Held to account: governments and Indigenous interests

 

For the last 15 years I have researched the primary evidence relating to the Queensland government’s control of Aboriginal lives, labour and finances.   I had no idea, when I took this as my PhD field, what an eventful journey it would be.  My curiosity has taken me through history, through the state’s financial priorities, and more recently, into the field of jurisprudence.

My starting point was a need to understand why governments would think it constructive, or even expedient, to tightly control every aspect of the lives of tens of thousands of people around the turn of the twentieth century.  I knew the general rhetoric was that this was to protect people who were said to be unable to secure their own interests.  And I knew the outcome of these extraordinary discretionary powers; indeed we all know the outcome of government management, it is apparent in the substandard communities and general poverty of today.  In all states and the Northern Territory.

My early task was to understand how governments in Queensland had operated.  I wanted to get within the machinery of power rather than evaluate only its effects.  How did politicians and bureaucrats rationalise the restrictions they imposed and the powers they assumed over the lives of Aboriginal people?  How did their thinking change over time?  How did they respond to the faults in their systems?  I was ever mindful of the French philosopher Michel Foucault who described governmentality as eternally optimistic and congenitally failing.  By governmentality he meant the whole sphere of knowledges, policies, procedures, policing and economic strategies.  And to the extent that these operate to effect constructive changes on populations (constructive in terms of making changes rather than in terms of succeeding), he describes governmentality as eternally optimistic (in its constant quest to resolve problems).  At the same time, Foucault argues, the field of government agency and influence is so complex there is inevitable non-conformity in the range of programs, diversity in their objectives, contrasting ‘expert’ opinions and conflicting power agendas; that being the case, government operations as a whole are by their very nature congenitally failing.

More and more as I worked through the official files I was struck by other contradictions.  Why control Aboriginal earnings and savings ‘for their own good’ but retain a system where this private wealth was lost to fraud and negligence, or, as it happened, was simply siphoned off to relieve state revenue?  Why freeze up to 80 per cent of private savings to make a profit for the state when this traps families in abject poverty?   How do I interpret the government’s failure to respond to criticisms and recommendations by its own officers, by state auditors, by pubic service inspectors?  Why, given all I have written and said about these financial improprieties, has it made not one iota of difference?  In 2002 the government said it was generous in offering a maximum payout of $4000 to those who might have lost decades of earnings under this blighted system.   It said people should just ‘move on’.  And, as another instance of our premier’s eternal optimism, he says he has resolved the matter of the Stolen Wages.

But of course he knows better.  He will have been briefed about the mountain of evidence of government mismanagement; indeed in making the reparations offer he said his government had already spent over $1.5 million preparing to defend itself against the claims of those whose interests it was sworn to protect.  In parliament he said I thought over $500 million might have gone missing from Aboriginal private funds under government control.  He also said the records are so patchy it is impossible to know what did happen.  He is hoping to keep a lid on the congenital failings of trust fund management.  His hope is in vain.

One of the government’s many assertions around this sorry saga is that it has legal advice it will win any action against it on this matter, and indeed the system is stacked to its advantage.   It is the government which holds all the evidence relating to personal financial controls; the people were never given any records of transactions on their accounts.  It is the government which produces to a claimant the material it says it can find; it is the government which defines how many staff will be available for these searches.  The odds of someone finding sufficient evidence to make a charge of fraud stick in the courts, are long indeed.   There must be a better way, I decided 18 months ago, to win justice.  And so began my education in trust and fiduciary obligations.  Much of this, of course, you will already know.

I want to begin by looking at trust and fiduciary obligations, in Australia, Canada and the United States.  I am particularly interested in how courts in the latter countries have taken a different line than courts here, in identifying a fiduciary duty enforceable at law.  I apologise if this summary is a little too brief; an expanded version is in my forthcoming book.

Like Australia, the US and Canada are former colonies of Britain. All expressed similar doctrine regarding the standing of their Indigenous peoples: an obligation that they, as a more civilised nation must protect the interests of native races who are deemed primitive and vulnerable.  All implemented pervasive controls and employed similar interventions: alienation from land, ascribed definitions of status, segregation onto state managed reserves, personal and community disempowerment, restricted employment and commercial opportunities, social marginalisation. Yet there was a crucial difference. Canada and the US recognised the independent status of Indian tribes and struck treaties to define the extent and management of reserve territories. The prior occupation rights of Aboriginal Australians were simply denied.  Indigenous peoples were hostage to the extraordinary discretionary powers of their colonisers. This vulnerability, those discretionary powers, are the meat of legal argument regarding an enforceable fiduciary duty owed by governments to those whose lives and property they controlled.

A trust creates a legally binding obligation under which those who control the trust (trustees) hold the trust property for the benefit of another (beneficiary) and not for themselves in their role as trustees. An enforceable trust depends on a proprietary interest.  In a fiduciary relationship, on the other hand, the key component  is power.  A fiduciary relationship arises when there is a material discrepancy between the power of one person and the vulnerability of the other, when there is scope for the party to exercise that power or discretion to affect the other person’s legal or practical interests, and that other person is vulnerable or at the mercy of the abuse of that power.  While trust law is well defined, fiduciary law remains a developing and disputed arena.  Fiduciary relationships and fiduciary obligations depend on the demands of the particular circumstances.   Courts in Canada and the US accept relationships such as parent–child that are not recognised as enforceable by Australian courts.

I want now to turn to case law relating to fiduciary relationships between governments and Indigenous peoples.  In 1942, in Seminole Nation v United States,¹ the Supreme Court said it was through the range of self-imposed policies and numerous acts of Congress that the government had ‘charged itself with moral obligations of the highest responsibility and trust’. The Court said this trust duty should ‘be judged by the most exacting fiduciary standards’, and by a majority decision it upheld claims that the government had failed to secure annuities promised under treaty. In 1944, in Menominee Tribe v United States,² the Supreme Court said it was ‘settled doctrine’ that the US was a trustee in its dealings with Indian property, and government dealings would be adjudicated according to ‘the same principles of law as would be applied to an ordinary fiduciary’.  In 1973, in Manchester Band of Pomo Indians v United States,³ the Court held that the Bureau of Indian Affairs had violated its trust obligations by failing to pay interest on tribal funds lodged with Treasury prior to 1956, and failing thereafter to invest funds for the highest interest return.

In 1980, in Navajo Tribe v United States,⁴ the courts declared the pervasive system of US government controls over tribal property was sufficient in itself to trigger a fiduciary obligation to affected tribes. It was the act of taking ‘control or supervision of tribal monies or properties’ which imported ‘a normal fiduciary relationship’.  This was restated in 1983 in United States v Mitchell II⁵ where the court held a fiduciary relationship necessarily arises ‘when the government assumes such elaborate control over forests and property belonging to Indians’.

A range of decisions in Canada in the 1980s and 1990s established similar criteria for recognising an enforceable fiduciary duty.  In the 1984 case Guerin v The Queen⁶ Justice Dickson of the Canadian Supreme Court held it was precisely the Crown’s discretionary powers that transformed the relationship between government and Indian tribe into a fiduciary obligation.  An enforceable trust arose because Indian land was inalienable except through surrender to the Crown, at which point Equity would hold the fiduciary to the strict standard of conduct of a trustee. Justice Wilson agreed.  A fiduciary obligation arose when the Crown received the surrendered land subject to the trust of the Musqueam in the proposed lease: ‘the Crown became a full-blown trustee by virtue of the surrender.’  In 1990, in R v Sparrow,⁷ the Supreme Court held that the special trust relationship and responsibility to the Aboriginals was a restraint on sovereign power that must be reconciled with federal duty. The onus was on the Crown to justify regulations that infringed or denied Aboriginal rights, cautioning: ‘The honour of the Crown is at stake in dealing with Aboriginal peoples’.  In a hearing in 2005 in the case Buffalo v Canada,⁸ the Federal Court held that by interposing itself between the Indians and prospective purchasers or lessees of their land to prevent them being exploited, the government had invoked a fiduciary duty that the courts could ‘supervise and enforce’.  It said that holding Indian monies for the ‘use and benefit’ of the bands was also evidence of the Crown’s fiduciary obligations.

In Australia, meanwhile, not a single case relating to Indigenous claims against governments upheld an enforceable fiduciary duty, but each of the handful of cases has discussed the possibilities.  In the 1987 case Northern Land Council (No 2),⁹ Chief Justice Brennan speculated a fiduciary obligation might have arisen if the Commonwealth had negotiated to receive payments from Energy Resources Australia for the Land Council, thus becoming ‘the conduit for the benefits provided’.  But he said this had not been argued and could not be determined in the abstract.  In 1992, in Mabo and Ors v Queensland (No 2)¹⁰ Justice Brennan briefly referred to fiduciary duty, stating that if the Murray Islanders had surrendered their native title to the Crown in expectation of a grant of tenure, then the Crown might have held a fiduciary duty in the exercise of its discretionary power.  But he held there had been no such surrender and he did not consider further ‘the existence or extent’ of such fiduciary duty.  Justice Toohey declared the Crown did hold a fiduciary duty to the Murray Islanders. He said that if the Crown held the power to extinguish native title, then this power was a matter for legal adjudication, independent of any action by the Crown to extinguish.  Justice Toohey identified additional grounds for the government’s fiduciary obligation in the legislative framework of protection and preservation incorporating special reserves, welfare regulations and advisers, and in the general presumption that the British Crown would respect the rights of the colonised Aboriginals. He described the government power to destroy or impair Aboriginal interests as ‘extraordinary’ and ‘sufficient to attract regulation by Equity to ensure that the position is not abused’.

However in 1996, in The Wik People v the state of Queensland,¹¹ Justice Brennan qualified Toohey’s Mabo interpretation.  While he acknowledged the people’s vulnerability to the Crown’s power to extinguish native title, he said it would be self-contradictory for the Crown to be under a fiduciary obligation to advance or protect Aboriginal native title interests while at the same time exercising its power — imposed by Parliament without guidelines — to alienate Aboriginal land.  Further, he said that the power to extinguish was not sufficient of itself to attract a fiduciary obligation. There also had to be an action or function to attract the fiduciary duty: for instance, a reasonable belief by the people that the Crown would act in their interests, or an undertaking by the Crown to act on their behalf.

This brief journey through national and international case law suggests a range of grounds where courts might find an enforceable fiduciary obligation in government dealings with Indigenous people. It might be the network of ‘humane and self-imposed’ policies by which governments ‘charge themselves’ with moral obligations of the highest responsibility and trust, as in Seminole, or the ‘control or supervision of tribal monies or properties’ (Navajo 1980).  It might be, as was argued in Guerin, that the surrender of title to government in the expectation of a particular transaction creates the discretionary power that invokes a fiduciary obligation.  In Mabo Brennan made a similar point, suggesting that the fact of surrender of land, if it were in expectation of specific tenure, might be sufficient to attract a fiduciary obligation because those who surrender their title would be critically vulnerable to abuse by government of its discretionary powers to alienate their interests in the land.  In Northern Land Council  Brennan also emphasised people’s vulnerability to abuse of discretionary powers when he speculated that a fiduciary obligation might pertain if the government acted as conduit for Aboriginal money, for instance as distributor of royalties to the Land Council.  Clearly, in both scenarios, the Aboriginal people concerned would hold a valid expectation the government would act in their interests.

 

Keeping those points of law in mind, I want now to look briefly at how governments in Queensland controlled the lives and finances of Aboriginal people.

Around Australia, interaction between the races was characterised by blatant abuses of contemporary laws, encouraged by a shameful disinclination of authorities and the courts to extend available civil protections to Aboriginal people.  In Queensland it has been estimated there were over 2000 people working on stations and in the sea trades around Cape York by the end of the nineteenth century.  They were rarely paid apart from scant food and shelter, and were commonly subjected to physical and sexual abuse.  The protection regime was implemented to bring under control relations between Aborigines and Europeans.

Under The Aboriginals Protection and Restriction of the Sale of Opium Act (1897) the government took control of all aspects of Aboriginal lives.  People could be deported to missions or settlements and detained there for life, or they could be contracted out to work for 12 month periods.  The state had the power to deny marriages to non-Aboriginal men and, since the Industrial School and Reformatories Act (1865), it had the power to send any Aboriginal child to an institution for training and employment.

Under the 1897 Act it was illegal for any Aboriginal to work except under contracts which set the rate of pay, always at a discount despite knowledge that Aboriginal labour was at a premium in many pastoral areas.  In the twelve months to June 1900 over 1200 work agreements were processed.  The minimum wage was introduced in 1901, ranging from children under 12 years and including domestics. Comments in the department’s 1904 Annual Report indicate the value placed on many Aboriginal workers: ‘more reliable than the general class of white stockmen’, ‘as good and, in a great many instances, better’, ‘They know the country better, and are more biddable’, ‘As stock-riders and bushmen in many cases superior to the general station hands.’  Yet these men were paid only one-eighth the white wage.

From 1903 protectors were instructed to take direct payment of the wages of all female employees, and the system of thumb printing all transactions was initiated to reduce frauds.  Wages were banked in the name of each employee, with the protector as trustee.  Detailed cash books were to be kept and audited each year.  Workers could only access their money by asking the protector, and people, even with large savings, were routinely refused.  The government knew police fraud was rife from as early as 1904 when it introduced thumb printing to reduce it.

When John Bleakley took over as chief protector in 1914 he expanded the compulsorily contracted workforce, increased minimum wages, and demanded every worker’s wage be paid direct to local protectors, thus increasing government holdings of Aboriginal earnings from around $875,000 to almost $4 million in that year alone.  In 1919 the government lobbied to exclude Aboriginal workers from the Station Hands Award, striking a deal with the pastoral industry to freeze Aboriginal wages at 66% the white rate.  This was despite a raft of testimonials over several years confirming many employers thought Aboriginal workers were equally or better skilled than their white colleagues.  Workers were responsible for maintaining their families on this fractional wage; failure to do so triggered removal to a reserve.  A public service inquiry in 1922 revealed that head office did not supervise the 8000 rural savings accounts and police practices were so unreliable the commissioners insisted workers be allowed to appeal dealings on their accounts.  The government rejected this recommendation.

Also in 1919, the government imposed a tax on Aboriginal earnings, taking 5% from single workers’ wages and 2.5% from married workers’, although of course it didn’t inform workers of this confiscation.  This levy went into a new trust fund, the Aboriginal Provident Fund, which was supposed to provide for sick or unemployed workers.  But the inquiry showed that the government had stripped large amounts from the Provident Fund, and from a second trust fund of unclaimed wages and deceased estates held for workers’ dependents, diverting the money to construction on the settlements, funding for missions and costs of compulsory deportations.  

An inquiry in 1932 found that ‘the opportunity for fraud existed to a greater degree than with any other Governmental accounts’.  The chief protector again admitted there were no real controls over official dealings on private accounts, and again rejected the recommendation that workers be allowed to see what was done with their money.  The government was again exposed for raiding Aboriginal money: during and after the 1929-32 depression years, it simply transferred around $3.5 million out of the two Trust funds ‘for departmental purposes’, rendering the deceased estates’ fund technically insolvent.

In 1933 the government centralised the bulk of workers’ savings in Brisbane, ostensibly to ‘minimise fraud by members of the Police Force who are Protectors.’  But it immediately sidelined over 80% of these private monies – almost $15 million – into investments to raise revenue for Treasury.  This earned interest of $320,500 in 1933 alone, money which legally belonged to account holders.  The government continued this manipulation of bulk savings until 1970.

The government ran its contract-labour system for 70 years.  It gave employers the right to pay into workers’ hands between 30-80% of wages.  Decade after decade the government was warned workers were not getting this ‘pocket money’, yet it never fixed the system.  The 1932 inquiry stated it could be ‘reasonably assumed’ that workers were cheated.  In 1943 protectors described the system as a farce and a direct profit to employers, in 1956 they said it was useless, futile and out of control, with workers ‘entirely at the mercy’ of employers who simply doctored the books.  In contempt of this knowledge, the government rejected auditors’ calls for external inspectors as ‘too costly’.  In the mid-1960s it admitted pocket money was probably not paid ‘in many instances’.  And the financial loss to workers?  The pastoral workforce numbered between 3000 and 5000 people in the 50 years to 1968.  Potentially an average of 50% of their wages may never have been paid; that’s many millions every yearthat the government knew was not paid ‘in many instances’.

In 1956 a department survey confirmed the pastoral industry was entirely dependent on Aboriginal workers, particularly in remote areas where white stockmen were rare.  The inspector said the entrenched mentality was to pay ‘as little as possible for Aboriginal workers’, while ‘white men of markedly less ability and industry receive higher wages and better living conditions than Aboriginals who are better workmen’.  Records show the government frequently failed to demand even the 66% wage parity.  Rates for the 4500 workers fell to only 31 per cent in 1949 and 59 per cent in 1956 – millions more dollars ‘stolen’ through government negligence.  Only after 1972 did Aboriginal pastoral workers get equal wages and control over their own labour.  For the first time elderly family members and wives who had been compelled to work for free on the stations could refuse to be exploited.

It was only right at the end of this appalling saga of financial deprivation that Aboriginal people were finally given bank books to check money going in and out of their accounts.  But these books recorded only the balance left in accounts at 1968, showing nothing of what had happened prior to that time.  Many people were shocked at how little was there despite decades of work and decades of financial denial.  Those who protested then, and now, were told the government has lost many of the files and can rarely account for their money.

Records show that the government intercepted workers compensation, inheritances, child endowment and pensions.  Endowment was paid by the Commonwealth from 1941.  Queensland’s department of Native Affairs immediately applied to receive the endowment direct and control its distribution to mothers on the settlements.  It also cut government grants to missions to reflect the endowment income.  In 1953 it had stockpiled over $400,000 (today) of child endowment funds just for Palm Island mothers at a time when epidemiological studies revealed malnutrition as the key factor in deaths of 50 per cent of children under three and 85 per cent of children under four.  Concerned that the Commonwealth might discover the stockpile authorities decided to spend the money on construction.  When baby welfare funds suffered budget cuts of two-thirds in 1959 settlement superintendents were told to meet the deficit of around $55,000 from the child endowment accounts.

Even before the pensions were made available to Aboriginal people the government was discussing in 1959 how it could divert these welfare payments to revenue; it applied to take control of the bulk payments, passing on only one-third to pensioners, and cutting annual grants to missions to reflect the pension income.  In 1960 the director told superintendents over $500,000 of pensions ‘goes direct to Revenue’.  When the compulsory wage levy into the Welfare Fund was dropped after 1966, the government began to merge child endowment income through the Welfare Fund, which was used to develop the settlements, for wages, and – as the files now reveal – to cover government liabilities.  Endowment was paid into this Fund as late as 1984.

After 1975, when the federal Racial Discrimination Act made it illegal to underpay workers on the basis of their race, the Queensland government continued to underpay its Aboriginal employees despite top level legal advice confirming this was unlawful.  The policy of paying illegally low wages continued until 1986, when Aboriginal community councils took over community administration and paid the legal rate.  By simply calculating the wage differential against the number of community employees in that eleven-year period, it seems that the Queensland government saved itself over $180 million.  I’ll return to the matter of under award wages shortly.

 

In considering this extraordinary system of controls and this incredible congenitally failing financial system, I’d like to revisit some of the points I raised earlier about enforceable fiduciary duties.

Certainly, as in Seminole, the Queensland government ‘charged itself’ with moral obligations of the highest responsibility and trust; in Mabo Justice Toohey also identified the comprehensive legislative framework and practices of Queensland’s protection and preservation regime as grounds for a fiduciary obligation.  He said the government’s extraordinary power to destroy or impair Aboriginal interests were such that Equity might intervene to ensure the position was not abused, and certainly there was no self-contradiction, such as Brennan identified in the Wik case over land title, in the government having the power to take control of Aboriginal finances and a fiduciary duty to protect those interests.  Indeed in successive laws and regulations the government quite specifically undertook to do just that, and Aboriginal people – indeed all Queenslanders – held a reasonable belief that it would do so.

Like the US government in Navajo (1980), the Queensland government controlled and supervised Aboriginal monies and property.  People unwillingly surrendered control of their labour and finances and were certainly critically vulnerable to abuse by government of its discretionary powers to alienate their financial interests, a point which echoes Brennan in Mabo.  And in acting as a conduit between people’s earnings, and their entitlements such as endowment and pensions, people’s vulnerability to abuse of those discretionary powers echo Brennan’s observations regarding a possible enforceable fiduciary duty if the Commonwealth government had acted as conduit for royalties to the Northern Land Council.

 

To set the scene for the Bligh case, I want to consider the situation on the missions and settlements, keeping in mind that ‘care and control’ of reserve inmates was a government responsibility.  There were over 8500 people confined on reserves struggling to survive on rations when the government introduced cash economies in 1968.  But it set the wage for its 2500 employees at only $116 per week, less than half the minimum wage, and most of this was withheld for ‘amenities’.  Living costs were dramatically higher on these remote communities.  The government knew school absenteeism soared because many lacked food for children’s lunches, it knew people could not afford even the grossly discounted rent for new Commonwealth houses, it knew houses were therefore dangerously overcrowded.

In 1972, when it was paying its employees 58% the basic wage, the government knew poverty was so dire many families survived on bread and syrup, most homes lacked cupboards or beds, few could afford refrigerators, and the electricity supply was so inadequate families were routinely refused permission to buy them.  A medical survey at that time showed deaths of children under five from gastroenteritis and pneumonia were 34 times that of white children, due to ‘massive infection loads resulting from substandard living conditions’.  Sickness and death were quite clearly grounded in deliberate financial deprivation by the authority charged with their ‘care and protection’.

Regulation s 68 gazetted in 1972 under the Aborigines Act (1971) decreed award wages had to be paid where due, other than on government reserves where the wage was now labelled a ‘training allowance’, although many employees had worked for decades. In 1974 heavy machine operators on Palm Island were paid only one-third of the award rate.  After passage of the federal Racial Discrimination Act in 1975 it was illegal to under pay workers on the basis of race, a fact the government simply ignored.   In 1978 premier Joh Bjelke-Petersen demanded the federal government cover the costs of bringing community wages to award levels, threatening to retrench 850 workers at the risk of ‘massive social problems’ from unemployment and ‘other factors’.  When this demand was refused the Queensland government resolved to freeze wages funding.  As pay rates rose massive sackings drove workforce numbers from around 2500 in 1976 to under 800 a decade later, frequently jeopardising essential services.  And the government sat by and watched the ‘massive social problems’ unfold.  Despite the desperate privation, in 1979 the department organised changes in the state’s Audit Act so that personal social security cheques could be redirected to meet rents owing.

The government’s illegal position was tested in 1979 when labourer Arnold Murgha from the Yarrabah reserve, assisted by the AWU, brought an action in the industrial commission for wages owing. The government sought advice as to the validity of s 68 and was told its position was untenable because the regulation did not state an intent to pay less than legal rates. Senior Counsel said ‘the award is relevant and binding …the claim must succeed’, and the Crown Solicitor concurred: ‘In the net result there is a liability to pay the award rate of wages irrespective of how or where that liability is enforced’.  The state settled the Murgha case, all union members were told their employment was terminated, and the government held to its refusal to fund award wages.  In 1981, with work forces reduced to 7.5 per cent of community residents, the government was sued by two Cherbourg nurses who sought award wages, almost double their current pay. The Solicitor-General warned the government ‘the prospect of resisting award wages was far from good’ and award rates applied. Senior Counsel agreed: there was no regulation clearly excluding award rates for Aboriginal employees on reserves so the government was not exempt from state industrial law.

From at least August 1982 Cabinet discussed its underpayment of Aboriginal employees but declared it would neither implement legal rates nor provide funding for wage increases.  By the time community wages reached the state’s minimum rate in March 1983, one-third of the 1979 Aboriginal community work force had been sacked, a benefit to the government of around $8 million (over $15 million) for that year. In Cabinet, the minister for Aboriginal and Islander Advancement again reminded colleagues that the department was moving towards award rates ‘in the knowledge, as previously conveyed to Cabinet, that payment for labour below Award rates is in breach of State industrial law and infringes certain laws of the Commonwealth’.  Cabinet again refused any funding for wage increases and, in an internal response to a Discussion Paper on the matter by the Human Rights Commission, confirmed it would maintain the current policy until it was challenged under the RDA.  In August 1984, Cabinet again acknowledged that underpayment of wages breached state and federal law.

Early in 1986, with community wages around 72 per cent of the award, the government faced writs for back pay from a range of unions on behalf of Aboriginal community workers.  The minister warned Cabinet that current wage distribution was a ‘relic of past policy’, that the state was liable to pay award rates and currently stood ‘in a position of extreme vulnerability’. He said that the Solicitor-General and the ministers for Justice and Industrial Affairs all confirmed that union-backed challenges against the department were likely to succeed. He said that it would be cheaper to implement award rates than to lose highly punitive court actions; finally Cabinet approved the introduction of awards but again refused to provide funding.

Around this time seven plaintiffs from Palm Island launched action in the Human Rights Commission (now HREOC).  It was lost in a bureaucratic maze but was reactivated in 1995.  The plaintiffs asserted that underpayment by the government was illegal after passage of the federal Racial Discrimination Act in 1975, and claimed damages for discrimination for the period from 1975 until 1986.  As an expert witness, I prepared evidence to support my affidavit to the HREOC inquiry held in a Palm Island classroom in April 1996, including copies of records of government decisions to breach federal and state laws and continue underpayment.  Two days before the Inquiry was to start, Crown Law suggested I might be sued if I presented this evidence to the Commission.

Here I will note three main points of defence raised by the government: that settlement workers were employed in an institutional, social welfare training setting; that payment at less than award rates was lawful; and that underpayment complied with the ‘special measure’ provision of the RDA.  In fact, as the Commissioner stated in his Decision, the ‘social welfare training’ assertion ignores the reality that many employees were highly skilled having worked for decades in their field, several at full rates of pay on the mainland.  It also, he said, was grossly insulting and failed to acknowledge their considerable skill levels.  Payment at less than award rates was not justified under the 1972 regulations cited by Crown Law: these regulations made no provision that Aboriginal workers on reserves could be paid less than the award, remaining silent on this point.  Indeed, as I mentioned earlier, the government had been specifically informed of this since 1979.  And the Commissioner said the ‘special measure’ provision of the RDA, which condoned those discriminatory practices implemented for the advancement of a racial or ethnic group, could only be valid in this case if the sole purpose of the differential rates of pay was to advance the requirement of equal pay for equal work, when quite clearly the Act and regulations effectively denied that right.

It was not only the evidence of the complainants which persuaded the Commissioner of the government’s untenable wages policy, but the detailed contextual evidence I had supplied charting government recalcitrance and denial of award wages.  The theme of this material was unmistakable, he said: ‘whatever the proper payment was for a particular service provided by a non-Aboriginal worker, the payment to be made to an Aboriginal worker doing the same work and providing the same level of skills had necessarily to be less.’   He noted that in 1978 the Queensland government was underpaying Aboriginal workers on reserves by $3.6 million (almost $11 million today) compared to the state’s guaranteed minimum wage, and $6.85 million (almost $21 million) compared to award rates.  That money should be law have been in the pockets of workers on the Aboriginal communities; instead it remained in consolidated revenue.

The Commissioner concluded the government had ‘intentionally, deliberately and knowingly’ underpaid the claimants during the period 1975–1986.  He suggested damages for loss of income of $7000 per person. The Borbidge National–Liberal Party coalition government said it would ignore the decision and the claimants lodged their case in the Federal Court.  In April 1997, the Borbidge government sent the minister to Palm Island to apologise to the claimants and hand over the $7000 cheques.  Payment was conditional on workers indemnifying the government against any legal actions relating to the ‘protection’ regime.  At that time, the records show the Palm Island claimants were owed between $8500 and $21,000.

When the Labor government came to power in mid-1998 several subsequent Federal Court claims had also been settled at considerable expense; by May 1999 the government had settled 22 actions — one for $4000 (around one-quarter of the debt showed on department records), and 21 for $7000 (where department estimates of underpayment ranged between $13 000–$27 000).  A further 350 claims had been lodged with HREOC.  To ‘resolve’ the issue the Beattie government provided $24.5 million over three years in the 1999–2000 budget to settle ‘with people whose grievances are legitimate.’  When this offer closed in January 2003, around 5700 people had claimed the $7000 as compensation, at a final cost to the government of almost $40 million. In 2002 the government was sued for over $100 000 by two former workers who settled out of court in 2004.  By illegally short changing the very people it was mandated to ‘protect’ the government effectively stole almost $187 million from these workers between 1975 and 1986, in full knowledge that this underpayment was illegal, and in full knowledge of consequential dire poverty.  Rightful payment of this money to community workers would have dramatically altered living circumstances and prospects, then and now.

In 1990, in response to what she said were repeated claims from Aboriginal people ‘alleging disappearance of wages and funds held in trust by my department’, the minister commissioned a preliminary investigation of the Welfare Fund and associated trust accounts.  The minister said the investigation had revealed Aboriginal funds were ‘raided in order to cover financial shortfalls’ of the department but found no evidence to suggest the money had ever been reimbursed.  She said use of the Welfare Fund as departmental funds ‘have continued in one form or another to the present day’.  In 1993 the Welfare Fund was frozen.  In May 1999 the new minister also declared her commitment ‘to settling the Welfare Fund and its associated savings accounts’ through which successive Queensland governments ‘denied Aboriginal people the opportunity to take control over their own economic circumstances’.  ‘We must be accountable for the dishonourable actions of former Governments in this State’, she said.

In May 2002 Premier Beattie made an offer of $2000 for people under the age of fifty, and $4000 for those older, as ‘reparations for the decades of control by former Queensland administrations of the wages and savings of indigenous people.’ The government estimated there were 11 400 surviving potential claimants in the first group, and 5000 in the second, giving a total projected payout of over $55 million.  The premier said the payment would ‘deliver some overdue justice to ageing people’ rather than forcing them to endure protracted court cases and the risk of dying in the interim.  Yet this ‘generous’ offer (his words) was closed to descendants of those who had died before May 2002; the government had no intention of compensating or repaying monies lost across generations prior to that date.  To get the payment people had to sign an indemnity against taking legal action on any aspect of the ‘protection’ regime; and the government is well aware than very few people have any idea of what might be missing or owed, having never seen any documentation.  This, it seems, is justice Queensland style.

 

I’ll turn now to justice US style – namely the Cobell case.

As trustee for Indian lands, it was the federal government that contracted the sales and negotiated leases for grazing, mining, logging, oil and gas production. It received and disbursed proceeds through the Individual Indian Monies (IIM) account, established in 1887 under the General Allotment Act. Under federal law Indian trust money was deposited in the US treasury and since 1918 trust funds were invested by the Bureau of Indian Affairs (BIA).  Government management of Indian trust money was criticised in general accounting office audits in 1928, 1952 and 1955. By then it was so discredited that Congress terminated the trust relationship releasing tribes from federal supervision, although trust fund controls continued.  From the 1960s Congress recommended major reforms of trust fund management and in 1975 (when policy changed to self-determination) tribes were given a degree of self-management over their accounts, including IIM funds held for the tribe or its members.

After a further 30 audits in the decade from 1982 exposed continuing serious accounting and fund management problems Congress issued a series of explicit directives. In 1985 the BIA was ordered to implement a comprehensive plan to overhaul management of the IIM accounts but did not do so.  BIA management of the trust funds was identified as a high-risk activity in 1989, and again in 1991, at which time the BIA admitted it had not distributed royalty income to account holders for six years.  In 1992 the Committee on Government Relations tabled a report in Congress which blew the lid on decades of negligence and malpractice.  The Synar Report argued that the government had a clear fiduciary duty to the individual Indians and tribes defined by federal statutes and by the relationship between the government and particular tribes. This was particularly the case, he said, since Indians were deemed legally incompetent adults when IIM management commenced in 1887 and their participation in the BIA’s banking service was rarely voluntary.

Synar affirmed that the most fundamental duty of the government and the BIA was to make a full accounting of the property and funds it held in trust for the beneficiaries each of whom was entitled to clear detailed reports of transactions on their funds. There was also a duty to ensure productive return on trust property and to maximise investment return on trust holdings of the 300 000 current accounts that comprised the IIM.  Despite years of high-level reports documenting what Synar described as an appalling array of management and accountability failures, the BIA had neither corrected its faults nor implemented expert advice to contain them. Endemic defects continued: inadequate accounting systems; inadequate controls over receipts and disbursements; inability to determine cash balances; absence of timely reconciliations; failure to provide account holders with meaningful statements of their accounts.  Congress appointed veteran banker Paul Homan as a special trustee to supervise reform of the system; he found such chaos he said it was ‘akin to leaving the vault door open’. Treasury retained funds owed to 50 000 of the 238 000 individual accounts because it had no addresses for them; 16 000 accounts had no records at all, and 118 000 lacked vital documents. He said it was impossible to say how many people were owed money.

It was against this background that Elouise Cobell and four co-plaintiffs filed a class-action lawsuit in June 1996 against the departments of Interior and Treasury on behalf of half a million past and present Native Americans.  They charged the Secretary of the Interior and the Secretary of the Treasury with failing to keep proper records, destroying evidence of breaches, failing to account to beneficiaries for their money, and losing or dissipating or using for their own benefit beneficiaries’ moneys.  Over decades the government had ignored all pleas to accurately account for the trust funds according to its fiduciary duties, effectively exhausting the only administrative remedies available to the plaintiffs. They had no way of knowing the true state of their accounts unless the court compelled the defendants to institute appropriate trust practices and restore funds that had been lost or misused.  In November 1996 and again in May 1998 the Court ordered the government to produce all the records of the five plaintiffs. The government refused to make them available.   In February 1999 the District Court found the defendants in civil contempt of the Court, stating that he had never seen such egregious misconduct by the federal government. It later transpired that before and during the contempt proceedings, Treasury destroyed 162 boxes of relevant documents and the departments were fined $US600 000 for their failure to report the destruction. Court-appointed special master Alan Balaran described a system ‘clearly out of control’.  In June 1999 the government admitted the BIA deliberately did not tell account holders that their balances were unreliable because it feared the risk of lawsuits.

In December 1999 the Court concluded the plaintiffs had achieved ‘a stunning victory’. The judge said under both the 1887 Allotment Act and the 1934 Indian Reorganization Act the US was trustee of the IIM trust.   He found that the plaintiffs had a statutory right to a full historical accounting of their funds and acknowledged that they only sought to recover what was rightfully theirs.  The government’s appeal was unanimously rejected in February 2001, the Court finding there was ‘ample evidence’ of ongoing breaches by the government of its trust responsibilities: the government didn’t know the proper number of accounts or the proper balances in each IIM account, nor did it have sufficient records to determine their value.  The Court said the very nature of the trust relationship with Native Americans required stricter standards of accountability, and the duty to provide full disclosure of all accounts was ‘black-letter trust law’. The legal breach of that trust was the BIA’s failure to provide a full accounting; such accounting, they confirmed, applied to all funds irrespective of when they were deposited in the trust.  A further judgment in September 2003 again confirmed the plaintiffs’ rights, and stated that an accounting was due on all individual Indian assets held in trust since 1887 and in accordance with the highest fiduciary standards.

The stakes are high.  The US government has more than 100 lawyers on the case and its costs are already over $US100 million; their own investigation warned that liability could be as high as $US40 billion (over $A50 billion).  But as Cobell has said so often, they only ever sought a full and complete accounting of their own entitlements, the basic legal right for every trust beneficiary.

 

What are the chances of winning that basic right for Aboriginal beneficiaries in Australia?

Australian case law has followed a different path to the US and Canada, despite emanating from the same United Kingdom source.  Each jurisdiction for years adhered to the doctrine that trust relations between government and constituents are grounded in the will of the people, and the exercise of such discretionary powers were therefore outside the province of the courts to adjudicate.  This doctrine is known as a political trust.  Indeed in the 1860s a citizen could only sue government in Australia if that government gave its consent to the action.   Since the mid-1930s, however, courts in the US and Canada have not adhered to the doctrine of political trust; yet our courts still hold a conservative line.

It would appear there has been a further watershed in international jurisprudence as regards government obligations relating Indigenous interests in the 1990 Canadian case R v Sparrow.  In this case the Supreme Court ruled that the special trust relationship and responsibility to the First Nations was a restraint on sovereign power that must be reconciled with federal duty.  Indeed in 1993 the New Zealand Court of Appeal¹² praised Canada’s activism as ‘part of a widespread international recognition that the rights of Indigenous peoples are entitled to some effective protection and advancement’.

In Australia however, with reference to a 1999 case relating to a guardian/ward relationship, the New South Wales Supreme Court¹³ noted Canada’s ‘greater willingness’ to extend fiduciary doctrine into new relationships but declared that such activism was not shared by Australia or New Zealand, and the United Kingdom’s reluctance was ‘even more marked.’  In rejecting the Canadian precedent, the judge said that ‘[i]f the common law [in Australia] does not impose a duty of care for a variety of reasons … it is difficult to see why equity should intervene.’   Yet there are exceptions to this convention in Australian jurisprudence.  Australian courts did find an enforceable fiduciary obligation in a guardian/ward relationship in cases in 1992 and 1999;¹⁴ both of which involved the protection of an economic interest.   And in two other cases in 1996 and 1998,¹⁵ the High Court declined to intervene because economic interests were not at stake.  In the latter case, the Full Court observed that in Anglo-Australian law, the interests ‘which the equitable doctrines … have hitherto protected are economic interests’.

This principle was affirmed in 2000 in Cubillo v The Commonwealth of Australia,¹⁶ where the High Court argued it would be inappropriate for a judge to expand the range of fiduciary relationships to conflicts of interest which did not include an economic aspect.  In 2001, again in the High Court,¹⁷ Justice Kirby remarked that authorities in Canada and the US were to some extent ‘reshaping the law of [fiduciary] obligations’, and blurring distinctions still maintained in the United Kingdom and Australia. Confirming the ‘general disinclination’ of our courts ‘to expand fiduciary obligations beyond what might be called proprietary interests into the more nebulous field of personal rights’, he urged Australian courts to stick to the ‘accepted doctrine’ that fiduciary duties adhere to the protection of economic interests.

If it is ‘accepted doctrine’ in Australia that fiduciary duties adhere to the protection of economic interests, then it can be argued that an enforceable fiduciary duty should adhere to the economic interests of Aboriginal people whose wages, savings, inheritances and welfare entitlements were intercepted and controlled by governments in the states and territories. Each of these governments had a ‘judicially prescribed’ duty to protect the finances of thousands of the ‘poorest people in our nation’ who did not voluntarily choose to relinquish their labour potential or their money.  In standing between people and their savings and entitlements, governments were a conduit for private finances, grounds conforming with those hypothesised by Brennan in Northern Land Council. Not only Aboriginal wards, but the parliament and the wider public had a valid expectation that governments would wield their extraordinary powers to the benefit of Indigenous interests; grounds conforming with Brennan’s hypothesis in Wik. A fiduciary obligation to do so is clearly expressed in the statutes and regulations.

Like US management of Indian monies, analysis of Queensland government controls of Aboriginal finances reveals an appalling array of management and accountability failures; it shows the department neither corrected its faults nor implemented expert advice to contain them.  Like the Indian experience, despite years of critical reports the endemic defects continued: inadequate accounting systems; inadequate controls over receipts and disbursements; failure to provide account holders with meaningful statements of their accounts.  Like the BIA, the Queensland government failed to keep proper records, failed to account to beneficiaries for their money, and lost or dissipated or used for its own benefit beneficiaries’ moneys.  Over decades it has ignored all pleas to accurately account for the trust funds, effectively exhausting the only administrative remedies available to Aboriginal account holders who now have no way of knowing the true state of their accounts unless a court compels the Queensland government to comply with standard trust practices.

It is my belief that it is within the ‘accepted doctrine’ of Australian courts to impose that requirement.  I believe it is within current jurisprudence for our courts to adjudicate government dealings on private Aboriginal finances under the same principles of law as would be applied to an ordinary fiduciary: namely that the trust must be administered solely on behalf of the beneficiary, that trustees must not profit from the administration of the trust, that there must be no conflict of interest or intent to gain from the fiduciary position, that trustees must not act for their own benefit or the benefit of a third party.  Above all, as was stated in the Cobell case, our courts should enforce the ‘black letter trust law’ that beneficiaries are entitled to a full accounting of all moneys held in trust.

 

Endnotes