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13.1 Prior to June 1999, and for each of the first five phases of the Oil-for-Food Programme, the usual basis on which AWB (and the Australian Wheat Board before it) sold wheat to the Iraqi Grain Board was CIF free out Umm Qasr.[371]
13.2 Under the CIF element of those terms, the price per tonne for which the wheat was sold included:
As the seller of the wheat on such terms, AWB was required to arrange, and in the first instance pay for, both the cost of the ocean carriage and the cost of the marine cargo insurance for each shipment. It would in turn recover those costs from the proceeds of the sale of the wheat. In determining the price at which it was prepared to sell its wheat, AWB took into account the anticipated costs of the ocean carriage and marine insurance that would need to be recouped from the proceeds, as well as the FOB price it wished to obtain.
13.3 Wheat AWB sold free out Umm Qasr during this period did not include in the sale price any allowance for the cost of the discharge of the wheat from the vessel on its arrival at Umm Qasr.
13.4 It was known within AWB that the Iraqi Grain Board had full responsibility for operation of the port facilities at Umm Qasr, as well as for the wheat's accumulation, storage and distribution to flour mills.[373]
13.5 Under the terms of the IGB's contracts with AWB, the obligation to effect or arrange for the discharge of the wheat from the vessel at Umm Qasr rested with the purchaser, the IGB. The costs of discharge, along with the usual port dues, were also to be borne by the IGB.[374] AWB had no obligation to discharge the wheat shipped to Iraq or to arrange for its discharge. Nor did it have any obligation to pay for the cost of the wheat's discharge or the costs of distributing the wheat within Iraq. Under the terms of its contracts with the IGB, AWB had no obligation to make any payments in Iraq.
13.6 However, with effect from July 1999, during phase VI of the Oil-for-Food Programme, the IGB proposed a significant change to the terms on which it would purchase wheat.
13.7 Phase VI of the Oil-for-Food Programme commenced on 25 May 1999 and continued until 11 December 1999.[375]
13.8 In June 1999 the IGB issued a wheat tender calling for the supply of Australian Hard Wheat to be shipped to Iraq between October and December 1999 on the terms and conditions set out in the tender.[376] The tender, which invited offers by 28 June 1999, was expressed to be 'in accordance with the M.O.U. signed between the UN Secretariat and Iraq on the implementation of the Security Council resolution Phase VI'.[377] The wheat called for by the tender was to be shipped as part of phase VI of the Oil-for-Food Programme.
13.9 The wheat tender included a number of changes to the terms and conditions on which wheat had previously been supplied to the IGB. Among the changes was a change to the elements within the price at which the wheat was to be sold and delivered. In particular, clause 10 of the tender called for the supply of wheat at a price that was expressed to be:
CIF free on truck to silo at all governarate. Cost of discharge at Umm Quser and land transport will be U.S.D. 12 per metric ton. To be paid to the Land Transport Co. For more details contact Iraqi Maritin in Basrah.[378]
13.10 For the first time in the history of its dealings with AWB, the IGB required the supplier to pay both the cost of the discharge of the wheat from the vessel at the port of Umm Qasr and the cost of transporting the wheat by road from the port of Umm Qasr to the various governorates throughout Iraq. This was in addition to the cost of the ocean carriage and marine cargo insurance, which the seller would have to continue to bear in the first instance.
13.11 The seller would recoup the additional costs from the proceeds of the sale of the wheat.[379] For the first time, the IGB required (or envisaged) that the additional costs would also be included in the tender price.
13.12 However, the additional costs were not costs the seller incurred in discharging and transporting the wheat or arranging for some one else to do that on the seller's behalf.[380] Rather, under the terms of its wheat tender, the IGB required the costs of discharge and land transport, fixed at US$12 per tonne, to be paid by the seller to the 'Land Transport Co.'
13.13 The reference in clause 10 of the wheat tender to 'Iraqi Maritin in Basrah' was a reference to the Iraqi State Company for Water Transport or the State Enterprise for Water Transport. This was the entity appointed to act as the agent of the vessel under both phase VI contracts[381], as well as contracts concluded under earlier phases.[382] It is not clear, however, on the face of the tender whether this reference to the 'Land Transport Co.' was a reference to the Iraqi State Company for Land Transport or a reference to the company that was to arrange the transportation of the wheat by road from Umm Qasr to the various governorates. AWB did not inquire of 'Iraqi Maritin in Basrah' what was meant by 'Land Transport Co.' The reasons for this will become apparent.
13.14 The wheat tender provided that any offer that did not comply with IGB's terms and conditions 'will be disregarded' and that 'any amendment for the L/C [letter of credit] will not be acceptable only for adjustment of shipment date.'[383]
13.15 In June 1999 Messrs Flugge, Officer and Emons attended an International Grains Conference in London. They attended a conference dinner that was also attended by representatives of Ronly Holdings Limited, Mr Bali and Mr Yaha.[384] AWB was giving consideration to buying Ronly. Mr Flugge recalled the dinner but could not recall any discussions that occurred.[385] He did not recall the matter of trucking fees being raised[386] and did not recall Iraq being discussed.[387] His evidence was that there was general one-to-one discussion at the dinner and a one-sided hearing defect impeded his hearing on such occasions.[388]
13.16 Mr Emons' recall was much more specific. His evidence was that by the time of the conference he was aware that most, if not all, of the European companies dealing in cereals who sold to Iraq had to pay some form of inland transportation fee. He said this was common knowledge amongst the traders with whom he spoke at the conference and on other occasions in 1999.[389]
13.17 Mr Emons recalled a conversation at a Grains Conference dinner during which the subject of Iraq and trucking fees was raised in the context of a discussion about the potential purchase of Ronly and the areas in which Ronly felt it could help AWB in its global trading expectations.[390] Ronly was an English company that carried on business as a grain trader. In 1999 AWB entered into discussions with Ronly in relation to a possible joint venture and acquisition of a company for the purposes of such a joint venture. Mr Emons said that at the dinner Mr Flugge, Mr Officer, representatives of Ronly, himself and others sat together. Mr Emons asserted that at the dinner the issue of payment of inland transportation charges in Iraq arose.[391] Someone from Ronly said, 'We can help you with this. We'll take a fee but we can discuss that later'.[392] Mr Emons said the matter was discussed openly with the AWB group attending the dinner, including Mr Flugge.[393]
13.18 The evidence of Mr Emons was challenged by Senior Counsel for Mr Flugge on a number of bases. First, Mr Emons incorrectly placed the dinner after the meeting in Baghdad at which trucking fees were raised, whereas in fact it was before. This is of little significance if one accepts his (Mr Emons') evidence that payment of trucking fees was common knowledge amongst traders. Second, it was unlikely that there would have been such a discussion with Ronly if at that time the payment of trucking fees was not seen as improper. It was said Mr Emons' view at that time was that payment of such fees was not improper. That was not his evidence.
Mr Emons drew a distinction between UN approval of the distribution plan, which had been approved, and the method or mechanism for payment of trucking fees, which had not.[394] It would have been likely for there to have been a discussion with Ronly about methods of achieving payment of the trucking fees insisted upon by Iraq.
13.19 Having regard to the general reliability of Mr Emons, it is probable the discussion occurred as Mr Emons stated. Mr Officer's evidence did not assist: he could not recall the conversation, although he did not doubt Mr Emons' account. The more difficult issue is whether Mr Flugge heard the discussion. That depends upon whether I accept his denial of hearing any such conversation.
13.20 The evidence of Messrs Emons and Officer is to be preferred to that of Mr Flugge.[395]
13.21 Following the issue of its wheat tender, the IGB invited representatives of AWB to visit it and discuss in person the proposed terms and conditions of the new tender. The IGB did not wish to discuss the new terms by facsimile or telephone. It was decided that Mr Emons and Mr Hogan should travel to Iraq.
13.22 At that time Mr Emons was the Regional Manager of the Middle East, African and European section of the International Sales and Marketing Division of AWB.[396] He was the officer with prime responsibility for Iraq. Mr Hogan was a marketing executive on the Middle East Desk in the International Sales and Marketing Division; at that time he was based in the Cairo office.[397]
13.23 On 16 June 1999 Mr Hogan, from Cairo, circulated an email addressed to Mr Geary and copied to Ms Scales and Messrs Borlase, Tighe, Hunter, Hughes, Owen, Watson, Morrison and Snowball, seeking information in preparation for his imminent visit to Baghdad.[398] The information he sought related to UN restrictions on trade with Iraq. He wrote:
Hence Mark [Emons] requires-copy of contract, copy of their contract, copy of MOU (Copy of MOU is in a folder-I know that much) and copy of UN contract conditions-not sure how much I stipulated on UN docs regarding the contract conditions-but if you find anything relevant regarding please fax through.[399]
13.24 On 17 June 1999, in an email to Mr Borlase and copied to Messrs Emons, Hogan, Lister and Aucher, Mr Owen (AWB's National Trade Finance Manager) commented on the IGB's wheat tender, including the proposed new price terms (item 10): 'Our price has to include Land transport costs of USD 12 per tonne. Why ??? and how do we pay Land Transport company when all Iraqi funds frozen ????????'[400] It is clear from this that Mr Owen believed the 'Land Transport company' to be an Iraqi company. Although Mr Borlase suggested otherwise in his evidence, that evidence should not be accepted.[401]
13.25 Thus the problem of how such contract conditions could be met while UN sanctions were in place was raised widely within AWB before representatives of AWB met with the IGB in Iraq to discuss the new tender conditions.
13.26 On 21 June 1999 Mr Hogan and Mr Emons travelled to Baghdad and there met with the then Director General of the IGB, Mr Daoud.[402]
13.27 Following his return from Baghdad to Cairo, Mr Hogan sent an email to Mr Emons at AWB in Melbourne on 24 June 1999, reporting on the outcome of the meeting with the IGB.[403] The email was circulated widely within AWB. A copy was sent to Mr Geary[404], Ms Scales[405], Mr Snowball[406], and Messrs Watson, Lister and Owen. Mr Hogan included in this email a report on the new terms for the price at which wheat was to be supplied:
1. FREE IN TRUCK
IGB have requested that the offers are submitted CIF, FREE IN TRUCK, IRAQ. The cost for this is USD 12.00 per tonne which the supplier adds to their offer.
Hence this part is not an issue.
The problem which still needs to be resolved is the payment mechanism as all Iraq accounts have been frozen. IGB have stated that we will be required to pay the Maritime Agents, and one possible way would be to pay this to an Iraq bank in Amman.
IGB will provided details of the banks which we can pay this through.
MICHAEL [407] - as mentioned to you, there may be a way to pay this through the vessel owners. Mark will discuss this with you, so you have to think about the possibilities. [408]
Reason for wanting suppliers to pay this amount is due to the excessive amount of Iraqi Dinars placed into the market by the Ministry of Finance for every Phase (Phase V = 23 billion Dinars, which has an impact on their currency rates). [409] [emphasis added]
Mr Hogan's email makes clear two things:
13.28 The email makes clear that Messrs Emons and Hogan had discussed with Mr Daoud the problem of making payments of US dollars to an Iraqi entity in Iraq. A possible solution was to pay the US dollars into an account in an Iraqi bank situated in Jordan. Irrespective of into which account the sums were to be paid, or where that account may have been situated, it is apparent that the payment was to be, directly or indirectly, to an Iraqi entity. That was prohibited by the UN sanctions.
13.29 Mr Hogan's email does not discuss:
The only discussion was how to pay the funds to Iraq, possibly to an Iraqi bank in Amman, Jordan.
13.30 The reason for this is that, from the outset of the introduction of the inland transportation fee, it was understood by AWB that, notwithstanding the terms of the wheat tender and of the contract AWB subsequently concluded with the IGB, AWB had no obligation to arrange or effect the discharge or transportation of the wheat within Iraq. Its obligation was to pay a fee to an Iraqi entity. The difficulty was how to achieve that when payments to an Iraqi entity were prohibited by UN sanctions.
13.31 Mr Hogan's evidence was that he believed in 1999 that contracts would require approval from the United Nations and that the fee to be paid was a fee required to address the cost of transportation in Iraq.[410] It is difficult to understand, if that was the case, why there was difficulty in paying the fee direct to Iraq if the United Nations approved of the payment. The need to find a means to pay the fee to Iraq necessarily involves absence of UN approval of such payments.
13.32 Mr Hogan concluded his email with a 'To do' list. The last item on the list was directed to the Manager of AWB Chartering, Mr Watson. It read, '4. Watson-payment method of USD 12.00 Free in Truck (via owners)'.[411] The reference to 'owners' was a reference to the owners of the ships used to carry the wheat from Australia to Iraq.[412]
13.33 Mr Hogan's email was based on discussions he and Mr Emons had had with Mr Daoud in Iraq. Mr Daoud told Mr Hogan that Iraq was standardising all grain and commodity contracts for goods coming into Iraq through Umm Qasr.[413]
13.34 From their discussions in Iraq in June 1999 it was understood by Messrs Hogan and Emons that:
13.35 Thus AWB had either to agree to the new conditions of tender or risk losing its Iraq market. According to Mr Hogan, AWB at first rejected the amended terms and complained to the IGB but was told that it was a presidential decree and that every supplier supplying Iraq would be operating under the same terms and conditions.[420] But for that initial reluctance, there is no evidence that suggests that AWB ever contemplated the possibility of losing the Iraq trade. Indeed, AWB was determined to do what it had to in order to safeguard that trade. Finding a method of satisfying the conditions of tender was required. This was reflected in conversations within AWB. For instance, Mr Officer spoke of the new contract terms with the Chairman, Mr Flugge, and Mr Flugge's response reflected an attitude of 'do whatever you have to in order to secure the trade with Iraq':
Q: What did you say to the chairman about the payment of the $12 a metric tonne?
A: Well, as I recall, to the best of my ability, this was an imposition that was placed upon us by the buyer, the Iraqi Grain Board. There was no option. There was no choice. It was $12 or not, or if you don't make that payment then, of course, there would be no business. That was made very clear. It was in that context that I discussed it with the chairman, and that was the nature of those discussions.[421] [emphasis added]
And later:
Q: What did the chairman say to you when you told him about his matter?
A: He would have said that this was a necessary part of doing business with Iraq and that the role we had at AWB was to maximise opportunities and sales returns for the commodities we were dealing with, and that we should proceed.
Q: When you say 'he would have said', is that your recollection of the substance of what he said, or is that something that you have supposed he said?
A: That is the recollection of the substance of what he would have said-of what he said.[422]
13.36 Mr Hogan accepted Mr Daoud's explanation for the imposition of an inland transportation fee. He also accepted that the fee was to be used by the Iraqis to meet the costs of inland transport, which were said not to have otherwise been covered under the Oil-for-Food Programme. Mr Hogan believed that the imposition of an inland transportation charge would be notified to the United Nations for its approval.[423]
13.37 Mr Hogan said:
Q: So you're saying at this time at least you believe that the Iraqis wanted the money to apply it towards the cost of transport?
A: Yes.
Q: And what they wanted were US dollars because they wanted, in effect, the assist their economy by not having to print dinars but by being able to use US dollars?
A: Correct. That was my understanding of it.
Q: So it follows, doesn't it, that when Mr Zuhair [Daoud] gave you this explanation about dinars and inflation, it was absolutely fundamental to his explanation that what the Iraqis wanted was the release of US dollars from the escrow account to come back to the Iraqis in Iraq?
A: That the money would go into Iraq, yes.
Q: And you've never had any doubt about that?
A: No, not really, no.[424]
13.38 Thus, from June 1999 Mr Hogan and AWB knew:
13.39 Within AWB it was widely understood that the money for the inland transportation fees was going to the Iraqis. Mr Hogan never had any doubt about that.[425] Neither did Mr Emons[426] or Mr Watson[427] or Mr Officer.[428] Mr Owen believed that the inland transport fee was to be paid 'into Iraq'.[429]
13.40 The problem confronting AWB, however, was how to make the payments to Iraq in the light of the existing UN sanctions. Again, Mr Hogan recognised as much in his evidence to the Inquiry.[430] Mr Emons discussed this problem of how to pay the inland transportation fee to the Iraqis with others at AWB, including Messrs Watson, Owen and Officer.[431]
13.41 Mr Owen believed that the UN sanctions prevented payments to Iraq.[432] He understood that payment of the inland transportation fee would be a breach of the sanctions.[433]
13.42 On 25 June 1999 Mr Watson responded to Mr Hogan's email of 24 June 1999:
Freight
reverting on this regarding payment of USD 12.00 I will discuss this with Mark [Emons] upon his return to find a suitable method.
My concern re CIF to trucks is that we are also now insuring cargo once unloaded from the vessel-i.e. truck-tfore our liability does not cease upon passing the ship's rail.
This leads to next problem, regarding shortage as I anticipate loss will take place from ship to truck.
Above for reflection, not insurmountable but we need to ensure that we fully aware and put into place suitable procedure etc.[434]
13.44 Mr Snowball (from AWB's US office) also responded to Mr Hogan's email of 24 June 1999. This was in an email dated 25 June 1999[441], in which he sought advice in relation to the proposed changes to the contract conditions: 'Can you advise what proposed changes to contract terms and conditions are to be agreed between IGC and UN, and what will be agreed between AWB and IGC only'.[442] Thus Mr Snowball contemplated, as early as June 1999, arrangements with Iraq that were not to be disclosed to the United Nations.
13.45 Mr Snowball also reported, 'The Australian mission to the UN spoke to the UN today. The UN said that they were looking at some proposed changes to contract terms and conditions, but we will not find out much more until it is finalised'.[443]
13.46 Mr Hogan replied to Mr Snowball's email by faxing a copy of the wheat tender to him.[444] On 25 June 1999 Mr Hogan sent a further email to Mr Snowball [445] (copied to Mr Emons, Ms Scales [446] and others), passing on the proposed changes to the terms and conditions and comments Mr Hogan had received from Mr Owen on 17 June 1999, annotated with his own comments.[447] In relation to Mr Owen's comment on item 10 of the wheat tender, Mr Hogan added, 'The USD 12.00 will be added onto CIF price-so no skin off our nose-however we need to find a way to implement the payments as iraq a/c's frozen. Discretion is required here'.[448]
13.47 Although Mr Hogan had accepted what Mr Daoud had told him about approval being sought from the United Nations for the imposition of an inland transport fee, he had reservations about whether the United Nations would be informed by the Iraqis of the payment of the fee in US dollars or how the fee was to be paid. Those reservations led to his reference to 'discretion' in this email.[449]
13.48 The clear implication of Mr Hogan's evidence was that the wheat trade with Iraq was paramount, and he did not want to put it in jeopardy. If the Iraqis had not sought or obtained approval for the inland transportation fee, he did not want AWB to raise the issue with the United Nations. The message from Mr Daoud had been clear: it was one of 'pay the inland transportation fee or Iraq will not buy your wheat'. The fee was going to be paid by AWB whether or not the United Nations had approved it.
13.49 As Mr Hogan said in evidence:
At that time-and this relates back to the first trip report-what had happened is Zuhair had said that the inland transport fee or the payment-this had been put within the distribution plan and submitted to the United Nations for approval, so that's what they've advised us. We still didn't know at that time whether it was-all right, the fee sounded reasonable, but we didn't know if it had been submitted to the United Nations, was it part of the distribution plan, were the United Nations going to make some form of concession to allow this to actually happen? But we don't want to be the one raising it-you know, waving the flag, we're the AWB raising this in front of the United Nations, because the Iraqis, say if it wasn't legitimate or it was legitimate, we could actually damage our business by doing it. That's why we're saying, like, a bit of discretion here, don't start waving our name all over the United Nations about the inland transport payment system. So we didn't know if it was legitimate or not legitimate. But don't start flagging that it's us raising the issue, because if it wasn't legitimate and the UN said, 'This is not going to happen', that's all good and well, but then they would say 'AWB was the company that raised this', so they go back to their standard CIF contracts, but AWB wouldn't sell a tonne of wheat to Iraq because they knew it was us who actually raised the issue.[450]
13.50 Mr Hogan's reference to a 'concession' by the United Nations to allow a fee to be paid to Iraq is consistent only with an understanding that payment of the fee was otherwise prohibited by UN sanctions.
13.51 In summary, following AWB's receipt of the wheat tender for phase VI of the Oil-for-Food Programme and the visit of Mr Emons and Mr Hogan to Iraq in June 1999, there had been widespread communication amongst Messrs Officer, Lister, Emons, Owen, Watson, Geary and Hogan and Ms Scales regarding the terms of the new tender and how they could be met. It was understood by those discussing these terms within AWB that:
(a) The inland transportation fee (or trucking fee) was fixed by Iraq.
(b) It was being paid to Iraq.
(c) It was being paid for the benefit of the Iraqis.
(d) Imposition of the inland transportation fee was a method of obtaining US dollars from the UN escrow account.
(e) AWB did not have to arrange or effect the discharge of the wheat at Umm Qasr.
(f) AWB did not have to arrange or effect the transportation of the wheat within Iraq.
(g) AWB was not required to enter into a contract with any transport company.
(h) The Iraqis would continue to organise the discharge, transportation and distribution of wheat in Iraq, as they had under the earlier phases of the Oil-for-Food Programme and under their earlier contracts with AWB.
(i) AWB's obligation was limited to payment of the fee set by the Iraqis.
(j) The Iraqis had said they either had obtained or would obtain UN approval for the payment of the inland transportation fee.
(k) The method of payment of that fee had not been approved.
(l) It was up to AWB to find a method of payment that was acceptable to the Iraqis.
(m) One method of payment suggested by Iraq was payment to an Iraqi bank in Amman.
(n) AWB was not prepared to raise with the United Nations the issue of the transportation fee for fear the fee might be prohibited by the United Nations, thus costing AWB its Iraq market.
13.52 By that time Mr Flugge was aware of the new contract terms requiring payment of US$12.00 per tonne, that the term had been imposed by Iraq and that the sums had to be paid if the Iraq business was to be retained. On that basis he had approved AWB making such payments. There is no specific evidence before me that, at that time, Mr Flugge knew that the US$12.00 per tonne was being paid to Iraq, but he did know that the fee had been imposed by Iraq.
13.53 In the case of Mr Snowball, who received only the emails from Mr Hogan of 24 and 25 June 1999 and the tender document[451], having read those emails, as I am satisfied he did, in June 1999 he had the knowledge referred to in points (a) to (i) inclusive, as well as (k) and (m).
13.54 In the case of Mr Geary, although he received the emails of 24 and 25 June 1999, the evidence does not establish that he read them or that he derived any knowledge from them.
13.55 Under the terms of the proposed sale, AWB was not required to discharge the wheat and effect delivery to all governorates in Iraq, despite the specification of the price in terms to that effect in the wheat tender (and subsequent written contracts). The obligation to transport the wheat sold by AWB to all governorates within Iraq was to rest upon the Iraqis, as it always had. Suggestions to the contrary in the tender (and in the subsequently concluded written contracts) were a sham.
13.56 Upon his return from the International Grains Conference in London, Mr Emons met with Mr Officer to discuss Ronly's offer.[452] Mr Emons' evidence was:
I recall saying something like:
'I think it will be a good idea to use Ronly to make these payments.'
I also said words to the effect
'There will be fees involved in this.'
In response, he [Mr Officer] said words to the following effect:
'That all sounds reasonable. Let me have a think about it, I'll probably discuss this with Muzza.'
I understood him to be referring to Murray Rogers.[453]
13.57 Following this meeting, Mr Officer convened a further meeting with Messrs Emons and Watson[454] regarding Ronly. Mr Emons' evidence was that they had a discussion about the implications and the methodology for the payment of the trucking fee. Mr Officer then telephoned Mr Ingleby (AWB's Chief Financial Officer) and requested that he (Mr Ingleby) attend the meeting.[455] Mr Emons' evidence was:
Mr Officer said to him [Mr Ingleby] words to the following effect:
'You know we have to pay this trucking fee. The guys are proposing that we pay Ronly and the shipping companies to do it directly and save our involvement. Are you comfortable with that?'
There then followed discussion about procedural aspects of what was being proposed. Mr Ingleby said words to the effect of:
'I'm quite comfortable with that.'[456]
13.58 In cross-examination by counsel for Mr Ingleby, Mr Emons said:
Q: It was a discussion on the various ways in which payment of a trucking fee approved by the United Nations could be implemented so that the wheat could be moved from the ship to the trucks to the governorates of Iraq in compliance with the contract that had been awarded to AWB?
A: Yes.
Q: The discussion that you had with Mr Officer, your recollection is that at some stage Ingleby was called in?
A: Correct.
Q: Did you understand the purpose of Mr Ingleby being called into that discussion was to run the methodology, or the possible methodology, of making a payment past him to see whether or not, as the chief financial officer, the methodology could be accommodated in the books of AWB?
A: Correct.
Q: And that Mr Ingleby wasn't told any great detail-he was asked whether or not the principle of payments to a third party of trucking fees would be acceptable-that is, an acceptable accounting practice?
A: Yes, I would agree with that.
Q: And that he said that, recognising that the trucking fees had to be paid, it would be acceptable if they were paid to a third party such as shippers and/or Ronly?
A: Yes.
Q: And that was the extent of Mr Ingleby's involvement in that discussion?
A: I can recall specifically that we asked him about using-the use of Ronly, and his agreement to do so.
It is to be noted that one question asked included a suggestion the trucking fee was 'approved by the United Nations'. Such fees were never approved by the United Nations, as Mr Emons knew, but he did not pick that up in counsel's question. The discussion was held on the basis that the United Nations had not approved such fees; it was for that reason that methods of hiding payments required to be made to Iraq as a condition of the tender were being discussed.
13.59 Mr Emons gave further evidence about this meeting:
Q: So did you keep any part of the deal secret from Mr Ingleby during the course of these discussions?
A: No, there would be no need to.
Q: And so then was it openly said that the proposal was to use Ronly and shipping companies to pay the US$12 a tonne to the Iraqi maritime agent in-
A: Yes.
Q: -Iraq?
A: Correct.
Q: During the course of this meeting, did anybody present raise any issue about whether or not this was proper, improper, lawful, unlawful?
A: In the context, if I can answer that, that we were uncertain about any legality about this matter. However, the issue of the process was approved.
Q: When you say 'the issue of the process was approved', which approval are you referring to?
A: I am referring to the process of paying through either the shippers or Ronly.
Q: Approved by whom?
A: By Mr Ingleby and Mr Officer.[457]
13.60 Mr Officer's evidence in relation to the discussions that took place following the International Grains Conference was:
In relation to the discussions after the conference, concerning how the transport fees were to be paid, including the role of Ronly, Mark Emons' recollection is accurate. Given my reporting to Murray Rogers, I believe I then told him about the general proposal (to use intermediaries to pay these costs) and he raised no objection. I kept him informed in a general way about the state of our relationship with the IGB and how the Middle East Desk was dealing with the IGB's requirements. Although I cannot recall any specific conversation, I have no doubt that Murray was aware of the IGB's requirement to pay the transport fees, that AWB's standard contract had to be changed to allow for payment of these fees by increasing the contract price, that the contract price (including the uplift for transport fees) be paid by the UN (from the escrow account) to AWB and that AWB would then remit those fees to a party nominated by the IGB either directly or via an intermediary. This was because we all within AWB, that is, the Middle East Desk and those Executive Team members with whom I spoke, including Murray Rogers, Paul Ingleby and others who attended the regular Executive Team meetings, were aware that the payment of these fees was the price for doing business in Iraq.[458]
13.61 Mr Watson could recall meeting with Mr Ingleby and Mr Officer in about June 1999 to discuss the payment mechanism for the trucking fee. His evidence was:
In substance, the discussion would have revolved around we had to find a method to pay this trucking fee, and there were different ways of doing it, one aspect was via a ship owner, and that aspect was discussed, as to whether ship owners would be agreeable to do this.[459]
Mr Watson said Mr Ingleby was involved in this discussion because he was the Chief Financial Officer and he would have been responsible for the payments.[460]
13.62 In cross-examination, Mr Watson accepted that all Mr Ingleby was asked by Mr Officer was whether or not there was any problem with the mechanics within AWB of making payments to third parties for trucking fees.[461]
13.63 Mr Ingleby had no recollection of a meeting with Messrs Officer, Emons and Watson. He accepted that it was not uncommon for him to meet with Mr Officer and that he may well have attended a meeting with Mr Officer and/or Mr Watson to discuss chartering matters in 1999. However, he denied that he had received an explanation of the process that had been decided upon in relation to the payment of trucking fees, that he had been made aware of any illegal payment or illegal methods of payment by Mr Emons or Mr Officer or that he had approved an illegal payment at any such meeting.[462] His evidence was:
If it was the case, and I have no memory of it being so, that Mr Officer asked me about a system for making payments then (if all that he said to me was whether or not my division could be comfortable with AWB making payments to Ronly and shipping companies to pay for the trucking that was being carried out for our wheat in Iraq), I would have said that we could accommodate such a payment because there would be no objection, from an accounting perspective, to the payment for services via an intermediary. Such a process has no illegal connotations and if Mr Officer had asked me questions in relation to such a proposal (and I cannot recall that he did) then in all probability I would have agreed that such a methodology was possible and that I was comfortable with it.<[463]
13.64 The evidence establishes that Mr Ingleby was called into a meeting when payment of the inland trucking fee was being discussed and at a time when the payment of such a fee to Iraq was known to be a breach of the UN sanctions. The purpose of that meeting was to find a way to meet the IGB's demands. It cannot be accepted that Mr Emons and Mr Officer discussed this matter in Mr Ingleby's presence and that the purpose of and reason for making indirect payments to the IGB never came up. Mr Ingleby was the Chief Financial Officer of AWB. There is no reason why Mr Emons and Mr Officer would have kept secret from Mr Ingleby the true facts as they knew them concerning the proposed payments to the IGB. Messrs Flugge and Lister were aware of them. International Sales and Marketing required Mr Ingleby's consent to the arrangement in order for AWB to make the necessary payments-hence the need to tell him of what was proposed to be done. In the very least this was the payment by AWB of a fee to the Iraqis, in breach of sanctions and in circumstances where AWB proposed to distance itself from the payments.
13.65 On 28 June 1999 Mr Emons sent an offer to the IGB for the supply of 600,000 tonnes of Australian Hard Wheat.[464] The price offered was expressed to be 'CIF Free in Truck'.[465] It included allowance for the inland transportation fee, which was now to be paid by AWB.
13.66 The terms of this offer provided that:
13.67 By telex dated 5 July 1999 the IGB rejected AWB's offer and countered by offering to purchase a higher quantity but at a lower price.[467] This lower price was expressed to be 'CIF F.O.T. to silo at all governorates of Iraq via Umm Quser port'.
13.68 On 6 July 1999 the IGB's counter-offer was rejected by Mr Emons, who responded with a revised price, again expressed as a 'CIF Free in Truck' price.[468] On 9 July 1999 Mr Emons sent a further offer to the IGB, after discussions with the IGB.[469] His offer was again expressed to be 'a CIF Free in Truck' price. That offer was rejected by the IGB on 12 July 1999[470]; the IGB then made a counter-offer at a price again expressed to be 'CIF F.O.T. to silo at all governorates of Iraq via Umm Quser port', consistent with its earlier offers.
13.69 AWB responded by facsimile on 13 July 1999, rejecting that offer and countering with a new price that was expressed to be '… per metric tonne CIF Umm Qasr delivered onto truck at a cost of USD 12. This clause remains subject to UN approval of the Iraq distribution plan. All other terms remain unchanged and as agreed in our discussions'.[471]
13.70 On 14 July 1999 AWB sent an 'electronic message' to the IGB, confirming the sale of 700,000 tonnes of wheat split between three contracts.[472] The agreed price was expressed to be a 'CIF Free in Truck price'. AWB numbered the three contracts A4653, A4654 and A4655.
13.71 That message also listed the terms and conditions applicable to the sale, including one in the following terms:
The cargo will be discharged free into truck to all silos within all governates of Iraq at the average rate of 3000 metric tonnes per weather working day of 24 consecutive hours. The discharge cost will be a maximum of USD12.00 and shall by paid by seller's to the nominated maritime agents in Iraq. This clause is subject to UN approval of the Iraq distribution plan.[473] [emphasis added]
13.72 Two written contracts were prepared and signed for each of the three contracts comprising this sale. The first was a single-page (short-form) contract prepared by AWB.[474] The second was a contract several pages long and prepared and signed by the Iraqi 'Ministry of Trade, Grain Board of Iraq' (the long-form contract).[475]
13.73 The AWB short-form contract identified the quantity and quality of wheat sold under that contract. It specified that the wheat was to be shipped to one safe berth Umm Qasr, Iraq, during the period from 1 October to 31 December 1999, subject to receipt of UN approval.
13.74 The short-form contract was substantially in accordance with the short-form contracts AWB had prepared for the sales it had concluded with the IGB under earlier phases of the Oil-for-Food Programme. That is, except for one difference.
13.75 The shipment clause in the short-form contract for these three contracts also contained the following provision:
The cargo will be discharged Free into Truck to all silos within all Governates of Iraq at the average rate of 3,000 metric tons per weather working day of 24 consecutive hours. The discharge cost will be a maximum of USD 12.00 and shall by paid by Sellers to the nominated Maritime Agents in Iraq. This clause is subject to UN approval of the Iraq distribution plan.[476] [emphasis added]
An identical clause had also appeared in AWB's 'electronic message' of 14 July 1999. This provision, and in particular the emphasised sentence, had not previously appeared in AWB's earlier contracts.[477] Despite the inclusion of this reference to 'discharge cost', this clause (and short-form contract) made no mention of 'land transport' or 'the land transport co.' (see clause 10 of the IGB's wheat tender).
13.76 Mr Emons explained that he used the expression 'discharge cost' in the short-form contract as a kind of shorthand for the expression 'discharge and land transport' costs after speaking to Mr Daoud.[478] He also explained that he had used the expression 'up to a maximum of USD 12.00' to 'try and cap any further increases'.[479]
13.77 The price at which the wheat was sold was expressed in this short-form contract to be a 'C.I.F. Free in Truck price per tonne'.[480]
13.78 At its conclusion, the short-form contract provided:
All other terms and conditions as per AWB LIMITED and GRAIN BOARD OF IRAQ Standard Terms and Conditions for Australian wheat of which the parties admit they have knowledge and notice, to apply to this Contract where not inconsistent with the above.[481]
13.79 The AWB short-form contracts were signed by Mr Emons on behalf of AWB. A copy of each short-form contract was also signed on behalf of the IGB, although the copies were not faxed to AWB until 1 September 1999.[482]
13.80 The IGB long-form contract was prepared, signed and sealed by the Iraqi 'Ministry of Trade, Grain Board of Iraq'.[483] It was dated 18 July 1999 and sent to AWB under cover of a facsimile dated 24 July 1999, which read:
We here by enclose a copy of said contract with copy of confirmation of order already signed by our side.
Pls sign it from yr side and present it to U.N.S.C. 661 for approval and fax again asigned copy to us[484]
13.81 This long-form contract was not in identical terms to the short-form contract prepared by AWB. In particular, the IGB long-form contract contained no clause equivalent to either the shipment clause in the AWB short-form contract (just quoted) or clause 10 of the IGB's wheat tender. The IGB long-form contract contained no mention whatsoever of the costs of discharge or land transport or any obligation on AWB to pay those costs or the IGB-nominated fee of US$12 per tonne. This was notwithstanding that the obligation to pay this fee was part of both the terms of the wheat tender and the subsequently concluded agreement for the sale of the wheat. Nor did the IGB long-form contract mention that a component of the purchase price was the US$ 12 per tonne fee payable in respect of such costs.
13.82 The price for which the wheat was sold was also expressed in terms slightly, although not materially, different from the terms used in the short-form contract.[485] It was described in clause 6 of the IGB long-form contract to be 'CIF F.O.T. to silo at all governerate of Iraq via Umm Quser port'.[486] Although this carried with it the implication that the price included the cost of discharge and transportation of the wheat within Iraq, it did not disclose the amount of that cost or that the 'cost' was in truth a fee nominated by the IGB to be paid to the person nominated by the IGB and which was added to the CIF price of the wheat. Further, although the use of these terms to describe the price in the long-form contract may have carried with it the implication that the seller (AWB) was responsible for the discharge and transportation of the wheat within Iraq and was including the costs incurred by it in discharging those obligations, the reality was that under the contract AWB concluded with the IGB these obligations remained with the IGB, and AWB's only obligation was to pay the fee nominated by the IGB to the person nominated by the IGB (which obligation the long-form contract did not disclose).
13.83 On 27 July 1999 Mr Borlase faxed to Ms Brodtmann[487] at DFAT in Canberra a copy of the long-form contracts for two of the three contracts[488] that had recently been concluded between AWB and the IGB (contracts A4653 and A4654).[489] On 29 July 1999 he faxed to Ms Brodtmann the IGB long-form contract for the third contract (contract A4655).[490]
13.84 On 3 August 1999 AWB faxed to DFAT in Canberra a copy of both the short-form and the long-form contracts for each of contracts A4653, A4654 and A4655.[491] The short-form contracts sent were signed by Mr Emons on behalf of AWB. They had not been signed on behalf of the IGB.[492]
13.85 Later that same day Ms Brodtmann sent a copy of those long- and short-form contracts by facsimile to Ms Moules at the Australian mission in New York.[493] She wrote:
Further to your email, I hope this helps clarify matters. According to the AWB the material sent to you was all they received from the Iraqis. However their own contracts may help. Let me know if you need the material sent through the bag so it is clearer.[494]
13.86 An application for the approval of the UN 661 Committee was completed by the Australian mission for each of the three contracts.[495] The applications were dated 3 August 1999 and lodged with the United Nations that same day.[496]
13.87 The material before this Inquiry does not reveal the clarification apparently required by the Australian mission and which Ms Brodtmann had hoped to provide by her facsimile and its attachments. Nevertheless, the following is apparent:
13.88 On 13 August 1999 the Office of the Iraq Programme wrote to the Australian mission, informing it that the 661 Committee had no objection to the applications lodged in respect of the three contracts and that AWB may therefore be eligible for payment from the UN Iraq Account. The letter stated that approval letters would be forwarded when the requisite funds were available.
13.89 On 16 August 1999 Ms Moules faxed a copy of the Office of the Iraq Programme letter to Mr Snowball at AWB's US office.[497]
13.90 On 27 August 1999 Ms Moules sent a further facsimile to Mr Snowball, enclosing a copy of the approval notices, dated 13 August 1999, that had been issued by the United Nations on 24 August 1999 in respect of contracts A4653, A4654 and A4655.[498] On 14 October 1999 Ms Moules forwarded to Ms Brodtmann at DFAT in Canberra a copy of the forms seeking UN approval bearing the Australian mission's seal for each of contracts A4653, A4654 and A4655, together with a further copy of the approval notices.[499] A copy of that facsimile was also sent to Mr Lister at AWB.
13.91 Contracts A4653, A4654 and A4655 were subject to two examinations at the United Nations prior to their approval by the 661 Committee. The first examination was conducted by a 'reporting officer' and the second by a 'checking officer'. In each instance the officer was to examine the contract to determine:
13.92 Both the reporting officer and the checking officer overlooked the clause in these three AWB short-form contracts that included the words:
The cargo will be discharged Free into Truck to all silos within all Governates of Iraq at the average rate of 3,000 metric tons per weather working day of 24 consecutive hours. The discharge cost will be a maximum of USD 12.00 and shall by paid by Sellers to the nominated Maritime Agents in Iraq. This clause is subject to UN approval of the Iraq distribution plan.[500]
13.93 Had this clause been noted at the time of examination, the contracts would have been put on 'under evaluating status', and the reporting officer would have written to the Australian mission to inquire what that clause referred to.[501]
13.94 Ms Johnston was the reporting officer for these three contracts. Her evidence was 'Well, I think the clause indicates that potentially payments are being made for services within Iraq, which while not always inconsistent with Sanctions, would be something that one would wish to clarify'.[502] Ms Johnston said she had not received any training to teach her that payment to an Iraqi entity of amounts other than in Iraqi dinars was a breach of sanctions.[503] The contractual term in question had not been seen by Ms Johnston in any other contract that she had seen.[504]
13.95 It is therefore apparent that the UN 661 Committee approved these three contracts without it having been noted by those charged with checking the contracts that they provided for a discharge cost to be paid in US dollars to an Iraqi entity. Moreover, the approvals were issued in circumstances where the UN inspectors had no knowledge that it was proposed that AWB would pay an inland transportation fee to the IGB or its nominee, although it would have been known, had the two inspectors properly checked the contracts, that a fee of up to US$12 per tonne was to be paid to 'Maritime Agents in Iraq'.
13.96 Neither AWB's short-form contract nor the IGB's long-form contract expressly provided for the payment of an 'inland transportation fee'-or, more particularly, the inland transportation fee AWB had agreed to pay (and which had been added to the price of the wheat to be paid from the UN escrow account).
13.97 It was explicit in the terms in which the price was quoted in both the signed and approved long- and short-form contracts that responsibility for discharging the grain from any vessel into trucks and for transporting the grain from the discharge port to the silos in each of the governorates of Iraq (or for arranging for that discharge and transportation) rested contractually with AWB.
13.98 The reality, however, was that AWB had no responsibility for either the discharge of the wheat from the vessel at Umm Qasr or the inland transportation of the wheat within Iraq. This was notwithstanding the terms in which the price was expressed. Every aspect of the arrangement for the discharge and transportation of the wheat rested with the Iraqis, as it had under contracts concluded before July 1999 and under earlier phases of the Oil-for-Food Programme. Under the terms of the agreement it concluded with the IGB, AWB's only obligation in these respects was to pay the Iraqis a fee as dictated by the IGB. AWB was aware of this.
13.99 That this was appreciated at AWB is reflected in Mr Emons' email to Mr Officer on 4 November 1999:
To date IGB have not advised the trucking co. to whom payment should be made. We have been approached by a company in Jordan but our response has been to ask for confirmation from IGB before discussing further.
We are not responsible for trucking in Iraq only the payment. Payment to us occurs as per existing contract after UN inspectors cert is issued at discharge.
When I see Zuhair at the end of Nov I hope to clear a number of the details up.[505] [emphasis added]
13.100 Mr Officer agreed that this email was final confirmation that AWB was not responsible for 'the actual trucking' of the wheat[506] and that from at least that time onwards (November 1999) he believed that, whilst AWB was paying a fee to the Iraqis said to be on account of trucking, AWB was not itself responsible for the trucking of the wheat within Iraq.[507] At no time prior to late 2003 did AWB seek to make any arrangements with any contractor for the discharge or transportation of grain within Iraq.
13.101 The terms of the contract between AWB and the IGB provided for payment for the wheat by an irrevocable and non-transferable letter of credit opened by the Central Bank of Iraq on behalf of the IGB and drawn on the bank holding the Iraq account, BNP.
13.102 On 10 September 1999 AWB received from its bankers (SG Australia) notice of the establishment of the letter of credit in favour of AWB for the proceeds of sale under contract A4653[508], together with a copy of the letter of credit.[509]
13.103 On 11 September 1999 Mr Lister wrote to the IGB, requesting that a number of amendments be made to this letter of credit.[510] Some of these amendments were minor and for the purpose of correcting typographical errors in the letter of credit. Other changes proposed reflected a request for an alteration to the substantive terms of the letter of credit.
13.104 The terms of the letters of credit initially established in respect of each of these three contracts provided that amongst the documents required to be produced by AWB in order to obtain payment under the credit was:
5) CMR Truck consignment notes, issued in 3 originals and 6 copies in the name of the Ministry of Trade/Grain Board of Iraq, Baghdad, Notify Ministry of Trade/Grain Board of Iraq, Baghdad marked /freight prepaid/evidencing shipment from Umm-Qaser port to CIF all provinces as mentioned below.
13.105 In his letter of 11 September 1999 Mr Lister asked that the requirement to produce these documents be deleted from the letter of credit. This request was made on the basis that 'The AWB Limited has no control over the issuance of this documentation and as such could not then present these documents to our bankers when negotiation procedures are being effected'.[511] The position would have been otherwise if AWB had engaged the services of the company employed to transport the wheat within Iraq-in particular, in fulfilment of a contractual obligation to perform or arrange for the performance of that task. That this reason was given by Mr Lister in support of his request for this change to the letter of credit is consistent with (and an acknowledgment of) AWB having no such contractual obligation and no contract (or any expectation of entering into any such contract) with a transportation company.
13.106 The letter of credit further provided that the documents required were to be presented only after the United Nations had advised that the standardised confirmation of the arrival of the goods in Iraq had been issued, evidencing shipment of the goods. The description of the goods for this purpose in the letter of credit included:
In his letter of 11 September 1999 Mr Lister asked that each of the passages just quoted be deleted from the terms of the letter of credit.[512]
13.107 Initially the IGB resisted AWB's request for these amendments.[513]
13.108 On 17 October 1999 Mr Lister repeated his request for these amendments.[514] In relation to the requirement to produce truck consignment notes, he again stated, 'The AWB Limited has no control over the issuance of this documentation and as such could not present same to our bankers come the time of negotiation of documents'.[515]
13.109 In relation to the other amendments, following discussions with AWB's bankers in Australia, who in turn were awaiting comments from BNP in New York, Mr Lister proposed to the IGB:
All that was required was for the associated clauses defining shipment terms would be read as only 'CIF F.O.T…………' without any mention of the governates/provinces.
We/the Bank would suggest that any mention of all of the provinces-i.e. Baghdad, Babylon, Basrah, Salahuddin etc does not need to be incorporated in the L/Credit as the final destination is entirely under your control and where the goods destined after arrival in Umm Qaser is at the discretion/direction of your goodselves.[516]
13.110 On 19 October 1999 Mr Emons had a lengthy telephone conversation with Mr Daoud. On 20 October 1999, in an email to Mr Officer and copied to Messrs Watson, Lister and Owen, Mr Emons explained that the purpose of his conversation with Mr Daoud had been 'to resolve quickly the amendments that we have requested to the L/C and the payment of the trucking cost as per our contract back to IGB'.[517] [emphasis added] The email continued:
With payment of the trucking fee we are prevented of doing this direct to Iraq for obvious reasons. Our contract which complies with the tender document details approved by the UN does not specify how this payment will be undertaken. As a result of this we requested of Zuhair [Daoud] that he supply us with suitable bank details to facilitate this payment.
We have always been aware from the outset that this issue is some what grey however I realised during my conversation with Zuhair that we need to be particularly careful on the execution of the contracts. Zuhair stated that he will supply details of the company to be paid and the account details. He also stated that the trucking fee may vary in the future.
To remove any potential criticism potentially of AWB or longer term considerations relating to facilitation payments etc as previously discussed I have recommended that the Charter Party be amended to include the trucking fee and therefore the payment of this fee will be carried out by the shipping companies.[518]
13.111 Mr Emons' evidence was that in his lengthy discussion with Mr Daoud the night before he had made the point that, although the contracts might be approved by the United Nations, it was the execution of the contracts that worried AWB. As at the time of that conversation there had been no resolution about how the payment for inland transport to the Iraqis would be effected.[519]
13.112 What Mr Emons and Mr Daoud were looking for was a method of effecting the payment without it being apparent that the payment was being made.[520] In Mr Emons' words, 'We knew that it was outside the sanctions and also there was no way that a US dollar could be paid to an Iraqi in Iraq through the UN Treasury'.[521] [emphasis added]
13.113 On 21 October 1999 the IGB sent a telex to AWB, advising of its agreement to AWB's request that the requirement to produce truck consignment notes be deleted from the letters of credit.[522] It also advised that it agreed that:
Shipment clause will read CIF free out Umm Quser port and that is in L/Cs only. But in our contracts will remain (CIF F.O.T. to silo at all governerates of Iraq via Umm Quser port) and shipment excution is according to contract terms regarding transport charges already remain as we agreed upon for aconveniant time to confirm on yr request. Awaiting yr reply in order to act accordingly.[523]
13.114 By telexes dated 25 October 1999[524] and 28 October 1999[525] the IGB confirmed to AWB that it had instructed the Central Bank of Iraq to agree to the requested changes. By telex dated 31 October 1999 the IGB further advised that the Central Bank of Iraq had instructed BNP on 25 October 1999 'regarding all required amendments' to the letters of credit.[526] On 3 November 1999 the IGB faxed to AWB the text of the amendments the Central Bank of Iraq had sent to BNP.[527]
13.115 On 18 November 1999 BNP sent by facsimile to the UN Treasury a copy of the amendments sought by AWB.[528] In doing so, BNP advised that it had approved the text of this amendment and was prepared to issue it to the beneficiary (AWB). BNP further advised that it noted no inconsistencies with the requirements of the letter of credit, as specified in its Agreement for Banking Services dated 12 September 1999 pursuant to Security Council Resolutions 986, 111, 1143, 1153, 1210 and 1242. Finally, BNP asked, 'Please pass this FAX on to the 661 Committee so that they can review the amendment and approve its issuance in writing to BNP'.
13.116 On 19 November 1999 the UN Treasury sent a facsimile to BNP stating that it had reviewed the proposed amendments to the letter of credit and repeating BNP's advice as to the purpose of the amendments.[529] A letter of credit containing the amendments requested by AWB was subsequently issued by BNP to the United Nations on 19 November 1999.[530]
13.117 On 22 November 1999 AWB received advice from its bankers (SG Australia Limited) of the amendments to the letter of credit[531], together with a copy of the amendments.[532]
13.118 AWB also received notification of the establishment of the letters of credit called for under contracts A4654 and A4655. AWB requested, and the IGB agreed to, similar changes being made to these letters of credit and, in due course, to all other letters of credit established in favour of AWB in respect of its contracts with the IGB that contained provision for the payment of inland transportation fees.
13.119 Thus:
13.120 The amendments to the letter of credit sought by Mr Lister, to which the IGB agreed, and the reasons Mr Lister gave for those amendments were consistent with the agreement AWB had, in reality, concluded with the IGB. The agreement was one in which AWB had no contractual obligation to arrange or effect the discharge of the wheat or its subsequent transportation to all governorates within Iraq, in which responsibility for these functions remained with the Iraqis, and in which AWB's only obligation was to pay to the person or account nominated by the IGB the fixed fee nominated by the IGB, which fee was said to be for the costs of discharge and transportation and was added to the CIF price at which AWB would have otherwise agreed to sell the wheat to the IGB on a CIF free out basis.
13.121 One of the documents AWB was required to produce under the letter of credit in order to obtain payment for each shipment under it was an invoice for the cost of that shipment. The invoice that was produced by AWB was addressed to the IGB; it referred to the contract under which the wheat had been shipped, the quantity of wheat shipped, and the total amount due based on the contract price.[533]
13.122 The price of the wheat shipped was expressed in the invoice to be 'CIF'-and not 'CIF free in truck' or some variation thereof consistent with the way in which the price was expressed in both the AWB short-form and IGB long-form contracts.[534]
13.123 The AWB invoice also stated that 'charges and expenses are included in the CIF price'.[535] This was consistent with the terms of the letter of credit.[536] Although the invoice did not specifically identify the charges or expenses comprised in the CIF price (as the letter of credit permitted), it did identify that both 'ocean freight' and 'insurance' were for the seller's care. There was, however, no similar reference to the cost of the inland transportation of the wheat within Iraq or any statement that this was for the seller's care, consistent with the manner in which the contract price had been expressed in both the short-form and long-form contracts. The manner of preparation of the invoice and the information it contained-which was no different in this regard from the form of invoice AWB had issued in relation to shipments prior to July 1999 and the commencement of phase VI of the Oil-for-Food Programme-was consistent with the true agreement that existed between AWB and the IGB; that is, of a sale on CIF (free out) terms in the same way as its sales before phase VI had been.
13.124 After contracts A4653, A4654 and A4655 had been concluded and approved by the United Nations and the details of the letters of credit had been settled, there were two matters that required further consideration before the contracts could be fulfilled.
13.125 One was the method by which the inland transportation fees were to be paid to Iraq by AWB. This had already been the subject of some discussion in June 1999, before the contracts had been negotiated. The other matter was through whom those fees were to be paid.
13.126 On 30 September 1999 Mr Emons emailed Mr Hogan in preparation for a further trip to Iraq. He wrote:
1. There is the issue of the USD 12 inland transport payment that we are required to make under the new contract. Speaking with [Mr Owen] he suggests that the only way we can make the payment would be either hold the money in an account in Australia until sanctions etc. are lifted or, we can make a payment into a Jordanian account. Because of sanctions we can't do any of this thru an OECD country. Alternatively we drop the USD 12 from the contract. Suggest that you discuss with Zuhair.[537] [emphasis added]
This demonstrates, yet again, that Messrs Emons, Hogan and Owen knew that UN sanctions prohibited payments of monies to Iraq.
13.127 In October 1999 a visit to Iraq by representatives of AWB was planned. Mr Emons was to accompany Messrs Flugge and Rogers. The visit was to coincide with an IGB grains conference in Baghdad, and Mr Flugge was to open the conference. Mr Emons was unable to attend. Mr Hogan went in his stead at short notice.
13.128 On 9 October 1999 Mr Hogan, in company with Mr Flugge and Mr Rogers, met with Mr Daoud and representatives of the IGB in Baghdad. Mr Flugge and Mr Rogers were present throughout Mr Hogan's conversations with Mr Daoud concerning the inland transportation fee.[538] Although Mr Flugge and Mr Rogers took no part in the discussion, it is not credible that they did not listen to what was being said.
Mr Hogan's evidence, which I accept, was that at the meeting:
1. The ITF [inland transport fee] was discussed being $12 pmt.
2. I protested about the prepayment of the ITF based on the Bill of Lading weights.
3. Proposed mechanisms for payment were discussed.[539]
13.129 Mr Flugge agreed that it was common to be briefed before such meetings. Although he could not recall any briefing from Mr Hogan or anyone else prior to this visit, he did not deny Mr Hogan's evidence that such a briefing must have taken place.[540]
13.130 By the end of this trip to Baghdad in October 1999, Mr Flugge was aware of negotiations between the IGB and AWB as to how payments of inland transport fees could be made and had been present during Mr Hogan's discussions with Mr Daoud regarding the manner of payment.
13.131 Although Mr Rogers was also present during Mr Hogan's discussions with Mr Daoud and although he said it was likely that he paid no attention to those discussions[541], it is probable that Mr Rogers was aware of the matters discussed at the time.[542]
13.132 On 11 October 1999 Mr Hogan reported on the outcome of the meeting in an email to Mr Emons.[543] His email was circulated widely within AWB, including to Mr Borlase, Mr Geary, Ms McCartney, Mr Watson and Mr Lister. At the conclusion of his email, Mr Hogan stated, 'Mark, I will send a separate note on the FIT [free in truck] payment system'.[544]
13.133 This email also referred to 'carrying costs' of grain from delayed shipments. Mr Hogan wrote:
Sarah/Peter/Stu-I will explain the no despatch/demurrage. Iraq have no mechanism to settle any amounts … we will need to do some work on the IGB to introduce carry into contracts, which I believe can be included under 986???[545]
The UN sanctions were thus to mind.
13.134 On 11 October 1999 Mr Hogan sent an email to Messrs Emons, Borlase and Owen in relation to the inland transport fees in the following terms:
I did have a brilliant idea how to settle the USD12 Free in Truck payment to the transport CO's-we do a contract with them when enough equity was built up and then they sell to IGB and IGB pay them in USD (via 986 system).
However Zuhair advised that the President has issued to all ministers bringing product into Iraq that suppliers must pay the USD 12.00 before ship arrive so that unloading could proceed. If the USD 12.00 was not in place then they would not be unloaded.
I voiced our protest to this system as we already wait so long for payment, that we would be unhappy to prepay this amount. Also with the weight discrepancies-there would be a lot of juggling with payments etc.
Zuhair could understand this point and was approaching the minister for a special concession for AWB. We will wait upon outcome.
The system that will be the most workable would be that AWB create an account in Jordan and transfer funds to this account. From this account, we would transfer to a special account (nominated by IGB) for each vessel.
(We could probably by pass the Account in Jordan and transfer directly to the 'special' nominated account-as long as the link is not apparent that the funds were going into Irq.
I will let you and Graham have a think abt it and wait for Zuhairs decision from the Minister.
(other option is to use Maritime agents/vessel owners account/or buy a very large suitcase).[546] [emphasis added]
13.135 The following day Mr Owen replied, asking, 'Why do we try and make our business more difficult?'[547] In his email Mr Owen reported that he had checked the possibility of opening an account in 'our name' in Jordan and set out the requirements were such an account to be opened with a friendly bank, such as the ANZ. One requirement was 'copy of board resolution authorising the opening of an account and nominating signatories. This assumes senior management/audit will sign off on opening an account'.[548] Mr Owen concluded that in view of these requirements:
I do not think that this proposal is a possibility to handle the payment of USD 12 per tonne for inland transport costs to Iraq.
I do not think that we need to open an account, I think that we could effect payment to the Iraqi transport companies USD account with a bank in Jordan from Australia. Despite the problems with USD payments to Iranian companies we are able to effect USD to GTC [the Iranian Grain Trading Company] for monies owed to them via their bankers in Europe. To enable payment, we would need to know the Banks name in Jordan and also where the bank conducts its USD account in USA. On payment for each shipment, we arrange the USD payment to the Iraqi transport company via ANZ thru their office's in Jordan.[549] [emphasis added]
13.136 The emphasised words show an understanding that Iraqi companies were to perform the transportation but that such Iraqi companies could be paid in Jordan since payment to them in Iraq was not possible.
13.137 Mr Borlase stated that he did not recall reading Mr Hogan's email[550] and that his involvement was limited.[551] He added that he was not fully aware of the sanctions and how the proposed payment mechanism worked.[552] He also claimed to have been unaware of the Iraqis receiving the monies because there was an ongoing debate about how the payments could be made.[553] This evidence is not credible. There was no reason for Mr Borlase not to have read the email, and the content of the email is unambiguous: it clearly indicates that AWB was looking for a way to disguise the payment, as Mr Borlase accepted when he read the email in the course of his evidence in 2006.[554] No experience or seniority was required to comprehend what was being proposed. Mr Borlase also could not explain why AWB had to resort to subterfuge if it was complying with the sanctions. He subsequently participated in the operational aspects of these and other contracts with the IGB, at which time he was clearly aware of how the 'free in truck' clause was going to operate.[555]
13.138 Mr Emons responded to Mr Owen's email on 12 October 1999, with a copy to both Mr Hogan and Mr Borlase, suggesting 'a couple of ideas to follow on with'[556]:
1. If we had an operable L/C could we not prepay the USD 12 prior to discharge in Iraq? I know we are risking USD 12 if the vessel does not get UN inspectors approval but with our ongoing shipping program are we really risking that much?
2. Iraq should then be in a position to put in place an L/c that does not require truck receipts.
3. We would then not be needing UN approval as we already have this for the existing contract and if we are to pay/or have another contract with IGB or a third party we would then need approval. Am I correct?
Thoughts any way, please revert.[557]
The recognised difficulty was the absence of UN approval for a payment AWB intended to make.
13.139 As noted, the IGB subsequently agreed to the deletion of the requirement for truck receipts referred to in the second of Mr Emons' paragraphs just quoted. This was discussed in a conversation between Mr Emons and Mr Daoud prior to 20 October 1999 and confirmed by the IGB's facsimile the next day.
13.140 By 20 October 1999 Messrs Emons, Watson and Officer had decided that the inland transportation fee for shipments of wheat to Iraq under contracts A4653, A4654 and A4655 would be paid via the shipping companies that were to carry that wheat to Iraq. Mr Emons said this plan followed on from discussions he had had with Messrs Watson, Lister, Officer and Owen.[558] The plan included a component whereby the shipowners would debit AWB for the trucking charge together with a handling fee and the cost of the freight.[559]
13.141 On 19 October 1999 Mr Emons and Mr Daoud agreed that the trucking fee would be paid to a company nominated by the IGB.[560] Mr Daoud was to provide to AWB the name of the company and its bank details. To whom the money was to be paid was thus resolved. How the payment would be made remained unresolved.
13.142 At 8.15 on the morning of 20 October 1999 Mr Watson sent to Mr Emons an email headed 'Iraq' in which he stated:
Further to our discussion concerning the best means in which to arrange to refund the trucking charges to Iraq, I have arranged with the various shipowners to handle this on behalf of AWB Limited.
Therefore the Owners will debit AWB this extra trucking charge, plus their handling fee together with the freight which has been finalised, upon completion of loading.
I therefore would suggest that you ammend the contract system to reflect both the agreed freight rate and the required trucking charges, as Chartering will need to debit the pool for both amounts and pay same to the Owners.
Please let me know in due course the banking details that Iraq will require as will then ensure that Owners remit the 100 pct of trucking costs directly to that a/c upon completion of loading.
Assume this will overcome the current difficulty that arising from L/c wording etc.[561] [emphasis added]
13.143 Mr Watson sent a further version of his email of 8.15 am to Mr Emons at 11.41 am.[562] The only difference was that, whereas the first paragraph of his earlier email had stated, 'I have arranged with the various shipowners to handle this on behalf of AWB Limited', the later version stated, 'I will arrange with the various shipowners to handle this on behalf of AWB Limited'.
Mr Emons immediately forwarded Mr Watson's email to Mr Lister and Mr Owen.[563]
13.144 Both Mr Emons and Mr Watson confirmed that Mr Watson's email of 20 October 1999 accurately reflected their discussions at that time.[564]
13.145 At 11.01 am on 20 October 1999 Mr Emons sent an email to Mr Officer, copied to Messrs Watson, Lister and Owen.[565] This followed his lengthy discussion with Mr Daoud the previous evening. Mr Emons wrote:
I needed to resolve quickly the amendments that we have requested with L/C and the payment of the trucking cost as per out contract back to the IGB.
With payment of the trucking fee we are prevented of doing this direct to Iraq for obvious reasons. Our contract which complies with the tender document details approved by the UN does not specify how this payment will be undertaken. As a result of this we requested of Zuhair that he supply us with suitable bank details to facilitate this payment.
We have always been aware from the outset that this issue is some what grey however I realised during my conversation with Zuhair that we need to be particularly careful on the execution of the contracts. Zuhair stated that he will supply details of the company to be paid and the account details. He also stated that the trucking fee may vary in the future.
To remove any potential criticism potentially of AWB or longer term considerations relating to facilitation payments etc as previously discussed I have recommended that the Charter Party be amended to include the trucking fee and therefore the payment of this fee will be carried out by the shipping companies.
I trust that this action meets with your approval.[566] [emphasis added]
13.146 Mr Emons drafted this email because he decided he wanted to record in writing his position.[567] He sent it to Mr Officer because Mr Officer was his superior, the person to whom he reported at AWB.[568] According to Mr Emons, after he sent the email Mr Officer was not happy.[569] They had a discussion in which Mr Officer asked why Mr Emons had sent the email to him. Mr Emons replied:
'So that you know what is going on and what we are doing?'
Mr. Officer then said words to the effect:
'Of course I do.'[570]
13.147 It was the common understanding of each of Messrs Emons[571], Officer[572] and Watson[573] at that time that the inland transportation fees were to be paid to ('refunded to') the Iraqis. This was reflected in the first paragraph of each of Mr Watson's and Mr Emons' emails. Mr Emons also acknowledged that at the time he sent his email he knew that payments to the Iraqis were outside the UN sanctions[574] and that what AWB was then looking for was a way in which these payments could be made without it being apparent that it was being done.[575]
13.148 At 2.12 pm on 20 October 1999 Mr Owen responded to Mr Emon's email to Mr Officer.[576] In this email, which was copied to Messrs Officer, Watson and Lister, Mr Owen stated:
I have a number of problems with the suggested proposal in regards to payment of USD12 per tonne to Iraqi trucking company. I details below my comments on this issue.
1. I believe it is contractual obligation of AWB to pay the fee and we are transferring that responsibility to a 3rd party.
2. I am concerned if the shipping company incorrectly effects payment the money will be frozen in New York, then Iraq may not release the vessel, until money is received in their nominated account. What happens then.
3. What happens if shipping company goes broke, (this has already happened to us a number of times in the last 18 months) and payment has not been effected to Iraq's.
4. At any one time, we could have 5-6 vessel on the water and if they are all Panamex vessels we could be talking about approx. USD3.3 million to USD4 million and payment doesn't have to be made prior to vessel's arrival in Umm Qasr. Shipping company would have the benefit of that money.
5. Over all the contracts we are talking about USD11.34 million why can't we remit those funds to BNP for use by the Iraqi Government to purchase approved commodities as is done with the Oil for food agreement. If the UN has approved the USD12 per tonne payment. Or get a one off approval to allow payment of the USD12 per tonne back to Iraqi trucking company.
6. Hold funds in an account with AWB for buyers benefit. Even if we have to pay interest on the funds and repay funds back once sanctions removed. They still owe us in excess of USD400million, so they should be able to trust us for USD11 million.
Mark I trust you find my comments constructive I just have a problem relying on a 3rd party to perform this administrative function of our contract and worry if they stuff-up, we have to explain, why we had to pay the USD12- twice.
I am happy to discuss further if required.[577]
13.149 Mr Emons responded to Mr Owen in an email later the same day, at 3.26 pm. He rejected Mr Owen's concern about shipping companies going broke. He stated:
I will reply in reverse order.
6. This is not an issue that the Iraqi Government recognise as the funds are frozen in US accounts by the US Government.
5. The UN is an unnecessary complication and would delay the Current contracts by some 3 to 6 months. Are you prepared to wear the storage and finance costs?
4. Presidential decree requires prepayment of the fee prior to arrival. Therefore we have to resolve payment in the least potentially damaging method to AWB.
3. Companies going bust are natural commercial risk, however our Iraq trade is conducted by a small number of reputable companies that have to date shown no evidence of financial stress. Also without payment being made there could be no discharge and I would therefore expect that we could arrest the vessel, after all we do have the dox's.
2. Good point but that is a manageable issue within the time frame of shipment to Iraq.
1. Correct, that is why we put the requirement in the charter party.[578]
13.150 Mr Watson also responded to Mr Owen's email. This was in an email to Mr Emons, copied to Messrs Owen, Officer and Lister, at 3.51 pm.[579] Mr Watson also dismissed Mr Owen's concern about 'shipowners going bust'.
13.151 Mr Owen sent a further email to Mr Emons on 20 October 1999 at 4.38 pm. It stated, 'How can we manage somebody else doing a payment ????????'[580] Mr Owen did not receive a response.
13.152 On 22 October 1999 Mr Emons sent to Mr Daoud a facsimile in which he advised:
We have instructed the shipping companies concerned to make payment as directed for the trucking fee.
As discussed we believe that payment should be carried out by a third party to remove any complications. I will discuss with you next week when I am in London.[581] [emphasis added]
13.153 Thus by late October 1999 the following was widely known within AWB:
13.154 What remained was to receive from the IGB the name and account number of the company to whom Iraq required the money to be paid.
13.155 In his conversation with Mr Emons during the night of 19 October 1999, Mr Daoud had promised to send Mr Emons details of the company to whom the inland transport payments were to be made.[582]
13.156 Later that evening AWB received a facsimile from Alia for Transportation and General Trade.[583] The facsimile was addressed to 'Australian Wheat Board', to the attention of 'Mr Murray Roges Manager Director'. It read:
We would like to introduce to you our company being one of the Jordanian Establishments specialized on the fields of overland and ocean freight transportation moreover, our company is a member of the syndicate of shipping agents in Jordan also we are agents of the state company for Iraqi land Transport and Iraq.
We have informed officially that your company won a contract to supply Iraq by (921000) tons of (Wheat).
So, we are pleased to offer our services on the field of transport form Um Qaser port in Basrah to the other governorate in Iraq and we well return all the documents of the goods to you.[584] [emphasis added]
13.157 The copy of the facsimile from Alia bears a manuscript note 'Mark Emons', suggesting that it had been passed on to Mr Emons. Mr Emons said he was shown the facsimile from Alia by Mr Officer on 20 October 1999.[585] Mr Officer did not recall passing the fax to Mr Emons.[586] He recognised the handwriting in the manuscript note as being that of Mr Rogers' personal assistant. Although Mr Officer conceded he may have passed the fax to Mr Emons, he suggested the most likely course was that it had been passed to Mr Emons by Mr Rogers' personal assistant.[587]
13.158 Until this time Mr Daoud had not mentioned Alia by name to Mr Emons. Mr Emons did not relate the company Alia to the company Mr Daoud had told him he would nominate as the recipient of the inland transport fees.[588]
13.159 Neither AWB nor the Australian Wheat Board had previously dealt with Alia.
13.160 Alia was incorporated in Jordan in 1994. At all times since 1994 it had been 49 per cent owned by or on behalf of the Iraqi Ministry of Transport. The remaining shares were owned by Mr Qtaishat, an Associate of Sheikh Al-Khawam. Sheikh Al-Khawam was a director and the Chairman of Alia. The other directors were two nominees of the Iraqi Ministry of Transport. The Ministry of Transport directors were rotated every six to 12 months.[589]
13.161 On 27 October 1999 Alia sent a further facsimile to 'Australian Wheat Board', this time addressed to Mr Emons.[590] It was in similar terms to the earlier facsimile. It repeated that Alia was one of the Jordanian establishments specialised in the field of overland and ocean freight transportation, a member of the syndicate of shipping agents in Jordan, and 'agents of the state company for Iraqi land Transport and Iraq'.
This facsimile was sent following a telephone call from Alia to AWB earlier that day, during which Alia was informed that Mr Emons was 'in charge of this matter'. Mr Hogan had received an inquiry from Alia, asking who was in charge of the Iraq account, and he referred Alia to Mr Emons. Alia then faxed the letter of introduction[591] to Mr Emons in Melbourne, with a copy to Mr Hogan.[592]
13.162 On 13 November 1999 Alia entered into an agreement with the Iraq State Company for Water Transport to collect inland transportation fees on behalf of the ISCWT.[593] The agreement provided:
Alia thus had no transport obligations in respect of arriving goods. Its only obligation under its agreement with the ISCWT was the provision of information about future shipments and the receipt and payment on to the ISCWT of the inland transportation fees payable in respect of those shipments. Although AWB was not aware of Alia's agreement with the ISCWT at this time, it did know that the IGB had said it would provide details of the name and account into which the inland transportation fee was to be paid, for payment back to Iraq.
13.163 The first shipment of wheat under contract A4653 was shipped on board the Pretty Ruby.
13.164 On 7 October 1999, in a facsimile to Mr Grenenger at the Department of Foreign Affairs and Trade, Mr Lister applied for permission to export the shipment pursuant to r. 13CA of the Customs (Prohibited Exports) Regulations.[595] Mr Grenenger faxed a copy of DFAT's permission to export to AWB the following day.[596] The vessel completed loading on 1 November 1999, whereupon she sailed for Iraq.[597] As she did, the arrangements for payment of the inland transportation fees in respect of that shipment had still not yet been finalised.
13.165 On 3 November 1999 Mr Hogan in Cairo submitted to Mr Emons a report for the benefit of Mr Rogers' forthcoming report to the Board.[598] Under the heading 'Iraq' Mr Hogan reported:
AWB is currently negotiating the Free in Truck clause that Iraq has included in all new contracts. Whilst AWB does not have an issue with the actual clause, there is some disagreement as to when the transport company should be paid and what tonnage. This is a concern for the AWB as Iraq is the only market contracted on final weight and quality after inspection by UN inspectors at Umm Qasr. (all other markets in the world are contracted on weight and quality final at load port). Subsequently, AWB do not wish to pay for transport costs upon Australian Load Port weight, as these invariably differ to the UN Inspectors discharge weights.
Two vessels have been loaded under the new contracts that include Free In Truck clauses, and the issue will be resolved in the near future.[599]
13.166 On 4 November 1999 a copy of Mr Hogan's email was forwarded by Mr Emons to Mr Officer's personal assistant. Later that evening Mr Officer emailed Mr Emons: 'Where are we with the trucking fee issue ? Even if we find a way through this issue do we take on any increased risk/exposure by contractually being responsible for trucking within Iraq?'[600]
13.167 Mr Emons replied 30 minutes later:
To date IGB have not advised the trucking co. to whom payment should be made. We have been approached by a company in Jordan but our response has been to ask for confirmation from IGB before discussing further.
We are not responsible for trucking in Iraq only the payment. Payment to us occurs as per existing contract after UN inspectors cert is issued at discharge.
When I see Mr Daoud at the end of Nov I hope to clear a number of the details up.[601] [emphasis added]
13.168 In his email to Mr Officer Mr Emons was doing no more than passing on what Mr Daoud had told him-that the Iraqis' imposition of an inland trucking fee was simply a mechanism whereby money was to be paid to the Iraqis.[602] It was not the imposition of a contractual term that required AWB to take any responsibility in fact to provide trucking to all governorates in Iraq.[603]
13.169 On 8 November 1999 the IGB faxed AWB: 'You are kindly requested to advise us the date of transfer Transportation charges (12 USD per Ton) of A.M Pretty Ruby vessel. Under M./O.U. phase Six also other coming vessels'.[604]
13.170 On 10 and 11 November 1999 Alia faxed Mr Emons with its bank account details. (There was an error in the details provided in the facsimile of 10 November 1999[605], which was corrected by the facsimile sent the following day.[606])
13.171 On 11 November 1999 AWB received a copy of an email from the operators of the Pretty Ruby, advising that they had received the following telex from the port agents (the ISCWT) at Umm Qasr and asking for AWB's advice on how to respond:
Pretty Ruby-ETA UMQ 25/11
Cargo (42,000 MT wheat in bulk) required oncarriage to consignees warehouses cost being USD 504,000-(at USD 12.- perton) please liaise with AWB and advise method pyment enabling us do needful.
Thanks/best regards
Varoojan Krikor
ISCWT Basrah.[607]
13.172 Mr Emons was to meet with Mr Daoud later in November, when Mr Daoud had proposed that he would give Mr Emons the full details of the identity of the company that would be handling the inland transport fees.
However, on 18 November 1999 Mr Emons spoke with Mr Daoud about payment of the trucking fee for the Pretty Ruby cargo.[608] Mr Emons recorded the outcome of his conversation in an email, headed 'Iraq trucking fee', to Mr Watson on 19 November 1999:
More confusion as ever with the trucking fee and my Iraqi's.
I spoke twice last night with Zuhair. I explained that without the L/c amendments nothing was going to happen. He assures me that this will take place and Rex this morning tells me that two of the contract l/c's amendments have come through.
On the trucking fee, I am still having some problems with him. He understand that we can't pay Iraq direct but he says he wants to tell me personally when I see him how it should all operate. This all well and good but as I said to him we have a vessel arriving before we see him and the IGB will not discharge until the money is rec'ved.
He then came back to me and said for the first vessel only that we should pay 90% (USD 10.80) to:
ALIA for Transportation and General Trade
Account No. ……..
ARAB LAND BANK
…………. JORDAN ……………
I know this is a little to direct but he assures me that it is a one off and that the full details will be supplied when we meet him of the company that will be handling this matter in the future.
So if you can make it you can make the payment as above rather than the shipping company immediately and we can sort the detail when in Iraq.[609]
Mr Officer expressed concern to Mr Emons that AWB had been asked to pay money directly into the Jordanian bank account of Alia. However, he expressed no objection to the matter proceeding that way when reassured by Mr Emons that this was the procedure that had been stipulated by Mr Daoud.[610]
13.173 On 23 November 1999 AWB received a facsimile from Alia further to a telephone call earlier that day setting out the details of the Arab Land Bank's correspondent bank in New York.[611]
13.174 The following day Alia sent a further facsimile to AWB, advising:
We have just received a Fax Message from the state Company for Water Transport in Basrah (Iraq) wherein they advise us that whereas the M.V. 'Pretty Ruby' is due to arrive at the port of Um Qaser today, your remittance in respect of over-land transportation charges amouting to USD (504,000) has not been received yet.
As you are aware, the renitence in question should be received here Five days prior to vessel's arrival at Um Qaser. therefore you are kindly requested to for our us urgently with the Bank Transfer detail to enable us follow -up the matter with the appropriate Bank here and the Grain Board of Iraq, Baghdad as well as aforesaid Company accordingly and remit the subject funds to them.[612] [emphasis added]
As is plain on the face of this facsimile, Alia was proposing to remit the 'over-land transportation charges' to the Iraqis.[613] This was in accordance with the arrangement Mr Emons had made with Mr Daoud.[614]
13.175 The facsimile bore a note indicating that it was to be copied to both the IGB and the ISCWT. This was an indication of the interest of these Iraqi organisations in the payment of the monies to Alia, inconsistent with the payment being for the benefit of Alia or for services it was providing. Further correspondence AWB received in 2000 and through until 2002[615], from the IGB and the ISCWT and from Alia enclosing correspondence from the ISCWT, revealed to AWB the Iraqis' continuing interest in these payments.[616]
13.176 On 26 November 1999, US$453,600 was remitted to Alia from one of AWB's US dollar accounts with the Bank of New York in New York.[617] This was pursuant to an internal AWB US dollar payment request dated 25 November 1999.[618] The amount of US$ 453,600 represented 90 per cent of the inland transportation fees payable in respect of the Pretty Ruby shipment. The payment request was signed by Mr Officer and authorised by Mr Laskie. On 26 November 1999 AWB faxed a copy of its payment request to Alia.[619]
13.177 The Pretty Ruby completed the discharge of her cargo in Umm Qasr on 7 December 1999. The following day, Alia sent a facsimile to AWB requesting remittance of the remaining 10 per cent of the cost of inland transportation.[620] The balance owing (less an adjustment for a small portion of the cargo that was short-delivered) was paid to Alia on 13 December 1999.[621] That payment was made by AWB Chartering.
13.178 On 7 December 1999 Alia sent a facsimile to AWB in the following terms:
Reference is made to the agreed terms and conditions of the contract between AWB Limited/IGB covering the sale of 700,000 5 pct more or less bulk wheat.
Alia for Transportation & General Trade, Amman Jordan is appointed to arrange all trucking under this contract and it is to be understood that remittance to Alia for Transportation and General Trade of trucking costs involved should in no way be delayed for more than seven (7) days prior to the arrival of, the vessel to Um Qasr port Iraq. Moreover, Alia is to be notified of vessel's name, details of cargo loaded on board and ETA at Um Qasr within the aforesaid period of time to enable us make appropriate arrangement with the State Company for Water Transport Iraq.
All payments relating to the agreed trucking costs to be remitted upon completion of loading of each vessel to Alia for Transportation & General Trade nominated account as follows: …[622]
13.179 Mr Watson replied by facsimile the same day :
Ref: Australian Wheat, Inland Trucking, Iraq, Phase 6
Thank you for your advice that you have been appointed to arrange all the inland trucking within Iraq under this phase.
For sake of good order, I would confirm that the trucking fee of USD 12 p/mt basis B/L weight at load port, will be remitted to your nominated account upon sailing of the vessels from Australia.
Please advise your banking details enabling funds to be remitted.
We would take this opportunity to thank you for your cooperation and look forward to working with you on this phase of the above contract.[623]
13.180 On 8 December 1999 the inland transportation fee of US$ 504,000 for the second shipment under contract A4653 was paid by AWB to Alia. This was 100 per cent of the fee due, and it was paid pursuant to a US dollar payment request by AWB Chartering, completed by Ms Gatto and authorised by Mr Watson.[624]
13.181 Alia was established by the IGB as the company to receive the inland transportation fees, and such fees were to be paid into its nominated bank account in Jordan. AWB knew that it was not responsible for trucking grain within Iraq: it was simply required to pay the inland transportation fee to Alia. AWB made no commercial arrangements with Alia or any other entity for the transportation within Iraq of the wheat sold to the IGB under contracts A4653 to A4655. This is to be contrasted with what occurred in late 2003, following the incursion into Iraq, when AWB was required by the Coalition Provisional Authority and the World Food Programme to fulfil its then subsisting contracts with the IGB which had not been completed in the terms in which they appeared-such that AWB was thereby obliged to discharge and deliver the wheat to all governorates within Iraq-and concluded an Agency and Transport Services Agreement with Alia for this purpose. From the time it first paid inland transportation fees to Alia, AWB knew Alia was the conduit for the payment of those fees to Iraq and that a Jordanian company had been nominated to receive these payments because the UN sanctions prohibited the payment of US dollar amounts to Iraq or an Iraqi entity directly. Alia received these fees pursuant to its agreement with the ISCWT, which obliged Alia immediately to remit the fees (less a commission) to the ISCWT and under which Alia was not required to undertake or arrange any trucking services at all.
13.182 Moreover, by October 1999 AWB had determined that the inland transportation fees payable in respect of its shipments would be payable through the conduit of shipowners (and Ronly Holdings Limited). There was no sound commercial reason for interposing both the shipowner who carried the wheat to Iraq and later Ronly (and its nominee, Tse Yu Hong Metal Limited) between AWB and Alia or for using these companies as a conduit for the making of payments to Alia. This is especially the case where neither the shipowners nor later Ronly had undertaken to effect or arrange for the discharge or delivery of the wheat in Iraq and had not entered into (or proposed to enter into) any contractual relationship with Alia for that purpose.
13.183 The reason this indirect method of payment was adopted by AWB was to mask (or 'disguise'[625]) its payment of the inland transportation fees. This was thought desirable because AWB knew that to make payments to the IGB or some other Iraqi entity directly was in breach of the UN sanctions. AWB also knew that making payments to Alia was an indirect method of making payments to Iraq or an Iraqi instrumentality. Using Ronly or shipowners to make these payments to Alia was regarded by AWB as further distancing or isolating AWB from the payment to the Iraqi entity.
13.184 Under a contract for sale on CIF terms, there is an obligation on the seller to procure insurance against the risk of loss or damage to the goods sold under the contract of sale. This obligation is not merely for the seller's benefit: under the terms of the CIF sale, the policy of insurance taken out by the seller is assigned to the purchaser upon payment of the purchase price, so that in the event of loss or damage the purchaser is also able to obtain the benefit of that insurance.
13.185 The duty of a seller under a contract for sale on CIF terms, so far as insurance is concerned, is to procure such insurance cover as is required by the express provisions of the contract of sale. In the absence of any special provisions in the contract of sale, the seller's duty is to effect insurance that, amongst other things, covers the transit contemplated by the contract.[626]
13.186 Under the terms of the contracts AWB[627] concluded with the IGB prior to July 1999, AWB's responsibilities-as a seller of the wheat on CIF terms-included an obligation to procure insurance against the risk of loss or damage to the wheat sold under those contracts, including loss or damage during the wheat's transit from Australia to Iraq. Moreover, since the contracts AWB concluded with the IGB prior to July 1999 were on CIF free out terms[628], AWB's obligation under the terms of those contracts was to transport the wheat to the nominated port of discharge in Iraq, where it was to be delivered to the IGB.[629] Accordingly, AWB's obligation under those contracts, so far as insurance was concerned, was to procure marine cargo insurance cover for the shipment of wheat up until the nominated port of discharge, Umm Qasr.
13.187 To this end, prior to July 1999 AWB maintained an open cover policy of marine cargo insurance, under which it would declare each shipment of wheat to Iraq at or about the time the shipment was made. Upon each such declaration, a certificate of insurance was then issued by the insurer to AWB in respect of that shipment.[630] Amongst the documents AWB (as seller) was required to deliver to the IGB in order to obtain payment for each of its shipments of wheat to Iraq under the terms of the letters of credit established in favour of AWB was a policy of insurance or certificate of insurance in respect of that shipment.
13.188 Amongst the documents AWB produced to the Inquiry were a number of certificates of insurance in respect of shipments made by AWB under contracts for the sale of wheat concluded before July 1999 and on CIF free out terms. The form of these certificates is consistent with the duration of the insurance cover thereby provided, being from the nominated port of loading to the nominated discharge port (Umm Qasr), commensurate with the duration and extent of AWB's obligations under its contract of sale.[631]
13.189 In relation to those contracts for the sale of wheat to the IGB that AWB concluded after July 1999, AWB remained a seller on CIF terms. Accordingly, under the terms of those contracts AWB (as seller) was still obliged to procure, both for its benefit and for the benefit of the purchaser, insurance of the wheat shipped to Iraq under those sale contracts.
That AWB remained under such an obligation was made plain, for example, by clause 7 of the IGB's wheat tender for phase VI of the Oil-for-Food Programme, which expressly provided that insurance was to be the seller's responsibility.[632] This obligation was also acknowledged by AWB in its 'electronic message' of 14 July 1999[633], confirming the sale that became contracts A4653, A4654 and A4655. It was repeated in clause 8 of the long-form contract AWB subsequently received from the IGB for each of those contracts and submitted to the United Nations.[634]
Although there was no corresponding provision in the AWB short-form contract expressly referring to or dealing with insurance, each of the short-form contracts nevertheless incorporated the AWB-IGB standard terms and conditions[635], which included the following clause:
INSURANCE Sellers to provide Marine, War and Strike Risk insurance on the usual terms and conditions of the Grain and Feed Trade Association Contract No. 12.[636]
13.190 Consistent with that obligation, amongst the documents AWB was required to produce in order to obtain payment under the letter of credit established in respect of contracts A4653, A4654 and A4655 was an insurance policy or certificate of insurance.[637]
13.191 This was also the position under both:
13.192 Also amongst the documents AWB produced to this Inquiry were certificates of insurance issued to AWB for a number of shipments of wheat to Iraq made by it under contracts for the sale of wheat to the IGB concluded after July 1999, including, for example, shipments made under contract A4653, dated 14 July 1999.[639] These certificates were issued following declarations of those shipments by AWB under the same marine open cover policy of insurance referred to in the certificates of insurance that were issued to AWB in relation to shipments of wheat to Iraq under its contracts with the IGB concluded before July 1999.
13.193 There is no evidence that AWB negotiated any change to the terms of its marine open cover policy or the cover provided by that policy, either for the period after November 1999 (when the first shipments under phase VI contracts were made) or specifically in relation to shipments made by AWB under those contracts it concluded with the IGB after July 1999-in particular, so as to extend the duration and scope of cover beyond the ship's rail at the nominated port of discharge and thereby insure the shipments of wheat for any loss or damage that might occur after completion of the voyage and discharge from the vessel and until the time the wheat is delivered to the silos in the governorates of Iraq.
13.194 Further, it appears that AWB's marine open cover policy was renewable in October of each year. It would have therefore been renewed shortly before the first of AWB's shipments under phase VI of the Oil-for-Food Programme and shortly before the first of its shipments under its contracts under which it appeared to have this extended obligation to deliver the wheat within Iraq. Yet there is no evidence that, upon its renewal in October 1999 or in any of the following years (prior to the policy lapsing in October 2002), the terms of this marine open policy were renegotiated-in particular, to extend the duration and scope of the cover provided by that policy beyond the port of discharge so as to include the inland transportation of the wheat.
13.195 Had AWB in fact agreed under the terms of its contracts with the IGB[640] to discharge and deliver the wheat to the silos in all governorates of Iraq or arrange for that discharge and delivery to be effected, as the terms of its written contracts suggested, then AWB would have been obliged to insure the wheat against any loss or damage that might occur not only during the ocean voyage but also during that inland transportation within Iraq. As observed, this would have been both for AWB's own benefit and for the benefit of the wheat's purchaser (the IGB), to whom the policy of insurance would be assigned upon payment for the goods.
13.196 But, despite the terms of its written contracts with the IGB and the appearance of an obligation to arrange for the discharge and delivery of the wheat within Iraq, AWB continued to declare the shipments under the marine open cover policy it maintained when its obligations were limited to those of a CIF seller on free out terms. It did not insure the wheat it shipped to Iraq for any loss or damage during inland transport. The absence of such insurance is consistent not only with AWB in fact having no obligation under its contracts with the IGB[641] to effect or arrange for the discharge and delivery of the wheat within Iraq but also with AWB's recognition of that.[642]
13.197 In his email to Mr Hogan dated 25 June 1999, Mr Watson wrote (when AWB was first informed of the changes that the IGB proposed to the terms of its contracts), 'My concern re CIF to trucks is that we are also now insuring cargo once unloaded from the vessel-i.e. truck-tfore our liability does not cease upon passing the ship's rail'.[643]
13.198 But, despite that observation and Mr Watson's (correct) recognition at that time of the effect of the terms proposed, no steps were in fact taken to insure the wheat shipped under the first contracts on the proposed new terms (or any later contracts) to cover this additional risk. The reason for this was, as Mr Emons recognised in his email of 4 November 1999, that 'We are not responsible for trucking in Iraq only the payment'[644]; Mr Watson also came to understand this to be the position.[645]
13.199 AWB's failure to take out any insurance in respect of the inland transportation of the wheat, despite the apparent changes in the terms of its contracts from July 1999, is to be contrasted with the steps it took when, after the commencement of hostilities in March 2003, it was held by the Coalition Provisional Authority and the World Food Programme to the express terms of its as then unfulfilled contracts and the obligation to arrange for the discharge and delivery of wheat within Iraq contained within those terms. At that time AWB actively investigated obtaining insurance for the inland transportation of the wheat within Iraq, as well as imposed an obligation on Alia, as part of the Agency and Transport Services Agreement it concluded with Alia at that time, to take out insurance for the carriage of the wheat within Iraq that covered not only Alia but also the rights and interests of AWB and the AWB Pool. These steps are examined in more detail in Chapter 25.
13.200 In September 2002 AWB did not renew its marine open cover policy with its then existing insurers. This was because of problems that had arisen concerning contamination claims that had been made by the IGB in relation to a number of shipments that year. Instead, AWB took out a marine open cover policy with another insurer.
13.201 In November 2002 AWB declared a shipment to Iraq under that new open cover policy.[646] This was a shipment under AWB's contract A1441, which was expressed in the same terms as its July 1999 contracts so far as price and delivery were concerned. In particular, both the AWB short-form contract and the IGB long-form contract for contract A1441 referred to the shipment being CIF free in truck[647] to all silos within all governorates[648], thereby creating the appearance that AWB was obliged to effect or arrange for the discharge and delivery of the wheat within Iraq.[649]
13.202 Yet, despite that appearance, the voyage was described in this certificate of insurance to be:
From (commencement of transit) PORT ADELAIDE and PORT LINCOLN, AUSTRALIA
to (final destination) UM QASER PORT[650]
13.203 Moreover, the terms of the certificate of insurance expressly provided:
Cover attaches from the time the goods pass the dock loading facilities spout for the purpose of loading for commencement of transit and ceases at either the unloading facilities spout &/or suction spout or ships rail as applicable.[651]
13.204 The insurance provided for by these certificates was not coextensive with the terms of the written contracts for contract A1441 and AWB's apparent obligations under those terms. If AWB in truth had an obligation to effect or arrange for the discharge and delivery of the wheat, it did not take out insurance in respect of that part of its obligations. The reason for this was because it in truth had no such obligation and did not regard itself as having any such obligation.
13.205 Certificates of insurance were also issued for other shipments under contract A1441 in the same limited terms, consistent with AWB's true obligations and responsibilities and inconsistent with the terms of its written contracts.[652]
[371] Ex 748, AWB.0416.0001_R at 0003_R. In the IGB long-form contracts for these sales the sale price was expressly said to be 'CIF free out Umm Qaser' (for example, Ex 1573, AWB.0135.0190 being the long-form contract for AWB contract A4333). Although in AWB's short-form contract the sale price was expressed to be 'CIF' only, it was nevertheless a CIF free out sale by reason of the incorporation of the AWB-IGB standard terms and conditions which required the purchaser (the IGB) to pay for the costs of discharge.
[372] This is commonly referred to as the FOB price. Where cargo is sold on CIF terms, the FOB price is equal to the CIF price less the cost of the ocean carriage and the cost of the marine insurance (and any other expenses that are incurred by the seller after the port of loading).
[373] As reported by Mr Hart and Mr Bunn in a memo (in the form of a trip report) dated 13 July 1998 to Mr Emons following a visit to Iraq from 17 to 25 June 1998 (T 1994; Ex 1469, AWB.0084.0006).
[374] See p. 3 of the AWB and IGB standard terms and conditions for Australian wheat contracts (fixed price) (Ex 387, SNO.0001.0018_R at 0020_R). To the extent that it was suggested in para. 3 of the Project Rose instructions to counsel (Ex 748, AWB.0416.0001_R at 0003_R) that the costs of discharging the wheat from the vessel formed part of the price paid for the wheat, it would appear that those instructions were incorrect.
[375] Phase VI was extended twice from its original expiry date of 20 November 1999 (Ex 585, UNO.0009.0009).
[376] Ex 1022, AWB.0058.0453_R. The wheat tender bears the fax tracer line dated and timed 16 June 1999 at 12.27 hours.
[377] Ex 1022, AWB.0058.0453_R. The wheat tender bears the fax tracer line dated and timed 16 June 1999 at 12.27 hours.
[378] Ex 1022, AWB.0058.0453_R at 0454_R.
[379] This was essentially in the same way that the seller would recoup the cost of the ocean carriage (freight) and marine cargo insurance and had in the past recouped those expenses under contracts for the sale and shipment of wheat concluded under the first five phases of the Oil-for-Food Programme. That is except for the one significant difference identified above.
[380] In the same way as the freight and marine insurance payable in respect of the shipment.
[381] Ex 729, AWB.0058.0427 at 0429, clause 11.4.
[382] Ex 1573, AWB.0135.0190 at 0192, clause 11.4.
[383] Ex 1022, AWB.0058.0453_R at 0455_R.
[384] T 3557.
[385] T 3558.
[386] T 3558.
[387] T 3560.
[388] T 3558.
[389] T 1866-7; Ex 96, WST.0006.0001 at 0004, paras 24-27.
[390] T 1867.12.
[391] T 1867.30.
[392] Ex 96, WST.0006.0001 at 0004, para. 26.
[393] T 1867.30. It is to be expected that a matter such as the imposition by Iraq of new contract terms requiring the payment of inland transport fees in respect of all grain imported into Iraq would be the subject of discussion at an industry conference such as the Grains Conference in London. Mr Daoud had said that Iraq was standardising its contracts for the importation of all grain. This applied therefore to barley, rice, and so on, and would no doubt have affected many exporters of grain from around the world. Mr Emons was cross-examined to the effect that the Grains Conference had occurred on 10 June 1999, yet the wheat tender notifying the imposition of a discharge and inland trucking fee had not been received until 16 June 1999. It was put to Mr Emons in substance that as AWB was not aware of the proposed new term until 16 June the matter could not have been a matter of discussion six days earlier at the Grains Conference in London. Mr Emons maintained that the matter was discussed notwithstanding. In his statement, Mr Emons had said that Mr Daoud had told him that President Hussein had 'asked the UN commission for Iraq to get inland transport covered and discharge covered' (Ex 96, WST.0006.0001 at 0003, para. 13). Mr Emons said he met Mr Daoud in Bangkok when he met him unaccompanied and that Mr Daoud had told him that the United Nations had approved the trucking fee. Mr Emons confirmed this in evidence given on 19 December 2005 in private session, a transcript of which was tendered in public session and adopted by him on 2 February 2006 (Ex 95, INQ.0004.0001 at 0012-0013). Business records of AWB indicate that arrangements had been made for Mr Emons to meet with Mr Daoud in Bangkok on 23 March 1999 (Ex 999, AWB.0135.0181_R, AWB.0135.0183_R and AWB.0135.0186). It is apparent therefore that the wheat tender was not the only or first source of knowledge of the imposition of fees for discharge and inland trucking.
[394] T 6027.
[395] There is also a body of evidence that renders it more probable than not that in October Mr Flugge was present with Messrs Hogan and Rogers in Baghdad during negotiations between Mr Hogan and representatives of the IGB. Mr Flugge opened the Iraq Grain Conference and attended meetings with Mr Daoud and Mr Saleh (Exhibit 453, WST.0012.0033_R at 0040_R, para. 55) which involved contract negotiations. Mr Hogan's evidence was that Mr Flugge would have been briefed before the trip 'about any matters which were on the table, including the inland transport fee' (Ex 142, WST.0005.0001 at 0015, para. 51), although he could not recall giving Mr Flugge a copy of the brief. Mr Flugge did not recall the discussions (Ex 453, WST.0012.0033_R at 0040_R-0041_R, para. 56) or negotiating contracts at the meetings (Ex 453, WST.0012.0033_R at 0041_R, para. 58). Mr Hogan sent an email on 11 October 1999 reporting on the negotiations (Ex 1376, AWB.5058.0070_R). This email included reference to the inland transportation fee. Mr Hogan's evidence was that both Messrs Flugge and Rogers had attended the meetings he had with Mr Daoud when these matters were discussed-the obvious inference being that both would have heard the conversation and, it follows, been aware of the issue of inland transportation. Mr Hogan believed that Mr Flugge would have heard the discussions in the meetings relating to the contract (T 5590.8) and did not believe there was any impropriety in the process (T 5590.20). There is also evidence from Mr Emons concerning his discussing 'some finer points of the trucking fee' with Mr Flugge at the end of May - early April 2000 (Ex 127, AWB.0138.0349 at 0349, point 1) and Mr Emons' evidence (T 1940.11 - T 1943.8), wherein Mr Emons said he had had discussions with Mr Flugge concerning (a) the imposition of the fee by Iraq; (b) the nature of the mechanism for the payment of the trucking fee; (c) the payment of the fee through Ronly; and (d) the nomination by the IGB of Alia as the recipient of the fee. Mr Flugge denied he was ever aware that Ronly was a conduit for the payment of the inland transport fee (T 3562.35). However, there is evidence to contradict Mr Flugge on this point, and again his evidence in this regard ought not to be accepted. Mr Lindberg gave evidence that he did tell Mr Flugge in early 2001 of the fact that Arthur Andersen had investigated AWB's use of Ronly to make payments to Alia. In this regard Mr Lindberg said that he was concerned about AWB's interest in Ronly, he was opposed to the takeover of Ronly, and it was in this context he would have discussed the matter with Mr Flugge (T 921.43 - T 922.21).
On 16 September 2002 Mr Long wrote an email to Mr Geary setting out the background (Ex 1311, AWB.5066.0344):
. Ronly were involved in paying inland trucking charges and chartering vessels for us because of alleged problemns with the UN / IGB. AWB paid Ronly in advance ($12 per tonne) and Ronly paid (via some shelf company) the Jordanian trucking company.
Mark Emons and Mike Watson set the deal up.
Based on the paper work we have from Ronly (our files are thin) there is not enough evidence to prove that AWB has liability or agreed to indemnify Ronly for acting as charterer. AWB paid Ronly USD20 cents per tonne facilitation fee. ROnly argue the opposite but can't substantiate it to our satisfaction.
Nori has mentioned that PAul and Trevor are aware of the deal and sanctioned it.
Nori called T Flugge Fri night complaining about our position. TF called me and wants to distance himself.
To the extent that this email relays a conversation between Mr Long and Mr (Nori) Bali about Mr Flugge having sanctioned the arrangement whereby Ronly was used as a conduit for the payment of the trucking fee it supports Mr Emons' evidence concerning Mr Flugge's knowledge of Ronly's role.
[396] Ex 96, WST.0006.0001 at 0001, paras 1-4.
[397] Ex 142, WST.0005.0001 at 0001-0002, paras 3-10.
[398] Ex 407, AWB.0135.0085.
[399] Ex 407, AWB.0135.0085.
[400] Ex 356, AWB.0135.0075 at 0076.
[401] Mr Borlase denied that Mr Owen's email indicated that the 'Land Transport company' was Iraqi or that sanctions prohibited AWB from making US dollar payments to an Iraqi company (T 2963.16). He said there was then a great deal of confusion about the identity of the company (T 2962.35) and that he was not involved in discussions about this issue because of his junior position (T 2963.17). This evidence should not be accepted. The 'Land Transport co.' referred to in the tender was plainly Iraqi. The concern raised was that payment could not be effected when 'Iraqi funds' were frozen. Further, as at this time, there was no suggestion that a company other than an Iraqi one would be undertaking the transportation of the wheat. There is no evidence of any 'confusion' as to that company's identity-the evidence was that the identity was at that time not yet known. But that of itself does not amount to 'confusion' and did not detract from the clear inference that it would be an Iraqi entity that carried out the transportation of the wheat inland.
[402] T 2003.
[403] Ex 995, AWB.0420.0020_R.
[404] Mr Geary initially could not say for certain whether it was more likely than not that he had read this email (T 1334.25). He later stated that it was likely that he had read it (T 1337.22). This later evidence should be accepted and his earlier reluctance to acknowledge that he had read it rejected. That earlier position was not open to Mr Geary. He had, only seven days earlier, written to Mr Hogan about the IGB tender. Further, Mr Hogan's email plainly addressed issues which affected the Pool, such as the IGB's stated wish to slow the shipping program down and the weight and quality at final destination issue. These would have been of interest to Mr Geary. Mr Geary also acknowledged that the 'To do' list in the email (in particular the instruction to Mr Watson) suggested that there was a problem with the payment mechanism (T 1330.12) and that the problem had arisen from the freezing of Iraq bank accounts. Mr Geary admitted that this had to do with the UN sanctions, when he gave the following evidence:
Q: That implies, without doubt, that this payment was in effect to be a payment to the Iraqis, and that the problem was to find a mechanism by which it could be made, does it not?
A: That's what it implies there, yes.
Q: That would have been a clear breach of the UN sanctions, would it not?
A: My memory of the sanctions at the time, it would appear so. [emphasis added] (T 1330.22-31).
[405] Ms Scales did not recall doing anything with this information. Her evidence was that she did not turn her mind to this aspect of the report for two reasons. The first was that there were other aspects of the report which would have interested her as Pricing Manager, as she then was (T 2929.31). The second was that there were other more senior recipients on the addressee list who were 'subject matter experts with respect to the free in truck' (T 2848.28). Although UN sanctions were not the stated reason for the accounts being frozen, given Ms Scales' broad knowledge of the effect of the sanctions, had she read this passage she would have been aware that the reason Iraqi accounts were frozen was to prevent payments to Iraq under the sanctions. She would also have been aware that AWB employees were trying to find a way to pay money to Iraq indirectly (and thereby avoid the effect of those sanctions). When Mr Hogan's email was drawn to Ms Scales' attention during her examination, she said she understood it to mean finding a way around the sanctions. However, she denied having this understanding at the time of the email (T 2930).
[406] Although Mr Snowball's evidence was that he could not recall whether he read this email, he admitted he must have read parts of it as he subsequently responded to those parts. He also conceded that he probably read the email, although he could not say for sure (T 3019). Mr Snowball also agreed that if he had read the email it would have been evident to him that the Iraqis were imposing a US$ 12 per tonne fee, that the fee was to be paid to the Iraqis via the maritime agents, that this was a problem because Iraqi accounts were frozen, that one way to avoid this problem was to pay to an Iraqi bank in Amman, that the IGB had agreed to provide details of a bank account in Jordan through which the payment of the US$12 per tonne fee could be made, and that AWB personnel were discussing the way in which this could be paid, including via the owners of the vessels used to carry the wheat to Iraq (T 3017-19).
[407] The reference to 'Michael' was a reference to Mr Michael Watson, Chartering Manager with AWB. Mr Watson said in his last statement (Ex 428, WST.0014.0001 at 0001, para. 4) that, whilst he 'was not the primary architect for the payment mechanism' he was 'part of a core strategy group who were responsible for implementing the payment mechanism'. Mr Watson said in evidence that he could not recall the conversation Mr Hogan referred to in this email when Mr Hogan wrote, 'Michael-as mentioned to you there may be a way of paying this through the vessel owners .' However, he conceded that when he read this email it was plain to him that the plan was to pay money to the Iraqis. He was aware that the UN sanctions prevented payments being made without UN approval (T 3402). He also agreed that when he read this email from Mr Hogan he was aware that Mr Hogan was proposing a means of paying the money to the Iraqis whilst avoiding UN scrutiny. (T 3402).
[408] Mr Hogan could not recall whose idea it was to pay the inland transportation fee through vessel owners (T 2006).
[409] Ex 995, AWB.0420.0020_R at 0021_R.
[410] T 2005.18-21; T 2008.20-33; T 6996.1-27.
[411] Ex 995, AWB.0420.0020_R at 0023_R. Mr Watson said he did not recall doing anything in relation to the 'To do' list Mr Hogan had provided at the time of this email. However, he said in evidence that he did act on it at a later time. Once he had discussed with others within AWB what was to be achieved he raised the matter of having shipowners make the payments on AWB's behalf with various shipowners. Some 'were agreeable to looking at this idea and some were not' (T 3404).
[412] Which, in this regard, and for the purposes of these chapters generally, included disponent owners of these ships.
[413] T 2004.
[414] Ex 142, WST.0005.0001 at 0010, para. 40; T 2005.10-21, T 1863.4-18.
[415] Ex 142, WST.0005.0001 at 0010, para. 40; T 2005.23 - T 2006.5, T 1863.4-18.
[416] Ex 1027, WST.0044.0001, para. 3.
[417] Ex 142, WST.0005.0001 at 0010, para. 36; T 2008.18 - T 2009.09 and T 2010.11-19; Ex 96, WST.0006.0001 at 0003-0004, para. 20; T 1863.34 - T 1864.4.
[418] T 2008.31; T 2010.1-19.
[419] Ex 142, WST.0005.0001 at 0010, para. 37; T 2003.35 - T 2004.23, T 1865.35-42.
[420] T 7004.42.
[421] T 2318.18-25.
[422] T 2320.46 - T 2321.11.
[423] T 2008-9.
[424] T 2010.01-19.
[425] T 2010; Ex 1027, WST.0044.0001 at 0001, para. 4, 'At the time I believed that the transport fee would go to the Iraqis' and at para. 3, 'They said that the reason for the inclusion of the fee was due to the high level of inflation in Iraq'; See also T 7000.38.
[426] T 1872; T 1886.
[427] T 3420-T 3421.
[428] T 2319.29.
[429] T 3614; T 3634.
[430] 'But I was concerned that the arrangement was skirting around the UN sanctions' (Ex 1027, WST.0044.0001 at para. 4).
[431] T 1887.
[432] T 3615; Ex 460, WST.0015.0002_R at 0008_R, para. 28.
[433] T 3635; Mr Owen was also aware that US embargoes made it likely that any money paid through a bank to Iraq would be frozen (T 3615). Mr Owen was adamant that he always believed the payment was genuine in the sense that it was a payment for inland transport services (T 3650; Ex 460, WST.0015.0002_R at 0009_R, para. 33). Although he maintained he was not aware of the entity that would be undertaking the inland trucking, he did believe that, whichever entity it was, he assumed it was in Iraq (T 3646). On the basis of Mr Owen's oral evidence before the Inquiry there can be no doubt that he was aware of the proposal to make payments of an 'inland trucking fee', that the payments were to be made to an entity in Iraq, and that the payments would be contrary to UN sanctions. In his statement Mr Owen said, 'Again I viewed the matter as simply an operational matter and a problem that needed to be solved in an operational context, rather than a problem involving any breach of sanctions' (Ex 460, WST.0015.0002_R at 0017_R, para. 55(d)). This does not fit with the content and tenor of the emails he wrote and received, as referred to. Clearly, on their face these emails establish that he was aware that it was intended to make payments to an Iraqi entity and that this would be in breach of sanctions. In fairness to Mr Owen, it should be noted that he never counselled others to breach sanctions, however, beyond forwarding some of the email traffic referred to to his superior, Mr Aucher; neither did he take it upon himself to report this in an effort to restrain others from breaching sanctions.
[434] Ex 99, MAE.0002.0037.
[435] The person referred to as 'Michael' in the last email.
[436] T 3400.
[437] T 3400.27.
[438] T 3400.29.
[439] T 3400.42.
[440] T 3400.39.
[441] Ex 63, AWB.5073.0086.
[442] Ex 63, AWB.5073.0086.
[443] Ex 63, AWB.5073.0086.
[444] Ex 1394, AWB.5000.0140_R; Ex 1023, AWB.0100.0350.
[445] As to whether Mr Snowball read Mr Hogan's email, Mr Snowball said, 'I don't recall reading it, but there is every chance I did read it, and that reading may have been a skimming or it may have been a detailed reading, and I just don't recall' (T 3026.25-8). He gave further evidence as follows: 'Q: If you read it, then you now had two emails indicating to you that the AWB was looking for a way to satisfy the Iraqis, but without bringing to the attention of the UN any breach of sanctions; would you agree with that? A: You could infer that, yes, sir. Q: Did that give you concern? A: I don't recall, but possibly' (T 3026.30-7). The only conclusion open on the material before the Inquiry is that Mr Snowball did read Mr Hogan's email. Mr Hogan's email was a direct response to Mr Snowball's questions about changes to the contract terms. It is inconceivable that Mr Snowball would have been moved to write the email asking questions and then for him not to have read an email which responded to those questions. It follows then that Mr Snowball was aware from at least the time of Mr Hogan's email of 25 June 1999 that AWB was looking for a method of meeting the Iraqis' demands, in the knowledge that it would be acting in breach of the sanctions, all the time wishing to avoid drawing the attention of the United Nations to the breach of sanctions. This is the effect of Mr Hogan's email.
[446] When Mr Hogan's email was drawn to Ms Scales' attention during the course of her examination, she said that it was likely that she read the email, although she did not recall reading it or replying to it. She also said that it did not strike her at the time that this email was discussing finding a way around UN sanctions (T 2931.2)-that is, a way to make a payment to Iraq (T 2930.42)-but conceded that that was how she understood the email as at the date of her evidence before the Inquiry (T 2931.12).
[447] Ex 100, MAE.0002.0038. The email was copied to Messrs Hunter, Officer, Geary, Richardson, Hart, Morrison, Watson, Lister and Owen and Ms Scales.
[448] Ex 100, MAE.0002.0038 at 0039.
[449] T 2010.45 - T 2011.22; T 5668.2-11; Ex 1027, WST.0044.0001 at 0001, para. 7. 'My email to [Mr Snowball] of the 25th of June included the statement that 'discretion is required here'. This was a reference to my concern that inquiries about the fee were to be made discreetly so as not to make it appear that the AWB was raising difficulties in dealings with Iraq. At this time I did not know whether the UN had approved the fee'; see also T 6995, especially at T 6995.40-Mr Hogan did not accept at that time what the Iraqis had told him.
[450] T 2010.45 - T 2011.22.
[451] T 3027.3-7.
[452] Ex 96, WST.0006.0001 at 0005, para. 28.
[453] Ex 96, WST.0006.0001 at 0005, para. 28.
[454] T 1868.27.
[455] T 1868.24-33.
[456] Ex 96, WST.0006.0001 at 0005, para. 30.
[457] T 1868.39 - T 1869.18.
[458] Ex 230, WST.0007.0014_R at 0020_R-0021_R, para. 33.
[459] T 3408.28 - T 3409.2.
[460] T 3409.13-17.
[461] T 5434.45.
[462] Ex 335, WST.0009.0001 at 0022-0025, paras. 105-109.
[463] Ex 335, WST.0009.0001 at 0023, para. 111.
[464] Ex 101, AWB.0058.0450_R.
[465] Consistent with the IGB's wheat tender.
[466] A copy of these terms can be found at Ex 387, SNO.0001.0018_R.
[467] Ex 1447, AWB .0058.0449.
[468] Ex 214, AWB.0058.0446.
[469] Ex 214, AWB.0058.0444_R.
[470] Ex 1377, AWB.0058.0443_R.
[471] Ex 454, WST.0012.0206.
[472] Ex 214, AWB.0058.0437_R.
[473] Ex 214, AWB.0058.0437_R.
[474] Ex 1225, DFT.0059.0375, DFT.0059.0364; Ex 1449, AWB.0058.0458.
[475] Ex 729, AWB.0058.0427.
[476] See, for example, Ex 995, AWB.0420.0385_R. [emphasis added in the quote]
[477] See, for example, Ex 1514, AWB.0109.0272_R (which was in this respect identical to the short-form contracts for contracts A4332 (Ex 1515, AWB.0109.0206_R) to A4336 (Ex 1516, AWB.0109.0174_R) all with the same date).
[478] T 1876.
[479] T 1876.
[480] Consistent with the prices expressed by AWB in its negotiations with the IGB.
[481] Ex 995, AWB.0420.0385_R. This was a reference to the standard terms and conditions at Ex 387, SNO.0001.0018_R.
[482] Ex 384, SNO.0001.0010_R, SNO.0001.0011_R, SNO.0001.0012_R.
[483] Ex 729, AWB.0058.0426, AWB.0058.0427.
[484] Ex 729, AWB.0058.0426, AWB.0058.0427.
[485] Although the terms in which the price was expressed in the short-form contract were limited to 'free in truck' and did not expressly refer to 'to silo at all governerate .' and so on, there was a reference to that effect in the shipment clause of the short-form contract.
[486] See, for example, Ex 729, AWB.0058.0427.
[487] Who was incorrectly described in the facsimile as Ms Gai Brockman.
[488] Ex 729, AWB.0058.0426, AWB.0058.0427, AWB.0058.0432.
[489] Ex 729, AWB.0058.0425.
[490] Ex 729, AWB.0058.0419, AWB.0058.0420, AWB.0058.0421.
[491] Ex 1225, DFT.0059.0357, DFT.0059.0358, DFT.0059.0364, DFT.0059.0365, DFT.0059.0375, DFT.0059.0376.
[492] Ex 1213, UNO.0003.3323_R; Ex 995, AWB.0420.0387_R, AWB.0420.0386_R.
[493] Ex 1225, DFT.0061.0096.
[494] Ex 1225, DFT.0061.0096.
[495] Ex 729, AWB.0058.0245, AWB.0058.0247, AWB.0058.0248.
[496] This is confirmed by the manuscript note appearing on DFAT's facsimile to Ms Moules of 3 August 1999 (Ex 1225, DFT.0061.0096), which reads 'lodged with UN 3 August 1999 BM'. 'BM' is a reference to Ms Moules.
[497] Ex 542, DFT.0002.0018.
[498] Ex 729, AWB.0058.0251, AWB.0058.0252, AWB.0058.0253, AWB.0058.0254.
[499] Ex 549, AWB.0058.0244, AWB.0058.0245, AWB.0058.0246, AWB.0058.0247, AWB.0058.0248, AWB.0058.0249, AWB.0058.0250.
[500] T 6719-21.
[501] T 6720.1.
[502] T 6720.11.
[503] T 6720.21. Ms Johnston's evidence was that her situation in this regard represented the situation of other customs reporting officers at the time (T 6720.29).
[504] T 6722.5.
[505] Ex 245, AWB.5056.0395.
[506] T 2342.4.
[507] T 2342.4-25.
[508] Ex 1447, AWB.0058.0401.
[509] Ex 1447, AWB.0058.0402-0407.
[510] Ex 1447, AWB.0058.0398-0400.
[511] Ex 1447, AWB.0058.0398 at 0399.
[512] Ex 1447, AWB.0058.0398 at 0399.
[513] Ex 1447, AWB.0058.0397, AWB.0058.0391, AWB.0058.0390.
[514] Ex 1447, AWB.0058.0388.
[515] Ex 1447, AWB.0058.0388.
[516] Ex 1447, AWB.0058.0388 at 0389.
[517] Ex 108, MAE.0001.0015 at 0016.
[518] Ex 108, MAE.0001.0015 at 0016.
[519] T 1896.
[520] T 1896 - 97.
[521] T 1896.
[522] Ex 1376, AWB.0058.0269.
[523] Ex 1376, AWB.0058.0269.
[524] Ex 1376, AWB.0058.0268.
[525] Ex 1376, AWB.0058.0265.
[526] Ex 1376, AWB.0058.0264.
[527] Ex 1376, AWB.0058.0261.
[528] Ex 1211, UNO.1211.0065.
[529] Ex 1211, UNO.1211.0064.
[530] Ex 1211, UNO.1211.0060.
[531] Ex 1376, AWB.0058.0377.
[532] Ex 1376, AWB.0058.0378.
[533] See, for example, Ex 1447, AWB.0042.0046.
[534] See, for example, Ex 1447, AWB.0042.0046.
[535] See, for example, Ex 1447, AWB.0042.0046.
[536] Ex 1447, AWB.0058.0401 at 0403-0404: 'If the goods are invoiced on inclusive cif terms, details of charges and expenses are not necessary to be shown provided the invoice states that such charges and expenses are included in the cif price'.
[537] Ex 98, AWB.5044.0241.
[538] Ex 142, WST.0005.0001 at 0015, paras. 51 - 52. Neither Mr Flugge nor Mr Rogers denied being present during the meeting with Mr Daoud and IGB representatives. Mr Hogan's evidence was consistent with the AWB practice that employees of AWB would not negotiate contracts in person alone.
[539] Ex 687, WST.0027.0082_R at 0093_R, para. 36.
[540] T 3488.39-46; WST.0005.0001 at 0015, para. 51.
[541] T 3265.7; T 3266.35.
[542] See also the other discussion at the conclusion of this chapter.
[543] Ex 995, AWB.0420.0041_R.
[544] Ex 995, AWB.0420.0041_R.
[545] Ex 995, AWB.0420.0041_R.
[546] Ex 1469, MAE.0002.0050.
[547] Ex 10, AWB.5035.0338.
[548] Ex 10, AWB.5035.0338.
[549] Ex 10, AWB.5035.0338.
[550] T 9267.30.
[551] T 2968.26.
[552] T 2969.28-46
[553] T 2967.40.
[554] T 2968.19.
[555] T 2970.29.
[556] Ex 103, AWB.5035.0341.
[557] Ex 103, AWB.5035.0341.
[558] T 1893-4 .
[559] Including disponent owners.
[560] Ex 214, MAE.0002.0060.
[561] Ex 106, MAE.0002.0059.
[562] Ex 107, MAE.0002.0061.
[563] Ex 107, MAE.0002.0061.
[564] Ex 106, MAE.0002.0059; T 1893.14; T 3406.47; Mr Watson's comments on Mr Emons' transcript of evidence to this Inquiry (Ex 427, MFW.0002.0002 at 0005, 1893).
[565] Ex 242, AWB.5056.0374.
[566] Ex 242, AWB.5056.0374.
[567] Ex 96, WST.0006.0001 at 0007-0008, para. 47.
[568] T 1898.40.
[569] Ex 96, WST.0006.0001 at 0007-0008, para. 47.
[570] Ex 96, WST.0006.0001 at 0007-0008, para. 47.
[571] T 1897.22.
[572] T 2336.46-T 2337.1.
[573] T 3406.41; Mr Watson's comments on Mr Emons' transcript of evidence to this Inquiry (Ex 427, MFW.0002.0002 at 0005, 1897).
[574] T 1896.40 (and also that it could not be paid to an Iraqi in Iraq through the US Treasury).
[575] T 1896.47 - T 1897.3.
[576] Ex 243, AWB.5056.0157_R.
[577] Ex 243, AWB.5056.0157_R.
[578] Ex 108, MAE.0001.0015.
[579] Ex 109, AWB.5057.0063.
[580] Ex 110, MAE.0001.0018.
[581] Ex 112, MAE.0001.0052; AWB.0058.0270.
[582] Ex 96, WST.0006.0001 at 0007, para. 46; T 1896.
[583] Ex 12, AWB.0087.0006.
[584] Ex 12, AWB.0087.0006.
[585] Mr Emons, T 1902-1903; Ex 111, AWB.0002.0195.
[586] Ex 230, WST.0007.0014_R at 0025_R, para. 52.
[587] Ex 230, WST.0007.0014_R at 0025_R, para. 52.
[588] Ex 96, WST.0006.0001 at 0008, para. 52.
[589] Ex 141, WST.0007.0001 at 0001, para. 2.
[590] Ex 113, AWB.0071.0223.
[591] Ex 144, MAE.0002.0066.
[592] Mr Hogan, T 2019. Mr Al Absi stated that Alia provided letters of introduction to AWB Limited in October 1999 at the request of Mr Watson and Mr Emons. The copy of the facsimile that is Ex 144, MAE.0002.0066, bears a manuscript note from Mr Al Absi marked to the attention of Mr Hogan: 'reference our telephone call today'.
[593] Ex 141, WST.0007.0001, para. 4, and accompanying minutes of a meeting between the ISCWT and Alia and English translation thereof at Ex 141, WST.0007.0008.
[594] Ex 141, WST.0007.0008.
[595] Ex 729, AWB.0058.0239.
[596] Ex 729, AWB.0042.0058.
[597] Ex 1376, AWB.0042.0042_R.
[598] Ex 244, AWB.5056.0390_R.
[599] Ex 244, AWB.5056.0390_R.
[600] Ex 245, AWB .5056.0395.
[601] Ex 245, AWB.5056.0395. It is apparent from this email, and was confirmed by Mr Emons in evidence, that Mr Emons had not linked Alia with the company Mr Daoud had said he would nominate (Ex 96, WST.0006.0001 at 0008, para. 52).
[602] Ex 245, AWB.5056.0395.
[603] T 1907.
[604] Ex 116, AWB.0136.0642.
[605] Ex 117, MAE.0001.0060.
[606] Ex 117, MAE.0001.0061.
[607] Ex 1013, MFW.0001.0012.
[608] According to Mr Emons, Mr Daoud told him that that the payment of 90 per cent of the inland transportation fee to Alia was to be a 'one-off' relating to the shipment on the Pretty Ruby, which was close to docking (T 1901 - T 1911). AWB could not use the shipowner to effect this payment (as had been envisaged) because the Pretty Ruby was already on the seas and there was no charter party set up which would support the payment (T 1912). As a consequence, Mr Daoud asked that AWB make the payment directly to Alia, on this one occasion only (T 1912).
[609] Ex 118, MAE.0002.0069.
[610] T 1912 - 13.
[611] Ex 1368, AWB.0001.0007.
[612] Ex 119, AWB.0002.0198.
[613] T 1914.
[614] T 1914.
[615] In relation to the period of 2001 and 2002-see Ex 960, INQ.0019.0001.
[616] As is noted in later chapters, AWB also received correspondence from the ISCWT, both directly and from Alia, chasing payments of these fees and also questioning whether fees had been paid for particular shipments and vessels.
[617] Ex 1376, AWB.0163.0003_R.
[618] Ex 1447, AWB.0042.0009.
[619] Ex 1376, AWB.0001.0167_R.
[620] Ex 1470, AWB.0001.0105_R.
[621] Ex 1447, AWB.0063.0029.
[622] Ex 120, MAE.0001.0063.
[623] Ex 429, AWB.0089.0309.
[624] Ex 1376, AWB.0042.0080_R.
[625] Ex 1347, AWB.0469.0106.
[626] In the absence of any special provisions in the contract of sale, the duty of a seller under a CIF contract with regard to insurance is to effect at his own cost with reputable insurers a valid policy of marine insurance that shall be available for the benefit of the buyer, covering the transit contemplated by the contract, of the kind and on the terms current in the trade (with reference to the particular goods in question, the type of vessel, the route contemplated, the port of destination and any other considerations that may affect the risk), and in an amount representing the reasonable value of the goods (Biddell Bros. v E. Clemens Horst Co. [1911] 1 KB 214 at 220; [1912] AC 12; C Groom Ltd v Barber [1915] 1 KB 316 at 324; Johnson v Taylor Bros & Co. Ltd [1920] AC 144, 149, 156).
[627] And the Australian Wheat Board before it.
[628] See above.
[629] This was also reflected in the bills of lading issued in respect of these shipments, which provided for the carriage of the wheat referred to from the nominated port of loading to the nominated port of discharge (Umm Qasr).
[630] See, for example, Ex 1447, AWB.0055.0235; Ex 1517, AWB.0026.0009; Ex 1519, AWB.0027.0059_R.
[631] In the certificates the port of loading in Australia is nominated, as is the port of discharge. The box labelled 'Final destination / Transhipment' is blank or, in a very few certificates, completed by reference to 'Iraq'. This is also consistent with the recollection of Mr Johnstone, AWB's Chief Risk Officer from January 2001, which was that AWB had the wheat insured up until it passed the ship's rail as the 'dis-port' under AWB's 'corporate insurance program'.
[632] Ex 1022, AWB.0058.0453_R at 0454_R.
[633] Ex 214, AWB.0058.0437 at 0438, clause 8.
[634] For example, Ex 729, AWB.0058.0426, AWB.0058.0427 at 0428, clause 8.
[635] This was through the final clause of the short-form contract.
[636] Ex 387, SNO.0001.0018_R at 0019_R.
[637] Ex 1447, AWB.0058.0401, AWB.0058.0402 at 0405, clause 12. This requirement was not changed under the amendments to the letter of credit negotiated by Mr Lister (discussed in paras 13.60ff).
[638] Being the contracts discussed more fully in Chapters 14 and 15.
[639] Ex 1520, AWB.0042.0155_R; Ex 1518, AWB.0042.0293_R.
[640] And also the grain traders.
[641] Or the grain traders.
[642] This can be contrasted with, for example, when, in October 2001, AWB wished to ship some equipment from Toowoomba to Umm Qasr on one of its vessels and inquiries were made to arrange for the insurance of that equipment not only during the ocean transit but also during its transportation by road within Australia-see Ex 1521, AWB.5064.0315_R; Ex 1522, AWB.5060.0106_R.
[643] Ex 99, MAE.0002.0037.
[644] Ex 245, AWB.5056.0395.
[645] Ex 427, MFW.0002.0002 at 0006, para. 1907.
[646] Ex 1523, AWB.0104.0296_R.
[647] Although expressed to be free on truck in the long-form contract, this was to the same effect.
[648] Ex 1376, AWB.0018.0028_R; Ex 542, DFT.0006.0014, DFT.0005.0147.
[649] The circumstances in which this contract came to be concluded are examined in Chapter 23.
[650] AWB.0104.0296.
[651] AWB.0104.0296.
[652] Ex 1524, AWB.0018.0300_R; Ex 1525, AWB.0248.0364_R; Ex 1526, AWB.0021.0014_R.
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