSW has awarded to Downer.”

8. “Downer” is a reference to Downer EDI Works Pty Ltd, which was a managing contractor engaged by Transport for NSW (“TfNSW”) to undertake rail station upgrades as part of two multi-million dollar programs.

9. Mr Watters was at all material times a construction manager employed by Downer. The allegations against him involved the actual request and receipt of $8,000 in connection with recommendations concerning a station upgrade at North Strathfield Station, and an expectation on his part for improper payment in connection with recommendations relating to station upgrades at Wollstonecraft and Birrong Stations. The Commission did not find corrupt conduct made out against Mr Watters, in circumstances explained further below, under the heading “More detailed outline of the investigation and Report”. Adverse findings about him were however made, and published.

Further detail of the current proceedings

10. The particulars of Mr Watters’ claim that the Commission acted unlawfully are as follows:

“The Commission’s exercise of its functions to publish the Report in the manner identified was an exercise in power that was unlawful, in the sense of being ultra vires the Independent Commis**sion Against Corruption Act 1988 (NSW) (ICAC Act), without rational support or otherwise a manifestly illogical or unreasonable exercise by the Commission of its functions and/or procedurally unfair:

1. The conduct alleged against the plaintiff to be “corrupt conduct” under 8(2A)(c) of the ICAC Act by Counsel Assisting the Commission and/or the conduct found by the Commission to have been engaged in by the plaintiff (the Conduct) was not “corrupt conduct” on the proper construction of the ICAC Act.

2. The Commission had no jurisdiction to make findings of “corrupt conduct” against the plaintiff having regard to the Conduct and the proper construction of s 8(2A)(c) of the ICAC Act.

3. The Commission had no jurisdiction to make the findings in Schedule A (paragraphs 3-6 and 8 [1] ) under any other provision of the ICAC Act, whether s 13(3)(a), 74A(1) or otherwise having regard to the Conduct and the proper construction of the ICAC Act.

4. The Commission acted unlawfully in refusing to decide the question of its jurisdiction to make findings of “corrupt conduct” against the plaintiff having regard to the Conduct and the proper construction of s 8(2A)(c) of the ICAC Act: see Report, p 33.

5. The Commission acted unlawfully in not accepting that it had no jurisdiction to make findings of “corrupt conduct” against the plaintiff having regard to the Conduct and the proper construction of s 8(2A)(c) of the ICAC Act.

6. The Commission acted unlawfully in making findings identified in Schedule A (paragraphs 3-6 and 8) having regard to the Conduct and the proper construction of 8(2A)(c) of the ICAC Act.

7. The Commission acted unlawfully in furnishing a report to Parliament and/or publishing a report on its website including the matters and findings identified in Schedule A having regard to the Conduct and the proper construction of 8(2A)(c) of the ICAC Act.

8. The Commission failed to afford procedural fairness to the plaintiff on whether findings which were unable to be made as findings of “corrupt conduct” under s 13(3)(a) could nonetheless be made under the ICAC Act, whether under s 13(3)(a), 74A or otherwise, despite the Conduct and the proper construction of 8(2A)(c) of the ICAC Act.

9. The Commission failed to afford procedural fairness to the plaintiff on the way in which the plaintiff was dealt with in the Report notwithstanding no findings of “corrupt conduct” under s 13(3)(a) of the ICAC Act were to be made against him.”

11. The relevant inclusions set out in Schedule A, as pressed, were as follows:

“1. Chapter 9 in its entirety.

2. Chapter 11 from p 127 up to p 130 but not including the heading “RJS Infrastructure is recommended to TfNSW by Downer for three packages of works on Wollstonecraft Station” and what follows.

3. Chapter 11 from the heading on p 131 “RJS Infrastructure completes the first possession at Wollstonecraft Station – further conversation between Mr Cox and Mr Watters” through to p 133 but not including the heading “Mr Gayed recommends AVCO to Downer” and what follows.

4. The text at Chapter 11 p 140 under the heading “Mr Watters”.

5. The reference to Kevin Watters in Chapter 11 p 141.

6. The text at Chapter 11 p 142 under the heading “Mr Watters”.”

12. By its filed response the Commission disputed that a basis for declaratory relief had been established; including because the Commission made no findings that Mr Watters engaged in corrupt conduct within the meaning of the Act, and had jurisdiction under s 13 of the Act to investigate whether or not the plaintiff had engaged in or was involved with corrupt conduct, and to make findings and form opinions, on the basis of the results of its investigation, in respect of any conduct, circumstances or events with which its investigation was concerned, whether or not the findings or opinions amounted to findings of, or related to, corrupt conduct. The response stated that ss 74 and 74A of the Act authorised the Report’s preparation including statements as to the Commission’s findings, opinions and recommendations, and the furnishing of the Report to both Houses of Parliament, with no power or authority to prevent any House of Parliament or its Presiding Officer from making public or publishing the Report.

13. The response contended that the Commission afforded procedural fairness, including by receiving and considering evidence and submissions from the plaintiff. It was alternatively said that if there was any failure to afford procedural fairness it was not material because there is no realistic possibility that a different outcome would have been reached.

14. The response denied the plaintiff’s standing to request the relief sought and the Court’s jurisdiction to grant such relief, particularly because the plaintiff does not challenge a decision of the Commission, nor contend that any decision of the Commission affected any legal or equitable rights of his. It was plain by the time of the filing of written submissions that the Commission took no issue with the power of the Court to afford declaratory relief if the plaintiff’s claim that the Commission acted unlawfully was made out. It was stated in the response that the [contentious] relief sought does not fall within s 69 of the Supreme Court Act 1970 (NSW) and that there is no legal basis or duty for the Commission undertaking any of the steps sought in paragraph 2 of the summons (which were initially more far-reaching than the claimed relief set out above at [4]).

Statutory Framework

15. The Commission is a corporation constituted by s 4 of the Act. The Act, which has not been materially amended since the time of the public inquiry in Operation Hector, is the source of the Commission’s powers and functions. The plaintiff alleges that the Commission has exceeded its powers under the Act.

16. The principal objects of the Act are as follows:

2A Principal objects of Act

The principal objects of this Act are—

(a) to promote the integrity and accountability of public administration by constituting an Independent Commission Against Corruption as an independent and accountable body—

(i) to investigate, expose and prevent corruption involving or affecting public authorities and public officials, and

(ii) to educate public authorities, public officials and members of the public about corruption and its detrimental effects on public administration and on the community, and

(b) to confer on the Commission special powers to inquire into allegations of corruption.

17. The Act defines “corrupt conduct” as:

7 Corrupt conduct

(1) For the purposes of this Act, corrupt conduct is any conduct which falls within the description of corrupt conduct in section 8, but which is not excluded by section 9.

(2) Conduct comprising a conspiracy or attempt to commit or engage in conduct that would be corrupt conduct under section 8 shall itself be regarded as corrupt conduct under section 8.

…

18. The general nature of corrupt conduct is specified in the Act as:

8 General nature of corrupt conduct

(1) Corrupt conduct is—

(a) any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the honest or impartial exercise of official functions by any public official, any group or body of public officials or any public authority, or

(b) any conduct of a public official that constitutes or involves the dishonest or partial exercise of any of his or her official functions, or

(c) any conduct of a public official or former public official that constitutes or involves a breach of public trust, or

(d) any conduct of a public official or former public official that involves the misuse of information or material that he or she has acquired in the course of his or her official functions, whether or not for his or her benefit or for the benefit of any other person.

(2) Corrupt conduct is also any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the exercise of official functions by any public official, any group or body of public officials or any public authority and which could involve any of the following matters—

(a) official misconduct (including breach of trust, fraud in office, nonfeasance, misfeasance, malfeasance, oppression, extortion or imposition),

(b) bribery,

(c) blackmail,

(d) obtaining or offering secret commissions,

(e) fraud,

(f) theft,

(g) perverting the course of justice,

(h) embezzlement,

(i) election bribery,

(j) election funding offences,

(k) election fraud,

(l) treating,

(m) tax evasion,

(n) revenue evasion,

(o) currency violations,

(p) illegal drug dealings,

(q) illegal gambling,

(r) obtaining financial benefit by vice engaged in by others,

(s) bankruptcy and company violations,

(t) harbouring criminals,

(u) forgery,

(v) treason or other offences against the Sovereign,

(w) homicide or violence,

(x) matters of the same or a similar nature to any listed above,

(y) any conspiracy or attempt in relation to any of the above.

(2A) Corrupt conduct is also any conduct of any person (whether or not a public official) that impairs, or that could impair, public confidence in public administration and which could involve any of the following matters—

(a) collusive tendering,

(b) fraud in relation to applications for licences, permits or other authorities under legislation designed to protect health and safety or the environment or designed to facilitate the management and commercial exploitation of resources,

(c) dishonestly obtaining or assisting in obtaining, or dishonestly benefiting from, the payment or application of public funds for private advantage or the disposition of public assets for private advantage,

(d) defrauding the public revenue,

(e) fraudulently obtaining or retaining employment or appointment as a public official.

…

19. Subsection (2A) of s 8 was introduced by the Independent Commission Against Corruption Amendment Act 2015 (NSW), in order to extend the definition of “corrupt conduct” to the conduct of non-public officials in certain circumstances. It was introduced pursuant to the recommendation of an Independent Panel established to review the Commission’s jurisdiction following the decision in Independent Commission Against Corruption v Cunneen (2015) 256 CLR 1; [2015] HCA 14 (“Cunneen High Court”).

20. Section 9(1)(a) of the Act provides that, despite s 8, conduct does not amount to corrupt conduct unless it could constitute or involve, relevantly, a criminal offence.

21. Any person may make a complaint to the Commission about a matter that concerns or may concern corrupt conduct: s 10(1). The Commission may investigate a complaint or decide that it need not be investigated: s 10(2).

22. Part 4 of the Act deals with the Commission’s functions. Section 12 provides that in exercising its functions, the Commission shall regard the protection of the public interest and the prevention of breaches of public trust as its paramount concerns. Section 12A provides that, in exercising its functions, the Commission is, as far as practicable, to direct its attention to serious corrupt conduct and systemic corrupt conduct and is to take into account the responsibility and role other public authorities and public officials have in the prevention of corrupt conduct.

23. The principal functions of the Commission are set out in s 13 of the Act as follows:

13 Principal functions

(1) The principal functions of the Commission are as follows—

(a) to investigate any allegation or complaint that, or any circumstances which in the Commission’s opinion imply that—

(i) corrupt conduct, or

(ii) conduct liable to allow, encourage or cause the occurrence of corrupt conduct, or

(iii) conduct connected with corrupt conduct,

may have occurred, may be occurring or may be about to occur,

(b) to investigate any matter referred to the Commission by both Houses of Parliament,

(c) to communicate to appropriate authorities the results of its investigations,

(d) to examine the laws governing, and the practices and procedures of, public authorities and public officials, in order to facilitate the discovery of corrupt conduct and to secure the revision of methods of work or procedures which, in the opinion of the Commission, may be conducive to corrupt conduct,

(e) to instruct, advise and assist any public authority, public official or other person (on the request of the authority, official or person) on ways in which corrupt conduct may be eliminated and the integrity and good repute of public administration promoted,

(f) to advise public authorities or public officials of changes in practices or procedures compatible with the effective exercise of their functions that the Commission thinks necessary to reduce the likelihood of the occurrence of corrupt conduct and to promote the integrity and good repute of public administration,

(g) to co-operate with public authorities and public officials in reviewing laws, practices and procedures with a view to reducing the likelihood of the occurrence of corrupt conduct and to promoting the integrity and good repute of public administration,

(h) to educate and advise public authorities, public officials and the community on strategies to combat corrupt conduct and to promote the integrity and good repute of public administration,

(i) to educate and disseminate information to the public on the detrimental effects of corrupt conduct and on the importance of maintaining the integrity and good repute of public administration,

(j) to enlist and foster public support in combating corrupt conduct and in promoting the integrity and good repute of public administration,

(k) to develop, arrange, supervise, participate in or conduct such educational or advisory programs as may be described in a reference made to the Commission by both Houses of Parliament.

(1A) Subsection (1) (d) and (f)–(h) do not extend to the conduct of police officers, Crime Commission officers or administrative employees within the meaning of the Law Enforcement Conduct Commission Act 2016.

(2) The Commission is to conduct its investigations with a view to determining—

(a) whether any corrupt conduct, or any other conduct referred to in subsection (1) (a), has occurred, is occurring or is about to occur, and

(b) whether any laws governing any public authority or public official need to be changed for the purpose of reducing the likelihood of the occurrence of corrupt conduct, and

(c) whether any methods of work, practices or procedures of any public authority or public official did or could allow, encourage or cause the occurrence of corrupt conduct.

(2A) Subsection (2) (a) does not require the Commission to make a finding, on the basis of any investigation, that corrupt conduct, or other conduct, has occurred, is occurring or is about to occur.

(3) The principal functions of the Commission also include—

(a) the power to make findings and form opinions, on the basis of the results of its investigations, in respect of any conduct, circumstances or events with which its investigations are concerned, whether or not the findings or opinions relate to corrupt conduct, and

(b) the power to formulate recommendations for the taking of action that the Commission considers should be taken in relation to its findings or opinions or the results of its investigations.

(3A) The Commission may make a finding that a person has engaged or is engaging in corrupt conduct of a kind described in paragraph (a), (b), (c) or (d) of section 9 (1) only if satisfied that a person has engaged in or is engaging in conduct that constitutes or involves an offence or thing of the kind described in that paragraph.

(4) The Commission is not to make a finding, form an opinion or formulate a recommendation which section 74B or 74BA prevents the Commission from including in a report, but section 9 (5) and this section are the only restrictions imposed by this Act on the Commission’s powers under subsection (3).

(5) The following are examples of the findings and opinions permissible under subsection (3) but do not limit the Commission’s power to make findings and form opinions—

(a) findings that particular persons have engaged, are engaged or are about to engage in corrupt conduct,

(b) opinions as to—

(i) whether the advice of the Director of Public Prosecutions should be sought in relation to the commencement of proceedings against particular persons for criminal offences against laws of the State, or

(ii) whether consideration should or should not be given to the taking of other action against particular persons,

(c) findings of fact.

24. Section 17 of the Act, concerning evidence and procedure, states that the Commission is not bound by the rules or practice of evidence and can inform itself on any matter in such manner as it considers appropriate: s 17(1). It is to exercise its functions with as little formality and technicality as is possible, and its public inquiries shall be conducted with as little emphasis on an adversarial approach as is possible: s 17(2).

25. The Commission has broad powers to conduct investigations:

20 Investigations generally

(1) The Commission may conduct an investigation on its own initiative, on a complaint made to it, on a report made to it or on a reference made to it.

(2) The Commission may conduct an investigation even though no particular public official or other person has been implicated.

(3) The Commission may, in considering whether or not to conduct, continue or discontinue an investigation (other than in relation to a matter referred by both Houses of Parliament), have regard to such matters as it thinks fit, including whether or not (in the Commission’s opinion)—

(a) the subject-matter of the investigation is trivial, or

(b) the conduct concerned occurred at too remote a time to justify investigation, or

(c) if the investigation was initiated as a result of a complaint—the complaint was frivolous, vexatious or not in good faith.

(4) (Repealed)

(5) If the Commission decides to discontinue or not to commence an investigation of a complaint or report made to it, the Commission must inform the complainant or officer who made the report in writing of its decision and the reasons for it.

26. The Commission may conduct public inquiries if it is satisfied, after weighing a number mandatory but non-exhaustive considerations, that doing so would be in the public interest:

31 Public inquiries

(1) For the purposes of an investigation, the Commission may, if it is satisfied that it is in the public interest to do so, conduct a public inquiry.

(2) Without limiting the factors that it may take into account in determining whether or not it is in the public interest to conduct a public inquiry, the Commission is to consider the following—

(a) the benefit of exposing to the public, and making it aware, of corrupt conduct,

(b) the seriousness of the allegation or complaint being investigated,

(c) any risk of undue prejudice to a person’s reputation (including prejudice that might arise from not holding an inquiry),

(d) whether the public interest in exposing the matter is outweighed by the public interest in preserving the privacy of the persons concerned.

…

27. Section 18(1) provides that the Commission may furnish reports in connection with any investigation and do all such acts and things as are necessary or expedient for those purposes. Part 8 of the Act deals with reports and references by, and reports to, Parliament. Pursuant to s 74(1) of the Act, the Commission may prepare reports in relation to any matter that has been or is the subject of an investigation.

28. In relation to any matter that has been or is the subject of an investigation, the Commission may choose to prepare reports and in certain circumstances must do so. Section 74 provides as follows:

74 Reports on referred matters etc

(1) The Commission may prepare reports in relation to any matter that has been or is the subject of an investigation.

(2) The Commission shall prepare reports in relation to a matter referred to the Commission by both Houses of Parliament, as directed by those Houses.

(3) The Commission shall prepare reports in relation to matters as to which the Commission has conducted a public inquiry, unless the Houses of Parliament have given different directions under subsection (2).

(4) The Commission shall furnish reports prepared under this section to the Presiding Officer of each House of Parliament.

(5), (6) (Repealed)

(7) A report required under this section shall be furnished as soon as possible after the Commission has concluded its involvement in the matter.

(8) The Commission may defer making a report under this section if it is satisfied that it is desirable to do so in the public interest, except as regards a matter referred to the Commission by both Houses of Parliament.

(9) (Repealed)

29. The content of reports to Parliament is governed by s 74A:

74A Content of reports to Parliament

(1) The Commission is authorised to include in a report under section 74—

(a) statements as to any of its findings, opinions and recommendations, and

(b) statements as to the Commission’s reasons for any of its findings, opinions and recommendations.

(2) The report must include, in respect of each “affected” person, a statement as to whether or not in all the circumstances the Commission is of the opinion that consideration should be given to the following—

(a) obtaining the advice of the Director of Public Prosecutions with respect to the prosecution of the person for a specified criminal offence,

(b) the taking of action against the person for a specified disciplinary offence,

(c) the taking of action against the person as a public official on specified grounds, with a view to dismissing, dispensing with the services of or otherwise terminating the services of the public official.

(3) An “affected” person is a person described as such in the reference made by both Houses of Parliament or against whom, in the Commission’s opinion, substantial allegations have been made in the course of or in connection with the investigation concerned.

(4) Subsection (2) does not limit the kinds of statement that a report can contain concerning any such “affected” person and does not prevent a report from containing a statement described in that subsection in respect of any other person.

30. The Act only allows the Commission to include findings of corrupt conduct in reports to Parliament if the findings are of serious corrupt conduct:

74BA Report may only include findings etc of serious corrupt conduct

(1) The Commission is not authorised to include in a report under section 74 a finding or opinion that any conduct of a specified person is corrupt conduct unless the conduct is serious corrupt conduct.

(2) The Commission is not precluded by this section from including in any such report a finding or opinion about any conduct of a specified person that may be corrupt conduct within the meaning of this Act if the statement as to the finding or opinion does not describe the conduct as corrupt conduct.

31. A copy of a report furnished to Parliament under Part 8 shall be laid before the relevant House within 15 sitting days: s 78(1). The Commission may include in a report a recommendation that the report be made public forthwith: s 78(2). If a report includes such a recommendation, a Presiding Officer may make it public whether or not that House is in session and whether or not the report has been laid before that House: s 78(3).

32. If the Commission wishes to include an adverse finding against a person in the report to Parliament, the Commission must first give that person a reasonable opportunity to respond to the identified adverse finding and the Commission must include in the report to Parliament a summary of the substance of the person’s disputed response to the adverse finding:

79A Right of response to reports of Commission or Inspector containing adverse findings

(1) The Commission is not authorised to include an adverse finding against a person in a report under section 74 unless—

(a) the Commission has first given the person a reasonable opportunity to respond to the proposed adverse finding, and

(b) the Commission includes in the report a summary of the substance of the person’s response that disputes the adverse finding if the person requests the Commission to do so within the time specified by the Commission.

…

More detailed outline of the investigation and Report

33. The Operation Hector investigation was prompted by a notification from the Inner West Council (“IWC”) under s 11 of the Act on 15 October 2019. It had received an anonymous complaint that Tony Nguyen, a senior project engineer at IWC, had received financial benefits for using his council position to provide insider information to another to ensure their company would be awarded IWC contracts. The investigation took place over a number of years and its scope changed on several occasions, as new information came to light. Eventually, the Commission determined that it was in the public interest to hold a public inquiry under s 31(1) of the Act. The reasons why the Commission investigated the allegations are set out in Chapter 1 of the Report, noting that Appendix 1 sets out the role of the Commission and Appendix 2 sets out the approach taken by the Commission in determining whether corrupt conduct has occurred. The public inquiry commenced on 20 March 2023 and concluded 10 May 2023. Over 25 days, 16 witnesses gave evidence. Mr Watters appeared before the Commission on 4 April 2023.

34. By the time of the public inquiry, the investigation had two principal, related aspects, identified in Counsel Assisting’s opening statement and subsequently in the Report. The first concerned the procurement of subcontractors to undertake building work by Tony Nguyen. The second concerned the procurement of subcontractors by Downer, which as noted above was a managing contractor engaged by TfNSW to undertake rail station upgrades as part of two multi-million dollar programs under TfNSW. These were the Transport Access Program (“TAP”) and New Intercity Fleet (“NIF”) program.

35. Under the relevant agreement for the TAP upgrades, TfNSW could notify Downer to proceed in respect of a particular project proposal and then enter into a “managing contractor contract” (“MCC”). The terms of the MCC for each station upgrade were materially identical. One aspect of the services provided by Downer to TfNSW under the MCCs was called “reimbursable work”, which was generally to be performed by subcontractors engaged by Downer. As the managing contractor, Downer was responsible for sourcing those subcontractors. The MCCs imposed probity, integrity and ethical requirements on Downer, and Downer was required to develop a procurement management plan. After approaching the market and prior to awarding a subcontract, Downer was required to submit tender evaluation documentation and make a recommendation to TfNSW for approval. For reimbursable work, Downer was entitled to be paid “reimbursable costs” by TfNSW.

36. Mr Watters’ alleged role was in connection with three particular station upgrades. The evidence regarding his actions in these respects was interrelated, and interrelated with the alleged conduct of others, including others in relation to whom findings of serious corrupt conduct were made, and statements furnished in relation to consideration for prosecution.

Opening statement of Counsel Assisting

37. At the time of the public inquiry, the investigation was focused on seven allegations, outlined in Counsel Assisting’s opening statement and subsequently in the Report. Relevantly, the fourth allegation was that, since 1 January 2017, certain employees of Downer had dishonestly obtained a benefit for themselves by favouring certain subcontractors when awarding work arising from contracts that TfNSW had awarded to Downer. The opening statement described the two principal aspects of the investigation as interrelated, and involving a commonality of persons of interest and modus operandi with respect to alleged corrupt conduct.

38. The opening statement of Counsel Assisting made clear that one of the Downer employees the focus of the fourth allegation was Mr Watters. One of the TfNSW projects referred to by Counsel Assisting was the TAP upgrade of North Strathfield Station, in respect of which Mr Watters was Downer’s project manager. Counsel Assisting stated that a company called RJS Infrastructure had been awarded subcontracts to the value of $95,299 on the project. RJS Infrastructure was owned by Mr Nguyen and Aidan Cox. Counsel Assisting stated that Mr Watters had accepted RJS Infrastructure’s quote of $51,007 without a tender process, that Mr Watters later approved $44,292 in variations (some of which were understood to have been inflated), and that Mr Watters appeared to have received a cash payment of $8,000 from Mr Nguyen and Mr Cox in response to a direct request for money.

39. Counsel Assisting also referred to works at Wollstonecraft Station, in respect of which RJS Infrastructure had been awarded subcontracts, and a text message exchange between Mr Watters and Mr Cox. Finally, in respect of Mr Watters, Counsel Assisting said that the public inquiry would explore whether Mr Watters provided confidential pricing information to Mr Cox in relation to other projects with an expectation that he would receive benefits in return.

Closing submissions

40. Following the public inquiry, written submissions were exchanged. On 24 July 2023, the submissions of Counsel Assisting were provided to the Commission and interested persons. Those submissions were 137 pages long. In the introduction and summary of key proposed findings it was submitted that the activities had been investigated by reference to seven specific allegations, corresponding with the summons.

41. The submissions set out the proposed factual findings that should be made and the corrupt conduct findings that should be made on that basis. In respect of Mr Watters, Counsel Assisting submitted that the Commission would find as a fact that Mr Cox paid Mr Watters $8,000 cash, which had originally been paid to Mr Cox by Mr Nguyen, in a carpark in North Strathfield. The evidence relied upon to support that proposition, and the context in which the alleged payment was made, was detailed over four pages.

42. In a later part of the submissions Counsel Assisting contended that, because of the nature of that payment in the context of the RJS Infrastructure quote and Downer’s MCC for the North Strathfield Station, the conduct of Mr Watters constituted corrupt conduct pursuant to s 8(2A)(c), read with s 9 of the Act (having regard to s 249B(1) of the Crimes Act 1900 (NSW) (“Crimes Act”) (corrupt receipt of rewards by agents)). It was submitted that it was conduct of a person (whether or not a public official) that impairs or could impair public confidence in public administration and which could involve dishonestly obtaining or assisting in obtaining, or dishonestly benefiting from, the payment or application of public funds for private advantage.

43. It was submitted that there was insufficient admissible evidence to make out a prima facie case for contravention of s 249B(1) of the Crimes Act beyond reasonable doubt (noting that the evidence of Mr Watters had been given pursuant to a declaration under s 38 of the Act that objection was taken, which in turn meant by virtue of s 37(3) that it would not have been admissible in a criminal trial), but submitted that the opinion of the Director of Public Prosecutions (“the Director”) should be sought regarding prosecution of Mr Watters for giving knowingly false evidence before the Commission regarding two aspects his evidence, pertaining to Wollstonecraft and Birrong Stations. Counsel Assisting did not propose any corrupt conduct findings be made about Mr Watters in relation to the Wollstonecraft or Birrong Station projects.

44. Mr Watters’ first written submissions were dated 28 August 2023.They were 40 pages long. At the outset it was stated that the opening submissions made by Counsel Assisting and associated publicity had caused Downer to terminate Mr Watters’ employment, and otherwise caused him damage. It was “at the same time” acknowledged that the investigation had served important functions, with a range of stakeholders, and was concerned with many more people than Mr Watters. It was said to be legitimate for assumptions and preliminary views to arise, but contended that now at the end point, care was required to scrutinise those assumptions and preliminary views in order to determine whether the evidence established the allegations, which were denied by Mr Watters.

45. It was forecast on Mr Watters’ behalf in the introduction to the written submissions that there were three central submissions. The first was that the Commission would not be satisfied on the evidence that Mr Watters engaged in “corrupt conduct” as alleged by Counsel Assisting. In this regard the critical allegation was the alleged suggestion to Mr Cox to inflate the quote for North Strathfield to include a kickback for him, and payment of $8,000 by Mr Cox in a carpark in North Strathfield. The critical issue was submitted to be Mr Cox’s truthfulness, and the importance of consideration of his allegations by reference to the statement of principle in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 (“Briginshaw”) was emphasised.

46. The second submission was to be that the Commission would not take steps to seek advice from the Director regarding lying before the Commission as recommended by Counsel Assisting.

47. The third forecast area of submission concerned the Commission being led into “jurisdictional error” (if this had not already occurred) in the course being commended regarding Mr Watters. It was stated that in connection with the fourth allegation of the seven, that relevant to Mr Watters, the misconduct alleged was a purely private matter that does not fall within any part of the definition of “corrupt conduct” under the Act. It was submitted that accordingly:

“The Commissioner should determine that it has no jurisdiction over the matters that concern Mr Watters and make clear that the allegations are withdrawn to mitigate the damage that has been caused already to him by reason of the allegations.”

48. There followed 23 pages of submissions in support of Mr Watters’ primary proposition that the Commission should find that the conduct alleged was not proved. Thereafter 9 pages analysed various text messages and communications pertaining to the Wollstonecraft and Birrong Station projects, and advanced the submission that the Commission would not refer Mr Watters to the Director for giving false evidence in connection with these issues.

49. The last five pages addressed the alternative proposition that “even if the above submissions are rejected, the findings contended for by Counsel Assisting at CAS [344] would likely lead the Commission into jurisdiction error.” The submission of Counsel Assisting at [344] was that Mr Watters should be found to have engaged in corrupt conduct pursuant to s 8(2A)(c) of the Act. It was submitted that the Commission is a corruption commission, not a crime commission. Reliance was placed upon Cunneen (High Court) and legislative amendments following this decision. It was submitted that corrupt conduct is carefully defined, and reference was made to aspects of the legislation. The decision of the Court of Appeal in Cunneen v Independent Commission Against Corruption [2014] NSWCA 421 (“Cunneen”) was relied upon for its finding that the conduct there alleged was not “corrupt conduct” and the Court’s making of a declaration that the Commission had “no power to investigate the allegation involving the applicants identified in the summons.”

50. The High Court’s dismissal of the appeal on 15 April 2015 was noted, as was the NSW legislative introduction of the Independent Commission Against Corruption Amendment (Validation) Act 2015 (NSW) on 6 May 2015. This was submitted to validate acts of the Commission rendered ultra vires by reason of the decision in Cunneen (High Court). It was noted that what is now s 8(2A) of the Act was introduced following Cunneen (High Court).

51. It was submitted that in relation to s 8(2A) of the Act the conduct must be conduct that both “impairs, or that could impair, public confidence in public administration” and “could involve” one of the identified “matters”. It was submitted that:

“When the above background and legislation is considered and analysed in the case of Mr Watters, there is no jurisdiction for the Commission to make any findings of the kind contended for by Counsel Assisting. Counsel Assisting appear to rightly recognise that the conduct of Mr Watters, even if established, could not constitute “corrupt conduct” within the meaning of ss 8(1) or (2) of the Act. The limb they contend it could meet is s 8(2A)(c). Counsel Assisting says what engages this provision is “his $8,000 secret payment received from Cox in connection with the award of the North Strathfield Station Building project, for which Watters had instructed Cox to increase RJS Infrastructure’s quote to Downer to cover his payment”: CAS [344].

Even assuming this finding is made (which is strenuously resisted for reasons set out above), there are no facts sufficient to support this finding. Neither of the two essential matters required by s 8(2A) as set out above at paragraph 161 can be met.”

52. The first of two submissions advanced in support of that contention was that Mr Watters’ conduct was as between himself and his employer, Downer, and a third party, RJS Infrastructure. It was not conduct that “impairs” or “could impair” the “confidence in the public administration.” The second was that it was critical, to fall within either precondition, that Mr Cox in fact inflated the original North Strathfield invoice. If he did not, it was submitted, then the conduct would not have resulted in Mr Watters having “obtained”, “assisted in obtaining” or “benefitted from” any “payment or application of public funds.” Unless this was so, any payment to Mr Watters would be coming purely and entirely out of RJS Infrastructure’s profits generally (which may have been entirely unrelated to any public funds). Reference was made to Mr Cox’s evidence that the invoice was appropriately costed, and that he could not say that it in fact had been inflated.

53. The final three paragraphs of the submissions were in the following terms, with the first two of these falling under the major heading “THE COMMISSION WOULD FALL INTO JURISDICTIONAL ERROR” that preceded the last five pages of the submissions:

“Next steps

[169] If the Commission is to accept that it does not have jurisdiction to make a finding of corrupt conduct, it should seek to mitigate any damage to Mr Watters by making clear that the allegations made in opening (which have since been picked up and reported by the AFR and remain available online) have been withdrawn. That may permit Mr Watters to apply to the relevant news outlets and ask either for those articles to be removed or clarified.

[170] If the Commission is inclined not to accept the submissions as to jurisdiction, the position is more complex. Given the immediate and further harm that would likely be caused by the publishing of a report in terms suggested by Counsel Assisting, Mr Watters’ respectfully requests that he be given reasonable notice by the Commission if the finding proposed by Counsel Assisting is sought to be made so that he may consider his legal position.

CONCLUSION

[171] Ultimately, for the reasons set out above, the Commission should not make any adverse findings against Mr Watters as have been sought by Counsel Assisting, should not seek any advice from the DPP in relation to him and, even in the event that it disagrees with the present submission factually, should not make any adverse findings if only for the reason that it lacks the jurisdiction to do so.”

54. On 2 November 2023, Counsel Assisting provided submissions in reply. These dealt in detail with the construction of s 8(2A)(c) of the Act, emphasising its purpose of promotion of the integrity and good repute of public administration. It was submitted that “could” when first appearing in s 8(2A) should not be interpreted as meaning “would”, but was concerned with the capacity of the conduct to impair confidence in public administration. The submission was maintained that the conduct of Mr Watters in requesting and receiving a payment constituted corrupt conduct, on the basis that the agreement between Mr Watters and Mr Cox resulted in RJS Infrastructure dishonestly obtaining, or dishonestly benefiting from, the payment or application of public funds for private advantage. Counsel Assisting submitted that such conduct could impair public confidence in public administration.

55. It was submitted that the term “public funds” in 8(2A)(c) had not received judicial attention, but should be taken to refer to monies held or dispensed in the course of public administration. The relevant public administration included the oversight and administration of tender processes and contract administration for TfNSW. It was submitted that the process to be adopted for considering the matters contained in s 9 is as Priestely JA explained in Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 (“Greiner”) at 187:

“I find facts (a) to (n); they constitute corrupt conduct within s 8; if accepted by a relevant tribunal as proved to the appropriate standard they would constitute a particular [criminal offence, disciplinary offence, reasonable grounds for dismissing, dispensing with the services of or otherwise terminating the services of a public official …]; therefore the conduct is corrupt conduct for the purposes of the Act.”

56. Under a heading “Section 13(3A) of the ICAC Act” it was acknowledged that s 13(3A) of the Act placed further requirements upon this process. Differences between sections 13(3A) and 9(1) regarding fact finding, characterisation and satisfaction of the Commission were addressed. These sections in turn were contrasted with the provisions in s 74A of the Act relevant to obtaining advice from the Director.

57. Further submissions under the heading “Jurisdictional point raised by Watters” were advanced. There followed a detailed analysis over five pages of the evidence, relevant to rebutting the contention for Mr Watters that money paid by TfNSW to Downer under the MCC is not “public funds”.

58. There were then, under a sub-heading “Nature of the ‘funds’ paid by TfNSW to Downer in respect of Reimbursable Work”, five paragraphs contending that money paid by TfNSW to Downer in connection with “Reimbursable Costs”, particularly “Subcontractor invoices”, did not change from public funds to private funds as a result of its transfer into Downer’s bank account. The system was said to be analogous to a “Quistclose Trust”, whereby money is paid over for a specific purpose so that it can be said that there is a trust for that purpose, and if that purpose is not fulfilled, there is a trust in favour of the payer: cf. Barclays Bank Ltd v Quistclose Investments Limited [1970] AC 567 (“Quistclose”).

59. Under a separate sub-heading “Watters’ dishonest conduct in encouraging Aiden Cox to inflate invoices” it was then submitted that the facts were sufficient to find that Mr Watters and Mr Cox combined to dishonestly obtain a payment of public funds for RJS Infrastructure’s private advantage, referring to ss 7(2) and 8(2A)(c) of the Act. It was noted that as the timing of this payment was uncertain, it cannot be said either way that payment of the bribe was a precondition to Mr Watters’ recommendation of RJS Infrastructure to Downer for the North Strathfield Station building works. It was submitted that the Commission would find the agreement dishonest, and known by Mr Watters and Mr Cox to be so, in accordance with the definition in s 4B of the Crimes Act.

60. The reply submissions of Counsel Assisting contain a further sub-heading “Impairing public confidence in public administration”. By virtue of redactions to the submissions, it is not clear whether there had been another heading after “Jurisdictional point raised by Watters” before this sub-heading. Under the sub-heading it was contended that the Commission would not accept Mr Watters’ further submission that his alleged conduct, insofar as it concerns the dishonest agreement reached with Mr Cox in respect of the North Strathfield Station building project, could not impair public confidence in public administration. Detailed analysis of evidence followed, which traversed issues outside the alleged North Strathfield Station project to place it in context, including evidence of Mr Watters’ conversations about Wollstonecraft, obligations under the MCC, systems and roles, due diligence and probity requirements and so on. It was submitted that as a consequence of these considerations the conduct allegedly engaged in by Mr Watters and Mr Cox in relation to the award of the North Strathfield Station building project was not beyond the remit of s 8(2A) of the Act.

61. A further 21 pages of written submissions, dated 17 November 2023, were made on Mr Watters’ behalf. Mr Watters reiterated that his primary position was that the Commission would not find that he engaged in the relevant conduct. It was submitted:

“The primary position of Mr Watters remains that the Commission would not find as a matter of fact that he engaged in “corrupt conduct” such that the difficult questions of the extent of ICAC’s jurisdiction need not arise. In particular, it is contended that for reasons that have already been submitted, the evidence does not establish that Mr Watters requested or received any secret commission in relation to the North Strathfield project. The present submissions are made as part of his alternative position assuming that the Commission does not accept that primary submission.

At a level of principle, there appears to be no dispute that for the Commission to have jurisdiction to make a finding of corrupt conduct in relation to Mr Watters, the Commission must be satisfied that, within the meaning of s 8(2A) and 9(1)(a) of the Independent Commission Against Corruption Act 1988 (NSW) (ICAC Act)), conduct has in fact been committed by Mr Watters that (see WS [160]-[161]):

(a) “impairs, or that could impair, public confidence in public administration” within the meaning of s 8(2A);

(b) “could involve” one of the identified matters, here with the only one advanced being s 8(2A)(c) “dishonestly obtaining or assisting in obtaining, or dishonestly benefitting from, the payment or application of public funds for private advantage or the disposition of public assets for private advantage”; and

(c) “could constitute or involve” a “criminal offence” within the meaning of s 9(1) of the ICAC Act, with the only nominated offence here being s 249B(1) of the Crimes Act 1900 (NSW) (Crimes Act).

If Mr Watters’ primary submission is accepted, it is plain that the Commission would not be satisfied it could make a finding of corrupt conduct. If his primary submission is not accepted, the primary issue on jurisdiction appears to be the proper construction of the two limbs of s 8(2A) of the ICAC Act and how they apply to Mr Watters. Section 9 is also addressed for completeness as it remains an important part of the jurisdictional threshold that must be met.

The ultimate submission on behalf of Mr Watters is that, construed correctly and even in the alternative scenario that the alleged conduct is proven, neither of the three limbs set out in paragraph 3 are met.” (emphasis in original)

62. There followed legal submissions regarding the two requirements arising from ss 8(2A)(c) and 9(1)(a) of the Act. Based on further analysis of s 8(2A)(c) it was acknowledged that corrupt conduct need not be the conduct of a public official, but contended that the critical question was how far the provision extended. The submission that an “offence by private citizen (let alone a breach of contract by a private company) is not ordinarily something that impairs or could impair confidence in public administration” was reiterated.

63. Mr Watters’ further submission argued that the funds were not “public funds”. The dispute was identified as limited to whether the evidence established that TfNSW funds were paid to Downer with those same funds then being paid on to RJS Infrastructure, and, if so, whether the TfNSW funds remained “public funds” after paid from TfNSW into a general account of Downer and at the time when they were then disposed of by Downer to a third party contractor (RJS Infrastructure). There followed detailed criticism of the Quistclose trust analogy that had been invoked by Counsel Assisting, by reference to legal authority and evidence regarding the terms of the MCC. It was submitted that the submissions of Counsel Assisting regarding “public funds” should be rejected, and that this would deprive the Commission of any power to find that Mr Watters engaged in corrupt conduct.

64. It was further submitted that there was no evidence before the Commission as to the background of the North Strathfield variation works that would establish that TfNSW had any role in the engagement or payment of RJS Infrastructure. It was submitted that the conduct relied upon by Counsel Assisting and put to Mr Watters in cross-examination had nothing to do with his interactions with TfNSW, but to do with his interactions with RJS Infrastructure and Downer only, and his duties to Downer only. It was submitted that there was no evidence to support the characterisation of a secret commission for a recommendation of RJS Infrastructure to TfNSW. It was submitted that there was no evidence of any such recommendation, and it was not what was put in submissions by Counsel Assisting in chief, and not put to Mr Watters in the witness box. It was submitted that what was alleged was a breach of his duties to Downer. It was also submitted that this expanded suggestion of corrupt conduct would not involve the same “conduct” for the purposes of s 8(2A)(b) and s 9 of the Act.

65. It was then submitted that if the funds paid by RJS Infrastructure were funds that originated from TfNSW and were paid by Downer pursuant to a Quistclose trust, the first limb – “impairs or could impair public confidence in public administration” – arose for consideration. It was argued that Mr Watters’ alleged conduct was not of a nature or scale to so threaten the NSW State as to impair public administration, but was an isolated act of dishonesty. In this respect Mr Watters’ distinction from others involved in the inquiry, allegedly committing more wide-ranging or systemic frauds, was emphasised. It was submitted that:

“Even if it might be established in relation to other individuals the subject of inquiry that there was some kind of failure by TfNSW, it is not clear how it is established in relation to Mr Watters. No reasonable system of oversight by Downer – let alone TfNSW – could have prevented an opportunistic request (as the allegation goes) by a relatively senior employee to a sub-contractor. Any failure simply cannot be sheeted home to the state of NSW so as to have the capacity to bring it into disrepute.”

66. This second set of written submissions for Mr Watters repeatedly and exclusively anchored their purpose to contending that the Commission did not have power or jurisdiction to make a finding of corrupt conduct: paragraphs [3], [6], [18], [32], [50], [55], [68]. There was no submission regarding absence of power or jurisdiction to make findings otherwise in relation to the alleged conduct.

67. On the issue of whether the alleged conduct “could impair” public confidence for the purposes of s 8(2A) of the Act it was expressly submitted that the inquiry was whether the conduct had that capacity. The submission continued:

“That is, the exercise is one of characterising the conduct that did in fact occur as opposed to conduct that may or may not have occurred or could have occurred had some other factual scenario existed. The exercise (combining for convenience both of the two limbs of s 8(2A) and s 9) appears to involve a two-stage analysis:

a. First, it is necessary to make factual findings as to the “conduct” that in fact occurred.

b. Second, it is necessary to determine as a matter of law (not as a mere matter of opinion) whether the conduct as found has the requisite character, namely, that it is conduct that “impairs, or could impair, public confidence in public administration” (s 8(2A), first limb), which “could [in the sense of would, if proven] involve any of the [identified] matters” (s 8(2A), second limb) and which “could constitute or involve” a “criminal offence” (s 9(1)(a)).” (emphasis in original)

68. The penultimate paragraph contended that the evidence does not establish to the requisite standard that the conduct relied upon by Counsel Assisting in relation to North Strathfield Station would, if established, amount to a criminal offence. It was submitted that:

“The present submissions on the complex issues of jurisdiction that arise in relation to Mr Watters serve to underscore his submissions as to the facts. He reiterates his primary position that he did not do what Mr Cox, and Counsel Assisting, allege.”

69. The final paragraph of these submissions, under the heading “CONCLUSION”, was as follows:

“Mr Watters reiterates his position as set out in WS [169]-[170] that the Commission does not have the evidence or the jurisdiction to make any finding of “corrupt conduct” against him as has been submitted by Counsel Assisting. If the Commission is inclined to take a different view as to its jurisdiction to make such a finding, he respectfully requests that he be given reasonable notice of that position so that he may consider his legal position.”

70. The Commission accepts that it took no further steps to give Mr Watters any notice about how it was proposing to proceed.

The content of the Report

71. The Commission made findings that ten people had engaged in serious corrupt conduct. Among them were Mr Nguyen and Mr Cox, who were both found to have engaged in corrupt conduct as they took steps to win work for RJS Infrastructure on various TfNSW station projects. The first chapter entitled “Summary of investigation and outcomes” is in evidence, but the underlying chapters in relation to the majority of these corrupt conduct findings are not before the Court. The Commission did not make corrupt conduct findings in respect of Mr Watters.

72. The abovementioned summary chapter also explains briefly the basis on which statements pursuant to s 74A(2) of the Act were made in respect of eight people that consideration should be given to obtaining the advice of the Director for prosecution. These were for substantive criminal offences such as fraud, forgery, wilful misconduct in public office and corruptly receiving or soliciting a benefit as an agent, as well as for giving false or misleading evidence at the public inquiry pursuant to s 87(1) of the Act. The underlying chapters in relation to the majority of these findings are not before the Court. The Commission did not make any such statement in relation to Mr Watters.

73. Chapter 2 of the Report was entitled “A question of jurisdiction”. It considered whether, and in what circumstances, the conduct of Downer employees could come within the Commission’s jurisdiction to make findings of corrupt conduct. Although the point about making corrupt conduct findings was advanced for Mr Watters, it potentially had broader significance because, if wholly accepted, it may have meant there was no capacity for the Commission to find that any Downer employees engaged in corrupt conduct. It was noted that the conduct in question in Mr Watters’ case was detailed in Chapter 9.

74. The Commission concluded that while Downer’s employees were not public officials, nor captured by the non-exhaustive list of individuals who fall within s 3 of the Act, their conduct could nevertheless constitute corrupt conduct in certain circumstances. The Report referred to employees holding positions of trust, and the significance of breach of the same given the obligations under the MCCs to ensure probity, integrity and accountability. The conduct alleged could have the capacity to impair public confidence for the purposes of s 8(2A) of the Act. On this issue, the Report stated:

“The Commission accepts Counsel Assistings’ characterisation that the relevant public administration for the purposes of this investigation is the oversight of the tender processes and contract administration by TfNSW; the administration and oversight of procurement processes by Sydney Trains; and the oversight of contract administration by Sydney Trains.

In general, the Commission does not accept that the conduct of a Downer employee agreeing to ensure a contractor engaged by Downer was recommended to TfNSW for a TfNSW public infrastructure project, in return for the employee being provided with a benefit by that contractor, could not impair public confidence in public administration.”

75. The Commission next considered the question of whether the relevant conduct involved “public funds” or “public assets”, as required by the second limb of s 8(2A)(c) of the Act. It was noted that the term “public funds” had not attracted judicial consideration. The Commission outlined the various submissions and analysed the flow of funds under the MCC. The Commission was satisfied that money paid by TfNSW to Downer in respect of reimbursable costs fell within the descriptor “public funds”, rejecting an argument by Mr Watters to the contrary. It noted, however, that the MCC envisaged that, at least generally, reimbursable costs would already have been paid by Downer. It found that the question as to whether these funds were “public funds” was “less clear”, rejecting the Quistclose trust analogy advanced by Counsel Assisting in circumstances where the actual funds do not commence from TfNSW.

76. Because the issues could bear upon other subcontractor arrangements discussed in the Report, and other affected parties had not had the opportunity to make submissions on the point, the Commission considered it was “not placed to come to a concluded position on the issue”. In those circumstances, the Commission determined that where Counsel Assisting sought to rely exclusively on s 8(2A)(c) of the Act, and the source of the payment to subcontractors could not be determined, it would decline to make a finding of corrupt conduct. It was noted that for the most part the Commission had been able to rely on other sections of the Act to make its findings.

77. Chapter 2 of the Report also resolved an argument that had been advanced on behalf of Downer regarding whether certain payments were “Reimbursable Costs”. The Commission was not satisfied it had jurisdiction pursuant to s 8(2A)(c) of the Act to make corrupt conduct findings in relation to specific invoices and payments, because the relevant funds as paid by Downer would not constitute “public funds”.

78. Chapter 9 of the Report was headed “North Strathfield Station”. This chapter examined the circumstances in which Mr Watters (on behalf of Downer) arranged for RJS Infrastructure to be awarded a subcontract to perform works as part of the TAP upgrade to that station without a formal tender process, and whether he sought or received a benefit in return for the same. Aspects of the relevant evidence related more broadly to RJS Infrastructure’s (then) proposed tender for works on the upcoming Wollstonecraft Station project.

79. The Commission began by examining the evidence and then made factual findings. On the basis of evidence of Mr Cox and Mr Nguyen, and recorded conversations and documentary evidence, the Commission was satisfied on the balance of probabilities, applying the approach in Briginshaw, that Mr Watters solicited a payment to himself, and Mr Cox paid Mr Watters approximately $8,000. The analysis of the evidence included discussion of the credibility of Mr Cox, and Mr Watters, as witnesses – in respect of Mr Watters for example accepting the submission of Counsel Assisting that “Mr Watters was one of several witnesses in the public inquiry whose evidence demonstrated an inclination to minimise their role and/or an inability to accept logical inferences.”

80. While the Commission was satisfied that Mr Watters had instructed Mr Cox to increase RJS Infrastructure’s quote to Downer to cover his payment, Counsel Assisting had not submitted and the Commission did not find that the RJS Infrastructure quote for the North Strathfield Station works was actually inflated. The Commission noted the evidence that variations to the subcontract were legitimate and that there was no evidence that Mr Watters sought or received any payment from Mr Cox or Mr Nguyen in relation to the variations.

81. The Commission then came to make findings in respect of corrupt conduct, firstly addressing the established conduct of Mr Watters. It noted that its findings were made pursuant to ss 13(3)(a) and 74A(1) of the Act. The Commission noted that it had already dealt in Chapter 2 with Mr Watters’ submissions that his conduct was not conduct that could impair confidence in public administration, and did not involve the payment or application of public funds.

82. The Commission determined to not make a corrupt conduct finding on the expanded basis contended for by Counsel Assisting in the final submissions (see above at [59]). That was for two reasons. Firstly, Mr Watters did not recommend to TfNSW that RJS Infrastructure was the appropriate subcontractor for the work. That recommendation was made by another Downer employee. There was no evidence that Mr Watters was even aware that Downer had any contractual obligation to recommend RJS Infrastructure to TfNSW. Although Mr Watters operated as if he was approving RJS Infrastructure’s involvement on behalf of Downer, the recommendation from Downer to TfNSW came well after RJS Infrastructure had already been engaged to carry out the work at North Strathfield Station.

83. Secondly, the conduct satisfying the second limb in s 8(2A)(c) of the Act must be the same conduct that falls within s 9. The conduct Mr Watters engaged in was a breach of his duties towards Downer and it had not been alleged that he breached a duty to TfNSW, and thus the relevant conduct would not constitute a criminal offence under s 249B(1) of the Crimes Act as the recommendation to TfNSW would not have been “in relation to the affairs or business” of Mr Watters’ principal (Downer). Counsel Assisting had not demonstrated (nor even contended) that Mr Watters could be viewed as an agent for TfNSW pursuant to s 294A of the Crimes Act.

84. The Commission thus found that the facts as established did not meet the definition of “corrupt conduct”.

85. In light of the position taken by the Commission with respect to Mr Watters, the Commission decided to exercise its direction under s 13(2A) of the Act not to make findings of corrupt conduct against Mr Cox and Mr Nguyen in relation to the payment of the $8,000, despite finding Mr Cox had made such payment as reward for Mr Watters arranging for RJS Infrastructure to be awarded a contract, and Mr Nguyen on behalf of RJS Infrastructure agreeing with Mr Cox for such payment to be made for such purpose.

86. The Commission concluded this chapter by noting that, in light of the fact that all three men gave evidence with the benefit of a declaration under s 38 of the Act, Counsel Assisting had submitted that there was inadequate admissible evidence to warrant obtaining the advice of the Director in relation to criminal prosecution of any of them.

87. Chapter 11 dealt with the TAP Tranche 3 projects at Wollstonecraft, Banksia and Birrong Stations. This chapter considered the evidence and submissions pertaining to a number of individuals. One part of it, under the heading “Kevin Watters weighs in” analyses over a number of pages the evidence relevant to Mr Watters, including text messages between Mr Cox and Mr Watters in relation to the Wollstonecraft Station and Birrong Station works, which were found to reflect an expectation on Mr Watters’ part of receiving a benefit for assisting RJS Infrastructure to win the works.

88. The Commission engaged with arguments about the credibility of Mr Watters’ evidence about the relevant communications, which was important not only because of the substantive allegations but because of the submission of Counsel Assisting that the Commission should issue a statement seeking the consideration of the Director for prosecution of Mr Watters for giving false evidence to the Commission. The Commission expressed agreement with the submission of Counsel Assisting that when compared to the content of his SMS messages to Mr Cox:

“Mr Watters’ evidence as to the meaning and intent of those SMS messages defies credibility. Having regard to the broader context of the circumstances in which those communications occurred, the Commission is satisfied that the SMS messages reflected a desire on the part of Mr Watters to seek a benefit in return for his showing favour to RJS Infrastructure in relation to the awarding of works on the Wollstonecraft Station project.”

89. It was found however that no such benefit was ultimately paid.

90. In relation to a later recorded conversation between Mr Watters and Mr Cox, after the completion of some of the works at Wollstonecraft Station, the evidence of Mr Watters and Mr Cox was analysed (the latter also giving evidence of his conversations with Mr Nguyen about the conversation with Mr Watters). Again, there was no evidence that Mr Watters was ultimately paid anything. However the Commission was similarly satisfied, as with the earlier conversation, that despite Mr Watters’ evidence to the contrary, the recorded conversation reflected an expectation on Mr Watters’ part of receiving a benefit in return for his assistance to RJS Infrastructure being awarded those works.

91. The Commission also considered the alleged conduct of Mr Watters, Mr Cox, Mr Nguyen, and others, in relation to tenders for the Birrong Station project. Again, the Commission declined to accept Mr Watters’ evidence as to the nature of the SMS messages between him and Mr Cox. The inference was drawn that his intent to provide Mr Cox with confidential information was to give RJS Infrastructure an unfair advantage. The Commission was satisfied in the broader context that Mr Watters was referring in the relevant communications to his expectation of receiving a benefit in exchange for having provided RJS Infrastructure with that unfair advantage.

92. The Commission made no finding of corrupt conduct on the part of Mr Watters, in circumstances where there was an absence of cogent evidence that his conduct involved the improper expenditure of public funds, or indeed that any such benefit was ultimately paid, in relation to the Wollstonecraft or Birrong projects. The Commission was not satisfied that Mr Watters’ conduct fell within the scope of ss 8 or 9 of the Act.

93. The Commission considered the submission made by Counsel Assisting that advice from the Director should be sought as to prosecuting Mr Watters for lying to the Commission. It was stated:

“It was submitted on behalf of Mr Watters that the Commission would not be satisfied that consideration should be given to seeking the advice of the DPP in respect of possible offences against s 87 of the ICAC Act arising from Mr Watters’ evidence as to the meaning and intent of his SMS messages to Mr Cox in relation to the Wollstonecraft and Birrong Station projects; that is, that he gave knowingly untruthful evidence to the effect that they were not in furtherance of Mr Watters seeking a bribe or kickback from RJS Infrastructure.

Mr Watters submitted that there is no tenable basis upon which his evidence as to the meaning of the relevant communications could be disproved beyond a reasonable doubt. In the circumstances, the Commission agrees with this submission.

Accordingly, the Commission is not of the opinion that consideration should be given to obtaining the advice of the DPP with respect to the prosecution of Mr Watters for an offence under s 87 of the ICAC Act.”

94. Chapter 11 also dealt in detail with the allegations of corrupt conduct, and/or giving false evidence in the Inquiry, on the part of Mr Nguyen, Mr Cox, and five others in connection with the Wollstonecraft and Birrong projects. Mixed findings were made, with no findings of corrupt conduct in relation to some (for varied reasons) but positive findings of corrupt conduct in relation to others; and a statement in relation to one affected person only that consideration should be given to the obtaining of the advice of the Director with respect to prosecution.

95. The Report is predominantly concerned with the Commission’s consideration of whether or not findings of corrupt conduct were made out. The Report addressed the various allegations of corrupt conduct in Chapters 3 to 12. The Report concluded with two chapters titled “Corruption Prevention”. One (Chapter 13) concerned corruption prevention at the IWC. The second concerned corruption prevention at TfNSW. The two different areas corresponded with the two main topic areas identified in the opening statement of Counsel Assisting as being the subject of the Commission’s investigation.

96. Chapter 14 examined the systemic factors that allowed corrupt conduct to occur in TfNSW infrastructure projects that used the managing contractor framework. The Commission identified weaknesses, including poor enforcement of contractual subcontracting requirements. It made nine recommendations.

97. Appendix 1 to the Report constituted a one-page summary of the role of the Commission. It included the statement that the Commission may make findings of fact and form opinions based on those facts as to whether any particular person has engaged in serious corrupt conduct. It stated:

“The role of the Commission is to act as an agent for changing the situation that has been revealed. Through its work, the Commission can prompt the relevant public authority to recognise the need for reform or change, and then assist that public authority (and others with similar vulnerabilities) to bring about the necessary changes or reforms in procedures and systems, and, importantly, promote an ethical culture, an ethos of probity.”

98. Appendix 2 to the Report is titled “Making corrupt conduct findings”. It sets out relevant provisions in the Act and the Commission’s approach to determining findings of corrupt conduct. The judgment of Gleeson CJ in Greiner at 136 and 143 is quoted in relation to the approach to s 9 of the Act, including of firstly making findings of fact, then asking whether, if there were evidence of those facts before a properly instructed jury, such a jury could reasonably conclude that a criminal offence had been committed.

99. Under a sub-heading “The path to findings” it is said that the Commission first makes findings of relevant facts on the balance of probabilities, and there are a number of paragraphs dedicated to the seriousness of making a finding of corrupt conduct, the care required, and the application of the approach in Briginshaw and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; [1992] HCA 66 at [7]. It is said that the Commission then determines whether relevant facts as found come within the terms of any of subsections 8(1), (2) and/or (2A) of the Act. If they do, the Commission then considers whether the conduct comes within s 9 of the Act. If the s 8 conduct is not excluded by s 9(1), the Commission considers the requirements of s 13(3A) of the Act. If satisfied those requirements have been met, the Commission then determines whether, for the purpose of s 74BA of the Act, the conduct the subject of the Commission’s finding for the purposes of any of subsections 8(1), (2) and/or (2A) is serious corrupt conduct. If those requirements are satisfied, the Commission may make a finding of serious corrupt conduct.

The parties’ submissions

Submissions for the plaintiff

100. The plaintiff argued from the outset of his written submissions that:

“For reasons which remain unexplained, the Commission refused to determine whether it had jurisdiction. But without deciding that it had jurisdiction, the Commission nonetheless went ahead and effectively made the findings contended for against Mr Watters but simply did not label the damning conduct ‘corrupt conduct’.”

101. It was submitted that although there was a time when the proposition that the alleged conduct did not occur was the primary submission for Mr Watters, this had changed by the end of the submission filing process, to one of his primary position being that the Commission did not have power or jurisdiction.

102. It was submitted that:

“The conduct of the Commission was unlawful. It was necessary for it to determine whether it had jurisdiction before it made findings adverse to Mr Watters. For the reasons below, it is clear that it had no jurisdiction. The conduct of the Commission has caused significant and ongoing reputational damage to Mr Watters.”

103. It was acknowledged on Mr Watters’ behalf that the powers of the Commission are not limited to making findings in relation to “corrupt conduct” but it was submitted that the other powers are all related to the question of preventing “corrupt conduct” such that the definition of “corrupt conduct” places a critical limit on the scope of the powers of the Commission under Act. It was submitted that whereas the complete definition is to be arrived at by reading ss 7, 8 and 9 of the Act together, only s 8(2A)(c) was relevant to the case advanced by Counsel Assisting.

104. The fact that s 13(3)(a) expressly permits the Commission to make findings “whether or not the findings or opinions relate to corrupt conduct” was submitted to not mean that there are no limits conditioning the Commission’s powers. The findings and Report must still be able to be rationally and logically connected to the purposes of the Act so that the actions of the Commission may properly be characterised as a lawful exercise of power. The section was said to not amount to a carte blanche to make any findings whatsoever irrespective of any connection to the purpose of the Commission. It was submitted that “The Commission does not have some unqualified power to make ‘a finding about what occurred’ irrespective of whether what occurred has any connection to the purposes and limits of its powers.”

105. It was made clear (in response to a submission advanced for the defendant) that the plaintiff was not contending as a matter of principle that the Commission may not make findings in respect of a person it ultimately did not find had engaged in corrupt conduct; but that in this case the Commission did not act lawfully in doing so. Although extreme scenarios could be put forward for either side in relation to the limits of power under s 13 of the Act, it was submitted that this case was one where the findings were not lawfully made.

106. Mr Watters contended that the Commission acted unlawfully and ultra vires the Act in circumstances where the Commission did not reach a positive satisfaction that the acts alleged against Mr Watters could ever have amounted to “corrupt conduct” under the Act. Without firstly determining this issue, there was no power to make any “findings” of “corrupt conduct” against Mr Watters under s 13(3)(a) or make findings under s 74A(1) or otherwise pursuant to the Act. The preparation of the Report and forwarding it were also submitted to be unlawful and ultra vires the Act because the findings and Report were, to the extent identified, without rational support or otherwise a manifestly illogical or unreasonable exercise by the Commission of its functions. It was submitted secondly that the making of findings and publication of the Report were procedurally unfair to Mr Watters.

107. It was submitted to be irrational and illogical for the Commission not to reach a positive satisfaction that the acts alleged against Mr Watters could in law amount to “corrupt conduct” (and therefore that it had jurisdiction in relation to Mr Watters’ conduct) before proceeding to consider whether in fact the allegations made against Mr Watters had been proven. Reliance was placed on the first duty of Courts to determine jurisdiction at the outset and before entering upon and opining on matters which would be relevant only if such jurisdiction existed. Although it was accepted that there are differences between a Court and the Commission, these differences were said to not make these principles any less applicable to the Commission. They were submitted to apply with equal force.

108. Of the part of Chapter 2 of the Report summarised at [75]-[76] above, it was submitted that:

“Despite refusing to reach a positive conclusion that it had jurisdiction to make findings of corrupt conduct as alleged against Mr Watters, the Commission in its report did not stop there and make plain that the allegations made by Counsel Assisting against Mr Watters should be withdrawn. The Commission instead decided to proceed to make findings in relation to the conduct but simply refrained from calling the conduct ‘corrupt conduct’.”

109. In relation to Chapter 9 of the Report, the plaintiff’s written submissions addressed firstly the Commission’s findings in favour of Mr Watters (that the conduct did not amount to corrupt conduct, contained in pages 107-109 of the Report and outlined above at [81]-[82]) before dealing with the earlier articulated findings regarding the conduct having occurred, as though they came after the characterisation issue, viz.:

“Despite all this, the Commission proceeded to make damning findings against Mr Watters in relation to North Strathfield. The Commission accepted Cox’s evidence that Mr Watters suggested to him – in a text message that was never produced – that if he ‘put in a few extra for him’ in the next quote he would ‘get the job’: p 104. Despite not having a copy of the message, the Commission rejected the plausible alternative that the message may have been to ensure the quote adequately covered all necessary works: p 104. The Commission then found that Cox in fact then paid Watters a sum of $8,000 in a carpark in North Strathfield: p 106.”

110. The paragraph in Chapter 9 of the Report dismissing the expanded allegation of corrupt conduct, for the second reason that there was no identification between the conduct in s 9 and s 8(2A)(c) of the Act as Mr Watters was not an agent for TfNSW and the conduct was rather a breach of his duties to Downer (see above at [83]) was submitted to be inconsistent with the lack of satisfaction of the public funds issue considered in Chapter 2. It was submitted that “This appears to be some kind of exercise in determining when the funds could be characterised as public funds for the statutory construction purpose, but the Commission has already said that they don’t know the answer to that question with respect to at least some of the funds.” This was thus described as the Commission apparently considering again whether the conduct was corrupt conduct.

111. It was submitted that the adverse findings set out in Chapter 11 were made for no apparent reason. It was submitted that once it is either accepted or assumed that the conduct was not “corrupt conduct”, there was no utility in Chapter 9 nor in any of the sections in Chapter 11 concerning Wollstonecraft, Banksia and Birrong Stations.

112. There was a repeated theme in the plaintiff’s written submissions of the asserted illogicality of proceeding to make findings of fact when the conduct could not be corrupt, such as:

“That is, once it is established that the conduct in question was not ‘corrupt conduct’ and that it would not be open as a matter of jurisdiction for the Commission to make findings of corrupt conduct, it cannot be seen to be a rational, reasonable exercise of power for a proper statutory purpose to nonetheless proceed to find the conduct proven irrespective of [its] connection or otherwise to jurisdiction. As put above, the Commission in effect ignored the limits on its own jurisdiction by declining to positively determine the limits of its own jurisdiction but then went on nonetheless to make all the findings it wished to make under the veil of simply not labelling the conduct as ‘corrupt conduct’.”

113. Similarly the written submissions in reply contended that there was no possible rationale for the Commission, “knowing that the conduct was not ‘corrupt conduct’, to make the findings it did.”

114. The outcome of the investigation into Mr Watters, namely finding no corrupt conduct, was submitted to have been able to be achieved by merely highlighting the allegations that were made and the reasons why those allegations, even if proved, could not amount to corrupt conduct. It was argued that “Having decided the question of jurisdiction first in accordance with principle and logic, there was no utility in making findings as to whether the allegation in fact was made out.”

115. It was submitted that although the Commission plainly may conduct investigations which do not culminate in a finding of corrupt conduct, there is a difference between such a situation (if the Commission is satisfied that the conduct, if established, could amount to corrupt conduct) and the purported exercise of power to investigate allegations which could not, even if proven, be corrupt conduct.

116. The far greater complexity of the current proceedings than a case like Cunneen was raised with Senior Counsel for Mr Watters, and it was contended that this case was not in fact complex as the Commission did not state that it needed to make findings as to whether the alleged conduct occurred because it was relevant, for example, to other persons of interest.

117. It was submitted that the need to decide jurisdiction at the outset was especially plain in the present case in circumstances where Mr Watters expressly raised the issue as being a basis for no findings to be made against him by the Commission in any report and where those submissions were to a large extent accepted by the Commission.

118. The timing of the problem of jurisdiction was expressed this way:

“The plaintiff does not assert that the investigation itself was unlawful because it is accepted that at least at the time of the conduct of the public inquiry itself, the Commission did not know at that stage that the conduct alleged against Watters could not at law amount to “corrupt conduct”. The problem for the defendant is that this position changed by the time the Commission came to prepare its report. At that stage, the Commission did know that the conduct could not (even if established) amount to corrupt conduct. It was at that stage that the question then arises as to what proper purpose could be served by taking the approach it did. The plaintiff says there is no rational reason for doing so…”

119. Senior Counsel for Mr Watters submitted that the request in paragraph 169 of the 28 August 2023 submissions seeking the withdrawal of the allegations (see above at [53]) was not the position that was taken after the next round of submissions, and “things were not left where they were left by paragraph 169 of these submissions.” It was acknowledged that there was no suggestion in the 28 August 2023 submissions that the Commission was bound to satisfy itself of the power it was exercising or jurisdiction before it did anything else. It was submitted that whereas the question of jurisdiction was put as third of three issues in the first submissions, the point reached by the last submissions was that the Commission did not have evidence or jurisdiction to make a finding and a request was made for an opportunity to be given notice if the Commission was of a different view. It was submitted that:

“…it would hardly be beyond the knowledge of anyone at the Commission that considering his legal position, having regard to what happened in a case like Cunneen, is ‘If you form a view, contrary to what we have said, that you have power or jurisdiction to investigate this conduct at all we wish to exercise our rights to prevent you from exercising that power, which we say you do not have’.”

120. Senior Counsel accepted that there was no viable legal action able to be taken had notice been given of an intention to make adverse evidentiary findings; but contended that one might put the reference to evidence aside, and see that legal action was contemplated if an adverse finding regarding jurisdiction was considered. It was agreed that there was no denial of procedural fairness in not providing advance notice of negative evidentiary findings, as these had been the subject of detailed submissions already. Any expectation that Mr Watters would be “given another opportunity to make the alternative factual submissions” if the Commission resolved against him that it had jurisdiction was described by Mr Lloyd SC as “extremely optimistic”.

121. It was submitted that failure to notify Mr Watters of the determination of the “fundamental question”, anterior to the exercise of lawful power, was a denial of procedural fairness. It was submitted that it was made clear in the second set of submissions for Mr Watters that he wanted fairly to be given notice if the Commission rejected his submissions about jurisdiction, and there was a failure to comply with that reasonable request for notice. Reliance was placed upon the statement of the majority of the High Court in Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 197 ALR 389; [2003] HCA 26 at [24]; namely, that to fail to respond to a substantial, clearly articulated argument relying upon established facts was at least to fail to accord natural justice.

122. There was submitted to have been a denial of procedural fairness because “at no stage did the Commission foreshadow a scenario where, despite conduct not being ‘corrupt conduct’, the Commission would go on to consider and make findings in relation to the conduct anyway, albeit simply not labelling it ‘corrupt conduct’.” This was submitted to amount to a material error because submissions could have been directed to the Commission along the lines of the present submissions to the Court.

123. It was submitted that insofar as the detailed written submissions of Counsel Assisting of 2 November 2023 included analysis of the construction of s 8(2A) of the Act, they were an implicit acceptance of the kind of approach adopted in Cunneen - of necessary construction of the statute to determine whether the allegations, if proven, could satisfy the definition, before lawfully exercising powers under the Act.

124. Senior Counsel for Mr Watters was asked by me to address the proposition that the Commission was not asked to deal as a preliminary issue with the question of whether the conduct, if proved, could amount to corrupt conduct, and only if that was resolved against Mr Watters to go on to consider the factual allegation. Senior Counsel’s response was that if the Court rejected the submission that the final paragraph of Mr Watters’ further submissions (above at [69]) was a request that the Commission proceed in that way, that would probably result in rejection of the procedural fairness ground insofar as it is based upon denial of natural justice in obtaining a finding on jurisdiction.

Submissions for the defendant

125. Senior Counsel for the defendant undertook a detailed review of the legislative scheme, which was said to clearly support the lawfulness of the acts of the defendant impugned by Mr Watters, in particular by reference to ss 13(3)(a) and 74A(2) of the Act. It was submitted that although the plaintiff had ultimately seemingly eschewed a pure ultra vires argument, it was important that the legislative provisions expressly authorised the findings here made.

126. It was made plain that the defendant did not contend that it would necessarily be irrational to proceed along a different path, as contended for by the plaintiff, but that this did not render unlawful the path taken.

127. The submissions for the Commission accepted that the concept of “corrupt conduct” is used to define and limit the scope of Commission’s investigative function, and that nothing in s 13(1)(a) of the Act permits the Commission simply to investigate crime or other misconduct at large. It was however submitted that the Commission’s power under s 13(1)(a) to investigate “allegations”, “complaints” or “circumstances” is by no means narrow. It is not just corrupt conduct which may be investigated: so too may conduct which is liable to allow, encourage or cause corrupt conduct, and any conduct connected with corrupt conduct. Moreover, it was submitted, the final words of the subsection emphasise that it is not necessary that conduct of this kind has occurred. It is enough that there is an allegation or complaint that conduct of the relevant kind “may have occurred, may be occurring or may be about to occur”, or there are circumstances which in the opinion of the Commission imply that this may be so.

128. It was submitted, by way of summary, that at the conclusion of an investigation spanning conduct by many individuals in respect of various projects, the Commission was presented in relation to Mr Watters with competing submissions about what findings of fact should (or should not) be made, and what findings of corrupt conduct should then follow. The Report records how the Commission resolved those competing submissions and made findings as permitted (and required) by the Act. The scale and complexity of this investigation and interrelation of issues, corrupt conduct of individuals, and systemic problems, pointed to the impracticality of dealing in isolation with all of the arguments as to why Mr Watters’ alleged conduct was not “corrupt”.

129. The purpose of investigating as set out in s 13(2) of the Act was said to confirm what is already implicit in the conferral of an investigative function of this kind – in conducting an investigation under s 13(1)(a) of the Act the Commission is engaged in a fact-finding process (determining whether any relevant conduct has occurred). It is also engaged in a broader exercise of corruption prevention, examining what systemic issues might have led to corrupt conduct and what changes might be made to prevent it in the future. Making determinations of the kind required by s 13(2)(a) was submitted to also require the Commission to proceed from fact-finding to characterisation.

130. The difference between the Commission and a Court exercising an adjudicative function in an adversarial process was relied upon; this underlining the fact that the purpose of an investigation is to investigate. The investigative function of the Commission was emphasised:

“As Gleeson CJ observed in Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 at 129, the Commission is not a court, but an administrative body that performs investigative functions and, in certain circumstances, makes reports. A premise of the plaintiff’s argument is that the Commission only has jurisdiction if it concludes there has been corrupt conduct. However, the Commission could only reach a conclusion about whether Mr Watters had engaged in corrupt conduct once its investigation was concluded and it had made findings about what conduct had in fact occurred, and its character.”

131. It was submitted for the defendant that care is required in analysing the use of the word “jurisdiction” in Chapter 2 of the Report and otherwise. It was submitted that it should be read as referring to the Commission’s power to make a corrupt conduct finding, as it was never argued that Downer employees could not be the subject of an investigation nor that their conduct could not meet the descriptions of conduct in s 13(1)(a) of the Act. It was submitted to be important to not allow references to “jurisdiction” to lead to a slide into false analogies with the jurisdiction of a Court to resolve disputes of a particular kind or in a particular way. The first obligation of a Court to determine jurisdiction was submitted to be inapt because:

“A court is asked to grant specific relief, while the Commission conducts a much more open-ended inquiry. The Commission clearly had the authority to conduct its investigation and then to make findings. As to the more specific question of whether it had power to make corrupt conduct findings in respect of a person, it cannot determine that at the outset as it does not know where the facts will go. It is not right that the ‘starting point’ is that the allegations against Mr Watters could not amount to corrupt conduct: cf PS [86]. If the Commission is undertaking an investigation that is not authorised by s 13(1) of the ICAC Act, then the remedy would be to restrain the investigation. That is not what is suggested here. The Commission conducted an authorised investigation, and only at the end of the exercise once the facts were ascertained was it in a position to make findings about whether corrupt conduct had occurred.”

132. The submission for the defendant was that Mr Watters’ arguments before the Commission, and the Commission’s analysis in Chapter 2 of the Report, was concerned not with jurisdiction to conduct an investigation and perform all the acts that flowed from that, but the more narrow meaning of whether a finding of corrupt conduct was within the legislative definition. It was submitted that the filed submissions for Mr Watters did not signal anything radical about jurisdiction, but were meant as an orthodox exercise of discerning the legal character of facts, if found.

133. The contrast between this case and Cunneen was emphasised. That was a case where the investigation to be undertaken did not fall within the scope of the Commission’s statutory functions. The investigation was thus unlawful, and had to stop. Mr Watters’ case was submitted to be a radically different situation where an investigation that took place over a number of years culminated in a public hearing and a report in relation to a whole series of people and transactions. The report was required to explain the Commission’s findings and the reasons for them: D*’Amore v Independent Commission Against Corruption (2013) 303 ALR 242; [2013] NSWCA 187 (“D’*Amore”).

134. It was submitted that this was a case where the Commission could not practically “silo its functions” as urged by the plaintiff. For example, the credit of witnesses was far reaching in its impact.

135. The plaintiff’s misconception as to the Commission’s functions was also submitted to be evident in Mr Watters’ repeated submission that if the Commission concluded his conduct was not corrupt the “allegations” must be “withdrawn.” Rather, the Commission found that Mr Watters’ conduct was not “corrupt conduct” and recorded that finding and its reasons for it in the manner contemplated expressly by ss 13(3)(a) and 74(1) of the Act. There was pointed out to be no power for the Commission to “withdraw” allegations.

136. It was submitted that this was not a case of the Commission reasoning that it could make findings that were adverse to Mr Watters “provided it did not label the conduct ‘corrupt conduct’”. This was said to misconceive the reasoning of the Commission. The Commission made findings of fact about what had occurred, as was logically appropriate if not essential, before then turning to the question of whether the conduct as so found constituted corrupt conduct. To do so was submitted to be entirely consistent with the Act, in particular s 13(3)(a).

137. The Court was reminded that the Commission had determined that a public inquiry was appropriate, after considering reputational damage and infringement of privacy, and this is not challenged. There was then a public interest in resolution of the matters that had been aired.

138. The Commission argued that the approach of the plaintiff was impractical, radical, would lead to bizarre outcomes and was legally baseless. This argument commenced as follows:

“It is worth noting what the plaintiff’s argument implicitly concedes about the powers of the Commission. As the plaintiff apparently accepts, the Commission had the power under ss 10(2) and 13(1)(a) to investigate the complaint it received from IWC, which suggested corrupt conduct may have occurred. At some point in the investigation, it gathered information which went beyond IWC and implicated the TfNSW TAP. This included information suggesting that Mr Watters may have engaged in conduct that was corrupt conduct. The Commission plainly had the power under s 13(1)(a) to investigate that. Having reached a state of satisfaction that it was in the public interest to do so, the Commission had the power under s 31(1) to hold a public inquiry for the purposes of its investigation. The plaintiff does not deny the Commission’s power to take any of these steps. The challenge is solely to the inclusion of findings about him in the Report.”

139. It was submitted that the Commission was logically obliged to make a finding about what had occurred, as this was essential in order to determine if corrupt conduct had occurred. In circumstances where the Commission was obliged to make a Report, the requirement for omission of reference to a person who had been a subject of the investigation was a radical proposition and contrary to the plain words of the Act, particularly s 13(3)(a). In circumstances where Mr Watters was an affected person, the Commission was also obliged under s 74A(2) of the Act to include a statement regarding whether obtaining the advice of the Director was appropriate. It was submitted that on the plaintiff’s construction, even if the Commission concluded that a person the subject of allegations was completely vindicated, and found not to have engaged in the conduct alleged, this finding would never be published.

140. In relation to Mr Watters’ complaints of denial of procedural fairness, the submissions for the Commission included reference to the fact that the Commission declined to accept the argument of Counsel Assisting in relation to “public funds”, and accepted (for the reasons outlined above at [82]-[83]) that it could not make a finding of corrupt conduct in relation to Mr Watters’ acts. It was accordingly submitted that even if Mr Watters did have an entitlement to be consulted again if the Commission was against him about the alleged conduct amounting to “corrupt conduct” (which itself was not accepted, as a party cannot recite himself into an obligation), such entitlement did not arise, because the Commission agreed with the proposition.

141. The defendant disputed the plaintiff’s contention that his position changed between his first and second set of filed written submissions. It was submitted that Mr Watters’ position before the Commission was always “deal with the facts first”. It was submitted that Mr Watters never contended that the Commission should make no findings of fact against him (not that it was accepted that, if he had, the Commission would have been obliged to take any particular course).

142. It was submitted that the Commission’s factual findings in respect of Mr Watters were closely related to the purposes of the Act and the concept of “corrupt conduct”. The Commission’s duty to give reasons was relied upon. It was submitted that there was a near impossibility of producing a report after this investigative inquiry which hived off Mr Watters in the way advanced.

143. The Commission’s requirements pursuant to s 79A of the Act were relied upon. The findings in this case were submitted to clearly be “adverse findings” as referred to in s 79A.

144. Insofar as Mr Watters had relied upon the principle enunciated in Dranichnikov at [24], there was submitted to have been a uniquely emphatic demonstration of engagement with that principle, in the Commission’s articulation of reasons in Chapter 2.

Determination

145. For the reasons advanced by the defendant, taking into account the review of the statutory scheme outlined above, the Act clearly authorised the Commission to make the findings it made, and include these in the Report furnished to Parliament. Parliament then authorised publication of the Report. Section 13(3)(a) in particular clearly permitted the impugned findings to be made, and sections 74 and 74A their inclusion in the Report. The making of the Report was mandatory as there had been a public inquiry, which only occurs when there has been a weighing of public interests and the reputational and privacy interests of concerned individuals. There was no issue taken on behalf of Mr Watters with the proposition that he was an “affected” person for the purposes of s 74A(2) of the Act, which required the Commission’s statement in the Report regarding whether consideration should be given to obtaining the advice of the Director in respect of his prosecution. In his case this related to alleged substantive criminal offending, and giving false evidence to the Commission. It was also important that the Commission make clear factual findings to enable review to the extent it might be available.

146. The Commission’s investigative function described in s 13(1)(a) of the Act is subject to a number of restrictions, including those in sections 12 and 12A. These sections make clear that the Commission is engaged in a fact-finding process - determining whether any relevant conduct has occurred - as well as a broader exercise of corruption prevention, examining systemic problems and potential changes for the future. Making determinations for the purposes of s 13(2)(a) also requires the Commission to proceed from fact finding to characterisation. The public inquiry was conducted “for the purposes of an investigation”: s 31(1).

147. In Duncan v Independent Commission Against Corruption [2016] NSWCA 143 at [686]-[688], Basten JA (with whom Bathurst CJ and Beazley P agreed on this issue) distinguished between these "fact-finding" and "characterisation" functions. His Honour stated that the primary function of the Commission "is to make findings of fact in respect of alleged conduct which may constitute corrupt conduct".

148. At [690] his Honour described the function being exercised by the Commission in the course of a public inquiry as “in a fundamental sense investigative”. His Honour further said that an inquiry bears “no relation to a civil or criminal trial before a court with jurisdiction to resolve factual and legal issues in a dispute between contending parties”.

149. The plaintiff’s acceptance of the lawfulness of this investigation is important, and demonstrates the inaptness of comparison of his case with Cunneen. The manner the plaintiff contends in this Court that the Commission was required to resolve the allegations against him is, although framed as determining “jurisdiction”, more like a “no case” scenario at the close of the prosecution case in a criminal trial. That is, where the evidence at its highest cannot as a matter of law make out the charge, requiring the entry of a verdict of not guilty, without determination of whether the alleged conduct occurred or not. The Act does not readily envisage such a procedure. It may be that there is sufficient flexibility in the Act that in a particular case, where an issue is sufficiently clear and discrete, and the point is plainly argued, to allow for the Commission to deal with an allegation in the manner now contended for by the plaintiff (for example as articulated above at [114]) – although the requirements of s 74A(2) would still need to be addressed. However this is far from a case where the issue was discrete, and the point clearly argued.

150. There was no argument in this Court that there is anything wrong as a matter of principle with the Commission’s explanation of the method of fact finding set out in Annexure 2 to the Report: see above at [98]-[99]. The references therein to the judgment of Gleeson CJ in Greiner was similar to the process of firstly determining factual disputes, then characterising the facts found according to law, as had been proposed by Counsel Assisting: see above at [55]. There was no submission for Mr Watters against that course, and in fact it was mirrored in the submission for him quoted above at [67].

151. As noted above, the plaintiff refrains from advancing a general principle that it is wrong to proceed in the way outlined in Annexure 2 to the Report. The argument seems to be that it was unlawful to do so in this particular case because the conduct alleged did not amount to corrupt conduct, the case was not complex, and the plaintiff clearly requested a different course.

152. The Commission’s consideration of a number of arguments mounted by Mr Watters (and Downer) in Chapter 2 of the Report was warranted because of the potentially wide reaching ramifications if they were wholly correct. The finding made adversely to the argument of Mr Watters was that alleged conduct of Downer employees had the capacity to impair public confidence in public administration for the purposes of the first part of s 8(2A)(c) of the Act: see above at [74]. There has been no criticism of that determination in this Court. Otherwise in Chapter 2 the Commission declined to accept the submissions of Counsel Assisting in relation to “public funds”. This had a limiting effect in relation to the findings in Chapter 9 regarding Mr Watters. It was envisaged in Chapter 2 that it would also have a limiting effect in relation to findings as to other payments where the source of funds was not clear; but due to the restricted content of the Report in evidence there was no exploration as to how this was followed through in relation to others.

153. For the reasons advanced by the defendant, the Commission was not obliged in the same way as a Court to determine, at the outset, its jurisdiction. Despite the Commission analysing these matters of potential impact beyond Mr Watters at the outset in Chapter 2, the use of the word “jurisdiction” in the submissions for Mr Watters before the Commission was not concerned with jurisdiction to conduct an investigation and perform all the acts that flowed from that, but the more narrow meaning of whether a finding of corrupt conduct was within the legislative definition. It was clearly only ever meant as an orthodox exercise of discerning the legal character of facts, if found.

154. The plaintiff’s acceptance in this Court that in the first set of written submissions for Mr Watters before the Commission there was no suggestion that the Commission should determine jurisdiction before deciding the facts was correct. However, contrary to the plaintiff’s submission, nothing changed by the filing of the second set of written submissions.

155. The first set of submissions included 23 pages in support of what was described as Mr Watters’ primary submission that the Commission should find that the conduct did not occur. Nine pages analysed the allegation of giving false evidence regarding the Wollstonecraft and Birrong Station projects. The last five pages addressed the alternative proposition that “even if the above submissions are rejected” a finding of corrupt conduct as contended for by Counsel Assisting would likely lead the Commission into jurisdictional error. The submission was clearly not contending that the Commission did not have authority to decide the joined issue of whether the conduct occurred – to the contrary. “Jurisdictional error” in context seems simply to have meant that the legislative definition of corrupt conduct was not made out. It was possibly also intended to convey that some aspect of the legislative definition involves a jurisdictional fact, in the sense of a characterisation the correctness of which may be determined by the Court on an application for judicial review, as referred to by Basten JA in D*’*Amore at [220] , regarding s 9(1) of the Act, and in contrast to s 13(3A). It was clearly not a submission that the Commission was required at the outset and in isolation to determine whether the conduct alleged amounted to corrupt conduct, and, if not, include no findings about it in the Report.

156. The second set of submissions dated 17 November 2023 reiterated that Mr Watters’ primary position was that the Commission would not find as a matter of fact that he engaged in the conduct alleged, such that the “difficult questions” of the Commission’s jurisdiction need not arise: see above at [61]. The plaintiff was clearly maintaining the position advanced in the earlier submissions that the Commission should firstly determine the factual contest (in his favour), but that if this was resolved against him there were complex legal issues of characterisation that would prevent a finding of corrupt conduct. The second set of submissions simply advanced some additional reasons in support of Mr Watters’ “alternative position”, and responded to the expanded allegation that had been advanced by the second set of submissions of Counsel Assisting, which was addressed by the Commission in Chapter 9 of the Report.

157. The Commission’s finding in Chapter 9 that the facts as established did not meet the definition of “corrupt conduct” was not based on the uncertainty identified in Chapter 2, regarding the source of funds paid to subcontractors and whether they could be considered “public funds”. It was because, on the “expanded” allegation of corrupt conduct mounted by Counsel Assisting in their second set of written submissions, the Commission was not satisfied that the conduct alleged was corrupt: see above at [82]-[83]. This related to a small aspect of the second set of each party’s written submissions, as summarised above at [59] and [64] respectively. By way of contrast to the fourth allegation in the summons requiring Mr Watters’ attendance at the Commission, the opening statement of Counsel Assisting and the first set of submissions for Counsel Assisting and Mr Watters, the expanded allegation was based on the benefit to RJS Infrastructure (flowing from the dishonest agreement linked with the payment of $8,000 to Mr Watters), rather than a benefit to Mr Watters himself.

158. The allegations against Mr Watters were deeply interrelated with allegations against others. Mr Nguyen and Mr Cox were found to have engaged in serious corrupt conduct. Their account of dealings with Mr Watters was important in understanding their conduct and processes more broadly, albeit for discretionary reasons no findings of serious corrupt conduct were made against them in relation to the North Strathfield Station project. Their credibility as witnesses was important. The evidence outlined in Chapter 9 had connection with the issues considered in Chapter 11, as mentioned in both Chapters. In Chapter 11, reference was made to the evidence of Mr Cox that the $8,000 payment to Mr Watters following the North Strathfield Station project created a degree of expectation that Mr Watters would assist RJS Infrastructure win future work from Downer.

159. Although the Commission did not refer to Mr Watters or the North Strathfield Station project in Chapter 14, those allegations were closely related to the context of the systemic problems addressed in the Chapter.

160. The plaintiff has offered no suggestion as to how the contention of Counsel Assisting that Mr Watters had given false evidence to the Commission was to be addressed otherwise than in the manner it was in Chapter 11 (which addresses most of Schedule A to the plaintiff’s summons, as pressed). The Commission’s articulation of its findings regarding the credibility of Mr Watters’ evidence in connection with the North Strathfield Station project in Chapter 9 was also clearly connected with the assessment of his evidence in relation to Wollstonecraft and Birrong Stations.

161. Procedural fairness was plainly afforded to Mr Watters. He was informed of the allegations and had ample opportunity to meet them. He gave evidence and made two sets of detailed submissions addressing the findings that Counsel Assisting suggested the Commission should make against him. As I have outlined, these dealt with the factual allegations and the submission that his conduct amounted to corrupt conduct. The Commission dealt with these matters in the Report in a way that was entirely within the scope of what the affected parties should have (and by their written submissions seem to have) appreciated. The Commission made findings of fact (rejecting the submissions of Mr Watters) and made findings of characterisation (accepting the submissions of Mr Watters). The Commission had no obligation to inform Mr Watters of the precise way it intended to record its findings and reasons in its report.

162. To the extent that one of the issues of characterisation or “jurisdiction” was determined adversely to Mr Watters (see above at [74] and [152]), nothing has been done about it, and no submission has been seriously made as to what could have been done about it had there been advance notice. The oral submission outlined above at [119] was not articulated further than as it has been quoted, and goes nowhere in circumstances where the plaintiff does not contend there was any error in this particular determination. Such a course was not foreshadowed by the final paragraph of the submissions for Mr Watters before the Commission. The Commission was not required to provide advance notice of this determination.

163. I reject the alternative proposition advanced in oral submissions, that the final paragraph of the written submissions for Mr Watters was a request that the Commission deal as a preliminary issue with the question of whether the conduct, if proved, could amount to corrupt conduct; and only if that was resolved against Mr Watters to go on to consider the factual allegations (see above at [124]). For the reasons I have outlined, this is the opposite of what was advanced, in both sets of written submissions, for Mr Watters. Senior Counsel’s acceptance that this finding would probably result in rejection of the procedural fairness ground insofar as it is based upon denial of natural justice in obtaining a finding on jurisdiction was fair. The Commission did not fail to respond to a substantial, clearly articulated argument relying upon established facts. There was no denial of procedural fairness.

164. I accordingly find that the Commission’s exercise of its functions to publish the Report in the manner identified was not an exercise in power that was unlawful, in the sense of being ultra vires the Act, without rational support or otherwise a manifestly illogical or unreasonable exercise by the Commission of its functions, and nor was it procedurally unfair. The substance of my determination has addressed the particulars included in the plaintiff’s summons (quoted above at [10]); but for completeness or clarity, using the same numbering:

165. The conduct alleged was found not to be corrupt conduct;

166. The Commission had jurisdiction to decide whether the alleged conduct occurred, and whether to make findings of “corrupt conduct”;

167. The Commission additionally had jurisdiction to make the findings in Schedule A because of the contention that Mr Watters had given false evidence to the Commission;

168. The Commission did not refuse to decide the question of its jurisdiction in the sense argued in this Court, because it was not required to and was not asked to;

169. The Commission had jurisdiction to decide whether the alleged conduct occurred and whether to make findings of “corrupt conduct”, and accepted the contention of Mr Watters that the conduct alleged did not amount to “corrupt conduct”;

170. As for 2 and 3;

171. Furnishing the Report to Parliament was mandatory and publication authorised by Parliament and the Act;

172. There was no denial of procedural fairness;

173. As for 8.

174. The plaintiff’s summons must accordingly be dismissed. I accordingly do not propose to consider in depth the dispute between the parties as to whether the Court has power to make orders of the kind sought by the plaintiff, beyond the orthodox declaratory relief sought, such as directing the Commission to remove the Report from its website and make redactions to any published report. In circumstances where the plaintiff does not contend that the Commission has affected any legal or equitable right of his, the only authority brought to the Court’s attention was the judgment of Gummow J in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Limited (2000) 200 CLR 591; [2000] HCA 11 at [97]. There was no submission beyond this. I am not satisfied that this paragraph of Gummow J’s judgment supports the plaintiff’s contention; however would have considered the issue more closely had the plaintiff’s claim that the Commission acted unlawfully been successful.

ORDERS

166. I accordingly make the following orders:

167. The plaintiff’s summons is dismissed;

168. The plaintiff is to pay the defendant’s costs.

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Endnote

This numbering is not the same as in paragraph [11] because a number of items in Schedule A were not pressed.