Senate
17 November 1920

8th Parliament · 1st Session

  1. Senate
  2. 8th Parliament
  3. 1920

The President (Senator the Hon. T. Givens) took the chair at 3 p.m., and read prayers.

page 6555

QUESTION

MANUFACTURE OF TELEPHONE PARTS

Senator THOMAS:
NEW SOUTH WALES · NAT

– I ask the Minister representing the Postmaster-General whether he is yet in a position to give me any information concerning a matter I raised during the discussion of the last Supply Bill as to the possiblity of making telephone parts in Australia?

Senator RUSSELL:
Vice-President of the Executive Council · VICTORIA · NAT

– I shall have inquiries made, and report later to the honorable senator.

Senator THOMAS:
NEW SOUTH WALES · NAT

– It is three weeks ago since I mentioned the matter.

page 6555

SHIPBUILDING

Senator BOLTON, on behalf of the Joint Committee on Public Accounts, presented the report of the Committee on Commonwealth Shipbuilding.

page 6555

PAPERS

The following papers were presented : -

Butter Agreement Act. - Regulations. -

Statutory Rules 1920, No. 193.

Customs Act -

Proclamation (dated 21st October, 1920) prohibiting exportation (except under certain conditions) of Arms and Ammunition.

Proclamation (dated 3rd November, 1920) revoking previous Proclamation relative to the exportation of Pig Iron, Machinery, and Manufactures of Metals.

Direction (No. 1) by Minister for Trade and Customs, relative to Exchange Kates and Value for Duty.

Customs Act and Defence Act. - Proclamation (dated 21st October, 1920) revoking previous Proclamations relative to the exportation of certain goods.

Distillation Act. - Regulations amended. - Statutory Rules 1920, No. 214.

Deceased Soldiers’ Estates Act. - Regulations Amended. - Statutory Rules 1920, No. 194.

Defence Act. - Regulations amended. - Statutory Rules 1920, Nos. 187, 188, 189, 195, 196, 197. 198, 199, 200, 203, 204, 205, 207, 208 and 215.

Norfolk Island. - Ordinance No. 2 of 1920. - Pasturage and Enclosure.

Norfolk Island. - Report for the year ended 30th June, 1920.

Northern Territory. - Ordinance No.8 of 1920.- Public Trustee.

Public Service Act -

Appointments -

D. M. Dow, Prime Minister’s Department.

J. Sykes, Attorney-General’s Department.

Regulations amended. - Statutory Rules 1920. No. 209.

War Precautions Act 1914-1918. - Regulations amended. - Statutory Rules 1920, No. 216.

War Precautions Act and Land, Mining, Shares, and Shipping Act. - Regulations amended- Statutory Rules 1920, No. 185.

War Service Homes Act. - Land acquired in New South Wales at -

Goulburn.

Tamworth.

Waratah.

page 6555

QUESTION

PUBLIC SERVICE

Basic Wage - Public Service Bills

Senator GARDINER:
NEW SOUTH WALES

– I ask the Leader of the Government in the Senate if he is aware that there is a good deal of unrest in the Federal Public Service in New South Wales owing to the fact that the wages or salaries, as the case may be, represent inmany cases less than a living wage at the present time?P ending the receipt of the report from the Federal BasicWage Commission, will the Government pay the Federal public servants, by way of bonus or otherwise, the declared basic wage of the New South Wales Commission, namely, £4 5s. per week ?

Senator PEARCE:
Minister for Defence · WESTERN AUSTRALIA · NAT

– The Government are aware that an agitation is going on in New South Wales on this subject. They have not yet received the report of the Commission they appointed to investigate and report on the basic wage, and they do not propose to anticipate the receipt of that report. On its receipt, consideration will be given to the recommendations of the Commission. If any immediate relief is desired by any section of the Commonwealth Public Service there is an Act on the statute-book which affords them ample opportunity to secure that relief through the medium of the Public Service Arbitration Court.

Senator KEATING:
TASMANIA

– In view of the recent repeated press statements to the effect that it is intended to adjourn Parliament about the end of this month, and in view of the announcement (made some few weeks since by the Minister for Defence, that he hoped, on the resumption of our sittings, to be able to introduce the main Public Service Bill, I ask the honorable senator if it is the intention of the Government, before any adjournment this year, to introduce and proceed with that measure? If they do not intend to proceed with it, will the Government consider the advisableness of introducing the measure and having it circulated, so that a thorough knowledge of its provisions may be obtained by honorable senators and others before it is proceeded with on our resumption after the adjournment?

Senator PEARCE:

– I am sorry to say that, owing to the stress of other work, the Sub-Committee of the Cabinet appointed to deal with the Bill has not yet been able to finalize its recommendations to the Cabinet. In consequence, I am afraid that the measure will not be ready before we adjourn for the Christmas recess. There is another Bill of great interest to the Public Service, and that is the Public Service Superannuation Bill, which is also undergoing consideration by a Sub-Committee of the Cabinet. Tt is thought desirable that these measures should be considered together, as they both affect the conditions of the Public Service. In the circumstances, I am afraid that it will not be possible to do what the honorable senator suggests.

Senator Keating:

– It would be a great advantage if we could have the Bill circulated so that we might consider it during the recess.

Senator PEARCE:

– The Government oan hardly circulate a Bill which they have not yet agreed to.

Senator Keating:

– The Government might introduce the Bill.

Senator PEARCE:

– We cannot introduce it until it is agreed to, and so far the Cabinet has not agreed- to it. On the resumption of our sittings after Christmas an ample opportunity will be afforded to honorable senators and members in another place to thoroughly study these Bills. They are very large Bills, and cannot possibly be put through in a short space of time.

page 6556

QUESTION

BASIC WAGE

Senator LYNCH:
WESTERN AUSTRALIA

– I wish to know from the Leader of the Government in the Senate whether the Government intend to an”oint a Commission to determine the basic wage for metalliferous miners, dairy men, wheat farmers and persons engaged in the fruit industry ?

Senator PEARCE:
NAT

– My impression is that the Basic Wage Commission was appointed to recommend what the basic wage should be for all classes of labour.

Senator Lynch:

– Including those I have mentioned?

Senator PEARCE:

– Yes; they will be affected.

page 6556

QUESTION

WHEAT POOLS

Senator PRATTEN:
NEW SOUTH WALES · NAT

– I ask Senator Russell, as Chairman of the Australian Wheat Board, whether the Government can give any approximate information now as to the actual stocks of wheat, not book stocks, in the various Pools, the financial position of the various Pools, and. further, when it is likely that the various Wheat Pools in operation will be cleared up, and final payments to scripholders will be made?

Senator RUSSELL:
NAT

– I might answer “Yes” to some parts of the honorable senator’s question, and “No” to other parts. The Wheat Board is not in a position to state what- the final payments will be, because no human being can say what the stacks are going to turn out. I suggest to the honorable senator that if he will give notice of his question we may he able to do something in regard to the information he requires, and I shall make the reply to his questions as complete as I possibly can.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– If the Victorian Wheat Board is able, as we see from this morning’s newspapers, to publish a balance-sheet showing the exact position of the Victorian Wheat Board, why are not the New South Wales and South Australian Wheat Boards able to do the same thing ?

Senator RUSSELL:

– I understand that the honorable senator refers to the Victorian balance-sheet. It is compulsory for the Victorian Wheat Pool to publish that balance-sheet, under an Act of Parliament. It has been done in some of the other States also, but I believe that there it is not compulsory. It. certainly ought to be, and, with the coming Pool I believe it is to be made compulsory for them to issue balancesheets from time to time in the form in which the Victorian balance-sheet appears this morning. The Victorian balance-sheet has appeared every year from the very inception of the pooling scheme.

ADJOURNMENT (Formal).

Defence Department: Collins Bros.’ Flannel Contract.

The PRESIDENT (Senator the Hon T Givens:
QUEENSLAND

– I have received the following notice from Senator J. F. Guthrie: - I beg to notify you that today I intend, to move the adjournment of the Senate until 9 a.m. to-morrow, to enable me to discuss a matter of urgent public importance, namely, ‘the adulteration of woollen goods supplied to the Defence Department by Collins Brothers Proprietary Limited, Geelong,’ “ Is the motion supported?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

, - I move. -

That the Senate, at its rising, adjourn until 9 a.m. to-morrow.

Four honorable senators having risen in their places in support of the motion,

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Some time ago I asked the Minister for Defence (Senator Pearce) a series of questions in connexion with the adulteration or supposed adulteration of woollen goods supplied to the Deportment for the use of our troops. One question I asked was, “ If any manufacturer committed the crime of attempting to foist material below specification upon the Department, and was in consequence fined, why was the guilty person or persons let off with a fine?” The reply given to that question was, “No manufacturers werefined. If the Department had sufficient evidence to prove that any manufacturer who supplied goods inferior to the specified standard did so fraudulently and knowingly, legal proceedings would have been taken.” I know that at the time of the war the Departments were tremendously rushed with work, and unprepared for such a colossal undertaking as the equipment of nearly 400,000 soldiers. It was therefore only natural that their business preparations were not so perfect as they became after they had had two or three years of experience, but there is no doubt that, in investigating the file in connexion with the contract for the supply of flannel between the Department and Collins Brothers Proprietary Limited, Geelong, I saw enough to make a business man almost turn grey at the loopholes of ‘escape that the various contractors had, although I realize that the Department did magnificent work, and therefore do not wish to make disparaging remarks about the organization, or the way they carried out the splendid equipiment of our troops. At the same time, I certainly think the question I am raising should be ventilated. When people commit a premeditated crime, with their eyes open, with the object of making a fortune by the adulteration of goods, it is one’s duty as a representative of the people to expose it. It is not a pleasant job by any means, and onemakes enemies by doing what one considers to be a public duty. It is not with any pleasure, or with any malice, that 1 approach this subject, but when I knew that a certain contractor had supplied to the Department about 2,000,000 yards of flannel for the use of our brave soldiers, and that he had fraudulently adulterated it with the object of increasing his already very handsome profits on his contract, I took the trouble to go through the whole of the files of the Defence Department, as I was authorized to do, and take out the absolute details. I must therefore bore honorable senators for a few minutes with details of this contract, the slacknesswith which the oversight of the affair was carried out, the criminal action of this manufacturer, and the fact that he has got off practically scot-free, and “boasts about the great amount of money that he has put into the War Loan.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– What about the criminal action of the officers who passed the flannel?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– I think I can exonerate the officers. They were very thorough in their investigations, but the whole trouble was that there was no proper contract.

When in 1915 the Government were hard put to it to get goods to supply our troops, they called for samples of grey flannel. Collins Brothers Proprietary Limited, of Geelong, submitted their sample, which was put away sealed by the Government, who accepted a contract in all for about 2,000,000 yards of all-wool flannel at1s. 41/2d. a yard, which was a splendid price, and the weave of it had to be 32 threads warp and 32 threads weft to the lineal inch. This firm supplied hundreds of thousands of yards, which was accepted, and it was not until early in 1916 that any investigation was made to find if they were supplying the material that they had contracted to supply. An examination was made by the Acting Chemical Adviser, whose report was as follows : -

That in comparison with the sealed pattern it is less closely woven, there being twentyseven and twenty-two threads per lineal inch, as against thirty-two and thirty-two.

That is very important, because the contractor has not been penalized for this careless and cheap weave.

The material contains 10.1 per cent. of cotton.

On a huge contract like that for allwool stuff, “that is a serious matter. These people were asked for an explanation. Their explanation was as follows: -

Wecan confidently assert that we have no knowledge of any variation in the weave, and as, approximately, 1,500,000 yards of this identical material has been made, delivered, and accepted by your Department, it appears to us that no further explanation can at this stage be offered. We can state that the make of this whole of the flannel supplied has in no way been varied from the supplies originally made, and accepted by your Department. The contractor admits that 1,500,000 yards of this flannel had been supplied to the Departmentpreviously and was identically the same as the stuff which was by analysis proved to be faked and adulterated in every way.

Senator Payne:

– Was this analysis made in comparison with the analysis of the sample submitted originally?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Yes. The sample upon which the contract was accepted showed 7 per cent. of moisture, all wool, and the weave was 32 and 32, whereas some of the stuff supplied showed over 9. per cent, of moisture and 10.77 of cotton, one sample even going up to nearly 14 per cent, of cotton, and the weave was as I have stated. On the 7th March the Acting Chemical Adviser, after examination of three samples of flannel, which Collins Brothers were then supplying as all wool, reported as follows : -

This firm had a lot of old cheap cotton on hand, and instead of supplying the Government with all-wool material, they adulterated it to the extent of 13.4 per cent. cotton in order to make a greater profit. The Chemical Adviser’s comment was -

It appears that in the weaving a woollen having a cotton core is used, and an all-cotton thread is introduced at varying intervals. If this class of goods is governed by a specification requiring “all wool,” the firm is responsible for gross adulteration.

This shows how premeditated was the action of the firm. They deliberately attempted to hide the cotton adulteration in the centre of the thread by covering the material with wool on the outside. Collins Brothers wrote in reply to the departmental complaint as follows: -

On inquiry we find that the make of the grey flannel supplied to your Department has not been varied in any way from the original sample.

That, of course, was a deliberate lie. I have evidence to show that they instructed their men to put this cotton in. Collins then wanted to wait upon the Department for the purpose of an interview. The Department, in order to make sure of the facts, because Collins had denied the charge of adulteration, had another examination made by Mr. Potts, Examiner of Stores, who reported that the number of threads per lineal inch was 27 and 22, as compared with the specification 32 and 32. This variation from the specification was just as gross an adulteration, because the stuff was not put into the material. The samples were then sent to the manager of the Geelong Woollen Mills (Mr. Smail), an experienced man, who reported -

I have gone carefully through the particulars supplied, and have come to the decision that -

Pieces 4893, 4397, and 5067 are not up to the quality of construction of the approved samples.

The first paragraph of Collins Brothers’ letter of 20th March is not correct, as the pieces referred to contain cotton, whereas an approved sample is all wool.

Instead of Collins Brothers being prosecuted, as they should have been, they were informed by the Department that no further supplies would be accepted at the usual price.

Senator Pearce:

– What! Repeat that, please.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– I say that the firm were written to on the 7th June, 1916, to the effect that no further supplies would be accepted at the usual price.

Senator Pearce:

– Is that all ?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– That is all.

Senator Pearce:

– Was that the only penalty ?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– At that time. I shall come to the question of penalty later. I maintain that Collins Brothers should have been prosecuted then, and all their supplies to the Department cut off. On the 7th June Mr. Marcus Collins called on the Examiner of Stores (Mr. Potts) in response to a letter from the Department, and admitted that there had been adulteration of the flannel. This was in June. I remind honorable senators that this was after Collins Brothers had, in previous correspondence, denied, in black and white, that there had been any adulteration. All through the correspondence, up to 16th June, 1916, the firm agreed with the Government to supply all-wool flannel, and had supplied 1,936,480 yards, every bit of which, on their own showing, was adulterated. We do not know to what extent the first 1,500,000 yards was adulterated, because it was apparently never tested, which showed slackness. Mr. Potts wrote to Collins Brothers on 7th June, 1916-

A further examination of a piece of the material selected at random from a consignment of flannel received in Ordnance has now been made. The result of a chemical analysis of this sample compares as follows with the sample submitted by you and approved by the Department: -

Approved sample - Moisture, 7 per cent.; cotton, nil; ‘threads per inch, 32; warp and weft, 32.

Sample of stuff actually supplied - Moisture, 10.37 per cent.; cotton, 12.7 per cent.; threads per inch, 25 warp and weft 21.

A Board minute, dated 16th June, 1916, states -

The quantity of cotton indicates that its use in what should be an all-wool material was deliberate.

On 22nd June, 1916, the Acting Secretary for Defence wrote as follows to Collins Brothers with respect to their flannel : -

It has been found to contain 13.7 per cent. cotton. The use of this amount of cotton could not possibly have arisen by accident, and must have been of deliberate intention.

The firm, when bowled” out, had claimed that the adulteration was the result of an accident ! They also submitted that the question of monetary gain was not a consideration. They pose as philanthropists. I understand that Mr. Marcus Collins has £120,000 invested in war loans, and this was actually offered as an excuse ! Not” wanting to lose business, Collins Brothers submitted fur ther samples of flannel, all wool, threads 31 and 32, thus proving that they could make the stuff if they desired to do so. They went straight, for about a month, and then, when they thought they were not being watched, in again went the 13.1 per cent. of cotton. It is worth noting also that, the Navy Department turned down this firm’s contract to supply 9,000 pairs of white blankets, because they were not manufactured in accordance with specifications. Permission was then given to sell in the open market, and that is, doubtless, the reason why the material! was adulterated. At that time manufacturers were working day and night inmaking goods to supply the troops. Collins Brothers Proprietary Limited saw there was an opportunity of adulterating the material and putting it on the open market, and that is no doubt how they made most of their money.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– Wherewas it placed on the market?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– I presume- in Victoria.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– The honorable senator cannot say that definitely.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– No, butthey received instructions from the NavyDepartment to that effect, and that is; just what they wanted.

The Examiner of Stores in his-, minute to the Secretary of the Contract and Supply Board on the 31st October,. 1916, said-

Approximately 1,500,000 yards of this identical material has been made, delivered, andaccepted by your Department. The work of” this firm, not only in regard to orders for flannel, but also inrespect of orders for khakimaterials, has been several times brought under notice. There can be no doubt but that theintroduction of the high percentage of cotton was intentional. There can be little doubt but that this firm has repeatedly attempted to take advantage of the Department in the unscrupulous methods to which the firm is prepared to resort.

They were not sufficiently checked at the outset, but later the Department did follow them up. It was a criminal offence for the firm to act in this manner, particularly when there was an urgent and’ prtessing need; for the material. The Examiner of Stores reported on the 14th November, 1916, as follows: -

The exact quantity of flannel containing: cotton between the beginning of February and the time when the firm commenced to supply “ all-wool “ material was 496,3941/8 yards, and the average amount of cotton was 12.4 per cent.

The Defence Department’s minute, signed by Major Ormaston, Secretary of the Contract and Supply Board, and approved on 21st November, 1916, stated -

That the contractor be called upon to refund to the Department the amount saved by him in supplying flannel containing a proportion of cotton instead of all-wool material as agreed upon. “ All-wool material as agreed upon ‘’ but they missed an important point, as in endeavouring to penalize contractors they forgot to inflict any punishment for the inferior weave. They could make more money out of the cheap weave than out of the adulteration of 12 per cent. cotton. For the inferior weave they have not been penalized to this day.

Senator Payne:

– Has no penalty been imposed ?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– No. The minute continues -

The quantity of flannel supplied below standard is, approximately, 2,000,000 yards- the amount involved is ?5,666, plus ?100 penalty.

That was only for the cotton contents. They admitted that they should have been penalized for the cotton, and they eventually got of with a penalty of ?700.

SenatorPearce. - No, they did not.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– In an interview on the 11th September, 1916, with the then Assistant Minister for Defence (Mr. Laird Smith), Mr. Macguire, Chairman of Defence, the Examiner of Stores. Contract and Supply Board, and Mr. Williams, the secretary of Collins Brothers, the following is recorded: -

Mr. Williams. ; We received a notification in regard to a rebate of ?6,000, and would like to know on what figures the rebate is based.

The Minister. - It is based on an admission you made, and the value is taken on the difference in the value of wool and cotton. . . . When you entered into an agreement with the Department for flannel the supply was to be “ all wool.”

Mr. Williams. ; The cotton was put in under instructions from the director of the mill (Mr. Marcus Collins).

That is the gentleman who said there was not an ounce of cotton in his material, and who was able to invest over ?100,000 in the war loans. On the 21st December, 1916, the Acting Secretary for De fence wrote to Collins Brothers as follows : -

I have to inform you that the explanation offered in your letter of the 14th inst., as to why cotton was introduced into flannel for which you were being paid the price agreed upon at the conference held in March, 1915, for “ all-wool “ material, is not regarded as satisfactory.

In all eight analyses were made, and the average percentage of cotton disclosed was 12.047. Cotton was first discovered in the flannel on 10th February, 1916, and the firm subsequently admitted the adulteration of 442,980 yards, whereas it was proved on their own correspondence that they had adulterated 2,000,000 yards with 12.7 of cotton. Of course, the Department at that time did not possess a Business Board to draw up these contracts in a business-like way, and prevent fraud being perpetrated by such slippery customers. After submitting the matter to the Crown Law Department on 8th February, 1917, the officers reported -

As the only punishment provided by the section is imprisonment, in my opinion the intention appears that the section is not to apply to corporations, and therefore, notwithstanding section 24, a corporation cannot be convicted of an offence under the section. In this case the contractor is Collins Bros. Pty. Ltd., which is a corporation.

Therefore Collins Bros. escaped imprisonment on a technical point, and were called upon to pay. ?1,255 2s. 2d. for supplying material adulterated with 12.07 of cotton of inferior weave, and over-supplied with moisture.

Senator Pearce:

– Not ?700, as the honorable senator said just now.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– I said they got off with ?700, and I shall lead up to that.

Senator Pearce:

-No, they did not.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– They sent a cheque for ?728 6s. l1d., and in doing so said that the assessment of damages by the Department was accepted by their directors. In my opinion, the damages were wrongly assessed, as there was only an assessment made of . 68d. per yard on 442,980 yards, whereas they had admitted adulterating 2,000,000 yards, and the proper fine should have been l1/2d. per yard. These men made a fortune out of the contract by disposing of goods to the unfortunate public at profiteering prices. The penalty is quite inadequate for the crime, and if the Defence Department have to arrange contracts in the future, it is to be hoped that they will be better drawn, so that any one who attempts criminal fraud will be gaoled, as an example to others.

Senator Fairbairn:

– This was a verbal contract ?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Practically.

Senator Payne:

– Then may we assume that the whole of the 2,000,000 yards of material supplied to the Department was of an inferior quality compared with the quality of the samples?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– The contractor was not penalized for the false weave at all, but for the adulteration of the material supplied by the use of cotton.

Senator Crawford:

– Does that difference in the weave mean a corresponding reduction in weight?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Yes. It would mean a great reduction in weight, and would be a much cheaper and a quicker article to manufacture. It would be a spongy, miserable material, whereas it ought to have contained thirty-two warp threads and thirty-two weft threads to the lineal inch.

Senator Reid:

– Has the honorable senator any idea of the difference between the prices of cotton and of wool at that time ?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– The price of wool was1s. 6d. per lb., and that of cotton 10d. per lb. If a manufacturer adulterated his goods in order to secure their rejection he was able to make a fortune out of them, because he could then put them upon the open market, and sell them at exorbitant prices. Some time ago I criticised the Department for allowing such goods to be placed upon the market at all. Fortunately, the great majority of the manufacturers of Australia were honest, but it is hard that any of them should have been obliged to suffer through the actions of the man of whom I am speaking.

Senator Lynch:

– Whilst he held the field, honest contractors were shut out ?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Exactly. He obtained1s. 41/2d. per yard for his supposedly all-wool material, which was a very good price.

I have now said all that I desired to say which was of a disagreeable character. In exposing this scoundrel who has made a profit of more than £100,000 during the war, I have discharged my duty as a public man.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– But the profit was made by a limited liability company.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– As a matter of fact I understand that there is really only one person in the company, namely, Mr. Marcus Collins. I have no desire to make disparaging remarks about the work of the Defence Department, because no troops in the world took part in the recent war who were better equipped than our Australian soldiers.

The PRESIDENT (Senator the Hon T Givens:

– Order! The honorable senator’s time has expired.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– I should like to conclude my remarks, if I may be permitted to do so.

The PRESIDENT:

– The honorable senator cannot do that. TheStanding Orders are emphatic upon the point.

Senator Pearce:

– I wish to move that an extension of time be granted to the honorable senator to enable him to complete his remarks.

The PRESIDENT:

– The only way in which that result may be achieved is by a suspension of the Standing Orders for that specific purpose, and the motion will need to be carried by an absolute majority of the whole Senate.

Motion (by Senator Pearce) put -

That so much of standing order 64 be suspended as would prevent Senator J. F. Guthrie from continuing and concluding his speech.

The PRESIDENT:

– There being more than an absolute majority of the whole Senate voting in the affirmative, and no voice being raised in dissent, I declare the motion carried.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Having exposed this dishonest contractor, I wish to congratalate the Defence Department upon its equipment of our Australian troops. Sometime ago I criticised the price charged for certain woollen goods which were being supplied to our returned soldiers, but I have since ascertained that the slightly increased price was charged only upon a very small quantity of tweeds, pending the time when a larger quantity of suitable wool would be available at lower prices. In all my twenty years’ experience of the wool manufacturing industry I have never seen better tweeds than those which the Commonwealth Woollen Mills at Geelong are manufacturing for our returned soldiers at from 5s. 6d. to 7s. 6d. per yard. I am very pleased, therefore, to learn that those mills are about to double their output, as the result of a very small capital expenditure. When the item relating to this matter comes before the Senate, I hope that it will be passed without any dissent whatever, despite the fact that many people do not know that Geelong is a great wool centre. The manager of the Commonwealth Woollen Mills there, with the permission of the Minister for Defence, has assured me that now that suitable crossbred wools are available at auction at a reduction of 25 per cent. as compared with their values in June last, he will be able to reduce the price of tweeds to our returned soldiers in the immediate future. I intend to invite all honorable senators to visit Geelong as my guests next week, in order that they may inspect these mills for themselves.

Senator PEARCE:
Western AustraliaMinister for Defence · NAT

– The object, of the honorable senator in submitting this motion was, I take it, to expose the contractor who has been guilty of certain practices, to the contumely of the public. I am a little bit afraid, however, that in doing so he has not been quite fair to the departmental officers who dealt with this matter. In justice to them, and for the purpose of showing that the question was not mishandled, but that everything which could be done was done-

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Except to prosecute.

Senator PEARCE:

– There was the will to prosecute if that course could have been adopted. It is only just to these officers’ that I should read to the Senate a statement which was prepared for the Minister at the time, which fully sets out the position, and which is backed up by the correspondence that appears upon the official file. When Senator J. F. Guthrie asked that the papers relating to this matter should be laid upon the table of the Senate he was informed that he was at liberty to inspect the official file at the Department. That is how he secured the papers from which he has quoted so extensively this afternoon. The statement to which I have already alluded reads: -

In a report dated 21st February, 1916, the Chemical Adviser to the Defence Department. reported that a sample of flannel taken by the Examiner of Stores from a delivery of grey flannel manufactured by Collins Brothers, of Geelong, contained 10.1 per cent. of cotton, and was less closely woven than the sample held by the Examiner of Stores to govern the supply, there being only twenty-seven and twentytwothreads per lineal inch instead of thirty-two.

On 26th February, 1916, the firm was advised of the result of the analysis, and in reply of 28th February, 1916, asked that the samplemight be forwarded to them for independent, analysis, and stated that there had been novariations of the weave of their samplethroughout, and that they had already supplied 1,500,000 yards of similar flannel.

May I direct Senator J. F. Guthrie’sattention to the fact that in that communication the contractors do no admit that they have been adulterating with cotton. What they say is that the weave of their sample throughout the 1,500,000 yards of woollen material supplied to the Department had been the same.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– It was pointed out to them that that material contained 10.1 per cent. of cotton, and, in reply, they said that the flannel had not varied in any way throughout the 1,500,000 yards which had been supplied to the Department.

Senator PEARCE:

– I see no admission on their part that they had supplied 1,500,000 yards showing 10 per cent. of cotton. What they claimed was that the sample in dispute was the same as material of which they had 1,500,000 yards. Three further samples were taken from the deliveries and submitted to analysis, and the result was shown to be the same as that which has been quoted by thehonorable senator, namely, 9.2 per cent. moisture, 10.7 per cent. cotton, 26 threads in the weave, and 31 threads in the weft, down to 9.4 per cent., 9.8 per cent., and 25 and 31 threads. The report continues -

The Chemical Adviser further stated that it. would appear that in weaving the material a. woollen- thread with a cotton core was used by the firm, while in piece No. 4397 mentioned above, an all-cotton thread had been introduced at varying intervals.

After correspondence with Collins Brothersthey, by memorandum dated 20th March, endeavoured to explain away the use of the cotton by the following statements: -

Cotton thread. - The existence of this, thread may be accounted for by the fact that the greater portion of thewarping and winding is done by artificial light, and by accident a warper or winder may have used a. wrong bobbin in the machine.

I hope that honorable senators will not assume that I am putting this forward, or that it is put forward by the officers of the Department; but it is only fair that when a firm is charged with an offence their side should be fairly stated, no matter how weak their defence may appear to be.

  1. Threads per inch. - Weavers are paid for twenty-live ends, and the extra strength is provided by shrinking process. As most of the carding and spinning is done by artificial light the count of the skein may have been varied, either more or less; but in either case the weight of the flannel and the value of the material contained in it would be exactly the same, and would be compensated for in the loom.

The manager, Woollen Cloth Factory, however, was of the opinion that the’ amount of cotton proved deliberate action.

On 7th June the Examiner of Stores again brought under the notice of Collins Brothers that flannel containing cotton was being delivered, as evidenced by an analysis made by the Chemical Adviser, disclosing cotton to the extent of 12 per cent. The Examiner of Stores further advised Collins Brothers that no further deliveries of flannel similar to that complained of would bo accepted, but that “ allwool “ flannel must be supplied.

When it is said that action should have been taken at once to penalize the firm, I remind honorable senators that at the time the Department held thousands of pounds belonging to this firm, and therefore had ample security for any fine that it might subsequently be found necessary to inflict.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– Why not have cancelled the contract?

Senator PEARCE:

– I shall come to that later.

In response to this letter, Mr. Collins called upon the Examiner of Stores, admitted the faults of the flannel, and promised that all future deliveries would be “ all wool.”

On 22nd June, 1916, a letter signed by the Acting Secretary was forwarded to Collins Brothers in accordance with Board’s decision of 16th idem (No. 3230), asking for any explanation they may have to offer. In reply, Collins Brothers advised on 27th June, 1916, that -

  1. The small quantity of cotton was put into the material merely with a view to strengthening it and reducing the shrinkage to a minimum.
  2. The matter of monetary gain was not considered by them for one moment, and would not amount to more than1/4d. per yard.

In reply to the firm’s letter, the Acting Secretary wrote on 17th July, 1916, that, in his opinion, the saving would be more than id. per yard.

The position up to the present date is as follows: -

  1. From the date the first delivery in which the presence of cotton was discovered (to which fact the attention of Collins Brothers was first drawn on 20th February, 1916), until the date on which they began to supply a satisfactory all-wool flannel, the firm supplied approximately 469,488 yards, of which 435,531 yards are reported by the Examiner of Stores to contain cotton. It would appear, however, from Collins Brothers’ letter of 28th February, 1916, to the Examiner of Stores that they admit having supplied prior to that date approximately 1,500,000 yards of material identical to that complained of in the Examiner of Stores’ letter of 26th February, 1916.
  2. In all, eight analyses were made of samples taken from the firm’s deliveries, and the average percentage of cotton disclosed by such tests was 12.04.
  3. The manager of the Government Woollen Cloth Factory estimates that for every 10 per cent. of cotton in the flannel the firm would save 57d. per yard. The saving on 12.04 per cent. cotton would therefore be 68d. per yard.
  4. The matter came before the Contract and Supply Board on 20th November, 1916, who recommended that the firm be called upon to refund to the Department the amount saved by them in supplying flannel containing a proportion of cotton instead of an all-wool material. The quantity of flannel upon which a refund of 68d. per yard was considered to be due by the contractor was set down approximately at 2,000,000 yards. This quantity was arrived at as indicated in paragraph 6a.
  5. Since last March, 1915, no regular contracts have been entered into with the woollen manufacturers, and the conditions under which supply has been made are explained as follows: -

I ask honorable senators now to take their minds back to the year 1915, when we had to supply hundreds of thousands of troops that were pouring into camp and going overseas. We had to requisition all the mills in the Commonwealth, and not merely to call tenders, because that would not have been anything like an adequate means of meeting our requirements for the troops. In order to organize the woollen mills of the Commonwealth, a Conference was called, over which I presided, and was held on the 10th and 11th

March, 1915, between representatives of several woollen mills and officers of the Department. We had there as adviser to the Department, and I think Senator Gardiner will bear me out in this, probably the best man in this particular line of business in the Commonwealth, namely, Mr. Smail, general manager of the Commonwealth Woollen Mills, and now employed by Vickers. He was our adviser as to the requisitions to be made out, and as to how the mills should be organized.

The report continues -

At a Conference presided over by the Minister, which was held on 10th and 11th March, 1915, between representatives of the several woollen mills and officers of the Department, the whole of the output of the mills was placed at the disposal of the Department for military purposes, and prices were agreed upon, at which different kinds of material were to be supplied.

The adviser to the Department as regards prices was Mr. Smail, and he based the prices on his own practical experience as a woollen manufacturer.

The price to be paid for flannel was fixed at a maximum of1s. 41/2d. per yard for quality equal to sealed pattern No. 1203. It is understood that the signing of the usual contract documents was. waived owing to the disinclination of the manufacturers to subscribe to clause 31 a.

I may interpolate here the reason why that clause could not be waived, as it is somewhat interesting. That clause was inserted by a Labour Government. It provided that a union organizer should have the right to enter any factory to collect subscriptions from union employees. The directors point-blank refused to sign a contract containing that clause, and the Government of the day would not waive it. . We could not afford to have an impasse, as the material had to be provided. We were informed that our powers of requisition were quite sufficient under the War Precautions Act, and that, therefore, no contract was necessary. No contract was entered into, as neither side would give way on the dispute which was raised.

  1. Unfortunately, the sealed pattern No. 1203 referred to in the proceedings of the Conference has been found to contain a percentage of cotton. Further, the scaled sample held by the Examiner of Stores as the standard to which the flannel supplied by Collins Brothers should conform is not signed or initialed by them, and it is open for them to disclaim it as a standard sample to govern the supply.
Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– But throughout, at interviews and in letters, they contracted to supply all wool. .

Senator PEARCE:

– They did not enter into a contract, but they certainly understood that they were to supply all wool. There can be no doubt whatever about that. This document further states -

It is beyond doubt, however, that Collins Brothers clearly understood that the flannel to be supplied by them was to be all wool. This was admitted to be the case by the representative of Collins Brothers (Mr. Williams) in the presence of the Assistant Minister, the chairman of the Contract and Supply Board, and the Examiner of Stores at an interview on the 11th December, 1916.

Subsequent to the date, 26th Feb ruary, 1916, on which Collins Brothers were advised of the presence of cotton in the supply, several communications passed between the Department and the firm before the latter would admit having put a percentage of cotton into any of the flannel supplied by them, and in letter dated 18th July, 1916, they gave the quantity of flannel manufactured with a percentage of cotton as 93,956 yards. Approval was given to take this flannel at a reduction of l1/2d. per yard pending settlement of the larger question, but adjustment has been made on 62,3693/8 yards only.

On 11th December, 1916, a represen tative of Collins Brothers, Mr. Williams, interviewed the Assistant Minister. Mr. Williams stated that the firm were prepared to make a refund for every yard of material that had been supplied with any trace of cotton, and at the request of the Assistant Minister promised to submit a statement in writing of the quantity of flannel involved and the amount of the rebate they were prepared to make in respect of same.

In letter dated 14th December, 1916, Collins Brothers estimate the quantity of flannel containing cotton delivered to the Department to be 442,960 yards, and in letter of 9th January, 1917, they admit the presence of cotton in this yardage to the extent of 10 per cent., and intimate their preparedness to make a rebate to the Department thereon at the rate of.56d. per yard, amounting to £1,033 12s. 5d.

Summary. - 1. It is clearly established that, although Collins Brothers were under no misapprehension as to their obligation to supply all-wool flannel, they deliberately introduced a percentage of cotton into at least a portion of the material supplied to the Department.

The latest reason given by the firm, viz., that cotton was introduced with the object of reducing the shrinkage and adding to the strength and appearance of the material, and not with a view to financially benefiting them as manufacturers, has an air of improbability which prevents its acceptance as the real motive. It may be true that the percentage of cotton added did not impair the wearing quality of the flannel appreciably, but as the firm were paid for an all-wool material, and as cotton is cheaper than wool, the introduction of the former without doubt meant a gain to the manufacturer.

It is impossible to fix the exact date when the firm first commenced to supply material with an admixture of cotton, or say with certainty what quantity is involved, or what was the average percentage of cotton.

That is not all surprising. Here was a Department suddenly faced with the necessity of taking delivery of millions of yards of material, and with only a small number of competent inspectors, at a time when inspectors were hard to get, because honorable senators will realize that every expert at that time was naturally in full employment in the very mills from which we had to get supplies. Senator Gardiner will remember that one of the difficulties with which we were faced in the early stages was to secure a competent corps of inspectors to pass the enormous stocks of material we had to get.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Anybody can analyze flannel.

Senator PEARCE:

– People can be obtained who can analyze all sorts of things. It is all very well for the honorable senator, in 1920, when the war is over, to talk in that way. We could now get inspectors by the score, but at the time to which I refer that was impossible. Every inspector we could get was pressed into the Service, and even then our corps of inspectors was totally inadequate to provide for constant inspection.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– The manufacturers need an inspector over them all the time.

Senator PEARCE:

– I should like to remind honorable senators’ that the report which I am reading is the report of the departmental inspectors, and is as strong as anything which Senator J. F. Guthrie said in his speech.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– That is so. I took all my matter from that report.

Senator PEARCE:

– I want it to be understood that that is the case, should any honorable senator attempt to impugn the integrity of the departmental inspectors.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– No one impugns the inspectors. I do not for a moment.

Senator PEARCE:

– The report goes on to say -

In regard to deliveries prior to the delivery in which cotton was first discovered (about 10th February, 1916), there is no evidence that cotton was used beyond the firm’s statement in letter, 28th February, 1916, that about 1,500,000 yards of material identical to that complained of in the Examiner of Stores’ letter of 26th February, 1916, had been supplied previously.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– That is my point. They admitted that they had supplied the Department with 1,500,000 yards of identical flannel.

Senator PEARCE:

– I shall be glad if the honorable senator will allow me to go on, or I shall have to ask for an extension of time.

The PRESIDENT (Senator the Hon T Givens:

– Order! The honorable senator should not be interrupted, as he is allowed only a limited time.

Senator PEARCE:

– The report continues -

The firm explained subsequently that when using the word “ identical “ they referred to weave only, and not to the introduction of cotton. The Department can, however, say definitely that between the date of the first delivery in which the presence of cotton was detected until the date on which Collins Brothers began to supply a satisfactory “ allwool “ flannel, 435,531 yards of material containing cotton were delivered, and from the result of chemical analyses which have been made it can be reasonably assumed the average percentage of cotton in the flannel supplied during this period was 12 per cent. The difference in value between “all-wool” and 12 per cent. cotton, is calculated to be . 68d. per yard, making the total amount to be refundedby Collins Brothers on this quantity (435,531 yards), £1,234 0s.1d.

Collins Brothers admit a yardage of 442,980 yards with 10 per cent. cotton, in respect of which they are prepared to make a refund to the Department at the rate of 0.56d. per yard, amounting to £1,033 12s. 3d.

In view of all the circumstances of the case, it would appear advisable to agree to a settlement of the matter by accepting a refund on the yardage which Collins Brothers admit having contained a percentage of cotton, provided they are prepared to calculate the difference in value of the material on the basis of 12 per cent. cotton, involving a rebate at 0.68d. per yard of £1,255 2s. 2d.

That was considered by the Contract and Supply Board on 26th January, 1917, and it was decided : -

That the matter be referred to the Crown Solicitor for opinion as to whether in addition to the refund mentioned in paragraph 7(5) of foregoing statement, Collins Brothers could on the evidence available be successfully prosecuted on a charge of fraudulently and knowingly supplying material inferior to what they were required to supply. If the opinion be not favorable to prosecution, it is recommended that a settlement be arrived at by accepting from Collins Brothers a refund on 442,980 yards at 0.68d. per yard of £1,255 2s. 2d., and that the Crown Solicitor be asked to draft the necessary letter to the firm.

That was signed by the Secretary of the Board, and approved on 30th January by Mr. Laird Smith, who was then Assistant Minister for Defence. The summary went to the Crown Solicitor, and I have here his opinion of the case. He draws attention first to sections of the Defence Act under which prosecutions could take place, and then says -

In this case the contractor is Collins Brothers Proprietary Limited, which is a corporation.

Section 24 of the Acts Interpretation Act 1901 provides that every provision of an Act relating to offences punishable on indictment or summary conviction shall, unless the contrary intention appears, be deemed to refer to bodies corporate as well as to individuals.

As the only punishment provided by the section is imprisonment, in my opinion the intention appears that the section is not to apply to corporations, and therefore, notwithstanding section 24, a corporation cannot be convicted of an offence under the section.

Further, the file does not, in my opinion, disclose sufficient evidence to justify the prosecution of an employee of the company for fraudulently and knowingly supplying to the Commonwealth, or any officer of the Commonwealth, for use by the Defence Force, or any part thereof, material which is inferior to that specified in the contract, agreement, or order under which it is supplied.

As, however, the company had admitted that the supply was to be “ all-wool,” I am of opinion that the Department is legally entitled to claim damages for inferior material supplied.

It may be difficult now to obtain adequate proof of the degree of inferiority, and the Department may have to rely upon the company’s own admissions.

However, in accordance with the instructions contained in the above memorandum, I suggest that a letter to the following effect be sent to the company setting out the attitude of the Department in the matter: -

The Secretary,

Collins Bros. Pty. Ltd.,

Geelong.

Sir,

Contract for the Supply of Flannel to the Defence Department.

I refer to my letter herein of the 21st December last, and to your reply thereto of the 9th ultimo.

I have to inform you that the Department estimates its damage in respect of inferior material supplied under the above contract at £1,255 2s. 2d.

The amount is assessed on the basis of 12 per cent. cotton, involving a loss to the Department of 0.68d. per yard on 442,980 yards of material supplied.

Unless this amount is paid within seven days hereof, the matter will be referred to the Commonwealth Law authorities to take such action against you as may be considered advisable.

Was there anything else that the Department could do ? Could it, in the teeth of that advice, prosecute Collins and so allow him to escape altogether? That would have been the effect if that legal advice was good. If we had prosecuted we should have failed, and then he could have claimed the full amount under his contract.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– He escaped on a technicality.

Senator PEARCE:
NAT

– It was no technicality. It was the law, and it was no fault of the Department or its officers. The honorable senator, in quoting from the files, might have pointed out that the Department not only did everything it possibly could, when the discrepancy in quality was discovered, to recover the amount which this man had improperly obtained, but also showed that it was prepared to prosecutehim if a prosecution could succeed. Senator J. F. Guthrie said that he got off with a fine of £750. That is incorrect. Here is a letter, dated 22nd March, 1917, to Collins Brothers, which was on the file when Senator Guthrie saw it: -

With reference to your letter of 19th ultimo, enclosing cheque for £728 6s. l1d., for which an official receipt was duly issued by the Receiving Officer, I beg to inform you that this amount has been accepted as part payment of the damage of £1,255 2s. 2d. estimated by the Department to be due to it on account of your supplying inferior material. The balance of £526 15s. 3d. has been obtained by making payment for84,282 yards flannel referred to in your abovementioned letter at the reduced rate of1s. 3d. per yard, i.e., a reduction of l1/2. per yard on the original price.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Why did they take off l1/2d. per yard from that lot when, on their own calculation, the deduction should have been only . 68 of a penny per yard ?

Senator PEARCE:

– That was flannel up to sample, on which the contractor was entitled to be paid1s. 41/2d. per yard. It was supplied subsequently and complied with all the tests, but the Department calculated that this amount ,was owing by him on the flannel which he had previously supplied below the standard, and therefore deducted it, instead of paying him the full amount due to him.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Therefore he was penalized to the extent of £1,200.

Senator PEARCE:

– The honorable senator said previously that he was fined only £750.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– I thought he had got off with a fine of £750, but first of all you claimed £6,000 from him, as an estimate of the damage he had done.

Senator PEARCE:

– That was estimated on the amount of 1,500,000 yards.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Because he admitted the adulteration of that quantity.

Senator PEARCE:

– No, I think she case made out by the Department was that they could not prove in a Court of law the adulteration of more than the 400,000 odd yards. The contractor afterwards qualified his previous admission by saying that it referred, not to the cotton, but to the warp and woof only.

Senator Crawford:

– What was the difference in the weight through the looser weave?

Senator PEARCE:

– It was very small. In an earlier . stage of the proceedings there is a statement by one of the inspectors that, in his judgment, the weave did not make much difference to the weight. The file is open to ‘inspection by any honorable senator. It shows that in this unfortunate affair the difference in the quality of the material was detected first of all by the officers of the Department, and in the stress of the existing circumstances was followed up as quickly as possible by the Department. Further supplies of that quality were at once stopped, and such a penalty was inflicted as robbed the contractor of any benefit from what he had done. I do not see how the Department, in view of the legal advice it obtained at the time, could have done any more than it did. If this had happened in a time of peace, contracts would have been undoubtedly entered into in the ordinary way, but the circumstances of the time made contracts most inadvisable. We did have contracts in the early stages of the war.

Senator Keating:

– Do this firm get any contracts from the Department now?

Senator PEARCE:

– Not to my knowledge. I do not think there are any contracts running at present. It was important that we should have the whole output of the mills of Australia, because, at ““a later stage, not only were we supplying our own troops with, flannel, but we were supplying the Indian Army with, a considerable quantity, and later even sections of the British Army in Mesopotamia and elsewhere.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– They knew that, and that shows how mean they were to take advantage of the necessities of the nation.

Senator PAYNE:
Tasmania

.- Senator J. F. Guthrie is to be complimented upon bringing this matter forward to-day. I take it that he has been actuated, not by a desire to hold up any particular firm to the gaze of Australia as one that cannot be trusted-

Senator Earle:

– I think that is his object, and it would be mine, too.

Senator PAYNE:

– Not solely, but because the honorable senator believed that the public should be made aware of the fact that there are in Australia individuals who were prepared to take every advantage of the fact that we were at war, and needed goods and materials to equip our men,, in order to make larger profits than they would have made under normal conditions. I listened carefully to Senator J. F. Guthrie’s statement, and very carefully indeed to the Minister’s statement in reply. Without desiring to place upon the officers of the Department the responsibility for the occurrence of this business, I must say clearly that I do not think the Department did all they could to get ‘to the bottom of it when it was brought under their notice. I may be wrong, but when I have stated my case the Minister will perhaps see that more could have been done, in order that those who were guilty of fraud should be penalized to a greater extent than they were.

Senator Pearce:

– How would you have penalized them?

Senator PAYNE:

– For one thing, by making thom.’ give a heavier refund. I do not think the refund claimed by the Department was anything like adequate. The departmental officers do not appear to have gone right to the root of these matters. Throughout the whole of the case they dealt simply with the question of the introduction of cotton into the material, which ought to have been supplied as all wool. They did not deal at all with themore serious question of the difference in the weave of the material.

Senator Pearce:

– Who was it reported that ? Was it not the officers of the Department? It was not Senator J. F. Guthrie who discovered it.

Senator PAYNE:

– The officers of the Department ought to have dealt with the whole of the discrepancies between the sample and the actual material supplied.

Senator Pearce:

– They did so.

Senator PAYNE:

– They did not. The Minister could have dealt with the discrepancy, because the departmental officers referred to the fact that there was considerably more moisture in the article supplied than in the approved sample upon which the contract was based.

Senator Pearce:

– They did not attach so much importance to that as to the addition of cotton.

Senator PAYNE:

– In the first place, samples were submitted. I do not know what quantity was contained in the sample, but it has great bearing upon the point. If the sample submitted was one yard, and if one yard of the adulterated flannel supplied to the Department was compared with the sample with regard to weight, and if it were found to be of the same weight, this would be conclusive proof of additional moisture.

Senator Pearce:

– We did not buy by weight.

Senator PAYNE:

– No; but the. specification provided for a 32 warp and a 32 weft, and 7 per cent. moisture. If the goods supplied contained twice, the moisture, and if the threads were 27 warp and 22 weft, the reduction in quality, assuming that the threads were the same thickness, would be equal to 25 per cent.

Senator MILLEN:
TASMANIA · NAT; UAP from 1931

– But you have no evidence of the weight of the flannel in either case.

Senator PAYNE:

– I am aware of that. Senator J. D. Millen. - Then you are arguing on wrong premises.

Senator Pearce:

– That factor did not enter into consideration at all.

Senator PAYNE:

– But it should have been taken into consideration by the departmental officers, because if the number of threads in the weave were less than specified, the goods supplied must necessarily have been inferior in quality. I put the case this way because flannel, of all materials, lends itself to adulteration. So do blankets. You can introduce cotton into the manufacture of flannel, and you can also introduce lighter threads, so that there will not be the same quality of material, and by the process of combing and teasing make the article appear as good as a sample, but still be 25 per cent. below in. quality. In view of the fact that this firm were given an excellent price for their commodity,1s. 41/2d. per yard, owing to the war breaking out - first-class flannel at that time was being supplied by other manufacturers to retailers throughout Australia at 121/2d. their adulteration of the material was all the more reprehensible. Evidently the firm took advantage of the fact that even men accustomed to handling flannel might be misled unless a very careful inspection were . made, and introduced a proportion of cotton into the process of manufacture so as to make a greater profit. This was done, too, at a time when we were at war, and the Department was hard-pressed to get material for the equipment of our soldiers. I do not want to say any more except to express the opinion that the Government ought to have gone a good deal further in thismatter. I have made an estimate, on the figures supplied, and have come to the conclusion that the . 68 per cent. refunded by the firm did not represent the additional profit made.

Senator Pearce:

– Then you do not agree wth Mr. Smail ?

Senator PAYNE:

– I agree with Mr. Smail that . 68 is a ‘correct calculation as to the extra profit made through the introduction of cotton thread. But that is not the most serious feature of the business. The most serious aspect was the discrepancy in the warp and the weft. Of course, as I have already shown, flannel could be made quite as heavy as the sample if thicker threads had been introduced, and it appears suspicious to me when I find from the analysis made by the various officers that the moisture in the material was considerably higher than was specified in the sample upon which the order was based. I have no sympathy with any one who wants to make undue profits out of war conditions. I agree with Senator J. F. Guthrie that our troops were equipped better than were the troops of any other nation engaged in the war. We are proud of our reputation in this respect, and I cannot understand how any one in Australia could take advantage of our circumstances at that time.

Senator Keating:

– Especially when posing as a patriot.

Senator PAYNE:

– All I can say is that at ls. 4+d., the firm were making a magnificent profit; and when we consider that the difference in the warp and the weft represents a difference in the quality of 25 per cent., the position is all the worse.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– It is cheaper to weave 27 and 22.

Senator PAYNE:

– If the threads were of the same thickness as those in the approved sample, a reduction in the number of threads would represent a difference in the quality of from 24 to 25 per cent. .

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– There is no doubt about that.

Senator PAYNE:

– ‘Consequently, I do not think the Department went far enough in this investigation. I cannot conceive that the ‘firm introduced the cotton for the purpose of insuring additional wear of the material. They certainly made a larger profit by the process. The object of the Department in insisting upon the supply of pure wool was not to insure for the soldier additional wear for the material so much as to insure his comfort. Every one knows that pure woollen flannel next to the skin is very much more comfortable than a wool and cotton mixture, especially in varying temperatures. I trust the Senate will indorse ‘Senator J”. F. Guthrie’s attitude in regard to this matter, because he has been actuated only with the desire to expose what has been going on. . If his action has no other result than to warn other firms - if there are any - that may have been guilty of similar practices that public men are not afraid to give publicity to such matters, then the end which Senator Guthrie had in view will have been attained.

Senator GARDINER:
New South Wales

– I do not know whether I should have addressed myself to this question but for the fact that I was acting as Assistant Minister for Defence at the time when this matter first came under notice, and silence on my part might be taken to mean that I am disinclined to accept my share of the responsibility. I fail to see how this matter can be regarded as of urgent public importance, in view of the fact that all that Senator J. F. Guthrie has stated this afternoon appears in the records qf the Department, and that, on the evidence produced, the departmental officers were alert at the time to prevent fraud upon the Department. For a period of about fifteen months Senator Pearce was good enough to place me in charge of the Supply Department, and, as far as the officers there were concerned I know that their alertness, intelligence; and public spiritedness will never be sufficiently recognised. I believe I am correctly interpreting Senator Pearce’s view that the officers were encouraged to do their utmost to prevent anything in the nature of fraud being practised upon the Department. If the files were investigated quite a number of cases could be cited of officers detecting wrongdoing, and, assisted by the Minister, making every effort to place the affairs of the Department on a thoroughly satisfactory basis. No secret ha& ever been made of the fact that these things happened. Nothing has been covered up. When a report was made by one who is, probably, the highest authority in Australia - I refer to Mr. Smail, the manager of the mills - in regard to this matter, the papers were sent on to the Crown Solicitor to ascertain if a prosecution could be laid. What more; could have been done? We have to realize that in January of that year 22,000 men enlisted ; in February, when the adulteration was discovered, there were 18,000 men, and in March 15,000 men, for. all of whom the Department had to provide equipment. It is all very well for an honorable senator, a couple of years afterwards, to treat this matten as one of urgency, and endeavour to. show that, perhaps, things were not done properly. It is a matter of surprise to me that not only were things done so well at the time, but that we were able to produce in Australia all the material required for the equipment of our men who were then rushing to the colours.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– We did not produce cotton here, yet it got into the flannel.

Senator GARDINER:

– I realize that. I am not now defending people who adulterated woollen material by the introduction of cotton.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– That is the whole trouble.

Senator GARDINER:

– That question was dealt with by the Department. Any one who peruses the official documents in connexion with this contract will find that from the moment the departmental officers discovered that cotton was being used they followed the matter up until satisfaction - such as it was - was reached. There are quite a number of people who. would gaol every contractor as soon as fraud was discovered. But my experience has been that it is hard to gaol a contractor even when fraud is apparent, because there is frequently an absence of evidence on which to obtain a conviction.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– Fraud was apparent in this case.

Senator GARDINER:

– Not at a particular juncture, as it was only when the officers, by careful and constant investigation, produced the bulk of evidence that is recorded in the files.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– That was their job, and I give them credit for what they did.

Senator GARDINER:

– Of course it was their job, and, in my opinion, they did their work well. Senator Payne endeavoured to show that the firm supplied a most inferior article, but it must be admitted that it was not receiving an extraordinary price.

Senator R STORRIE GUTHRIE:
SOUTH AUSTRALIA · ALP; NAT from 1917

– They received all they asked for.

Senator Pearce:

– They wanted 2s. 6d.; that was their estimate.

Senator GARDINER:

– At that particular juncture it was not a pre-war price, and the material they were supplying at1s. 41/2d. per yard could have been disposed of at 2s. 8d. per yard.

Senator Payne:

– The pre-war price was1s.01/2d.

Senator GARDINER:

– The price at which they contracted to supply was not on a pre-war basis. Although manufacturers may have made a lot out of the Commonwealth during the period of the war, they rendered good service. As a member of the Government responsible for the arrangement made with the mill-owners, I am not at all sorry that they were able to conduct their operations at a good profit, because, good as the profit was to them, it must be remembered that it was not one-tenth of what it would have been if they had been allowed to trade freely. Senator J. F. Guthrie also referred to a Department with which I did not have any dealings - the Navy Department - and mentioned that the firm were allowed to place a certain quantity of blankets on the open market. That may not have been wise under some circumstances, but possibly there was some justification. There was a powerful reason why the Minister for the Navy should allow the blankets to be placed on the market when there was a pressing need for them outside.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– These people knew that, and it was a premeditated crime.

Senator GARDINER:

– The officers of the Department at the time not only had to consider that there were a number of blankets contrary to the specification, but that there were a number of people who were in need of them. Would it have been wise to keep them out of use when they were urgently needed ? I had a similar experience in connexion with a number of undershirts that were under size.

Senator Keating:

– Who controlled the sale of blankets to the public?

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– There was no control.

Senator GARDINER:

– I was mentioning the case of a contractor who, instead of making a number of undershirts in small, medium, and large sizes, made up too many in the small size, and thus increased his profits. They were put aside for the time, but when it was found chat in the colder portions of the Commonwealth, particularly Tasmania, there was a demand for such garments, we permitted them to go on the market, but stipulated a price at which they were to be sold. We did not give the contractors an opportunity of making a profit out of them.

Senator Reid:

– And you could have got almost anything.

Senator Keating:

– Was a price stipulated in connexion. with the blankets?

Senator GARDINER:

– The sale of the blankets was authorized by the Department of the Navy, over which I had no control.

Senator Keating:

– The public should have been informed as to the price and quality.

Senator GARDINER:

– I do not know exactly what was done in the matter. I remember, however, that a number of shirts were held over for a considerable period, and were later released on the condition that the contractor would not make a profit. The evidence that has already been brought before the Senate shows that the officers of the Department were very alert. In the event of another war, I can readily understand, with the experience we have had during recent years, that contracts would be more efficiently and effectively handled. If we were to go into all the ramifications of the work performed, we would find other contractors who had defeated the Department, but, thank God, they were not many. I know that while I was responsible for the work in a portion of the Department I wa3 beaten in some directions; but it was impossible to get men with the necessary expert knowledge in different branches of manufacture. We had good officers, but there were not sufficient with the experience required. It was easy to get men to offer their services, but it was useless to employ those who were incompetent. The firm to which Senator J. F. Guthrie referred might, doubtless, have been prepared to send along some of their best. I think that we should acknowledge the efforts of a number of excellent firms in Australia who offered their assistance and that of their best men. I could refer to quite a number of instances that came under my notice as Assistant Minister, but as far as this particular transaction was concerned it must be admitted that as soon as it was discovered it was followed up, and Mr. Laird Smith, who undertook the work which I endeavoured to do to the best of my ability, finally settled it. Senator J. F. Guthrie has brought forward ample proof that alert officers of the Department discovered the fraud, and followed it up, with the result that contractors were compelled to pay as much as they could be forced to pay. The Crown Law officers were given the whole of the facts, and action would have been taken if the firm could have been prosecuted. In view of the fact that all the details are on record, I cannot see the urgency of bringing the matter before the Senate at this stage.

Senator KEATING:
Tasmania

– In spite of what has been said by Senator Gardiner, I believe that there is every justification for bringing this matter before the Senate and treating it as one of urgency. I stood up as one of those whosupported Senator J. F Guthrie when it* was announced that he intended to adjourn the Senate to discuss this question. I have observed, in common with other honorable senators, what has been questioned and answered in this connexion, and although the matter occurred some years ago, and although it has been shown that the officers of the Department and the Minister were very alert, and took all the necessary steps possible to bring the offenders to book, I think that great good has been achieved in ventilating the subject today. It appears from what has been said in the debate that the contractors on this occasion were deliberately wilfully, and criminally defrauding the Commonwealth at a time of war and while posturing as patriots. They were doing what might have proved of incalculable harm, not only to the men at the Front, but to the Commonwealth and to the cause of Empire. It is unnecessary to go over the whole of the circumstances, but so far as I can gather from what has been said, they were practically safe from criminal prosecution, by reason of the fact that they were trading as a limited liability company. Senator J. E. Guthrie interjected, in answer to that, that it was brought out that the company consists of one man. Unfortunately, the company law of Victoria enables a single individual to convert himself into a company, by associating with other members of his family, or “ dummies,” who hold one share each in a company, which nominally consists of, say, 25,000 shares. He is then able to do certain things, which, if done in the capacity of an individual, would bring him within the scope of the criminal law. That is how he escapes. If that is brought well forward, the Senate will have done some good in discussing this matter, and it should serve as a warning to the Defence Department and other Departments of the Commonwealth when entering into contracts with contractors who appear to be corporate or limited liability concerns. In such cases the Commonwealth should insist upon some individual taking the criminal responsibility just as an individual contractor would have to do. If that cannot be done, the Commonwealth should pass ito own legislation to enable it, when entering into contracts with one man companies, to provide for some individual responsibility in the event of a criminal offence being committed. If the Victorian or any State law does not give protection in this regard, the Commonwealth, by administration or by legislation, should protect itself against criminal action on the part of individuals who are clothed for the time being with the immunities, as well as the privileges, of limited liability concerns. Eoi- that reason, if for no other, I think the debate this afternoon has been justified. I trust that the Government will see that contractors who are technically and legally corporate or limited liability concerns, name some one to be responsible in such cases, so that the Government may be protected.

Senator J F GUTHRIE:
VICTORIA · NAT; UAP from 1931

– I do not think it is necessary for me to say very much by way of reply to the debate which has taken place upon this motion. I hope that some good “has been accomplished by ventilating the question. Personally I think the discussion must result in good if we only enact legislation upon the lines indicated by Senator Keating, and thus render persons liable to criminal proceedings whenever they set out to rob the people and the Government in circumstances such as I have indicated. Whilst I admit that Mr. Smail, who assessed the damages in this particular case, is an expert of the highest order, I would point out that he assessed them only upon the quantity of material which these contractors were proved to have adulterated with cotton. But, as a matter of fact, they had previously adulterated another 1,500,000 yards, inasmuch as the 422,000 yards to which the damages related, were identical, not only in regard to the weave, but in all other respects, to the 1,500,000 yards previously accepted by the Department. Consequently I maintain that the penalty imposed was quite inadequate, especially as, in assessing the damages, no notice was taken of the cheaper weave. The firm1 would really make a greater profit out of their contract through the cheaper weave, than they would make by admixture with the wool of more than 12 per cent, of cotton. I ask leave to withdraw the motion.

Motion, by leave, withdrawn.

page 6572

AIR DEFENCE BILL

Motion (by Senator Pearce) agreed to-

That leave be granted to introduce a Bill fur an Act relating to air defence.

page 6572

ASSENT TO BILLS

Assent to the following Bills reported -. -

Treaty of Peace (Germany) Bill. Treaties of Peace (Austria and Bulgaria)

Bill. - .

Customs Bill.

page 6572

NATIONALITY BILL

Bill returned with a message intimating that the House of Representatives had agreed to the amendments made by the Senate upon amendment No. 3 of the House of Representatives.

page 6572

COMMONWEALTH ELECTORAL (WAR-TIME) REPEAL BILL

Bill received from the House of Representatives, and (on motion by Senator Russell) read a first time.

page 6572

COMMONWEALTH BANK BILL

Bill received from the House of Representatives, and (on motion by Senator Pearce) read a first time.

page 6572

LAND TAX BILL

Bill received from the House of Representatives, and (on motion by Senator Pearce) read a first time.

page 6572

ALIENS REGISTRATION BILL

Bill returned from the House of Representatives, with amendments.

Senate adjourned at 4.58 p.m.

Cite as: Australia, Senate, Debates, 17 November 1920, viewed 22 October 2017, <http://historichansard.net/senate/1920/19201117_senate_8_94/>.

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