20.13 Mr Hogan was aware that AWB was not in reality contractually bound to deliver wheat to all 'governates' of Iraq. The arrangement he had struck with the Iraqis was that Iraq would continue to be responsible for delivery of wheat to all governorates and that AWB would pay the IGB a fee. Mr Hogan described the arrangement in evidence [1937]:

Q: Free in truck, yes, was approved. If the contracts had, in truth, reflected the arrangement as you understood it after your meetings in June 1999, is it not correct to say that they ought to have said, 'CIF, Umm Qasr, with AWB to pay to IGB or Iraq $14 for arranging discharge and transport'?

A: Commissioner, I think in hindsight, firstly, it would have been even before that contract was written, that someone actually approached the United Nations and asked them about the inland transport fee. I didn't write the original contracts or the terms of it-

Q: I'm not suggesting you did, and we know that this all emerged from a tender which was put to you by the Iraqis. But what I am suggesting to you is that it was known that that tender, and it was known that the contract in fact signed did not in fact represent the true arrangement which you and Mr Emons knew had been made by June 1999, because, in truth, as you understood it, AWB had an obligation to deliver to Umm Qasr; in truth, it was IGB who was thereafter to look after transportation and distribution; and, in truth, AWB's only obligation was to pay a sum of money to Iraq, who would use that money for whatever purposes they thought.

A: Correct. But I-sorry, I think in the contract, it says, 'Payable to Iraqi maritime agents'.

Q: Yes, which was known to be an Iraqi instrumentality?

A: Yes, but my interpretation of that was that, yes, we were taking the funds and then paying it through to Iraq.

Q: Yes, you have told us many times that you knew money was going to Iraq?

A: But I know that-looking back now in hindsight, the whole contracts would have been written completely differently the whole way through.

20.14 Mr Hogan's draft letter should be viewed as a disingenuous attempt to:

A second draft

20.15 A second version of this proposed facsimile to DFAT was also produced to the Inquiry by AWB. [1938] This second version was dated 30 October 2000. Like the first, it was addressed to 'Jill Coutney'.[1939] However, unlike the earlier draft, this second version was expressed as being from Mr Stott, not Mr Hogan. There were also substantial differences between the contents of this facsimile and Mr Hogan's first draft. [1940]

20.16 The second version, which was also unsigned, was in the following terms[1941]:

Dear Jill,

As you are aware, AWB is experiencing problems managing its' Iraq business efficiently. The first problem concerns United Nations procedural issues, which we will document in a separate note.

The second issue is the physical execution problem resulting in delays of vessels discharging at Umm Qaser, Iraq. As a consequence of these delays, AWB is incurring significant demurrage costs.

We urgently need to rectify the problem which our delegation identified is caused by the lack of trucks at discharge port.

For your guidance, Jordan based trucking companies are responsible for arranging trucks at discharge port. We propose entering into discussions with these trucking companies with a view to agreeing a commercial arrangement in order to ensure that there are enough trucks to enable the prompt discharge of Australian wheat cargoes.

While we believe the proposed solution will eloquently solve our problem, the purpose of writing is to ensure that DFAT is comfortable with AWB proceeding with the suggested approach.

Thanks in anticipation

Best regards

Charles Stott

General Manager

International Marketing

This version was headed 'Confidential'. Mr Hogan's first draft had no such heading. The file path that appeared at the foot of the second page of this second version was:

L:\MEDESK\MARKETS\M_EAST\IRAQ\DFAT\Tranpsort_Discharge2.doc

This is consistent with this second version having been saved or stored in the same Middle East Desk folder as Mr Hogan's first draft and as an amended version of that first draft.[1942] This second version was also sent by Mr Hogan to Mr Stott as an attachment to an email on 30 October 2000. [1943]

This second version is reproduced as Figure 20.2 in Appendix 20.

The third and final version

20.17 A third version of this facsimile was also produced to the Inquiry.[1944] This third version was again addressed to 'Jill Coutney', was expressed as being from Mr Stott, and was dated 30 October 2000. However, unlike the two earlier versions, this third version was signed by Mr Stott over his name. It also bore a fax tracer line indicating that it was faxed on 30 October 2000. The facsimile transmission sheet confirms that it had been faxed to DFAT.[1945]

20.18 This third version was headed 'Commercial in confidence' (rather than 'Confidential', as the second version had been) and was in slightly different terms from the second version. It read:

Dear Jill,

The purpose of writing is to ensure that DFAT is comfortable with AWB proceeding with the approach outlined below. As previously discussed we are currently experiencing problems managing our Iraq business. The first problem concerns United Nations procedural issues, which we will document in a separate note.

The second issue is, vessels discharging at Umm Qasr suffer long delays and as a consequence AWB incurs substantial demurrage bills. Our recent mission identified that the slow discharge of vessels is caused by a lack of trucks at discharge port.

For your guidance, Jordan based trucking companies are responsible for arranging trucks at discharge port. To rectify the problem, we propose entering into discussions with the Jordan trucking companies with a view to agreeing a commercial arrangement in order to ensure that there are enough trucks to enable the prompt discharge of Australian wheat cargoes.

We believe the proposed solution will eloquently solve our problem and look forward to receiving your response.

Thank you in anticipation.

Best regards,

Charles Stott
General Manager
International Marketing

A copy of this third version is reproduced as Figure 20.3 in Appendix 20.

Mr Stott confirmed it was this third version that was the document he signed and sent to DFAT.[1946]

The amendments to the various drafts

20.19 As noted, Mr Hogan sent a copy of his first draft of this facsimile to Mr Stott as an attachment to an email dated 27 October 2000.[1947] Mr Stott did not accept that this document was a version sent to him by Mr Hogan, even though the electronic records of AWB showed that this was so.[1948]

20.20 Mr Hogan had no recollection of discussing with Mr Stott any changes to his draft. Nevertheless, Mr Hogan's evidence was that Mr Stott's usual practice was to give any draft that Mr Hogan had prepared back to him with changes marked in red and to ask him to retype it. Mr Hogan believed that if he composed the first draft, he would have retyped the second draft, incorporating any changes requested by Mr Stott.[1949]

20.21 The file path that appears on the second version of the facsimile is consistent with it being a second draft of that facsimile. In particular, it is consistent with changes having been made to Mr Hogan's first draft, with the amended document then saved as a second version of the first draft and in the same folder as the first draft. It is therefore likely that those changes included in the second version of this facsimile were physically made by Mr Hogan. That is consistent with Mr Hogan's evidence of how Mr Stott's amendments to Mr Hogan's drafts were usually made. Mr Hogan then emailed the amended document (that is, the second version) to Mr Stott at 12.02 pm on 30 October 2000. [1950]

20.22 Whilst it is possible that Mr Hogan may have made the amendments found in the second version of this facsimile himself and independently of Mr Stott or any suggestions by Mr Stott, such a course is unlikely. Rather, the material before this Inquiry supports a finding that Mr Stott was the author of the amendments that gave rise to the second version of this facsimile.

20.23 Mr Stott recalled receiving a draft from Mr Hogan, although he could not recall what it looked like.[1951] He recalled receiving only one draft from Mr Hogan. [1952] According to Mr Stott, he made changes to the draft he received from Mr Hogan [1953], although he could not recall which of the several versions of this facsimile to DFAT produced to the Inquiry was the draft he received from Mr Hogan and amended. Nor could Mr Stott recall which of the several versions of that facsimile produced to the Inquiry was the product of his amendments, although he did say the version he had signed was the 'version [he] was comfortable with signing'. [1954] Mr Stott recalled making changes to only one document. [1955]

20.24 In the course of his examination Mr Stott stated:

When I came back in October there was the drafts of the letter that I sent to DFAT, there was some interesting exchanges on the draft of the letters, and I went-we ultimately sent the letter as I had wanted it to be written, which is the relation to the trucking-right to use trucks at discharge port.[1956]

When asked what he meant by 'interesting exchanges' Mr Stott replied:

Mr Hogan had a draft of the letter and I had made changes to that draft. Mr Hogan and Mr Hughes asked if they could meet me to discuss my changes in that letter.[1957]

Mr Stott claimed that in his subsequent meeting with Mr Hogan and Mr Hughes they became agitated, vocal and irrational about his proposed changes to the facsimile. Mr Stott could not recall what they said or why they were unhappy[1958], other than that they were unhappy about the changes he made. [1959]

20.25 Mr Hughes' evidence was that he had no recollection of seeing or receiving Mr Hogan's draft letter and he did not attend a meeting with Mr Hogan or Mr Stott in that regard. [1960] He recalled that on one occasion, late in 2000, after a discussion with Mr Stott, Mr Hogan returned to his desk holding a draft document that was covered in red handwriting. Mr Hogan said to Mr Hughes words to the effect, 'Well, I certainly got an F for that'.[1961] Mr Hughes did not know what the document was but understood Mr Hogan to be referring to corrections made by Mr Stott to something Mr Hogan had drafted.[1962]

20.26 Mr Hogan denied that any meeting-which Mr Stott had described as a shouting match[1963]-between himself, Mr Hughes and Mr Stott concerning amendments to his draft letter ever took place.[1964]

20.27 It is not necessary for the purposes of this Inquiry to determine whether Mr Stott's evidence that he had a meeting with Mr Hogan and Mr Hughes should be accepted and, if so, whether this was the occasion on which Mr Hogan's draft was amended by Mr Stott. Nor is it necessary to determine whether the meeting Mr Stott said he had with Mr Hughes and Mr Hogan was-as Mr Stott claimed in his evidence before the Inquiry-a theatrical performance that appeared to be for the benefit of the people outside the room, rather than for Mr Stott's benefit[1965], or whether this theatre concerned Mr Stott at the time. [1966]

20.28 Despite Mr Stott's inability to recall which version of the facsimile he reviewed and which was the product of that review, there is no doubt on his evidence that he did review a draft that had been prepared by Mr Hogan and that he amended that draft.

20.29 The evidence supports a finding that it was Mr Hogan's first draft of the facsimile to DFAT dated 27 October 2000 that Mr Stott reviewed and amended and that the second version of that facsimile (dated 30 October 2000) was the product of Mr Stott's amendments to Mr Hogan's first draft, although the amendments themselves were made by Mr Hogan (in keeping with his evidence about the usual practice at that time).

20.30 Such a finding is both consistent with and supported by:

20.31 Although the file path on the second version of the facsimile is consistent with Mr Hogan having physically made the changes incorporated in that version, that is not inconsistent with those changes having emanated from Mr Stott. That is so especially given Mr Hogan's evidence of the practice by which Mr Stott's amendments to Mr Hogan's drafts were usually made and Mr Hughes' evidence of Mr Hogan returning to his desk with a document marked up in red and reciting 'Well, I certainly got an F for that'. Nor is the fact that Mr Hogan emailed the second version to Mr Stott necessarily inconsistent with Mr Stott being the author of the changes that Mr Hogan made.

Further changes were made to the second version of this facsimile to produce the third and final version. These changes were not as substantial or significant as the amendments made to Mr Hogan's first draft. They were more a matter of style than substance. They are of themselves not sufficiently substantial to give rise to the 'interesting exchanges' that Mr Stott suggested took place.

20.32 Although Mr Hogan said in his statement [1968] that he did not see the final version of this facsimile, he later explained that he was mistaken in this regard and went on to say:

I think when I made the statement that I possibly thought that I was still in Cairo because I may not have seen or looked at my itinerary, but if I have typed the first draft, then I would have typed the second draft.[1969]

20.33 The file path appearing at the foot of the third version of the facsimile was:

C:\WINNT\Profiles\stottc\Personal\Tranpsort_Discharge2.doc[1970]

The change in the file path from that appearing on the first and second drafts suggests that this third version of the facsimile was saved in Mr Stott's personal folder rather than in a shared Middle East Desk folder or the folder in which Mr Hogan saved the first and second drafts. It is therefore likely that Mr Stott was also the author of the changes that were made to the second version and which produced the third and final version of the facsimile Mr Stott signed and sent to DFAT.

To the extent that Mr Stott suggested in his evidence that he only made one set of changes to the drafts of this facsimile and that it might therefore be thought that the only changes he made were to this second version, that evidence and conclusion are rejected.

Differences between the first and second drafts

20.34 There are a number of differences between Mr Hogan's first draft of this facsimile to Ms Courtney and the second (and final) versions.[1971]

20.35 First, the problem that had prompted AWB to write to DFAT in the first place was expressed differently in each draft. In Mr Hogan's first draft the problem identified was the substantial delays then being experienced in the discharge of wheat. In the second draft of the facsimile it was that AWB was experiencing problems in managing its Iraq business efficiently. These problems included the delays in the discharge of vessels at Umm Qasr that AWB was then experiencing and the demurrage that AWB was incurring as a result of those delays. They also included an additional problem concerning UN procedural issues, which the second draft of the facsimile stated would be the subject of a separate note.

20.36 Second, in relation to the question of delay, the first draft stated that the rate of discharge of wheat from the vessels was 'affected by the availability of road transports' and that 'to increase the discharge rate, more transports would be required'. That first draft did not assert that there was any lack of trucks to transport the wheat or that the delays in discharge that AWB was experiencing at the time were caused by a lack of trucks. Rather, what was recorded in Mr Hogan's first draft was that to increase the rate of discharge of cargo more trucks would be needed. It was in this context that the proposal in the second-last paragraph of this draft was made.

20.37 The second draft of this facsimile, however, more pointedly attributed the cause of the delays in discharge that AWB was experiencing to 'the lack of trucks at the discharge port'. Moreover, it was also stated in this second draft that AWB's recent delegation to Iraq had identified this lack of trucks at the discharge port as the cause of this problem (namely, the delays). This was notwithstanding that:

20.38 Contrary to what was said in the second draft of this proposed facsimile to DFAT[1973], it would appear from Mr Hogan's report of the October 2000 visit to Iraq that the cause of the delays in discharge that were being then experienced by AWB were delays resulting from the testing of the wheat prior to its discharge at Umm Qasr, delays associated with waiting for the results of those tests, delays caused by the fumigation of the wheat where required, and reduced rates of discharge and attendant delays because of the equipment used to discharge the wheat from the vessels and the inadequacies and insufficiency of that equipment.

20.39 Third, the following paragraph from Mr Hogan's first draft was deleted from the second draft:

Currently all Iraq contracts are concluded as 'Free in Truck' all governates Iraq, with a predetermined and UN approved transport fee. The inclusion of the transport fee in the contract reduces AWB's ability to negotiate rates directly with the transport company, and subsequently there is no performance incentive for the transport company to maximise the discharge rates at Umm Qaser.[1974] [emphasis added]

The second draft contained no paragraph of similar content. These words in Mr Hogan's first draft made clear that AWB had a pre-existing relationship with a transport company[1975], that a transport fee was paid to that company, and that this fee was 'UN approved'. Deletion of these words (or words to similar effect) and substitution of what appeared in the second draft) removed from the proposed facsimile any indication that AWB was already paying an inland transportation fee to a Jordanian company.

Deletion of this paragraph (and its subject matter) from the proposed facsimile to DFAT was also carried through to the third and final version of this facsimile.

20.40 There was no reference in either the second or the final versions of this facsimile to AWB's contracts with the IGB at that time being on a free in truck basis or containing an obligation on AWB to pay an inland transportation fee (even a 'pre-determined and UN approved transport fee'), to the payment of that fee to Alia, to Alia being the Jordanian trucking company that was involved in relation to those existing contracts, or even to the fact that there were already in place arrangements with a Jordanian trucking company.

20.41 Mr Stott's evidence was that he removed those words because they were not relevant to the issue he wanted to address in his letter. He believed:

the purpose of this letter … was to get the approval to enter into an arrangement with Jordan-based trucking companies, to ensure that more trucks were at discharge port in Iraq to reduce the amount of time that my vessels were waiting at Iraq, thereby reducing the demurrage bills.[1976]

20.42 There was also a change in the description of the proposal AWB wished to put to DFAT. In Mr Hogan's first draft the proposal was to commence discussions directly with 'the transport company in Jordan' with the aim of introducing a performance incentive scheme. According to Mr Hogan's first draft, this 'eloquent solution' would reward the trucking company based on the final discharge performance of each vessel. The problem that the preceding paragraph of the first draft had identified and that this proposal was seeking to redress was that 'the inclusion of the transport fee in the contract [with the IGB] reduced AWB's ability to negotiate rates directly with the [Jordanian] trucking company'. In that context, Mr Hogan's first draft sought any feedback from DFAT before AWB commenced discussions along the lines proposed 'with the Jordanian trucking company'. Again, this reference to 'the transport company in Jordan' made plain that AWB had an existing relationship with a Jordanian trucking company. [emphasis added]

20.43 In the second draft of this facsimile, the proposal was expressed in different terms. The second draft stated that Jordan-based trucking companies (plural) were responsible for arranging trucks at the discharge port. The proposal contained in the second draft was for AWB to enter into discussions 'with these trucking companies' and 'with a view to agreeing a commercial arrangement in order to ensure that there are enough trucks to enable the prompt discharge of Australian wheat cargoes'. Unlike the first draft, the language of the second version of this facsimile did not reveal AWB's existing relationship with the Jordanian trucking company. Rather, the second version was couched more in terms of a prospective relationship. Further, the nature of the proposed commercial arrangement was no longer made explicit. In particular, it was no longer described as a performance incentive scheme. Whilst the goal may have remained the same-namely, to increase the number of trucks available and thereby increase the rate of discharge-what was now proposed was of a more general description. Although Mr Stott was correct when he said in evidence that this reference to 'a commercial arrangement' could have been read as referring to or including a performance incentive scheme [1977], it is not apparent from the letter itself that that is what the author had in mind.

20.44 Mr Stott said he wanted to 'incentivise Alia to get more trucks into Iraq'[1978], but at the time of writing the letter he did not have anything in mind by way of an incentive arrangement.[1979] Mr Stott said his proposal involved obtaining agreement to a guaranteed discharge rate with no consequences in the event of a breach of that obligation.[1980] He acknowledged that the guarantee as to discharge rate would be made by 'the Iraqis'[1981] but denied that the incentive system he proposed was to involve adjustment of the trucking fee.[1982]

20.45 The reference to more than one company being responsible for the discharge of wheat at Umm Qasr was possibly consistent with what was recorded in the final two lines of the October 2000 trip report [1983]: '2 shipping Companies in Jordan who handle free in truck discharge-Alia Shipping Company and Water Transport Company'.

20.46 Although in the course of his examination Mr Stott eschewed any knowledge of the involvement of the Water Transport Company at that time, he said:

… in the October delegation the water transport company's name was mentioned as a possible alternate provider. That was the first occasion that I think I have heard of that particular company.

….

I asked Dom [Mr Hogan] if he knew anything about it, and he didn't know anything about the trucking-the water company …[1984]

20.47 This reference to the 'water transport company' was presumably a reference to the Iraqi State Company for Water Transport. The ISCWT was an Iraqi company, not Jordanian. It was the port agent at Umm Qasr, nominated as such in AWB's contracts for the sale of wheat to the IGB. If not actually involved in the discharge and transportation of wheat, it was at least involved in the receipt of inland transportation fees.[1985] The ISCWT was, to the knowledge of AWB, involved in the collection of the inland transportation payments payable by AWB in respect of its shipments of wheat to Umm Qasr. Even if Mr Stott's evidence that he had no knowledge of the ISCWT were to be accepted, from as early as November 1999 AWB [1986] had from time to time received from Alia requests from the ISCWT for payment of inland transportation fees in respect of shipments that were said to be late or outstanding. [1987]

Differences between the second and final versions

20.48 There were some slight differences between the second and final versions of the facsimile to DFAT. For example, the third version brought to the forefront the purported purpose in writing the letter-'to ensure that DFAT is comfortable with AWB proceeding with the approach outlined' in the facsimile.[1988] The third version no longer referred to an urgent need to rectify the problem caused by the delay in discharge from the vessels, although the cause of that problem was still said to be 'a lack of trucks at discharge port' and the proposal for remedying that problem remained the same. [1989]

20.49 However, none of these differences or any of the changes made to the second draft significantly altered the contents of the facsimile or its substance. Mr Stott agreed as much in his evidence when he said, 'I think that there are some subtle differences, but the substance appears to be similar'.[1990]

Whether Mr Stott spoke with DFAT before sending his facsimile

20.50 Mr Stott said he spoke to 'people in DFAT' before sending the facsimile of 30 October 2000. [1991] In his statement he said:

… we informally consulted on the terms of a letter I wished to write to DFAT about inland transport arrangements. As a result of the discussions, I wrote to DFAT on or about 30 October 2000, to seek DFAT's approval for AWB Limited to enter into discussions with the Jordan trucking companies … in order to enter into a commercial arrangement to improve the efficiency of the discharge process.[1992]

20.51 During his examination Mr Stott said:

I can't recall if I had a discussion before the letter. I think I did have a discussion before I sent the letter, because it was customary, before sending a letter to DFAT, to make sure that DFAT was comfortable with the terms of the letter, because I didn't want to send a letter to DFAT that they were not prepared to receive in a format that they were-would be happy with. So that was customary practice for me, on any correspondence to DFAT, I would talk to them about that before I would generally send the letter to make sure that it was in a form that would not-it was a form that would be received appropriately.[1993]

20.52 Mr Stott was not certain of the identity of the person from DFAT with whom he spoke. At first he said, 'I can't be certain … I think it would have been Jane'[1994], referring to Ms Drake-Brockman, who was the then Assistant Secretary of the Middle East and Africa Branch of DFAT. Later Mr Stott said, 'I don't recall … it would been either Jane or Jill but I can't be certain'. [1995] Still later, Mr Stott said, 'It's most likely I would have spoken to Jill but I can't be certain'.[1996] These references to 'Jill' are references to Ms Courtney, to whom the facsimile was addressed.

20.53 Mr Stott could not recall when this conversation took place, other than it was around the time he amended the draft of the facsimile.[1997] He doubted it would have been before he asked Mr Hogan to prepare a draft. [1998]

20.54 As to what was said during this conversation, Mr Stott's evidence was:

A: I just would have explained the issue that we had down at Umm Qasr, the shortage of trucks, 'Propose to write to you along those lines', and basically making sure that they're comfortable to receive a letter from me in that format.

Q: Along which lines?

A: The general proposition around wanting to seek approval from them to enter into arrangements with the-commercial arrangements with a trucking company. I can't recall specifically what I would have said, but it would have been the general theme of the letter.

Q: Might it have been what you said to Mr Hogan, seeking advice as to a proposal to introduce a performance incentive scheme?

A: I can't be certain, Mr Agius. I can't be certain as to what I would have said.[1999]

20.55 According to Mr Stott, the response he received from either Ms Drake-Brockman or Ms Courtney in this conversation was 'that they would have been happy to receive a letter from me along those lines'.[2000]

20.56 There is no evidence-from anyone, including Mr Stott-that he said anything in this conversation about the inland transportation fees, the fact that AWB was already paying these fees, that they were being paid to Alia, or that Alia was the Jordanian trucking company associated with the inland transportation of the wheat. Nor did Mr Stott suggest in his evidence that he had informed the representative of DFAT with whom he had spoken (whoever that might have been) that AWB's contracts with the IGB were concluded as '"Free in Truck" all governates, Iraq' with a predetermined inland transportation fee, or that this had been approved by the United Nations, being the material that Mr Stott had deleted from Mr Hogan's first draft of the facsimile.

20.57 At its highest, Mr Stott's evidence was that he had conveyed to whoever he had spoken with the substance of the facsimile he proposed to send to DFAT. Even if this had occurred, it is likely to have been either the second or third versions of this facsimile to which Mr Stott would have made reference in that conversation.

20.58 Mr Hogan believed there may have been conversations between himself and DFAT officers between 27 and 30 October 2000. [2001] In this regard, he referred to a diary note dated 30 October 2000 [2002] which began:

DFAT: Jill Coutney:
Can't see legal/UN-Jordanian UN (Article 50 exception) → Tim

Mr Hogan believed the diary note may have been related to this subject matter but could not recall anything specific about it or any discussions with DFAT.

20.59 Against this, Ms Drake-Brockman's evidence was that she had 'never had any discussion with Mr Stott about the terms of a letter he wished to write to DFAT'[2003] or about Mr Stott's facsimile of 30 October 2000 or about 'inland transport arrangements'. She also said she did not have a practice of assisting in settling letters before they were sent to her. [2004]

According to Ms Drake-Brockman, she had never had a report from any officer of DFAT or otherwise been made aware by any officer of DFAT of any discussions they may have had with Mr Stott about the terms of a letter or facsimile he proposed to send or about inland transport arrangements. [2005]

20.60 Ms Courtney's evidence was that she 'did not have many telephone conversations with AWB. I do not recall having any telephone conversation with Charles Stott either in the period immediately before 30 October 2000 or in the week after'. [2006]

In the course of her examination, it was put to Ms Courtney that there were discussions with someone from AWB about the way in which the letter should be phrased. Ms Courtney's response was that she had no recollection of that taking place and that she would be surprised if that had happened.[2007] It was Ms Courtney's evidence that she did not have a practice of negotiating the form in which letters ought to be addressed to her. [2008]

20.61 Mr Don Cuddihy did not recall having had a discussion with anyone about the form the letter should take. When asked whether he may have had such a discussion and forgotten about it, Mr Cuddihy said, 'I suspect I would remember this issue'. [2009]

20.62 Mr Stott's evidence that he spoke with someone from DFAT before sending his facsimile of 30 October 2000 cannot be accepted. It is against the weight of evidence. It was met by a denial from Ms Drake-Brockman, and Ms Courtney had no recollection of any such conversation. Mr Stott's evidence that he had such a conversation was tentative and uncertain. This conversation was not referred to in Mr Stott's statement to the Inquiry and emerged only during his oral evidence.

20.63 This finding, however, is not crucial. Even if it is accepted that Mr Stott did have a conversation with either Ms Drake-Brockman or Ms Courtney, his evidence was that in that conversation he did no more than repeat at most what was set out in the final draft of his facsimile. He did not inform them of AWB's agreement to pay inland transportation fees as part of its contract with the IGB, of the payment of those inland transportation fees, of their payment to Alia, of the existence or role of Alia, or that AWB was already 'using' a Jordanian based trucking company. He did not inform them that AWB had no contract with Alia but had been paying transportation fees to that company since November 1999 or that this inland transportation fee was fixed by the IGB. His letter spoke only of 'discharge', not of transportation. It gave no explanation of the true transportation arrangements that were linked to discharge, as Mr Hogan's earlier draft had done. It avoided drawing to DFAT's attention, as Mr Hogan's draft had, that AWB had included in its price a 'predetermined and UN approval transport fee', a statement likely to draw inquiries from DFAT. Mr Stott did not inform the person at DFAT with whom he spoke of any of these matters. He did not give evidence of any reply to anything he said during any conversation with any officer of DFAT in any conversation about the letter that bears upon the issue of whether DFAT was aware of the existence of Alia or that AWB was proposing to or did contract with Alia or pay any fee to Alia. [2010]

Whatever the circumstances that led to DFAT receiving Mr Stott's letter, there is nothing in the letter to support the statement made by Mr Whitwell to Ms Armstrong in the email of 18 March 2004 already referred to-namely, 'AWB advised DFAT of the arrangement with the Jordanian trucking company in 2000'.[2011]

Intentionally, it did not do so.

DFAT's letter to Mr Stott in reply

20.64 On 2 November 2000 DFAT replied to Mr Stott's facsimile of 30 October 2000. [2012] This reply was signed by Ms Drake-Brockman and was in the following terms:

Dear Mr Stott,

Thank you for your communication outlining the manner in which you propose to proceed to deal with problems you have encountered in discharging vessels of your wheat exports to Iraq at Umm Qasr port. As you have explained to us the delays in discharge were causing you to incur substantial demurrage costs and affecting the viability of your trade.

We understand that, on your recent visit to Baghdad, you identified the source of the problem as being a lack of trucks at the discharge point. These trucks are supplied by Jordan-based companies. You therefore propose to enter into discussions with the Jordan trucking companies with a view to agreeing to a commercial arrangement in order to ensure that there are enough trucks available to enable the prompt discharge of Australian wheat cargoes when they arrive.

We have examined, at your request, this proposed course of action and can see no reason from an international legal perspective why you should not proceed. That is, this would not contravene the current sanctions regime on Iraq.

International Legal Division has been consulted in the preparation of this response.

I trust this is of assistance to you.[2013]

A copy of this letter is reproduced as Figure 20.4 in Appendix 20.

The circumstances in which this letter came to be signed and sent

20.65 Ms Drake-Brockman's evidence was that she did not draft DFAT's reply to Mr Stott's facsimile. She first saw a draft of that reply dated 2 November 2000, together with Mr Stott's facsimile of 30 October 2000, in her 'urgent' in-tray. [2014] This was on the day the letter was signed by her and sent. The draft letter was not in her in-tray used for routine matters.[2015]

20.66 Ms Drake-Brockman did not recall if the copy of the 30 October facsimile she saw at that time was signed. [2016] However, she had a 'distinct recollection' that the copy of the facsimile she saw was 'relatively informal' and comprised two pages; that when she first saw it, the first page was folded over the back of the second page so that she saw the second page first; that when she looked at the second page she did not see a salutation and was unsure of the addressee; that she had to turn the first page over in order to ascertain to whom the facsimile had been addressed; and that the first line of the page that was open to her began with the words 'As you are aware …' [2017] If this evidence is accepted then the copy of the facsimile of 30 October 2000 that Ms Drake-Brockman saw on the day she signed the letter of 2 November 2000 was the second version of that facsimile and not the final version of that facsimile. There is no evidence or explanation as to how DFAT came to have a copy of that second version (unless one concludes it was provided in conjunction with the conversation that Mr Stott says he had with either Ms Drake-Brockman or Ms Courtney prior to sending the final version of his letter, but Mr Stott did not suggest he sent a draft to DFAT for discussion). Ms Drake-Brockman said she did not recall seeing the signed final version of that facsimile before January 2006. [2018]

20.67 According to Ms Drake-Brockman, the 30 October facsimile and draft reply in her urgent in-tray were brought to her attention by her personal assistant, Ms Watson. [2019] In response to an inquiry from Ms Drake-Brockman[2020], Ms Courtney presented herself as the action officer. [2021] Ms Drake-Brockman's evidence was that she then had a conversation with Ms Courtney and Mr Cuddihy. According to Ms Drake-Brockman, either Mr Cuddihy was nearby at the time or Ms Drake-Brockman asked the other officers, 'What does Don think?' To the best of Ms Drake-Brockman's recollection, Mr Cuddihy came over to join her and Ms Courtney. She asked him what he thought about 'the letter'. Mr Cuddihy then explained to her the background to the correspondence. [2022] She was also told by either Ms Courtney or Mr Cuddihy that 'AWB needs this dealt with urgently'.[2023]

Ms Drake-Brockman could not recall the full details of what Mr Cuddihy and others said to her at the time. [2024] To the best of her recollection, Mr Cuddihy told her AWB had recently visited Iraq and that there was very considerable concern in AWB about demurrage costs at the port due to delays in discharging vessels.[2025]

20.68 Ms Drake-Brockman's understanding was that the 30 October 2000 facsimile resulted from these delays AWB was experiencing in discharging shipments of its wheat at the port in Iraq. [2026] She attached particular significance to the reference to 'demurrage costs' in that facsimile.[2027] She had a concern at that time that 'payment of an escalating amount of demurrage costs could potentially be an issue in relation to sanctions'. [2028]

20.69 Ms Drake-Brockman's understanding of the 30 October 2000 facsimile was 'that AWB was proposing to limit its possible payment of demurrage costs by seeking to engage Jordanian trucking companies to provide trucks for discharge purposes at the port in Iraq'. [2029] Furthermore, her understanding at that time was that AWB needed to resolve the problem quickly. At the time, she was aware that there were a number of ships carrying Australian wheat due shortly in Iraq, since some weeks before she had signed a number of permissions to export.[2030] There was also reference in the 30 October 2000 facsimile to the issue being urgent.[2031]

20.70 According to Ms Drake-Brockman, if AWB or anyone else approached DFAT for advice relating to the Oil-for-Food Programme that raised a question of law, the standard procedure was that the Middle East and Africa Branch of DFAT would refer the matter to the responsible areas-namely, the UN Section and the Legal Branch in the International Legal Division (ILD) or sometimes the Australian mission to the United Nations. She said she was aware that her staff in the Middle East and Africa Branch had regular contact with the UN Section and with the Legal Branch. [2032] Her evidence was that before signing the draft letter of 2 November 2000, she asked her staff whether it 'had been to New York'. [2033] To the best of her recollection, Mr Cuddihy replied that according to the ILD it was not necessary because the Legal Branch was able to give that advice. Ms Drake-Brockman recalled stating that such a decision by the Legal Branch would have to have been made at an Assistant Secretary level and that her staff confirmed to her this had been the case. She then asked to see the head of the Legal Branch but was told by her staff he was then out of the office and not contactable.[2034]

20.71 Ms Drake-Brockman also said that, before signing the draft reply, she had noted that the penultimate paragraph stated that the International Legal Division had been consulted in its preparation. This was a form of words that, in her experience, was only used when the contents of the document had been prepared or approved by the ILD. She gave evidence that she had understood this to be the case when she signed the reply of 2 November 2000.[2035] According to her, she signed the draft letter of 2 November 2000 '… because I was assured by the responsible officers in my Branch that the Assistant Secretary of Legal Branch had informed his staff that he was comfortable with the reply and that the matter did not need to go to New York'. [2036]

20.72 In signing the letter of 2 November 2000, Ms Drake-Brockman said she did not form a personal view as to the matter with which it dealt. She had not formed her own opinion as to whether the advice that it contained was correct or not; rather, her understanding was that the letter was conveying advice that had been received from the Legal Branch, which she accepted. [2037]

20.73 Ms Drake-Brockman's evidence was that, had she not been assured that the Legal Branch had looked at the matter, she would not have signed the letter of 2 November 2000. [2038] The reason she gave for this was that she was an economist, not a lawyer. She was not prepared to sign off on a legal view or whether a proposal was consistent with the UN sanctions 'without advice from elsewhere'.[2039] In the absence of advice from the Legal Branch, she would have sent the letter to Ms Moules at the Australian mission to the United Nations for advice. [2040]

20.74 Notwithstanding extensive searches within the department, DFAT was not able to locate or produce in response to the notices to produce served upon it by this Inquiry any advice from the International Legal Section or Legal Branch to the Middle East and Africa Branch (or the Middle East Section generally) in relation to the subject matter of Mr Stott's facsimile of 30 October 2000 and DFAT's response. Any such advice, if it existed, falls within the terms of the notices served. No claim was made by DFAT that it is not obliged to produce any such advice on the grounds of legal professional privilege. There is no documentary evidence that any such advice was given to the Middle East and Africa Branch at that time, other than the letter itself.

20.75 Nevertheless, the evidence of Mr Scott provides some corroboration of Ms Drake-Brockman's evidence and belief that the letter of 2 November 2000 was based on legal advice provided to the Middle East and Africa Branch. In October and November 2000 Mr Scott managed the International Humanitarian Law and Criminal Law Unit of the International Law Section, which was part of the Legal Branch. His unit had particular expertise in relation to the UN sanctions and the sanctions regime in Iraq.[2041] According to Mr Scott, there was 'regular' interaction between the International Law Section and the Middle East Section of DFAT. From time to time, the Middle East Section would refer to the International Law Section inquiries that had been made by persons or companies in respect of the operation of the UN sanctions in Iraq.[2042] It was a routine part of the work in the International Law Section to provide advice to the Middle East Section on the sort of issues raised by Mr Stott's facsimile of 30 October 2000 and DFAT's reply of 2 November 2000.[2043]

20.76 Where such an inquiry was made of the International Legal Section, it was the practice of the section to provide a minute of its advice to the Middle East Section, which, as Mr Scott understood it, would then take that advice into account in formulating a reply to the outside inquiry, often by incorporating all or part of the advice in the reply letter.[2044] Whilst the preferred practice was for the International Law Section to prepare a minute of its advice, on occasions the advice would be in an email or sometimes even oral. It depended on the nature of the request for advice and the circumstances in which it was to be made. [2045]

20.77 Mr Scott said he had a 'faint recollection of the subject matter' of the 30 October 2000 facsimile and the 2 November 2000 reply, although he conceded that this could have been due to the fact that 'the letter' was forwarded to him by a DFAT colleague in April 2005 in the context of the IIC inquiry, rather than a recollection from November 2000. [2046] Whilst Mr Scott did not have any precise recollection of the International Law Section providing advice to the Middle East Section in relation to Mr Stott's facsimile of 30 October 2000, his evidence was that there nevertheless were textual indications in DFAT's reply of 2 November 2000 to suggest that it may have been based on advice received from the International Law Section. [2047]

20.78 Mr Cuddihy had no recollection of seeing the signed letter from Ms Drake-Brockman of 2 November 2000, no recollection of having assisted in drafting that letter and no recollection of having obtained advice from or referring the issue to the International Legal Division.[2048] He also had no recollection of having been asked by AWB in October or November of 2000 whether it would be permissible for AWB to employ a Jordanian trucking company.[2049]

20.79 Ms Courtney recalled that during the time she was employed in the Middle East and Africa Branch of DFAT AWB was experiencing problems 'with waiting periods and charges in relation to the discharge of wheat at Umm Qasr'.[2050] However, she had no recollection of having received AWB's facsimile of 30 October 2000.[2051] The usual procedure, although not formal, was that incoming facsimiles would be given to the addressee.[2052] Ms Courtney had no doubt that she would have seen the 30 October 2000 facsimile at the time. However, she could not recall seeing it.[2053] Her evidence was that she would hand such faxes to the desk officers, Mr Cuddihy or Mr Grenenger, to draft a response, and such responses were often not seen by her before being signed by a senior officer. [2054] During her examination, Ms Courtney maintained, however, that she had no recollection of the circumstances surrounding the 30 October and 2 November 2000 correspondence. She disagreed with Ms Drake-Brockman's evidence that she was the 'action officer' in relation to AWB's 30 October facsimile, stating that she would have regarded Mr Cuddihy as the action officer. [2055]

20.80 Whatever the circumstances were in which Ms Drake-Brockman's letter came to be drafted, they do not detract from the fact that there was nothing improper in the letter. Nor did the letter purport to authorise any activity by AWB outside UN sanctions. There is nothing in the letter that could be considered to be advice that it was appropriate for AWB to make payments for inland transportation to Alia in circumstances where those payments were to be passed to an Iraqi agency or entity.

Whether Mr Stott spoke with DFAT after he received its letter of 2 November 2000

20.81 According to Mr Stott, following receipt of Ms Drake-Brockman's letter of 2 November 2000, he had a telephone conversation with her. Precisely when this conversation is said to have taken place, he did not say. Mr Stott said that in the course of this telephone conversation he thanked Ms Drake-Brockman for her letter and then said to her something to the effect, 'So, therefore dealing with Alia is okay?' He said Ms Drake-Brockman replied that DFAT was aware of Alia, had looked at Alia and that 'Alia is okay'[2056], that he was informed by Ms Drake-Brockman 'We've looked into Alia and we're comfortable with Alia'.[2057]

20.82 Mr Stott was not certain whether he made a file note of that conversation[2058] although he suggested that, having been told DFAT was aware of Alia, he did not think it necessary to be worried about it or to prepare a note. [2059] He was not aware of any document recording the fact of this conversation. [2060] When pressed, he said that he did not recall actually writing a file note. [2061] He did not send a confirmatory letter or email or note to DFAT recording the fact of the conversation[2062] or its content. No document was produced to this Inquiry, by either DFAT or AWB, referring to the fact of this conversation or to its content.

20.83 When pressed as to the absence of any document recording or referring to this conversation, Mr Stott faintly suggested that the reason for the absence of any documents may have been as a result of the relevant AWB files having been tampered with. This was (according to Mr Stott) when some files had temporarily gone missing at the time of the Arthur Andersen review.[2063] There is no basis for that suggestion. This is especially given the lack of evidence that any document was ever brought into existence in the first place and Mr Stott's own evidence that he did not really recall making a file note.

20.84 Prior to Mr Stott's oral evidence, no mention had ever been made of this conversation that Mr Stott claims to have had with Ms Drake-Brockman. In the course of his examination, Mr Stott said that he had forgotten about this conversation and only remembered it a couple of weeks prior to 22 December 2005, when preparing to give evidence to this Inquiry. [2064] Mr Stott said he did not recall that he had had this conversation with Ms Drake-Brockman at the time the IIC was conducting its inquiries. [2065]

20.85 In his evidence to this Inquiry Mr Stott said he had told Mr Goodacre about his conversation with Ms Drake-Brockman on the day it took place. [2066] However, he did not believe Mr Goodacre would have made a note about their conversation. Mr Goodacre had no recollection of Mr Stott telling him in late 2000 about a conversation he had had with Ms Drake-Brockman [2067] but said it is possible that he had such a conversation with Mr Stott. [2068]

20.86 Ms Drake-Brockman denied that she had ever had any discussion with Mr Stott to the effect alleged by Mr Stott. [2069] Her evidence was that she had no recollection of ever hearing of a company called Alia before it was mentioned to her by officers of the IIC in the course of their investigations in 2005.[2070] She had never received any report from any officer of DFAT, or otherwise been made aware by any officer of DFAT, about Alia or any particular Jordanian trucking company; of any inquiries that any officer of DFAT had made about a company called Alia or any particular Jordanian trucking company; of any inquiries that had been made of DFAT's post in Jordan about a company called Alia or any particular Jordanian trucking company; or of any discussion or other communication in relation to any of the above matters between Mr Stott or any officer of AWB and any officer of DFAT. [2071]

20.87 I do not accept Mr Stott's evidence that he spoke with Ms Drake-Brockman and of what he says he was informed in that conversation. There is no documentary or contemporaneous evidence supporting either the fact that such a conversation occurred or Mr Stott's evidence as to its content. Had Mr Stott had such a conversation with Ms Drake-Brockman, one would expect that it-or at least the fact that it had occurred-would have been documented by either AWB or DFAT. Yet there is no such document.

20.88 There is also no material before this Inquiry that indicates that Ms Drake-Brockman was at that time aware of Alia, of its circumstances, and in particular that it was a Jordanian trucking company. She would therefore not have been in a position to say what Mr Stott contends she said to him. There is no material indicating that DFAT had 'looked into Alia' or that anyone was able to authoritatively say that 'Alia was okay'. On the material before this Inquiry, there is no reason to reject Ms Drake-Brockman's denial of having had any such conversation with Mr Stott.

20.89 It is also implausible that Mr Stott would have had a conversation to the effect that he contends-in particular, as a consequence of his facsimile to DFAT and DFAT's reply. There is no mention in Mr Stott's facsimile of 30 October 2000 of Alia, or that it was the trucking company being used by AWB, or that AWB was making payments to it (in particular, payments of the inland transportation fees). That paragraph of Mr Hogan's first draft of the facsimile to DFAT referring to the existing arrangements for the payment of what Mr Hogan described as 'a predetermined and UN approved transport fee' and in that context the existing use of a transport company had been deleted by Mr Stott from both the second and the final versions of his facsimile. There was also no mention of Alia in DFAT's reply of 2 November 2000. In those circumstances, even if there had been a conversation, as Mr Stott contends, it is difficult to see why there would have been any mention of Alia in the course of that conversation, let alone any statement to the effect contended by Mr Stott approving of the use of Alia.

In the course of his examination, Mr Stott was asked why his facsimile to DFAT did not refer to Alia. His response was that that was not the issue that the letter was addressing.[2072] If that was so, then it is again difficult to see how or why Alia would be raised in the course of a conversation that was said to have followed and been based on the exchange of that correspondence.

20.90 According to Mr Stott, the purpose of his letter to DFAT was to enter into discussions with Jordan-based trucking companies[2073] and to give him utmost flexibility in dealing with any trucking company in Jordan. [2074] That was in the context of possibly negotiating 'a commercial agreement' with some other trucking company or trucking companies. Again, in those circumstances it is difficult to see how or why Alia would be raised in the course of a conversation following from that exchange-Alia being the trucking company that was already involved-or that AWB would seek or need DFAT approval for such negotiations. It is also difficult to see why in those circumstances Mr Stott would not have mentioned the 'Water Transport Company' which, according to Mr Stott, he had been informed was an alternative transport company in Jordan and which Mr Stott understood was not providing services at that time.[2075] Yet not only, according to Mr Stott's evidence, did he not mention the 'Water Transport Company' in his alleged conversation with Ms Drake-Brockman: he also disputed that it would have been appropriate for him to have done so.

20.91 The better view is that Mr Stott deliberately refrained from referring to Alia in his correspondence with DFAT so as not to draw DFAT's attention to, and thereby avoid any scrutiny of, AWB's relationship with Alia. In those circumstances a reference to Alia by him in a conversation about that correspondence would have been inimical to his purpose.

20.92 The only evidence of any possible knowledge of Alia within DFAT at the time Mr Stott says he had this conversation is that of Ms Courtney. However, it is not clear as to precisely when Ms Courtney came to have the knowledge she said she had or how she came to have that knowledge. The best evidence as to when Ms Courtney claims to have had that knowledge is between April 2000 and January 2001. [2076] There is nothing in the material before this Inquiry to suggest that Ms Courtney either acquired that knowledge from Ms Drake-Brockman or conveyed it to her at any time prior to November 2000. There is no evidence that it was with Ms Courtney that Mr Stott spoke on this occasion. The evidence is to the contrary: Mr Stott did not give evidence to that effect; Ms Courtney had no recollection of having spoken to Mr Stott about Alia.[2077]

20.93 These conclusions are supported by the fact that Mr Stott did not refer to his speaking to DFAT after 2 November 2000 when he was interviewed by Mr Quennell in approximately April 2004 [2078]or by the solicitors who prepared his draft statement in September 2004. [2079] Mr Stott's explanation that he might not have recalled the conversation in 2004 is not credible given:

November 2000: the Board report

20.94 On 14 November 2000 Mr Hogan sent an email to Mr Stott's personal assistant, Ms Wilson. [2081] It was headed 'URGENT-Board Report Input required today'[2082] and listed a number of dot points for inclusion in the report to the Board of AWB. The second of these dot points was:

2. DFAT have approved AWB's 'eloquent solution' to increasing discharge rates at Umm Qaser[2083]

This is presumably a reference to Ms Drake-Brockman's letter of 2 November 2000.

20.95 This item found its way into a report for the Board entitled 'Board Report Input-International Marketing' in the following terms:

Department of Foreign Affairs and Trade have approved the suggested mechanism AWB proposes to implement in order to increase the discharge rates of AWB vessels at Umm Qasr. The mechanism is currently being negotiated with customers.[2084]

20.96 The report itself did not identify the 'suggested mechanism' AWB was said to have proposed and DFAT was said to have approved. Having regard to the terms of the final version of Mr Stott's facsimile of 30 October 2000, it could only have been the proposal of:

…entering into discussions with the Jordanian trucking companies with a view to agreeing a commercial arrangement in order to ensure that there are enough trucks to enable the prompt discharge of Australian wheat cargoes.[2085]

20.97 There is also a reference to this item in the 'CEO Report' dated 29 November 2000.[2086] It was in substantially the same terms as the entry in the 'Board Report':

Department of Foreign Affairs and Trade have approved the suggested mechanism AWB proposes to implement to increase the discharge rates of AWB vessels at Umm Qasr. The mechanism is currently being negotiated with customers.[2087]

This report was presented to the Board of AWB Limited at a Board meeting held that same day. The minutes for that meeting record in this regard:

7. CHIEF EXECUTIVE'S REPORT

i) The Board discussed and noted the following reports: Chief Executive's Report;[2088]

20.98 Despite this proposal of a 'suggested mechanism … to increase discharge rates' and this report of its approval by DFAT, no material before this Inquiry indicated that at any time following AWB's receipt of DFAT's letter of 2 November 2000 Mr Stott or any one else from AWB entered into any discussions with any Jordan-based trucking companies, including Alia, with a view to reaching a commercial agreement along the lines contemplated by Mr Stott's facsimile. There is also no evidence that, following AWB's receipt of DFAT's letter of 2 November 2000, Mr Stott or any one else from AWB entered into any discussions with any Jordan-based trucking companies, including Alia, with a view to introducing a performance incentive scheme, as contemplated by Mr Stott's instructions to Mr Hogan when he first asked Mr Hogan to prepare a draft of this facsimile.

20.99 Assuming the reference in the report to the AWB Board to 'customers' is to be read as a reference to the IGB (being AWB's customer in the context of its sales of wheat to Iraq), there is no evidence that Mr Stott or anyone from AWB entered into any discussions with the IGB along the lines proposed in Mr Stott's facsimile of 30 October 2000, or with a view to reaching a commercial arrangement as contemplated by that facsimile, or with a view to introducing a performance incentive scheme as contemplated by Mr Stott's instructions to Mr Hogan when he first asked Mr Hogan to prepare a draft of this facsimile.

20.100 When asked why no discussions had taken place along the lines foreshadowed, Mr Stott replied:

…because the trucks-the issue was resolved. The trucks actually started to appear. The trucks actually got down to Umm Qasr, so the issue was removed, and that's consistent with my theory…

… my theory that the Iraqis fixed the problem. With the benefit of hindsight, they didn't want me going anywhere near their Jordanian or Alia trucking companies. They fixed the problem by getting the trucks to flow, so I didn't need to enter into any contractual arrangements because the trucks were no longer the choke point issue, it became some other issue-vacuvators or some other issue that was the slow point.[2089]

20.101 There is no evidence that Mr Stott informed the IGB of his intended or actual exchange of correspondence with DFAT, of the conversations he says he had with DFAT both before and after that exchange of correspondence, or his intention to approach Jordanian trucking companies (including Alia) either with a view to reaching a commercial arrangement with the trucking companies or with a view to introducing a performance incentive scheme. There is nothing to suggest that the IGB was aware of Mr Stott's intention to approach 'their Jordanian or Alia trucking companies' [2090] such that it could be said (as Mr Stott did) that the Iraqis fixed the problem to avoid that happening.

20.102 Mr Stott's evidence was that AWB would have done nothing about the trucking problem or to implement its proposed solution until the next delegation went to Iraq.[2091] According to Mr Stott the resolution of this issue with the appearance of more trucks occurred some time after AWB received DFAT's letter of 2 November 2000 and before the next delegation was due to visit Iraq. I reject this evidence of Mr Stott.

20.103 On 25 October 2000-two days before Mr Stott asked Mr Hogan to prepare the first draft of what became this facsimile of 30 October 2000-Mr Stott received an email from the IGB inviting an offer for the sale of wheat and informing him that 'prices for above two offers should includ inland transport charges equil to US$(25) per metric ton …' [2092] This represented a substantial increase on the inland transportation fees of US$14 per tonne that had been payable on AWB's last contract with the IGB. [2093]

20.104 Within three days of Mr Stott's facsimile of 30 October 2000 to DFAT and on the same day of Ms Drake-Brockman's reply, AWB entered into a further contract for the sale of wheat to Iraq under the Oil-for-Food Programme (contract A0430). The terms of that contract provided for the payment by AWB of not only the increased inland transportation fee but also a 10 per cent after-sales-service fee, which was added to the inland transportation fee. As a result, commencing with this contract, there was a significant increase in the inland transportation fee payable by AWB as part of its sales to Iraq and to which AWB looked for reimbursement from the escrow account.

20.105 Mr Stott's purpose in sending his facsimile of 30 October 2000 to DFAT-in particular, in the terms that he did-was not for the reasons he gave in evidence before this Inquiry. I do not doubt that the real reason Mr Stott wrote the letter to DFAT was in an effort to create a 'paper trail' on which AWB could seek to rely in the event of its payments to Alia being queried.[2094] Nor do I doubt that the letter was a disguised attempt to establish a demurrage and despatch system to operate as Mr Hogan explained. The demurrage problem arising from delays in discharging cargo at Umm Qasr was a real one, causing severe losses to AWB. It was the one thing in the Iraq market that Mr Goodacre was concerned with. It was a major problem for Mr Stott, who managed that section of the business. He had discussed it with the Iraqis in mid-October. It was not due, at least in major part, to lack of trucks: it was due to a combination of infection and fumigations and inefficient and inadequate port facilities. The solution was to improve overall discharge rates and the methodology was to seek to implement a demurrage and despatch system to 'incentivise' the Iraqis. Mr Stott had sought, through Mr Hogan, approval from DFAT for such a system in August 2000 but had been rebuffed on the basis that the UN sanctions did not permit such a system. Nonetheless, within two months he was negotiating with the Iraqis to establish such a system. He knew that Alia was a recipient of monies for Iraq and that if he could get approval from DFAT to 'incentivise' Jordanian trucking companies he might be able to implement a demurrage and despatch system. He had been told just two weeks prior to his letter that the Iraqis would consider such a system but required that any despatch earned by Iraq be paid back to Iraq through the 'inland transport system'. Thus he sought DFAT's approval to 'incentivise' Jordanian trucking companies as a means of overcoming the demurrage problem. His letter spoke of 'substantial demurrage bills' as being the problem but then inaccurately sheeted home that problem to lack of trucks, thus requiring action to alleviate that difficulty. However, he was not prepared to spell out the true circumstances of AWB's arrangements with the Jordanian trucking company-which were non-existent apart from paying it money-or his true purpose in seeking DFAT consent, which was to provide a 'paper trail' of government approval of a non-disclosed demurrage and despatch system. He knew that if he was frank with DFAT his proposals for such a system would be rejected as contrary to the sanctions, as they had been some two months earlier.

Notes