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Justin Hemmes, the treasurer and the $100m wages case

Jun 24, 2020 • 15m 33s

New details have emerged in the Justin Hemmes wages case, as the treasurer confirms he consulted the businessman over the country’s largest ever spending measure.

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Justin Hemmes, the treasurer and the $100m wages case

250 • Jun 24, 2020

Justin Hemmes, the treasurer and the $100m wages case

RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

Justin Hemmes is one of four businessmen consulted by the federal Treasurer on the JobKeeper program, the single largest spending measure in Australian history.

At the same time, Hemmes is defending a multi-million dollar wages case in the federal court - alleging underpayment of workers.

Today, Rick Morton on the man who changed Sydney’s nightlife - and the case now brought against him.


RUBY:

So, Rick, how did Justin Hemmes make his money?

RICK:

It started with his parents. You know, Justin's mother was a milliner in Sydney and his father, John - or Mr. John - kind of created their own fashion business when they met in Sydney. And that was named after her, his mother, Merivale. And it kind of revolutionised fashion in Australia.

RUBY:

Rick Morton is a senior reporter for The Saturday Paper.

RICK:

But his dad's real talent was property.

Justin recalls being driven around as a kid, just looking at building up to building and being completely bored by it. But in a way, buildings became Justin's talent as well - or I guess more to the point, what you could do with a building. So in 1993, his dad bought a vacant office block on York Street in Sydney and Hemmes, you know, young Justin, pitched to his dad this idea for a multi-story entertainment venue.

Archival tape -- Hemmes:

We came up with this concept for this building was a multi-level building on a corner.

RICK:

With a restaurant on one floor and a cocktail lounge was a nightclub on another floor, there was a piano bar - and the whole thing became Hotel CBD.

Archival tape -- Hemmes:

I thought this would be a great site to house all these different offerings in the one building.

RICK:

It was meant to be run by a tenant, but that fell through and they backed out. And Justin, you know, he's just a young kid really at this stage, was left in charge of the whole thing.

Archival tape -- Hemmes:

I got a call from my dad who said, we can't even get someone to manage it. Can you come back and run this place for us?

And I was in Darwin at the time, so I said I’ll come back straight away. So I drove from Darwin to Sydney in two days.

RICK:

And it was an enormous success.

Archival tape -- Hemmes:

So I parked the car in the city there, and I ran in and I started managing. And, then, I fell in love with hospitality.

RICK:

And then there was the Establishment. And you've got to remember at this time, Justin is now 24 years of age, and he again, he pitched this idea to his dad. There was this site on George Street in Sydney's CBD. It was a nine million dollar building. He wanted another kind of multi-level pleasure palace. And this time there's going to be a hotel as well as bars and restaurants.

It was a huge investment at the time and the Hemmes family had to put their own home on the line basically to get the investment secured. But they did it and they did it because, as you know, as Justin told the Financial Review, that his dad had unconditional support for him. And he actually said if ‘I told him the sun wasn't going to come up the next morning, he probably would have been like, oh, I bet you're right.’

But from there, it's really just grown and grown and grown. So, you know, he had family money behind him to begin with, but it wasn't a huge amount compared to what he's actually done with Merivale, the business now.

And now when you talk about that company, it's almost impossible to go for a drink in Sydney over a year and not go into one of these venues that is owned by Justin Hemmes in the family. So they've got the Ivy, which really changed a whole segment of how Sydney society went out to drink and party and have fun.

Archival tape -- reporter:

No, it's not a Broadway production. This is the future of clubbing. Every Saturday night, Ivy nightclub will be transformed.

Archival tape -- unknown:

It’s a wonderful collaboration of cabaret and theatre and circus meets clubbing.

RICK:

The Hemmes' Group, of which Justin is now CEO, it just keeps adding venues. They've got the Coogee Pavilion, they bought the Newport Arms on Sydney's northern beaches for about, I think, 50 million dollars from memory.
And they bought the Vic on the Park where I was just a couple of weekends ago and scores and scores of others. So that was about 70 venues in 20 different buildings, plus, they've got a whole suite of residential property. So it is the property business as much as anything else, but Justin has always described it as, he’s in the business of fun and making people feel good.

RUBY:

Mhm. And so what is Justin Hemmes like?

RICK:

Perhaps exactly as you'd imagine, someone who is in that business. You know, he's got a Playboy reputation. He likes fast cars. He owns a Bombardier jet...

Archival tape -- Hemmes:

You eat great food, you have a drink by the ocean and you go swimming, you know, and this is what I like. This is how I like to live.

RICK:

When he was younger, he flipped and sunk his speedboat. A very expensive speedboat, I should add… often surrounded by beautiful women, almost always in a loose, open neck linen shirt

Archival tape -- Hemmes:

I think it's a country that is so full of opportunity and so ripe with opportunity that if you have the gusto to go for it, chances are you're going to succeed.

RICK:

He's got a reputation for being absolutely fastidious with detail, not only his own in terms of the way he dresses, but the business itself, they talk about the fact that he will check receipts for a 50 dollar business expense. And when the AFR actually - the Financial Review - photographed him for that profile, you know, about the fact that his wealth had cracked the one billion dollar mark, he just went and grabbed a lobster out of the kitchen for the photoshoot. And as soon as the photoshoot was over, he put the lobster back. He didn't return the lobster to freedom. He just put it back in the kitchen so it wouldn't go to waste.

RUBY:

Mhm. And so can you tell me why you started looking into Justin Hemmes?

RICK:

Well, actually started with the coronavirus virus pandemic, ironically… Because I was looking at the suite of influences around the treasurer, Josh Frydenberg, particularly the ones involved in the creation of the landmark JobKeeper wage subsidy program.

So Josh Frydenberg actually called Justin Hemmes and three others to kind of iron out the details of this government spending program. The biggest one ever. And it was meant to say the Australian economy during the Coronavirus lockdown.

And I was especially interested because I knew at the same time as that call, Hemmes was fighting an enormous underpayment case in the federal court.

RUBY:

We'll be back in a moment.

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RUBY:

Rick, Can you tell me more about this phone call between Justin Hemmes and the Treasurer Josh Frydenberg, that happened while the JobKeeper package was being formulated?

RICK:

Right. So Justin Hemmes is a close friend of the federal treasurer, and so Hemmes has always been there. He was at his first speech as an MP in parliament. He was at his first budget speech as treasurer last year, shortly before the federal election. So, you know, Frydenberg...he knows Justin quite well. And there's this dinner.

So on the night of the 26th of March, Josh Frydenberg goes to Scott Morrison's parliamentary office. He's there with the Finance Minister, Mathias Cormann, and both the Treasury secretary and Deputy Secretary Steven Kennedy and Jenny Wilkinson were beamed in via video link.

And they're kind of thrashing about going, ‘What are we going to do for people who are losing their jobs?’ And for weeks, you know, this team had been pressured by many different parts of society to adopt a wage subsidy, very similar to one being used in Britain and New Zealand.

Archival tape -- unknown:

We need the wage subsidy implemented, and we need it implemented urgently. Two weeks ago, when we were arguing this - and unions have been arguing it, and businesses have been arguing it...

RICK:

But Scott Morrison was adamant that that was not going to be the case, mostly because he'd resisted it in the first place quite publicly. But they needed something. And what they realised they needed was that they needed a program that could be delivered using the existing government infrastructure, i.e. Centrelink, or Services Australia. And crucially, the thing that really convinced them was that they needed a program that preserved the relationship between employers and their staff. The employers didn't want their staff going into the Centrelink queue. They wanted to be paid directly so that they could keep them and their staff on their books.
So this dinner happens.

Not long after that dinner on the night of the 26th of March, Josh Frydenberg made four separate phone calls: to Justin Hemmes, to the retail billionaire Solomon Lew, and to the CEOs of JB HIFI and Wesfarmers… where he kind of sussed what they thought about this now embryonic JobKeeper package. And those phone calls, each of them individually became quite significant, I think, to Josh Frydenberg thinking about what needed to be done.

Archival tape -- Alan Jones:

Josh, just one point. I mean, they always say government doesn't consult, you don't listen to anybody, you don't talk to people - just explain for our viewers what happened that night when you put the package together…

RICK:

Josh Frydenberg confirmed this, on April 1 in an interview with 2GB’s Alan Jones. Josh Frydenberg detailed his call to Hemmes about the JobKeeper.

Archival tape -- Frydenberg:

Well that’s true, Alan. When we were working on the JobKeeper package, we wanted to talk to the business leaders who tragically were closing their doors and laying off their staff. And so I did speak to a number of them: Justin Hemmes, Solly Lew...

RICK:

Frydenberg told Alan Jones that the men were really emotional about having to close their doors as a result of the pandemic. So that really stuck in Frydenberg’s head.

Archival tape -- Frydenberg:

Between them, they employ around 150,000 Australians. And through no fault of them, no fault of their staff, but as a result of this global pandemic, they had to close their doors…

RICK:

Hemmes, I should point out, has also been a key voice on the business advisory committee convened by the New South Wales Treasurer, Dominic Perrottet, which has assumed increased influence after the coronavirus outbreak.
And, you know, there've been multiple kind of hookups and discussions, just kind of sorting through the crisis. And Justin Hemmes is kind of influential now in these two spheres of coalition governments.

RUBY:

Right, so Hemmes is offering advice to the government - formally at the state level, and informally at the federal level... You also mentioned that there's this court case over wages… can you tell me more about that?

RICK:

It's a class action against Hemmes' pub empire.

Archival tape -- reporter:

Explosive legal action will be brought against hospitality king Justin Hemmes this week following allegations by staff…

RICK:

Essentially, it's alleged that almost one hundred million dollars in back pay and penalties and entitlements is owed to staff, both current and former, for lost penalty rates and other entitlements that were kind of not included in this workplace agreement, which is a kind of a leftover from the Howard-era WorkChoices regime.

Archival tape -- reporter:

Sydney's Bar tsar in for another court row. A class action announced claiming Merivale short-changed more than 8000 staff over six years.

RICK:

In the defence that Hemmes’ lawyers have filed, they say that they believe the agreements they were working under were legal and indeed that the business would actually not have made many of the decisions that had ended up making, like expanding aggressively and going into debt, if they thought that these agreements were not legal. So that's the key to their defence, right.

Now, Merivale first began draughting this collective employee agreement around August 2007. In the dying months of the Howard government. The deal was voted on, agreed and inked in December of that year. But under the WorkChoices-lite, as it became known, this employee agreement was now subject to a fairness test from what was then the workplace authority. So from here begins quite a complex back and forth.

RICK:

And the argument now is that the agreement that was left in place allowed for a decade of underpayment, really quite substantial underpayment. And so while much of the lawsuit targets the payment of flat rates to staff, which is meant to cover the fact that they don't get penalties, about 12 million to 18 million dollars of the claim is regarding salaried employees who were paid for about 38 hours a week, but were, according to Aderro law, who is running the class action, rostered and actually did work up to 55 hours each week.

Now, Hemmes’ lawyers say that this was actually averaged out across the 52 weeks of the year and that this was fair. And they agreed to these conditions when they signed on to the Merivale agreement. And it goes on like this almost ad infinitum.

RUBY:

Mm. So do we know when this will be resolved? Do we know what the timeline is on this case?

RICK:

So right now, we're still in the document discovery phase. So Merivale has filed the defence. And there's been - just in the last week, actually - there's been a couple of more documents requested from the class action lawyers, Aderro. So this will at this stage go to trial at some point. We just don't have a date for that yet. So we're still doing the backroom stuff. But, you know, I guess at the moment we're watching and waiting to see what the judge does.

RUBY:

And did you talk to the treasurer, Josh Frydenberg, about any of this? Were you able to ask where it was appropriate to seek counsel on wages policy from someone who is defending a wages case in the federal court?

RICK:

Look, I tried. He didn't get back to me, obviously, and neither did Justin Hemmes, through Merivale. But, you know, the court documents do speak for themselves. And I went to Dominic Perrottet, the New South Wales Treasurer, as well. And he said, you know, they've never discussed the legal proceedings. And you're saying it's important to get a wide range of views when you're leading the state, which is not inaccurate.

You've got to talk to everyone, I guess.

RUBY:

Rick, thank you so much for your time today.

RICK:

Thank you, Ruby.

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RUBY:

Also in the news -

The Prime Minister Scott Morrison has said sexual harassment allegations against former High Court judge Dyson Heydon were "very disturbing", "very concerning" and "incredibly serious".

An independent investigation commissioned by the High Court found Heydon harassed six former court staff, some of whom have since left the law.

Former Labor leader Bill Shorten has called for Dyson Heydon to be stripped of his Australian honours.

The Law Council of Australia President Pauline Wright said the findings were indicative of broader cultural problems within the profession, and has called for change.

Dyson Heydon categorically denied the allegations.

I’m Ruby Jones, this is 7am, see you tomorrow.

Justin Hemmes is one of four businessmen who were consulted by the federal treasurer on the JobKeeper program. At the same time, he is defending a multi-million dollar wages case in the federal court.

Guest: Senior reporter for The Saturday Paper Rick Morton.

Background reading:

Inside Hemmes’ $100m wage case in The Saturday Paper
The Saturday Paper
The Monthly

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem.

Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas.

Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief.
Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

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250: Justin Hemmes, the treasurer and the $100m wages case