COPYRIGHT RESERVED Note: Copyright in this transcript is reserved to the Department of Finance, Services and Innovation. The reproduction, except under authority from the Department of Finance, Services and Innovation, of the contents of this transcript for any purpose other than the conduct of these proceedings is prohibited. INQUIRY UNDER THE CHARITABLE FUNDRAISING ACT 1991 Public Hearing Held at Level 3, LPI Building Queens Square 1 Prince Albert Road Sydney, New South Wales On Thursday, 7 September 2017 at 10am BEFORE: The Public Inquirer, The Hon. P A Bergin SC Anthony Cheshire SC Ms Jennifer Single Mr Enzo Camporeale .07/09/2017 (2) 43 Transcript produced by DTI

1 PUBLIC INQUIRER: Yes, Mr Cheshire. 2 3 MR CHESHIRE: Thank you, Madam Inquirer. Before I start 4 with the first witness, I would like to tender some 5 material, if I may. May I start with the bundles that are 6 titled RSL LifeCare Limited, volume 1, volume 2 and 7 supplemental. I tender that as perhaps exhibit 1. 8 9 PUBLIC INQUIRER: Yes. I presume there's no objection to 10 this? 11 12 MS HOGAN-DORAN: No. 13 14 PUBLIC INQUIRER: Yes, the RSL limited LifeCare bundles, 15 volume 1, volume 2 and supplementary will become volume 1, 16 volume 2 and supplementary of exhibit 1. 17 18 EXHIBIT #1 RSL LIMITED LIFECARE BUNDLES, VOLUME 1, VOLUME 2 19 AND SUPPLEMENTARY 20 21 MR CHESHIRE: Thank you. Then there are three volumes 22 that are titled "Notices to answer questions and key 23 correspondence RSL LifeCare Limited". I tender those three 24 volumes. 25 26 PUBLIC INQUIRER: Any objection? 27 28 MS HOGAN-DORAN: No, Madam Inquirer. 29 30 PUBLIC INQUIRER: Those three volumes will become volume 31 1, 2 and 3 of exhibit 2. 32 33 EXHIBIT #2 VOLUMES 1, 2 AND 3 TITLED "NOTICES TO ANSWER 34 QUESTIONS AND KEY CORRESPONDENCE RSL LIFECARE LIMITED" 35 36 MR CHESHIRE: There is then a two-volume bundle "RSL 37 LifeCare Directors Handbook Bundle". 38 39 PUBLIC INQUIRER: Any objection? 40 41 MS HOGAN-DORAN: No objection. 42 43 PUBLIC INQUIRER: The handbook, volumes 1 and 2, will 44 become exhibit 3, volumes 1 and 2. 45 46 EXHIBIT #3 RSL LIFECARE DIRECTORS HANDBOOK BUNDLE VOLUMES 1 47 AND 2 .07/09/2017 (2) 44 Transcript produced by DTI

1 2 MR CHESHIRE: A bundle entitled "Authority Approvals and 3 Conditions, Statements of Officers and Auditors Report", 4 that is one volume and I tender that. 5 6 PUBLIC INQUIRER: Any objection? 7 8 MS HOGAN-DORAN: There's no objection, but I do understand 9 that volume includes documents concerning entities other 10 than LifeCare. 11 12 PUBLIC INQUIRER: Yes. Is there no other objection from 13 any party or person in the room? Yes. I note there is no 14 objection. That will become exhibit 4. 15 16 EXHIBIT #4 ONE VOLUME ENTITLED "AUTHORITY APPROVALS AND 17 CONDITIONS, STATEMENTS OF OFFICERS AND AUDITORS REPORT" 18 19 MR CHESHIRE: There are two volumes of material 20 "Charitable Fundraising Act 1991 Documents". I tender 21 those two volumes. 22 23 PUBLIC INQUIRER: That will be exhibit 5, volumes 1 and 2. 24 25 EXHIBIT #5 TWO VOLUMES ENTITLED "CHARITABLE FUNDRAISING ACT 26 1991 DOCUMENTS" 27 28 MR CHESHIRE: Finally, at this stage, there is a small 29 volume entitled "Ron Thompson" and I tender that volume. 30 31 PUBLIC INQUIRER: Any objection? 32 33 MS HOGAN-DORAN: No objection. 34 35 PUBLIC INQUIRER: Thank you. That will become exhibit 6. 36 37 EXHIBIT #6 VOLUME ENTITLED "RON THOMPSON" 38 39 MR CHESHIRE: Thank you. Then I propose to call Mr Ronald 40 Thompson. 41 42 PUBLIC INQUIRER: Yes, Mr Thompson, come to the witness 43 box, please. 44 45 <RONALD BRUCE THOMPSON, sworn: [10.07am] 46 47 MS GERACE: If I could announce my appearance, .07/09/2017 (2) 45 R B THOMPSON Transcript produced by DTI

1 Madam Inquirer. I appear for Mr Ron Thompson, Ms Gerace, 2 instructed by Arnold Bloch Leibler. 3 4 Mr Thompson is giving evidence pursuant to summons 5 issued on 16 August 2017. He wishes to make objection on 6 the grounds of privilege against self-incrimination. I 7 understand the process to be adopted is that the witness 8 must claim privilege in relation to each question by 9 prefacing an answer by the word "privilege", or by some 10 other means. I just wish to observe the procedure. 11 12 PUBLIC INQUIRER: Thank you, Ms Gerace. 13 14 Q. Mr Thompson, you've heard what your counsel has said. 15 First of all, would you please tell us your full name, 16 address and occupation? 17 A. Ronald Bruce Thompson, 105 Maxwell Street, Turramurra. 18 Chief Executive, RSL LifeCare. 19 20 Q. If you would just move slightly closer to the 21 microphone, I would be grateful. You are represented by 22 counsel and your counsel, no doubt, has had discussions 23 with you about which I do not want to know, of course. You 24 are entitled to object to any question that may tend to, 25 what they've called previously self-incrimination, but that 26 may tend to expose you to prosecution for a criminal 27 offence, or to proceedings in respect of a civil penalty. 28 Do you understand that? 29 A. My solicitor, my counsel has said that, yes. 30 31 Q. Your counsel will be entitled also to assist you 32 throughout your evidence to make an objection, to take an 33 objection, so if you are concerned, you just pause and 34 indicate that you wish to object. Alternatively, your 35 counsel will be on her feet to object. Do you understand 36 that? 37 A. Yes. 38 39 PUBLIC INQUIRER: Yes. Yes, Mr Cheshire. 40 41 MR CHESHIRE: Thank you, Madam Inquirer. 42 43 <EXAMINATION BY MR CHESHIRE: 44 45 MR CHESHIRE: Q. Mr Thompson, you are currently the 46 Chief Executive Officer of RSL LifeCare Limited; is that 47 correct? .07/09/2017 (2) 46 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Yes. 2 3 Q. If I call that LifeCare, that company, you'll be happy 4 with that? 5 A. Yes. 6 7 Q. When did you commence in that position? 8 A. May 2001. 9 10 Q. Prior to that time, were you working for LifeCare? 11 A. No. 12 13 Q. You have been Chief Executive Officer throughout; is 14 that correct? 15 A. Correct. 16 17 PUBLIC INQUIRER: Q. Just before you go on, what is that 18 you've got in your hands there? 19 A. I've been given this by my counsel, to start saying 20 "privilege". 21 22 Q. Put that to one side, Mr Buckley will take that away. 23 It is just a matter of objecting, so there's no need to 24 claim privilege. 25 A. Can I just clarify what word I say? 26 27 Q. You just say "I object". 28 A. I object, okay. 29 30 Q. Your counsel will be alert to what is going on. Feel 31 more comfortable just concentrating on the questions, and 32 the words to be used are "I object". 33 A. Thank you. 34 35 MADAM INQUIRER: Yes, Mr Cheshire. 36 37 MR CHESHIRE: Q. When you commenced with LifeCare, 38 presumably you looked into the books and records of 39 LifeCare to try and work out what the organisation was; 40 correct? 41 A. I object. Yes, I did look at the financial situation 42 of RSL LifeCare when I commenced, yes. 43 44 Q. You came to the view, didn't you, that RSL LifeCare 45 had been struggling financially in the late 1990s; correct? 46 A. I object. 47 .07/09/2017 (2) 47 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 PUBLIC INQUIRER: Just pause there. When you say 2 "I object", it has to be the on the basis that it will 3 expose you to the risk of prosecution. What I've said is 4 that your counsel is here, and has advised you, no doubt, 5 and your counsel will take objection should the question in 6 the form that it is in fact given to you be one that would 7 truly expose you to prosecution. I think you're speaking 8 about May 2001? 9 A. Yes. 10 11 Q. What you did in May 2001. 12 A. Yes. I'm simply following instructions from counsel 13 at the moment, so could I have that clarified by counsel? 14 15 PUBLIC INQUIRER: Yes. What I might do is take a short 16 adjournment whilst Ms Gerace discusses the matter with you, 17 so there's no embarrassment for anyone, and she will 18 indicate to you a process that is one where you only object 19 when there's a true exposure. Ms Gerace, are you happy to 20 do that? 21 22 MS GERACE: Thank you, Madam Inquirer. 23 24 PUBLIC INQUIRER: Thank you. I'll just take an 25 adjournment. Would you step down, Mr Thompson, and I'll 26 give you a few minutes to discuss it with your counsel. 27 You may leave the witness box. Take a few minutes to 28 discuss it with your client, Ms Gerace. Do you want to 29 raise anything further before I take a short adjournment? 30 31 MS GERACE: No, I might have a short discussion with your 32 Counsel Assisting privately. 33 34 PUBLIC INQUIRER: It is a matter for you. I will adjourn. 35 36 SHORT ADJOURNMENT 37 38 PUBLIC INQUIRER: Yes, thank you. Come back into the 39 witness box, please, Mr Thompson. Take a seat, 40 Mr Thompson. 41 42 Ms Gerace, I think your anxiety about this can be 43 cured in this way: you can object to the questions as you 44 see them. Please don't feel that you've run out of time. 45 Seriously, if there is a problem, then you can look at the 46 transcript and make a submission to me so that I can have 47 the transcript covered by the questions that you say are .07/09/2017 (2) 48 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 subject to objection after you get the transcript. Would 2 that be a suitable course for you? 3 4 MS GERACE: Thank you, Madam Inquirer, that would. 5 6 PUBLIC INQUIRER: As you hear them, if you wish to object, 7 please do so. 8 9 MS GERACE: I might just I identify the source of the 10 anxiety. 11 12 PUBLIC INQUIRER: There's no need to do that. We've cured 13 it now, I would hope. 14 15 Yes, Mr Cheshire. 16 17 MR CHESHIRE: Q. Mr Thompson, it is right, to your 18 understanding, from your review of the records of LifeCare, 19 in the late 1990s LifeCare was struggling financially; 20 correct? 21 A. Yes. 22 23 Q. At that time, the Board was operating, as you saw it, 24 more as a Board of management; correct? 25 A. Yes. 26 27 Q. The directors at that time were drawn from RSL (NSW) 28 State Council or the RSL Ladies Auxiliary; is that right? 29 A. Correct. 30 31 Q. So none of those directors, as you understood it, had 32 specific skills in relation to the business that was 33 conducted by LifeCare; correct? 34 A. The directors at that time, no, did not have specific 35 skills. 36 37 Q. And that time was prior to the engagement of 38 Mr Riddington and Dr Macri; correct? 39 A. Yes. 40 41 Q. Those two persons were appointed, as you understood 42 it, because they had skills that were specific to the 43 business of LifeCare; correct? 44 A. Yes. 45 46 Q. So, as you understood it, it was an attempt by 47 LifeCare to add a degree of specialisation and expertise .07/09/2017 (2) 49 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 into its ability to run the business; correct? 2 A. Can I just clarify one point, please? 3 4 Q. Yes. 5 A. When you said "appointed", did you mean appointed as 6 consultants or appointed as directors? 7 8 Q. They were initially appointed as consultants; correct? 9 A. Yes. 10 11 Q. My question was on the basis of them being appointed 12 as consultants. 13 A. Yes. 14 15 Q. So you would then agree with me, wouldn't you? 16 A. Yes. Yes. 17 18 Q. Some time after they were appointed as consultants, 19 they were then appointed as directors; correct? 20 A. Yes. 21 22 Q. So that then was, as you understood it, a continuation 23 of the Board endeavouring to bring people into the running 24 of the business who had that expertise and specialisation; 25 correct? 26 A. That's what I was advised in May 2001 prior to the 27 appointment of Mr Riddington and Dr Macri. 28 29 Q. When you started in May 2001, were either or both of 30 Mr Riddington and Dr Macri on the Board at that time? 31 A. No. 32 33 Q. Neither of them were on the Board; is that right? 34 A. No, neither were on the Board. 35 36 Q. But they were both consultants? 37 A. They were consultants advising the Board and attending 38 Board meetings. 39 40 PUBLIC INQUIRER: Would you just move that microphone just 41 a little closer to you, if it's possible. Mr Buckley, you 42 might come and assist. Thank you. 43 44 MR CHESHIRE: Q. It is right, isn't it, that 45 Mr Riddington was not a State Councillor or a member of the 46 RSL Ladies Auxiliary? 47 A. That's correct. .07/09/2017 (2) 50 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. And, likewise, Dr Macri; is that correct? 3 A. That's correct. 4 5 Q. At that time, when you started in May 2001, LifeCare 6 had in place various committees, didn't it? 7 A. There may have been committees. I'm not one 8 hundred per cent sure, sorry. 9 10 Q. You know that has been some form of strategy 11 committee, correct, in place for some years? 12 A. No, I don't, sorry. 13 14 Q. You are aware that there has been some form of finance 15 committee in place at LifeCare for some time? 16 A. I'm not familiar with the committee structure prior to 17 June 2001, sorry. 18 19 Q. You are aware now that there has been a finance or 20 equivalent committee in place for some time; correct? 21 A. Since June or July 2001, yes, there has been. 22 23 Q. Is that when you say the committee was started, or do 24 you say that it had been in place for some time and it was 25 in place when you started, but you don't know how long? 26 A. In May and June 2001, I don't recall any committees 27 meeting. 28 29 Q. Do you recall then whether there were any committees 30 in place at that time? 31 A. To the best of my knowledge, at that particular point 32 in time, I don't think there were, but I can't be 33 100 per cent sure, sorry. 34 35 Q. Committees were, in any event, set up at some stage, 36 around about that time; correct? 37 A. Committees - from recollection, there were four 38 committees, I think, set up in the third quarter of 2001. 39 40 Q. Those committees - what do you recall them including? 41 A. One was strategy based, one was finance based, one was 42 care and services based, and I think the fourth one was 43 property based. 44 45 Q. Mr Riddington and Dr Macri, when were they appointed 46 to the Board? 47 A. On or around July 2001. .07/09/2017 (2) 51 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. So it is right that after that time when these 3 committees were set up, Mr Riddington and Dr Macri were 4 appointed to a number of those committees; correct? 5 A. That's correct. 6 7 Q. But also a number of the other Board members were 8 appointed to those committees; correct? 9 A. That's correct. 10 11 Q. It is right, isn't it, then, that the Board members 12 other than Mr Riddington and Dr Macri served on those 13 committees as part of their ordinary duties as being 14 directors; correct? 15 A. Can I just clarify that, please? 16 17 Q. Yes. 18 A. There were three other additional consultant 19 appointments from July or August 2001 and five people were 20 consultant directors from the third quarter of 2001. 21 22 Q. Those three others being Mr Longley, Mr Kells and 23 Mr Magee; correct? 24 A. Correct. 25 26 Q. In addition then to those five - Mr Longley, Mr Kells 27 and Mr Magee were not State Councillors or members of the 28 ladies auxiliary; correct? 29 A. Correct. 30 31 Q. So they were brought in, as with Mr Riddington and 32 Dr Macri, as being specialists; correct? 33 A. Correct. 34 35 Q. So you then had on the Board a mixture between those 36 five specialists and a number of directors who were still 37 members of State Council or ladies auxiliary; correct? 38 A. Correct. 39 40 Q. The committees that were set up had on them a mixture 41 between some of the five specialists and some of the other 42 State Councillors or members of the ladies auxiliary; 43 correct? 44 A. Yes. 45 46 Q. Put aside the specialists for the moment - I'll call 47 the other non-specialists or State Councillors - those .07/09/2017 (2) 52 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 non-competition specialists, they served on those 2 committees as part of their ordinary duties as being 3 directors? 4 5 MS GERACE: I object to that question. 6 7 PUBLIC INQUIRER: Yes, the objection is noted. Do you 8 press it? 9 10 MS GERACE: I also object on this basis. It is said that 11 they sat on the committee as part of their ordinary 12 directors duties. The objection is this: the Constitution 13 provided for the establishment of these committees. 14 I think the proposition being put that they sat there as 15 part of their ordinary duties is part of what this inquiry 16 is considering. I don't understand whether it is being put 17 as part of the instruction, and I think it is confusing, 18 given the Constitution. 19 20 PUBLIC INQUIRER: What do you say, Mr Cheshire? 21 22 MR CHESHIRE: If I add in the words "to your 23 understanding", I'm content to do that. 24 25 MS GERACE: Yes, thank you. 26 27 PUBLIC INQUIRER: Yes. 28 29 MR CHESHIRE: Q. To your understanding, Mr Thompson, the 30 non-specialist directors sat on those committees as part of 31 their ordinary job as being directors; correct? 32 A. They sat on the Board as directors. They sat on those 33 committees. I'm not sure on what basis they sat on them, 34 but they certainly sat on those committees. 35 36 Q. Your understanding at the time would have been that 37 was part of their role as directors to sit on committees; 38 correct? 39 A. I did not put my mind to it. 40 41 Q. It is right, isn't it, that Mr Riddington and 42 Dr Macri, Mr Longley, Mr Kells and Mr Magee were receiving, 43 at that time, consulting fees; correct? 44 A. Yes. You said five people, did you, then? 45 46 Q. Yes. The five specialists were receiving fees; is 47 that correct? .07/09/2017 (2) 53 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Yes, that's correct. 2 3 Q. The other non-specialists were not receiving fees; 4 correct? 5 A. That's correct. 6 7 Q. Did you turn your mind to whether that seemed odd that 8 some people were being paid and some people were not being 9 paid? 10 A. I can't recall, but - yes, I can't recall, sorry. 11 12 Q. When you started - and I think you did say this 13 earlier but I'll just clarify - Mr Riddington and Dr Macri 14 were they on the Board when you arrived, or just 15 consultants? 16 A. They were not directors, they were consultants, and 17 they attended Board meetings. 18 19 Q. So they were assisting the Board; correct? 20 A. Yes. 21 22 Q. After their appointment to the Board, you understood 23 that they continued to act in that previous consulting 24 capacity; correct? 25 A. There were new contracts provided to them that 26 specified the consulting services for sitting on 27 committees. 28 29 Q. So your understanding was that they were being paid 30 for being on committees; is that right? 31 A. That's what was explained to me. 32 33 Q. Who explained that to you? 34 A. In May 2001, there was a meeting between myself, 35 Bill Riddington and John Cannings. 36 37 Q. Who was it that was telling you about them being paid 38 for sitting on committees? Was that Mr Riddington or 39 Mr Cannings? 40 A. Primarily Mr Cannings, but both. 41 42 Q. Was your understanding that Mr Riddington and Dr Macri 43 were initially providing, as consultants, advice to the 44 Board; correct? 45 A. Yes. 46 47 Q. That's what they were being paid for? .07/09/2017 (2) 54 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Up to that time, yes. 2 3 Q. At that time, were they on committees? 4 A. I don't know. 5 6 Q. But you were then told that they were then going to be 7 paid for being on committees; is that right? 8 A. Yes. 9 10 Q. What they were being paid for, as you understood it, 11 was changing, is that right, from advising the Board to 12 being on committees? 13 A. Yes. I wasn't really sure what the basis of their 14 engagement was prior to July 2001. 15 16 Q. Could you be handed the LifeCare document, exhibit 1, 17 volume 1, at page 4. Just before I ask you about this, you 18 said there was a meeting with Mr Riddington and 19 Mr Cannings; correct? 20 A. Correct. 21 22 Q. That meeting was where they advised you about 23 Mr Riddington and Dr Macri being appointed to the Board; is 24 that right? 25 A. That's where Mr Cannings and Mr Riddington talked 26 about bringing in specialist people, specialist advisers, 27 to sit on the Board and to attend subcommittee meetings and 28 be engaged as consultants on the subcommittees. 29 30 Q. Mr Cannings, as you understood it, was a lawyer; 31 correct? 32 A. Yes. 33 34 Q. He was not a member of the Board of LifeCare; correct? 35 A. No. 36 37 Q. You agree with me? 38 A. No, he wasn't a member of the Board. 39 40 Q. Did you understand that he was a legal adviser to 41 LifeCare? 42 A. That's what I was told, yes. 43 44 Q. Were you told that he was the honorary or senior 45 honorary legal adviser, or just legal adviser? 46 A. It's hard to recollect, it's so long ago, sorry. 47 .07/09/2017 (2) 55 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. All right. 2 A. But definitely the legal adviser. 3 4 Q. Was it explained to you why, in the context of a 5 meeting where you were being told about a number of people 6 being appointed to the Board, why they there needed to be a 7 legal adviser involved in that meeting? 8 A. No. 9 10 Q. Did you think it strange? 11 A. Not - no. 12 13 Q. Was any issue discussed as to why the lawyer needed to 14 be involved in that process? 15 A. No. Mr Cannings explained the rationale for having 16 people engaged as consultants on subcommittees and referred 17 to the Constitution. 18 19 Q. When you say "explained the rationale", in what sense 20 did he explain the rationale by reference to the 21 Constitution? 22 A. He referred to the fact that directors could not be 23 remunerated, but could receive services for other - could 24 receive fees for other services, and I recall him 25 specifically referring to a clause of the Constitution. 26 27 Q. That was some time in 2001 you had this meeting; is 28 that right? 29 A. I believe May 2001. 30 31 PUBLIC INQUIRER: Q. That was before you started, was 32 it? 33 A. I started in May 2001, sorry. A couple of weeks - two 34 or four weeks after I started. 35 36 MR CHESHIRE: Q. Was it then Mr Cannings who was 37 effectively telling you, "We can't pay them for being on 38 the Board, but we can pay them for being on committees"; is 39 that right? 40 A. He described how directors could not be remunerated 41 for director services and he suggested, or he brought 42 forward, the way of paying people to sit on subcommittees, 43 yes. 44 45 Q. At that stage, the only people that it was proposed to 46 pay were the five specialists; correct? 47 A. Correct. .07/09/2017 (2) 56 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. Did you not think it strange that only the five 3 specialists were going to be paid for being on committees? 4 A. I understood that they had skills, specialist skills, 5 as it was described to me. 6 7 Q. So your understanding was that they were going to be 8 paid for being specialist members of subcommittees, whereas 9 the non-specialists, they weren't specialists, so they 10 didn't get paid for being on committees; is that right? 11 A. At the time it was described to me, I don't know that 12 I knew the make up of those subcommittees, they hadn't been 13 formed at that stage. 14 15 Q. But then when they were set up, if that was at that 16 time, you understood that the people who were being paid 17 were being paid for being specialist members of the 18 committee rather than non-specialist members of the 19 committee; correct? 20 A. I don't recall thinking about it, but what you're 21 saying is correct, that there were directors on committees 22 who were not receiving remuneration, and some people 23 receiving specialist consulting fees, correct. 24 25 Q. Was there any discussion about how the committees 26 needed to be set up? 27 A. My recollection is that had already been decided. 28 29 Q. Was there any discussion about whether the committees 30 were in fact going to be carrying out the work of the 31 Board? 32 A. Not to my knowledge, no. 33 34 Q. Your understanding is, isn't it, that directors are 35 entitled to delegate certain of their duties to committees; 36 correct? 37 A. Yes. 38 39 Q. It would then have seemed odd to you, wouldn't it, if 40 Board members could not be paid for serving on a Board - it 41 would seem odd if those Board members delegated their 42 functions to a committee and then got paid for being on 43 that committee? That would have seemed odd to you, 44 wouldn't it? 45 46 MS GERACE: I object. 47 .07/09/2017 (2) 57 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 PUBLIC INQUIRER: Yes, it is noted. 2 3 MS GERACE: On that basis, but also because the 4 Constitution provides that they may delegate duties and/or 5 set up advisory committees. The initial presumption hasn't 6 been made good in terms of putting to the witness what he 7 understood about the nature of those committees. 8 9 PUBLIC INQUIRER: Yes, thank you. Yes, Mr Cheshire. 10 11 MR CHESHIRE: I'll make clear I put it in terms of purely 12 delegation. 13 14 Q. What I'm asking you is this: the Board has certain 15 tasks and duties that it has to perform; correct? 16 A. Yes. 17 18 Q. It is entitled to delegate some of those functions to 19 committees; correct? 20 A. Yes. 21 22 Q. It would have seemed odd to you if directors could not 23 be paid for performing functions on a Board, it would would 24 have seemed odd to you, wouldn't it, if they could have 25 delegated some functions to a committee and then paid 26 themselves for sitting on that committee; correct? 27 A. I had not thought that. 28 29 Q. Thinking about that now, that would have seemed odd, 30 wouldn't it? 31 A. There is a logic to what you say, yes. 32 33 Q. Did you not get from this meeting with Mr Cannings 34 that there was this sensitivity to make sure that the Board 35 members were not seen to be taking money for being Board 36 members? 37 A. I took from the meeting that directors could not be 38 remunerated for directors services, yes. 39 40 Q. Did you not take from that meeting that there was a 41 sensitivity about directors being seen to take money for 42 performing directors' duties? 43 A. I don't recall thinking that. 44 45 Q. Do you remember at any time being concerned about that 46 issue from 2001 onwards? 47 A. Can you repeat the issue, please? .07/09/2017 (2) 58 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. The issue about whether the directors could be seen, 3 by paying themselves consulting fees, to be in fact paying 4 themselves for being directors? 5 6 PUBLIC INQUIRER: Do you mean up to today, Mr Cheshire? 7 8 MR CHESHIRE: Up to today. 9 10 MS GERACE: I object. 11 12 PUBLIC INQUIRER: Yes, it is noted. 13 14 Q. You may answer the question. Your counsel has made 15 the objection, Mr Thompson. You're being asked whether in 16 that period of time, right up to today, it seemed odd to 17 you? 18 A. I'm sorry, can I have the full question? 19 20 PUBLIC INQUIRER: Yes, of course. 21 22 MR CHESHIRE: Q. I'm not sure I can remember it. 23 I might leave it and I'll come back to it in due course, if 24 I need to. You are aware now, are you not, that there is a 25 suggestion that the payment of consulting fees may have 26 been payment for those directors for, in fact, ordinary 27 services of being directors; correct? 28 A. I understand that some people might have that opinion, 29 yes. 30 31 Q. When was the first time it occurred to you that that 32 might be a perception that people might have? 33 A. It is difficult to say, but certainly when the media 34 issue broke in 2016. 35 36 Q. But you don't think years before that? 37 A. In the years before that, there was legal advice 38 stating the separation between directors' work and 39 consultants' work, and I sought to ensure that was adhered 40 to. 41 42 Q. That legal advice that you referred to was 2005; is 43 that correct? 44 A. The primary legal advice was November 2006. 45 46 Q. When you say "primary legal advice", you've referred 47 to advice in 2001. Was there any other advice, either .07/09/2017 (2) 59 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 primary or secondary, tertiary or any other level, on this 2 issue, apart from 2001 and 2006? 3 A. There was the John Cannings PwC advice in 4 November 2006. There was supplementary advice in 2008 on 5 another matter, but did refer to the fact of directors fees 6 and consultants' fees. I think that's the major advice, 7 yes. 8 9 Q. You say that's the major advice. Was there any other 10 advice that you recall apart from that advice? 11 A. At this point in time, no. 12 13 Q. It is right, isn't it, that Mr Longley, Mr Kells and 14 Mr Magee, when they commenced, they commenced as 15 consultants and directors at the same time; correct? 16 A. Yes. 17 18 Q. They received payment for being consultants; correct? 19 A. Yes. 20 21 Q. Did it occur to you at that time that it was important 22 to be able to offer specialists fees in order to attract 23 them to serving the company? 24 A. Yes. 25 26 Q. You wanted them to serve the company as directors; 27 correct? 28 A. As - well, specialist fees were for consultants' 29 services. 30 31 Q. But it was the position of LifeCare, wasn't it, that 32 they wanted those consultants not just to be consultants 33 but to be on the Board; correct? 34 A. Yes. 35 36 Q. In order to attract specialist directors on to the 37 Board, it was important to be able to offer them 38 remuneration; correct? 39 A. That was the view, yes. 40 41 Q. So this was, in effect, a way of offering remuneration 42 to directors whilst at the same time, as you understood it, 43 not falling foul of the Constitution; correct? 44 A. Yes, not falling foul of the Constitution, yes. 45 46 Q. But primarily, you wanted them to serve as directors; 47 correct? .07/09/2017 (2) 60 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Can I just clarify - you said I wanted them to serve. 2 I'm the chief executive, I don't appoint the Board and it 3 is not for me to have a say in the Board. 4 5 Q. You agreed with the procedure, didn't you, and the 6 process of having more specialists on the Board; correct? 7 A. I think it's definitely beneficial for a Board to have 8 professional skill-based people, yes. 9 10 Q. You thought at the time, back in 2001, it was 11 important to have specialists on the Board; correct? 12 A. Yes, given what had preceded in 2001, it was 13 beneficial to the company to have specialists on the Board, 14 yes. 15 16 Q. That was better than just having specialists as 17 consultants; correct? 18 A. I could see the benefit, yes. 19 20 Q. So in order to persuade specialists to come on to the 21 Board, the company needed to be able to offer them 22 remuneration; correct? 23 A. I concede your point, yes. 24 25 Q. So, really, what was being offered was money for them 26 to serve on the Board; correct? 27 28 MS GERACE: I object. 29 30 PUBLIC INQUIRER: Yes, it is noted. Mr Cheshire? 31 32 MR CHESHIRE: I press it. 33 34 PUBLIC INQUIRER: Any other objection? It is just the 35 objection you want to take in respect of the incrimination, 36 is it? 37 38 MS GERACE: Yes. 39 40 PUBLIC INQUIRER: Could I have the question again? 41 42 Q. They were receiving money for the purpose of serving 43 on the Board? 44 A. I don't think that's correct. 45 46 MR CHESHIRE: Q. You understood the company wanted to 47 attract specialist directors; correct? .07/09/2017 (2) 61 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Yes. 2 3 Q. In order to attract them, it needed to be able to 4 offer them remuneration; correct? 5 A. Yes. 6 7 Q. So, really, what was being offered to these 8 specialists was, "Come on the Board, we'll pay you, but we 9 will call it a consulting fee for serving on committees"; 10 correct? 11 A. They received a consulting fee, as I understand it, 12 for serving on committees yes. 13 14 Q. You understood, really, that that was hiding the true 15 nature, which was this was a payment for serving on the 16 Board; that's right, isn't it? 17 A. No. No. 18 19 MS GERACE: I object. 20 21 PUBLIC INQUIRER: That is noted. 22 23 MR CHESHIRE: Q. I took you I think to page 4 of the 24 document in front of you. In the middle of the page, as 25 I think you've confirmed in your evidence, Mr Riddington 26 and Dr Macri attended Board meetings and advised on matters 27 of operation and governance. Do you see that? 28 A. Yes. 29 30 Q. Then, two paragraphs down, you say that it was natural 31 for them to be selected to join the Board, and in the third 32 line: 33 34 Their skills were such that both were asked 35 to continue to act in their previous 36 consulting capacity as well. 37 38 Do you see that? 39 A. Yes. 40 41 Q. That previous consulting capacity was being consultant 42 to the Board; correct? 43 A. Correct. 44 45 Q. It was not serving on committees, was it? 46 A. But that changed in July when they were appointed. 47 .07/09/2017 (2) 62 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. Yes. This document gives the impression that they 2 were simply continuing in their previous capacity; correct? 3 A. This document gives that impression, yes. 4 5 Q. This is a document that you prepared, isn't it? 6 A. In conjunction with legal assistance, yes. 7 8 Q. Do you now say that the impression that is given in 9 this document is wrong? 10 A. Well, my understanding is that the fees, specialist 11 fees, were for sitting on committees, not for attending 12 Board meetings. 13 14 Q. So their previous consulting capacity that they were 15 being paid for, as set out in this document, that was 16 attending Board meetings, wasn't it? 17 A. I'm not exactly sure, as I wasn't part of the company 18 then, but I know that they did attend meetings, Board 19 meetings. 20 21 Q. What you've said in this document is that they were 22 asked to continue to act in their previous consulting 23 capacity, and that was consulting to the Board; correct? 24 A. That's what those words say, yes. 25 26 Q. Not serving on committees; correct? 27 A. That's what those words say, yes. 28 29 Q. So the reality is, isn't it, whereas previously they 30 were attending Board meetings as consultants, they then 31 attended Board meetings as directors; correct? 32 A. Correct. 33 34 Q. That was their previous consulting capacity, wasn't 35 it, the attending Board meetings; correct? 36 37 MS GERACE: I object. It is erroneous, in my view, to 38 conflate the process of a Board retaining a consultant 39 provided by some specified areas, with the work to be done 40 by that same person should they be appointed to the Board; 41 that's not to say that they are entirely the same. 42 43 PUBLIC INQUIRER: Quite so. Yes, Mr Cheshire? 44 45 MR CHESHIRE: Thank you. 46 47 Q. What I'm suggesting to is that prior to their .07/09/2017 (2) 63 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 appointment to the Board, they were attending Board 2 meetings and advising the boards on matters of operation 3 and governance; correct? 4 A. I believe so, yes. 5 6 Q. After their appointment, they were attending Board 7 meetings, perhaps giving advice on matters of operation and 8 governance, and carrying out the ordinary duties of 9 directors; correct? 10 A. They were attending Board meetings and they were also 11 attending committee meetings, correct. 12 13 Q. Yes, but what they had previously been doing in their 14 previous capacity was just attending Board meetings; 15 correct? 16 A. As I've said previously, they certainly attended Board 17 meetings. They may have had other duties as well. 18 I wasn't there. 19 20 Q. Then Mr Longley was one of the specialists who were 21 appointed around that time; correct? 22 A. Yes. 23 24 Q. If you have in the same bundle at page 10 - I beg your 25 pardon. 26 27 PUBLIC INQUIRER: Just pause there, Mr Thompson. You've 28 been given the wrong page. 29 30 MR CHESHIRE: Q. I beg your pardon. You have been 31 handed the supplemental volume of exhibit 1, page 126. 32 Do you see that LifeCare at the time was known as 33 RSL Veterans' Retirement Villages Limited; correct? 34 A. Yes. 35 36 Q. Do you see on the top left-hand side the patron and 37 then the directors are set out; correct? 38 A. Can I check what page you're on, sorry? 39 40 PUBLIC INQUIRER: 126. 41 42 MR CHESHIRE: The top left-hand side. 43 44 PUBLIC INQUIRER: Just wait a moment, please. 45 46 THE WITNESS: Sorry, yes. 47 .07/09/2017 (2) 64 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 MR CHESHIRE: Q. Do you see, one from the bottom, you're 2 recorded as the Chief Executive Officer, do you see that? 3 4 MS GERACE: Madam Inquirer, I just rise to make sure I've 5 got the right -- 6 7 PUBLIC INQUIRER: Page 126, volume supplemental bundle. 8 9 MS GERACE: 6 September 2017, is that the one? 10 11 PUBLIC INQUIRER: No, 12 June 2001. 12 13 MS GERACE: Thank you. Yes, I have it. 14 15 MR CHESHIRE: Q. I'm sorry, for the transcript, I should 16 have said JL.05.0000028_001. Do you see, Mr Thompson, 17 you're recorded as the Chief Executive Officer? 18 A. Yes. 19 20 Q. Under you, Mr Cannings is recorded as being the 21 honorary solicitor, do you see that? 22 A. Yes. 23 24 Q. If you turn over the page, page 127, you will see that 25 you've signed this? 26 A. Yes. 27 28 Q. You were provided with that document an orientation 29 pack; correct? 30 A. Yes. 31 32 Q. Then if you go over to page 128, this is the draft 33 agreement that I think was provided to Mr Longley. Do you 34 see at clause 2 that it is for a 12-month term commencing 35 July 2001. Do you see that? 36 A. The blank form, sorry? 37 38 Q. No, clause 2, "Purpose of this agreement"? 39 A. Right. 40 41 Q. Do you see the 12-month period commencing July 2001; 42 correct? 43 A. Yes. 44 45 Q. That's because at that time directors' terms of office 46 were one year; correct? 47 A. Yes. .07/09/2017 (2) 65 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. Then over on page 131, you will see this is a contract 3 for specialist consultancy services? Do you see that? 4 A. Yes. 5 6 Q. Again, clause 2 has 12 months commencing July 2001; 7 correct? 8 A. Correct. 9 10 Q. When Mr Riddington and Dr Macri were acting as 11 consultants, and before their appointment, do you recall 12 whether they had some form of consulting contract? 13 A. I'm not aware, but when I started, Mr Riddington was 14 acting CEO, and I was aware that he was engaged in a fairly 15 significant capacity at that time. 16 17 Q. Page 131, which is the consulting contract, is for the 18 same term as the Board contract that I showed you, both 19 being 12 months? 20 A. Yes. 21 22 Q. To your understanding, the consulting contract, why 23 did it run for the same period of time as being a director? 24 A. I haven't considered that. 25 26 Q. There would have been no reason, just because one 27 ceased being a director, why they shouldn't continue to be 28 a consultant; correct? 29 A. Correct. 30 31 Q. In that contract, page 131, being the consulting 32 contract, do you see the duties? 33 A. Section 3. 34 35 Q. Clause 3, yes. 36 A. Yes. 37 38 Q. 39 The Contractor will: 40 41 (a) Attend and commit to specific 42 Committees ... 43 44 Do you see that? 45 A. Yes. 46 47 Q. Strategic planning and finance administration, that's .07/09/2017 (2) 66 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 separate to strategic planning; is that right? 2 A. At that time, yes. 3 4 Q. Resident services is again separate? 5 A. Correct. 6 7 Q. And property and safety, was that one or is that two? 8 A. One. 9 10 Q. So one has four -- 11 A. Yes, so there were four committees, yes. 12 13 Q. Four committees. Then 3(b) 14 15 Provide specialist industry advice and 16 input to the committees. 17 18 A. Yes. 19 20 Q. Then (c): 21 22 Provide written reports ... to those 23 committees. 24 25 Do you see that? 26 A. Yes. 27 28 Q. You attended a number of committee meetings; correct? 29 A. Yes. 30 31 Q. Did any of those people who had consulting agreements, 32 ever, as it were, step out of their role as being on the 33 committee and formally provide some sort of advice or 34 written report to the committee? 35 A. The primary role, as I understand what they did, or as 36 I recall what they did, was sitting on those committees. 37 38 Q. In effect, what clause 3 said, to your understanding, 39 they were being paid for serving on the committees; 40 correct? 41 A. I think that's a fair comment, yes. 42 43 Q. There's nothing in this contract that dealt with 44 providing any services as a consultant outside of those 45 committees; correct? 46 A. I'd have to check it, but -- 47 .07/09/2017 (2) 67 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. You can see clause 3, that's the duties. 2 There's nothing there that records any service outside of 3 those committees; correct? 4 A. They all seem - the three clauses seem to be related 5 to the committees, yes. 6 7 Q. There's nothing there that refers to serving outside 8 of the committees; correct? 9 A. Yes. 10 11 Q. Would you then go back to page 5 of volume 1 of 12 exhibit 1. Do you see "Services Provided By Consultants" 13 at item 4? Do you see that? 14 A. Yes. 15 16 Q. You refer to "Service on committees"; do you see that? 17 A. Yes. 18 19 Q. At the bottom of the page, there's a section "Services 20 provided by Consultants outside of committees"; do you see 21 that? 22 A. Yes. 23 24 Q. It says, over the page: 25 26 These factors have meant that Consultants 27 are often called on to provide their skills 28 and expertise to support ... management 29 outside of their service on formal 30 committees. 31 32 Do you see that? 33 A. Yes. 34 35 Q. At least at the time, back in 2001, at the time of 36 these contracts, it appears that, in fact, what you've 37 described as service provided by consultants outside of 38 committees was not part of the role of consultants for 39 which they were being paid; correct? 40 A. There's a comparison here of a 2001 contract and a 41 document that addresses the period 2012 to 2016. What 42 you're saying is correct, but there's a significant time 43 difference and, I think, different contracts in force. 44 45 Q. So you say that what you've put in this document at 46 pages a 5 to 6 is solely related to 2012-2015; is that 47 right? .07/09/2017 (2) 68 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. The purpose of this document was for that period for 2 the ACNC inquiry. 3 4 Q. You say that initially these consultants were only 5 being paid for being on committees and then after that, at 6 some stage, they were then being paid for what they did 7 outside of committees; is that right? 8 A. Yes. 9 10 Q. But the -- 11 A. Can I clarify? 12 13 Q. Yes. 14 A. The primary remuneration was for serving on committees 15 all the time. 16 17 Q. The sort of matters that you've listed on page 6 of 18 volume 1 as being the sort of jobs that consultants did, 19 helping management with various matters, those would have 20 been matters that people such as Mr Longley would have been 21 doing back in 2001; correct? 22 A. I think the organisation was very different in 2001 23 and 2012. There was a significant level of expansion in 24 2012 to 2016. I partially agree with what you're saying, 25 but there's a difference in the organisation. 26 27 Q. Is that difference that back in 2001, the consultants 28 or consultant directors, their large role was being on 29 committees and there was some, but not very much, work 30 outside with assisting management, but from about 2012 that 31 increased very substantially; is that right? 32 A. It increased. However, I go back to my previous 33 statement where I said the primary basis of the 34 remuneration all the time was serving on committees. 35 36 PUBLIC INQUIRER: Q. And that didn't change? 37 A. No. 38 39 MR CHESHIRE: Q. Are you able to assist when 40 Mr Riddington and Dr Macri went from being consultants to 41 being Board members, did their remuneration continue at the 42 same rate? 43 A. I don't know what they were being paid or receiving or 44 what their terms were prior to July 2001 when they were 45 appointed to directors. 46 47 Q. When Mr Longley was appointed as a director, so that .07/09/2017 (2) 69 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 one has at that stage the five specialist directors, are 2 you able to assist as to how the remuneration that they 3 received was calculated? 4 A. I was told. 5 6 Q. What were you told? 7 A. Whatever figure was in the contract. 8 9 Q. They received, did they, the same amount under that 10 contract, each of them? 11 A. Yes. 12 13 Q. Was it explained to you how that figure had been 14 arrived at? 15 A. I don't think so. 16 17 Q. You see, they were paid, in effect, a retainer on an 18 annual basis; correct? 19 A. It definitely has the hallmarks as a retainer, yes. 20 21 Q. You've identified in Mr Longley's contract four 22 different committees, so somebody who served on four 23 committees would be the paid the same as somebody who only 24 served on one committee; correct? 25 A. That was certainly the case in the last 10 years. 26 I can't recall in 2001 who served on what committee, I'm 27 sorry. 28 29 Q. No, but -- 30 A. But they all got paid the same. 31 32 Q. If you look at page 28 of the volume that you have, 33 you'll see part of Mr Riddington's contract. 34 A. Yes. 35 36 Q. You'll see under "Duties", this is in identical terms 37 to what was in Mr Longley's contract? 38 A. Yes. 39 40 Q. And you'll see that it says, under (a), "one or more 41 of the following committees", correct? 42 A. Correct. 43 44 Q. You viewed, did you, their role as consultants as 45 being different to their role as Board members; correct? 46 A. Because they are serving on committees, correct. 47 .07/09/2017 (2) 70 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. And, therefore, you viewed this consulting agreement 2 as being effectively a commercial agreement between the 3 company and the individual director; correct? 4 A. Yes, as advised by the lawyer, yes. 5 6 Q. When you say "the lawyer", you mean Mr Cannings? 7 A. Correct. 8 9 Q. Was it your understanding that Mr Cannings drafted 10 these contracts? 11 A. Yes. 12 13 Q. In doing so, was it your understanding he was advising 14 or providing legal services to the company or to the 15 contractor? 16 A. To the company. 17 18 Q. Part of your role was ensuring that the company was 19 being compliant with its legal requirements; correct? 20 A. As CEO, yes, you have that level of responsibility, 21 yes. 22 23 Q. Also ensuring that the directors complied with their 24 legal responsibilities towards the company; correct? 25 26 MS GERACE: I object. I object on two grounds, the 27 primary ground, is it suggested that it is the CEO's 28 obligation to ensure the directors fulfil their own legal 29 obligation? I think that was the way it was put. 30 31 PUBLIC INQUIRER: It will be rephrased. 32 33 MR CHESHIRE: I'll make it clear. 34 35 Q. I'll put it this way: you understood that your role, 36 part of it, was giving advice to the Board; correct? 37 A. Yes. 38 39 Q. If you thought that there was a situation arising 40 where the Board members might be in breach of their duties, 41 if you appreciated that, you understood that was part of 42 your role to tell them; correct? 43 A. Yes. 44 45 Q. When you look at this contract, what this required is 46 for them to attend and commit to one or more of the 47 following committees; correct? .07/09/2017 (2) 71 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Correct. 2 3 Q. Under this contract, they would be entitled to say 4 "Well, I'll just serve on one"; correct? 5 A. You could interpret that way, yes. 6 7 Q. That's what it says, isn't it? 8 A. Yes. 9 10 Q. Somebody who says, "I'll just serve on one committee" 11 would receive the same amount of money as somebody who 12 serves on four committees; correct? 13 A. Yes. 14 15 Q. It may well be that you would want, let's say 16 Mr Riddington, to serve on more than one committee; 17 correct? 18 A. The Board determined who served on the committees, 19 yes. 20 21 Q. When you say the Board, that's the Board of directors; 22 correct? 23 A. Yes. 24 25 Q. And that would have included, for instance, here, 26 Mr Riddington; correct? 27 A. Yes. 28 29 Q. Did you understand that the five specialists who had 30 consulting fees were sitting on the Board to determine 31 which committees they should sit on? 32 A. They were on the Board and the Board determined who 33 sat on the committees, yes. 34 35 Q. Did it occur to you that that might be a conflict of 36 interest? 37 38 PUBLIC INQUIRER: For the directors? 39 40 MR CHESHIRE: Q. For the directors. 41 A. At that point in time, no. 42 43 Q. It occurs to you now, though, doesn't it? 44 A. I concede your point. 45 46 Q. In those circumstances, who was determining the terms 47 of these contracts? .07/09/2017 (2) 72 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. The contracts were drafted by John Cannings. 2 3 Q. Yes, but the lawyer doesn't decide on what the terms 4 are, does he? 5 A. The contract was drafted by John Cannings. If you're 6 referring to who sat on the committees, the Board 7 determined who sat on the committees. 8 9 Q. As to the wording of the contract, for instance, 10 whether it was to say in 3(a) "attend and commit to three 11 of the committees", or "one or more of the following 12 committees", those sorts of matters, who was deciding on 13 that for the company? 14 A. The Board. 15 16 Q. Again, sitting here today, you would appreciate that 17 that represented a conflict of interest for those five 18 directors; correct? 19 A. Sitting here today, yes. 20 21 Q. Did that not occur to you at the time? 22 A. No. 23 24 Q. Did Mr Cannings not raise that with you? 25 A. No. 26 27 Q. What about the calculation of the fee of $12,500, was 28 it explained to you how that was arrived at? 29 A. No. 30 31 Q. Again, to your understanding, that was calculated by 32 the Board as a whole; is that right? 33 A. I can't be sure. I can't recall, sorry. 34 35 Q. Is it possible that you determined that fee? 36 A. No. I was given the information, I think, by 37 Bill Riddington, but I'm not sure. 38 39 Q. Are you aware of there being at that time any analysis 40 of the time that might be provided of being on those 41 committees so as to arrive at the figure of $12,500? 42 A. I'm not aware. 43 44 Q. One of the directors around that time was a 45 Mr Vanzella; correct? 46 A. Yes. 47 .07/09/2017 (2) 73 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. In about the middle of 2004 he was not reappointed; 2 correct? 3 A. At some stage, if that's the right date, yes. 4 5 Q. When I say reappointed, it is right, isn't it, the 6 directors of LifeCare have always been appointed by 7 RSL (NSW); correct? 8 A. Correct. 9 10 Q. It is right, isn't it, that after Mr Vanzella was not 11 renewed as a director, a number of the Board members of 12 LifeCare were unhappy about that; correct? 13 A. Yes. 14 15 Q. So then that Board determined to keep him on as an 16 adviser; correct? 17 A. Yes. 18 19 Q. In his capacity then as an adviser, he received a 20 consulting contract; correct? 21 A. Yes. 22 23 Q. So, in effect, he was moving, as it were, in the 24 opposite direction to people such as Mr Longley; he was 25 going from director to adviser rather than adviser to 26 director, correct? 27 A. Well, Mr Longley became a simultaneous director. 28 29 Q. I beg your pardon, in the opposite direction to 30 Mr Riddington and Dr Macri, that they went from consultant 31 advisers to directors, whereas Mr Vanzella was going from 32 director to adviser; correct? 33 A. Yes. 34 35 PUBLIC INQUIRER: Q. You said that Mr Riddington was the 36 Acting Chief Executive Officer at the time that you were 37 appointed? 38 A. Yes. 39 40 Q. Was he also a consultant at that time? 41 A. Mr Riddington had been a consultant for a number of 42 years. There was a vacancy in the chief executive position 43 for about six months between when the previous chief 44 executive left and when I commenced. He had additional 45 responsibilities for that period as acting chief executive. 46 I'm not sure what terms he was engaged under. 47 .07/09/2017 (2) 74 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. At the time that you took over, you had a handover, 2 I presume, from Mr Riddington? 3 A. We had about a two- to four-week handover, yes. 4 5 Q. As exact acting CEO, he was also a consultant, but he 6 wasn't a Board member at that time? 7 A. No. 8 9 Q. He came a Board member after you became the CEO? 10 A. He became - yes. I started in May. Mr Riddington 11 remained with me for two to four weeks, giving a handover, 12 and then I believe in July 2001 he became a director. 13 14 Q. At the time that you discussed with Mr Cannings and 15 Mr Riddington the contractual arrangements in respect of 16 the consultants, Mr Riddington was still in the handover 17 phase with you; is that right? 18 A. He was in the handover phase and, just to clarify, you 19 said "discussed"; it was very much this is - it wasn't so 20 much a general discussion, it was, "This is what's being 21 planned". 22 23 PUBLIC INQUIRER: Thank you. 24 25 MR CHESHIRE: Q. Would you then turn to page 29 in the 26 bundle in front of you. This is LFC.02.0000322. 27 A. Yes. 28 29 Q. Do you see these are minutes of Board of directors of 30 LifeCare of 18 October 2005. You're recorded as present; 31 do you see that? 32 A. Yes. 33 34 Q. The directors are listed before you. Mr Longley, in 35 fact, was on a leave of absence at that time, do you see 36 that? 37 A. Yes. 38 39 Q. Each of those contracts that I've shown you was for 40 2001-2002. Do you remember that? 41 A. Yes. 42 43 Q. I showed you that they were for a fixed term of 44 12 months. Do you recall that? 45 A. Yes. 46 47 Q. Were they ever formally renewed? .07/09/2017 (2) 75 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. I don't believe so. They were effectively rolled 2 over. 3 4 Q. When you say effectively rolled over, all that 5 happened was they were continued to be paid? 6 A. And continued to provide the services, yes. 7 8 Q. They stayed on the committees and they continued to be 9 paid; correct? 10 A. Correct. 11 12 Q. Then in 2005, I've shown you who was at this meeting. 13 Would you then go forward to page 31. You will see under 14 5.11 the specialist consultants' fee proposal. Do you see 15 that? 16 A. Yes. 17 18 Q. I'll come back to the first paragraph shortly, but do 19 you see the second part: 20 21 It was agreed by the Board that the 22 Specialist Consultant fees be increased by 23 ten per cent (10%). 24 25 Do you see that? 26 A. Yes. 27 28 Q. On occasions, members of LifeCare Board have withdrawn 29 themselves or left a meeting because of some conflict of 30 interest; correct? 31 A. There have been a number of times when that occurred 32 because of conflicts of interest, yes. 33 34 Q. When that occurs, that's noted in the minutes; 35 correct? 36 A. Yes. 37 38 Q. You will see in 5.11 there is no record of anybody 39 having left the meeting; correct? 40 A. Correct. 41 42 Q. May we take it from that that all of the directors 43 were present and involved in the agreement as recorded in 44 that second paragraph? 45 46 MR BECKETT: I object to that. One of the directors noted 47 in those very minutes was overseas at the time. .07/09/2017 (2) 76 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Mr Longley, who had been appointed some years before, was 2 in the USA at that particular time. I object to the 3 term -- 4 5 PUBLIC INQUIRER: Yes, it is noted that Mr Longley was not 6 present at that meeting. 7 8 MR CHESHIRE: Thank you. 9 10 Q. Just on that point, Mr Longley took a leave of 11 absence. Are you able to assist us as to whether he was 12 paid his consultancy fee while he was away? 13 A. I'm sure he was not. 14 15 Q. At this meeting all of the directors who were noted at 16 the start as being present, we may take it, may we not, 17 they were all present and agreed as set out in the second 18 paragraph of 5.11? 19 A. Yes. 20 21 Q. That means that in those Board directors, that 22 included a number of the specialist consultants who were 23 getting consulting fees, correct? 24 A. Yes. 25 26 Q. Those persons were voting for themselves to get a 27 10 per cent increase; correct? 28 A. Yes. 29 30 Q. Sitting here today, that doesn't sound right, does it? 31 A. Not at all. 32 33 PUBLIC INQUIRER: Q. You agree with that, do you? 34 A. I agree with that. 35 36 MR CHESHIRE: Q. You were present at the meeting, 37 correct? 38 A. Yes. 39 40 Q. Did that not occur to you at the time? 41 42 MS GERACE: I object. 43 44 PUBLIC INQUIRER: Noted. 45 46 THE WITNESS: At the time, no. 47 .07/09/2017 (2) 77 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 MR CHESHIRE: Q. Was there any discussion or explanation 2 that you're aware of as to where that figure of 10 per cent 3 came from? 4 A. No. 5 6 Q. It sounds like a 10 per cent increase on a consulting 7 fee would sound like more than CPI; correct? 8 A. I'm not exactly sure what the CPI was at the time, but 9 you're probably right. 10 11 Q. You don't remember turning your mind to whether that 12 seemed like a big amount or a small amount? 13 A. In 2006? I can't go back that far in my memory, 14 sorry. 15 16 PUBLIC INQUIRER: Q. Just while that is happening, can 17 I ask you to go back to the agreement for one 18 clarification. Would you go back to the other volume and 19 would you have a look at the contract for specialist 20 consultancy services at page 131. I understand that you've 21 said that Mr Cannings drafted these? 22 A. Yes. 23 24 Q. And that your discussion was not a discussion, you 25 were told what was happening, I understand that. Would you 26 have a look at 132 where it says "ending the agreement" - 27 that is, ending the consulting agreement? 28 A. Yes. 29 30 Q. It says that the organisation may end the directorship 31 without notice if the contractor commits a serious or 32 repeated breach of any obligations as a director. Do you 33 see that? 34 A. Yes. 35 36 Q. It would seem that the contractor had to behave as a 37 director to maintain the contractual relationship of the 38 specialist. Is that as you understood it? 39 A. I haven't focused on that particular clause before, 40 but I think it is fair to say that without doubt there was 41 a strong connection between the directorship and the 42 consultancy. 43 44 Q. This contractual arrangement, as you understood it, 45 where the company could terminate a contractor if he or she 46 misbehaved as a director, that remained in force from 2001 47 to about 2012; is that right? .07/09/2017 (2) 78 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. There was a contract in 2001, a revised contract in 2 2007 and a revised contract in 2012. 3 4 Q. So this is the contract that you understood governed 5 the relationship, as you've called it, on a holding over 6 basis? 7 A. From 2001 to 2007, yes. 8 9 PUBLIC INQUIRER: Yes, I see. Thank you. 10 11 MR CHESHIRE: Q. Were you aware as well that, just going 12 back to this directors voting for their own fee increase, 13 there were provisions in the Constitution about directors' 14 conflicts of interest? 15 A. I can't recall, but I would believe that there 16 probably would be. 17 18 Q. Did you read the Constitution when you first started 19 with this organisation? 20 A. I certainly read the Constitution in the first year, 21 yes. 22 23 Q. If I suggest to you that there was a provision in the 24 Constitution at this time that a director may not vote in 25 respect of any contract in which the director was 26 interested, does that ring any bells as being in the 27 Constitution? 28 A. Yes. 29 30 Q. It would suggest, wouldn't it, to you what was 31 happening at this meeting was also a breach of the 32 Constitution; correct? 33 A. Yes. Could I get the same folder that you're on? 34 35 PUBLIC INQUIRER: Yes, I'm sorry. 36 37 MR CHESHIRE: Q. I'm not sure the Constitution is in 38 that folder. I'm happy to show you a copy of the relevant 39 page? 40 A. I accept that. I just thought we should be on the 41 same folder. 42 43 Q. No, we're still on that page 31. 44 A. Could I have page 31? 45 46 PUBLIC INQUIRER: Yes, would you give him page 31, please. 47 .07/09/2017 (2) 79 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 MR CHESHIRE: I'm sorry, I apologise. 2 3 MR CHESHIRE: Q. At 5.11 on page 31, the first 4 paragraph, do you see the first sentence refers to: 5 6 Discussion took place in relation to a 7 proposed increase in Specialist Consultants 8 fees payable to the relevant directors who 9 provide specific Industry experience to the 10 Board. 11 12 Do you see that? 13 A. Yes. 14 15 Q. What is being recorded in that first sentence is that 16 the discussions were about the fees being payable to 17 directors who provided specific industry experience to the 18 Board? 19 A. Yes. 20 21 Q. That is different, isn't it, from providing services 22 on a committee; correct? 23 A. Yes. I think it is a wording issue, but what you're 24 saying is correct. 25 26 Q. I want to suggest to you that that is how the Board 27 were discussing it, but they were discussing it in terms of 28 their perception which was that they were being paid, those 29 specialists, for what they did on the Board with their 30 experience; do you accept that? 31 A. That's what the words say. 32 33 Q. Yes. And that, as you understood it, was how it was 34 perceived by the Board; correct? 35 A. No, my understanding is that the specialist 36 consultants received remuneration for their - for sitting 37 on committees. 38 39 Q. Then it is recorded that the Board also discussed 40 future remuneration for the other members of the Board also 41 appointed by the RSL State Council. What was being 42 suggested there is that it wouldn't just be the five 43 specialist directors who would be paid, but it would be all 44 Board members; correct? 45 A. Correct. 46 47 Q. Those other Board members, as you understood it, .07/09/2017 (2) 80 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 wanted to be paid for being on the Board; correct? 2 A. I can't recall the conversation, but that's certainly 3 what the words say. 4 5 Q. You understood, didn't you, that what was really being 6 proposed here was for all Board members to be paid for 7 being directors; correct? 8 A. Subsequent Board meetings suggested that the Board was 9 definitely investigating payment of directors fees, so -- 10 11 Q. Before we get to subsequent, do you see, 12 "Action: Ron Thompson"? Do you see that? 13 A. Yes. 14 15 Q. In the paragraph above that the Board requested you to 16 make inquiries with the institute of company directors for 17 director prerequisite status and to prepare a report on 18 remuneration and fee structure options. Do you see that? 19 A. Yes. 20 21 Q. What you understood is you were being asked to 22 investigate what would be appropriate remuneration for 23 these people to be paid for being directors; correct? 24 A. Yes. 25 26 Q. So the proposal was, "We have five specialists who are 27 being paid, we want all the directors to be paid and we all 28 want to be paid as directors"; correct? 29 A. Sorry, can you say that again, please? 30 31 Q. The suggestion was, "We have five people, five 32 specialists who are being paid, we all want to be paid, you 33 go and find out how much we should be paid for being 34 directors"; correct? 35 A. If you take the second sentence and the last sentence, 36 yes, I agree with you. 37 38 Q. But that's how you understood it at the time, 39 isn't it? 40 A. That's how I read it. I can't recall the specific 41 meeting, sorry. 42 43 Q. Mr Thompson, you knew very well that when they all 44 wanted to be paid, they all wanted to be paid for being 45 directors, not for being on committees? 46 A. They weren't being paid as directors at this point in 47 time. .07/09/2017 (2) 81 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. No, but the proposal was. What they all wanted, they 3 all wanted to be paid for being directors; that's right, 4 isn't it? 5 A. Yes, I was asked to prepare a report on remuneration 6 of the structure options for directors, yes. 7 8 Q. Yes. 9 A. Yes. 10 11 Q. The suggestion wasn't, "Well, some of us are serving 12 on committees and not being paid and we should be paid for 13 being on committees", was it? 14 A. No. 15 16 Q. This suggestion for the non-specialists to be paid, 17 that came, did it, from one of the State Councillors? 18 A. Conversations on this matter or discussions on this 19 matter in the open part of the Board meeting were extremely 20 restricted, so I'm not sure where it came from. 21 22 Q. Thinking back now, was it the case that, in effect, 23 one of the State Councillor members of the Board was 24 saying, "Well, you five are being paid, why aren't we being 25 paid?" 26 A. I think that would be a reasonable assumption. 27 28 Q. Do you recall whether it was Mr Crosthwaite? 29 A. I actually don't recall the details of this meeting at 30 all, sorry. 31 32 Q. Do you recall who it was who was pushing for the State 33 Councillors to be paid? 34 A. As I said previously, there was extremely little 35 discussion about this subject in the open part of the Board 36 meeting. 37 38 Q. If I asked you now who was it that was pushing to be 39 paid not just in the open part of the Board meeting, but 40 generally, would you be able to identify who it was? 41 A. I don't recall being party to any significant 42 discussions. 43 44 Q. Do you remember now having an impression as to who it 45 was that was pushing? 46 A. I can't honestly recall. 47 .07/09/2017 (2) 82 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. Was the thrust of the discussion that one of the State 2 Councillors saying, in effect, "You're being paid for being 3 specialists; we are all specialists, so we should all be 4 paid"? Was that the thrust of the discussion? 5 A. As I said, I can't recall this meeting in detail, but 6 I know generally any discussion about specialist 7 consultants or directors was extremely restricted in the 8 open part of the Board meeting. What was documented 9 generally was the full amount of what was said in that part 10 of the meeting, but there was very little said. 11 12 Q. If you then go back to the supplementary bundle, in 13 the bottom right-hand corner, page 146 - supplementary 146? 14 A. Yes. 15 16 Q. Would you turn through to page 150. At the bottom of 17 that page, do you see you're recorded on page 146 as being 18 in attendance. I should have pointed that out to you. 19 A. Yes. 20 21 Q. At the bottom of page 150, do you see, "Board Review - 22 Self Assessment": 23 24 Discussion took place in relation to the 25 survey ... 26 27 Do you see that? 28 A. Yes. 29 30 Q. Then over the page at page 151, do you see Mr White 31 expressed the view there, and this is October 2004, that 32 each director appointed brings to the Board a good range of 33 skills? Do you see that? 34 A. Yes. 35 36 Q. Then Mr Kells made a suggestion that there should be a 37 profile summary with their skills, experience and 38 expertise, and then Mr Crosthwaite gave a brief outline of 39 his professional background. Do you see that? 40 A. Yes. 41 42 Q. Followed by, in fact, Mr Carlson. Do you remember 43 there being discussion to that effect about the experience 44 of those gentlemen? 45 A. I don't remember a 2004 meeting, but if it's in the 46 minutes it would have happened. 47 .07/09/2017 (2) 83 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. You see, what I'm wondering is whether then on page 2 31, the meeting I was just asking about, clause 5.11, the 3 proposal for the other State Councillors to receive 4 payments, I'm wondering if that was along similar lines of 5 those persons saying, "We've got experience and expertise, 6 we should be paid"; is that right? 7 A. There's a correlation in what you say, I can't be 8 sure, sorry. 9 10 Q. You may not be able to be sure, but is that what you 11 recall as being the flavour of what led to the 12 State Councillors subsequently being paid, the fact that 13 they said, "Why shouldn't we get paid?" 14 A. As I said, any conversation about this in the open 15 part of meetings was very restricted. There wasn't much, 16 if any, conversation about this subject in my presence. 17 18 Q. Did anybody at any stage around this time come to you 19 and say either, "We should be paid" or "Those people 20 shouldn't be paid"? Was there any discussion that anybody 21 had with you about that? 22 A. I think it's likely that there might have been, but 23 I just can't recall, sorry. 24 25 MR CHESHIRE: All right. Is that a convenient time, 26 Madam Inquirer? 27 28 PUBLIC INQUIRER: We're going to take a short adjournment 29 so you can stretch your legs, Mr Thompson. Would you like 30 to step down. 31 32 THE WITNESS: Yes. 33 34 PUBLIC INQUIRER: I will adjourn until just after a 35 quarter to 12. 36 37 SHORT ADJOURNMENT 38 39 PUBLIC INQUIRER: Yes, thank you. Mr Thompson, would you 40 come back into the witness box, please. You understand 41 you're bound by the oath you gave a little earlier in the 42 morning. 43 44 MR CHESHIRE: Q. Mr Thompson, you understood that you 45 were being asked to source levels of directors' fees; 46 correct? 47 A. Yes. Could I have the book back, please? .07/09/2017 (2) 84 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 PUBLIC INQUIRER: Yes. 3 4 MR CHESHIRE: Q. Yes, you may. I think we were on 5 page 31. 6 A. Yes, I understand I was requested to seek 7 information - page 131? 8 9 PUBLIC INQUIRER: No, just 31. 10 11 THE WITNESS: 31, sorry. I was requested to make 12 inquiries with the Institute of Company Directors for 13 directors' prerequisite status and to prepare a report on 14 remuneration and fee structure options. 15 16 MR CHESHIRE: Q. Subsequently to that, in fact, you 17 approached Mercer Human Resource Consulting; correct? 18 A. Correct. 19 20 Q. Mercer provided a report to you; correct? 21 A. Correct. 22 23 Q. That was in relation to fee levels for directors; 24 correct? 25 A. Correct. 26 27 Q. You understood if that proposal was adopted, in 28 effect, that would then replace consulting fees; correct? 29 A. I don't think it was a proposal. It was information 30 from Mercer on directors' fees, as I understand it. 31 32 Q. But in terms of what you understood was being 33 suggested, instead of having a regime where some people are 34 paid consulting fees and some people not, the suggestion 35 was that everybody would simply be paid a fee for acting as 36 a director; correct? 37 A. I provided - I sought and provided the Board with 38 information on directors fees by the Mercer proposal. 39 40 Q. As you understood, that was with a view to the 41 directors being paid for being directors; correct? 42 A. Not necessarily. 43 44 Q. All right. Could I then go to the supplementary 45 bundle, page 3. You will see minutes of a Board meeting on 46 22 August 2006. You are recorded as being in attendance? 47 A. Yes. .07/09/2017 (2) 85 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. LFC.13.0000007. If you then go forward two pages to 3 page 5, which is _0002, you'll see the Mercer report there 4 being discussed at the top of the page, 5.5? 5 A. Yes, correct. 6 7 Q. Do you see there it was resolved there would be an 8 increase in remuneration for specialist consulting fees? 9 Do you see that? 10 A. Yes. 11 12 Q. Again, it appears that that included members voting in 13 respect of their own consulting fees; correct? 14 A. Yes. 15 16 Q. And then it was requested that Mr Cannings review the 17 Constitution in order to suggest amendments to allow for 18 Directors' fees to be paid. Do you see that? 19 A. Yes. 20 21 Q. And "Action", you; correct? 22 A. Yes. 23 24 Q. You understood, did you not, what was being suggested 25 was to replace the existing regime with simply amending the 26 Constitution and paying directors; correct? 27 A. Well, it's what it says. It was requested that 28 Mr John Cannings review the Constitution in order to 29 suggest amendments to allow the directors fees to be paid. 30 31 Q. You understood that what was being suggested was 32 replacing the consulting contract regime with a payment to 33 directors regime; correct? 34 A. Whether it's replacing or supplementing, I'm not sure. 35 36 Q. Are you aware of it ever having been suggested at this 37 time that they were going to get these payments in addition 38 to consulting fees? 39 A. Well, only part of the Board at that time received 40 specialist consulting fees. 41 42 Q. If the Constitution was amended so that directors 43 could be paid, all of them could have been paid, correct, 44 as directors? 45 A. Yes. 46 47 Q. You didn't understand that what was being suggested .07/09/2017 (2) 86 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 was that all of the directors be paid a director's fee and 2 some of the directors receive in addition a consulting fee? 3 You didn't understand that was what was being proposed, did 4 you? 5 A. I don't know that they had - that the directors had 6 thought through that, so it could have been supplemental or 7 it could have been replacement, that's all I'm saying. 8 9 Q. Then exhibit 1, the main first volume of the LifeCare 10 volume, page 40. This is you following up with 11 Mr Cannings? 12 A. Yes. 13 14 Q. Do you see that you were seeking advice as how to 15 amend the Constitution to allow for directors to be paid? 16 Do you see that? 17 A. Yes, I was seeking legal advice. 18 19 Q. On behalf of the company? 20 A. Yes. 21 22 Q. At this time, you're aware that LifeCare brought 23 proceedings before the Supreme Court of New South Wales; 24 correct? 25 A. For the cy pres scheme? 26 27 Q. Yes. 28 A. Yes. 29 30 Q. And part of the reason for seeking that scheme was the 31 fact that there were a diminishing number of veterans; 32 correct? 33 A. Yes. 34 35 Q. And the result of that was that LifeCare, as you 36 understood it, would not be able to continue unless it was 37 allowed to amend its Constitution to extend its articles to 38 cover non-veterans? 39 A. That's correct. 40 41 Q. At this stage, if I tell you that the decision on that 42 case was on 13 November 2006, at this stage you didn't know 43 whether in fact that cy pres scheme would be permitted, 44 correct? 45 A. I never connected these two subjects, no. 46 47 Q. At this stage, it is right, isn't it, that you didn't .07/09/2017 (2) 87 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 know if the cy pres scheme would be approved; correct? 2 A. On 11 September? 3 4 Q. Yes. 5 A. No. If the cy pres scheme came through in November, 6 yes, what you're saying is correct. 7 8 Q. If the cy pres scheme did not come through, your 9 position was that LifeCare would be in financial 10 difficulties; correct? 11 A. Ultimately, yes. 12 13 Q. Unless and until the cy pres scheme came through, how 14 could LifeCare be contemplating paying all of its 15 directors? 16 A. I'm struggling to understand the connection, sorry. 17 18 Q. You don't have a cy pres scheme in force. You say, 19 "Unless we get the scheme through, LifeCare will be in 20 financial difficulties", and, at the same time, you were 21 investigating "Can, in fact, we incur further expenses of 22 paying all of our directors?" 23 A. Yes, that's correct. 24 25 Q. You understand the link between the two now? 26 A. I struggle to understand the materiality, but yes, I 27 understand the link. 28 29 Q. On the one hand, you're saying, "We're going to be in 30 financial difficulties unless we get an amendment to our 31 Constitution, unless we get a cy pres scheme", and on the 32 other hand you're saying, "But that doesn't matter, the 33 potential financial difficulties, we'll look at paying all 34 of our directors". 35 36 MS GERACE: I object. 37 38 PUBLIC INQUIRER: Yes. 39 40 MS GERACE: I don't think it is this witness saying, "We 41 should pay all of our directors". 42 43 PUBLIC INQUIRER: Quite so. 44 45 MR CHESHIRE: I apologise, I'll rephrase that. 46 47 Q. You understood that if, in fact, the cy pres scheme .07/09/2017 (2) 88 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 did not go ahead, the company would be in financial 2 difficulties; correct? 3 A. Correct. 4 5 Q. If it was going to be in financial difficulties, then 6 the company should not have been looking at increasing its 7 expenditure on directors; correct? 8 A. I don't think it is a simple yes or no answer, 9 because - if I can expand? 10 11 Q. Yes. 12 A. The issue facing the organisation regarding the 13 village at Narrabeen would be that if we were going to only 14 be able to allow veterans or ex-service people into the 15 village, ultimately, there would be a reduction, a 16 significant reduction, in people coming into the village, 17 so the debts owed to current people exiting the village 18 would struggle to be paid by tens of millions of dollars. 19 I did not connect the issue of many tens of millions of 20 dollars with a potential issue of a few hundred thousand 21 dollars if the Constitution was changed to allow directors' 22 fees and it was a resolution of the Board that I was 23 following instructions on. 24 25 Q. As you understood it, what you're saying is, "If we 26 can't get this cy pres scheme, LifeCare will not be able to 27 survive"; isn't that right? 28 A. LifeCare ultimately would struggle to fill the 29 retirement village and nursing homes at Narrabeen and the 30 debts owed to people, to veterans, when they finally 31 exited, would cause the company to not be able to survive 32 over many years, but, yes, that's correct. 33 34 Q. You say "over many years". Wasn't it your evidence 35 that you didn't know how long it would be? It could be a 36 short period of time or it could be a long period of time? 37 A. Yes. 38 39 Q. Did you not think to tell the directors or to say to 40 the directors at this time, "Hang on a minute, if we don't 41 get the cy pres scheme through, we're not going to be able 42 to survive, so we should not be adding to our expenses on 43 directors at the same time"? 44 A. At this point in time I was asked to explore or to 45 seek legal advice on the potential to modify the 46 Constitution. It wasn't at the point of enactment. 47 .07/09/2017 (2) 89 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. At the point of the discussion at the Board level of, 2 "Can we look at paying our directors", if it had had no 3 money, at that stage you would have said, "Hang on 4 directors, we can't afford to pay directors"? That's 5 right, isn't it, if that had been the case? 6 A. If at some stage in the future, are you saying? 7 8 Q. No. If at the time of a Board meeting where they're 9 saying, "Could you please look into a mechanism for paying 10 directors", if in fact the company had no money you would 11 have said, "We can't pay directors, we don't have any 12 money"? That's right, isn't it? 13 A. At the point when I was asked this, there was money. 14 15 Q. Yes, but my point is if you're saying, "We won't be 16 able to survive without the cy pres", why didn't you say to 17 the directors, "Hang on a minute, why don't we wait and see 18 what happens in the Supreme Court"? 19 A. As I said a few minute ago, the issue facing the 20 company if the cy pres scheme did not come through was many 21 tens of millions of dollars. I did not connect that 22 significant potential issues of many tens of millions of 23 dollars with the potential, not realised at that stage, of 24 tens of thousands of dollars being paid to directors at 25 some point in the future. 26 27 Q. Did you regard the amount that was being paid to the 28 directors really as being immaterial? 29 A. Compared to the tens of millions of dollars that the 30 cy pres scheme was about, it was relatively immaterial, 31 very immaterial. I'm not saying the fees themselves aren't 32 material, but I'm saying the comparison - I definitely 33 didn't see the comparison. 34 35 Q. If you would go forward to page 51. 36 A. Yes. 37 38 Q. Do you see this is a Board meeting on 24 October 2006? 39 A. Yes. 40 41 Q. LFC.02.0000329. 42 A. Yes. 43 44 Q. You are recorded as being in attendance? 45 A. Yes. 46 47 Q. At 1.3.1, Mr Longley there is appointed as a .07/09/2017 (2) 90 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 specialist consultant. Do you see that? 2 A. Yes. 3 4 Q. At this stage, Mr Longley, it appears, was not a 5 director; is that right? 6 A. He had been on leave or had resigned his directorship 7 and special consultancy for approximately 12 months to be 8 overseas. 9 10 Q. He then came on as a consultant initially; is that 11 right? 12 A. I'd have to stand corrected, but if he did come back 13 as a consultant and a director, whether it was simultaneous 14 or not, I can't recall. 15 16 Q. As a specialist consultant, as is recorded there, he 17 was invited to be in attendance at Board meetings and Board 18 subcommittee meetings? 19 A. Yes. 20 21 Q. Was it your understanding that consultants were in 22 fact required to attend subcommittee meetings and Board 23 meetings? 24 A. The contracts for special consultant services are very 25 clear, that they attend subcommittee meetings only. 26 27 Q. Then if you go forward to page 52, point 330. 28 A. Yes. 29 30 Q. You will see at 3.4 that a letter in respect of 31 directors remuneration was reviewed and discussed. It was 32 agreed not to further investigate the payment of fees to 33 directors. Do you see that? 34 A. Yes. 35 36 Q. That letter then is at page 46, LFC.02.0000468. 37 A. Yes. 38 39 Q. This document you've seen before; correct? 40 A. I'm familiar with it, yes. 41 42 Q. This is a document where, in effect, Mr Cannings 43 advised that in order to pay directors you needed to amend 44 the Constitution and then seek approval from the Minister; 45 correct? 46 A. Yes. There were two points: the Constitution and 47 seek approval from the Minister. .07/09/2017 (2) 91 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. As I showed you on page 52, the Board decided not to 3 follow that route that Mr Cannings had suggested; correct? 4 A. Correct. 5 6 Q. What was your understanding as to why it did not 7 pursue that route? 8 A. My recollection is that they did not pursue that route 9 because of the requirements to seek ministerial approval, 10 in particular, the legal advice that said that approval 11 would be unlikely and that if approval was gained, it would 12 be for one director only. 13 14 Q. So the alternative route that was then adopted was for 15 all directors to be given contracts as specialist 16 consultants; correct? 17 A. The resolution following that then says that it was 18 resolved by the Board that payments to people, including 19 directors, for special consulting services be confirmed, 20 subject to review and advice from John Cannings. 21 22 Q. You understood, didn't you, that what was being said 23 is, "We don't want to go the route of amending the 24 Constitution, what we'll do instead is to pay all the 25 directors a consulting fee"; correct? 26 A. What I said previously was my understanding was the 27 primary reason they did not go the directors' route was 28 because of the advice regarding ministerial approval. As I 29 understand it, the primary reason was not for the 30 Constitution, but because of the ministerial approval. 31 32 Q. What then was being proposed was to go a different 33 route in order to achieve payments being made to all of the 34 directors; correct? 35 A. They instructed me to seek advice from John Cannings 36 on the ability to pay specialist consultants' fees to all 37 directors, yes. 38 39 Q. You understood that as being, in effect, a different 40 route to achieve the same purpose, namely, paying all of 41 the directors; correct? 42 43 MS GERACE: I object. 44 45 THE WITNESS: I would not put it that way, but I hear what 46 you're saying. 47 .07/09/2017 (2) 92 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 MR CHESHIRE: Q. That's how understood it, didn't you? 2 A. As I said, there was an interest in seeking advice as 3 to the ability for all directors to receive consultancy 4 payments. 5 6 Q. That advice only came one the directors had decided 7 not to go through the route of amending the Constitution; 8 correct? 9 A. There are two factors to that advice. 10 11 Q. Yes. 12 A. There's that one, and over that period of time when 13 directors were investigating these matters, I put my mind 14 to it and thought, "What does the advice of 2001 say?" 15 I made inquiries of the people around at that time, my 16 secretary, Bill Riddington and John Cannings, seeking the 17 written advice. As I said previously, I only received 18 verbal advice. In all my investigations, I could not find 19 any written advice. Prior to this meeting, I discussed 20 this with the Chairman and stated that I felt that we 21 needed to get written advice regarding specialist 22 consulting fees. So there were two factors that led to the 23 request for this; that's all I'm trying to say. 24 25 PUBLIC INQUIRER: Q. But the situation was if they'd 26 gone down the route that Mr Cannings had suggested, they 27 could only end up with one director being paid? 28 A. That's as I read the advice, yes. 29 30 Q. They really wanted them all to be paid, as I apprehend 31 it, isn't that right? 32 A. That's how I apprehend it, yes. 33 34 PUBLIC INQUIRER: Thank you. Yes, Mr Cheshire. 35 36 MR CHESHIRE: Q. When you were previously asked to 37 source information from Mercer, you weren't at the same 38 time asked to source advice about paying consultant fees to 39 all of the directors as well, were you? 40 A. No, I don't believe so. 41 42 Q. And what is recorded on page 52 at 3.5, being 43 extending the consulting fees to the non-specialists, you 44 understood that that effectively only came once it was 45 clear that the route of amending the Constitution and 46 obtaining ministerial approval was not going to work, 47 correct? .07/09/2017 (2) 93 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. I think the timeline is clear, correct. 2 3 Q. So you are agreeing with me? Yes? You agree with me? 4 A. Yes. 5 6 Q. You said the timeline was clear, which could be, "The 7 timeline is clear, I disagree with you"? 8 A. Sorry. 9 10 Q. The timeline is clear, you agree with me? 11 A. Yes. 12 13 Q. Thank you. Then on page 54, you will see that 14 confirms your understanding, as you've just stated? 15 A. Yes. 16 17 Q. As you describe it in the second paragraph, the fees 18 being currently in place for non-RSL directors, the Board 19 would like to extent this potential to all directors; do 20 you see that? 21 A. Yes. 22 23 Q. You understood, didn't you, that back in 2001 the 24 reason why the five specialists were being paid for 25 committees, whereas the other RSL directors were not being 26 paid, was because the five were specialists; correct? 27 A. Correct. 28 29 Q. What then did you understand could be the 30 justification for the non-specialists then being paid 31 consulting fees for being on those committees? 32 A. I was not sure that there would be justification when 33 I sent this email. 34 35 Q. Were you concerned about this issue at that time? 36 A. Not overly, not that I can recall. 37 38 Q. Then you received a further advice from Mr Cannings; 39 correct? 40 A. Yes. 41 42 Q. I should have said that email was LFC.07.0000699_4. 43 Would you then go forward to 58, LFC.02.0000473? 44 A. Yes. 45 46 Q. This was the further advice that you received; 47 correct? .07/09/2017 (2) 94 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Yes. 2 3 Q. Did you read this and consider it at the time? 4 A. Yes. 5 6 Q. On page 60, being 475, at the top of the page 7 Mr Cannings says: 8 9 Therefore, the Board may extend the payment 10 of specialist consultancy fees to all 11 directors ... provided that the 12 contract ... 13 14 A. Sorry? 15 16 Q. Page 60. 17 18 PUBLIC INQUIRER: The top line. 19 20 THE WITNESS: Sorry. Yes, I'm with you, sorry. 21 22 MR CHESHIRE: Q. You will see there that Mr Cannings 23 said: 24 25 Therefore, the Board may extend the 26 payment ... provided that the contract ... 27 clearly identifies and distinguishes the 28 services that the director will be 29 remunerated for, from those duties 30 ordinarily provided by a director as an 31 officer ... 32 33 Do you see that? 34 A. Yes. 35 36 Q. Article 13 empowers the directors to delegate to 37 committees? 38 A. Yes. 39 40 Q. Then: 41 42 The members of these committees can include 43 current directors ... Those directors who 44 are elected as members of such committees 45 should possess specialist skills and 46 provide specialist consultancy services to 47 the Board, as distinguished from their .07/09/2017 (2) 95 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 ordinary services ... 2 3 Do you see that? 4 A. Yes. 5 6 Q. 7 8 The members of the committees may be 9 remunerated for providing their specialist 10 consulting services. 11 12 A. Yes. 13 14 Q. 15 16 A committee may be formed to advise the 17 Board in relation to a particular project 18 or service ... 19 20 Do you see that? 21 A. Yes. 22 23 Q. Then "Procedures": 24 25 The directors ... must convene a meeting to 26 resolve to establish the committee for a 27 particular purpose. 28 29 Do you see that? 30 A. Yes. 31 32 Q. As was clear from this, in order to justify the 33 payment of these consulting fees, the directors needed to 34 possess specialist skills; correct? 35 A. Yes. 36 37 Q. You understood, didn't you, that the whole purpose of 38 the five specialists who were initially brought on to the 39 Board back in 2001, was to draw a distinction between those 40 specialists and the ordinary State Council members who were 41 not specialists; correct? 42 A. Yes. 43 44 Q. So how could those non-specialists justify payment for 45 being on committees under Mr Cannings' advice? 46 A. At this point, I had a concern, so I emailed John on 47 the - so, to me - sorry, could I step back - there were .07/09/2017 (2) 96 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 three hurdles: one, they had to serve on the committee; 2 that the committee's work needed to be different from that 3 of a Board; and the people had to have a specialist skill. 4 5 With regards to the specialist skill, I had a concern 6 regarding the potential to offer contracts to all directors 7 on the Board, so I emailed John Cannings, I think on 8 27 November, asking his advice as to the specialist skills 9 that would be - sorry, asking about, in inverted commas, 10 "RSL directors", what specialist skills they could have for 11 RSL LifeCare, particularly those without aged care or 12 retirement village experience. 13 14 I had a concern, I sought legal advice, and the 15 response was that they could have experience in other 16 areas, such as property, banking - sorry, property finance, 17 veterans's culture. 18 19 PUBLIC INQUIRER: Q. Veterans culture, yes. 20 A. Those sort of - I can't remember - recall it exactly, 21 it is not here in front of me. At some basic level 22 I needed to be able to define a level of knowledge or 23 understanding in those areas, a basic level. 24 25 MR CHESHIRE: Q. Do you say that you received that 26 advice in writing from Mr Cannings? 27 A. Yes. 28 29 Q. Did you take that advice back to the Board? 30 A. I don't think it went to the Board. 31 32 Q. You understood as well that this wasn't just for 33 serving on any committees that the directors could be paid 34 for; correct? 35 A. I did ask - as part of that advice, too, I sought from 36 John, what he meant by "meetings", because he talked about 37 meetings. I sought clarification, does this mean just 38 Board meetings or committee meetings as well? The 39 clarification was just Board meetings were excluded, so 40 other committee meetings were okay. 41 42 Q. You understood, though, that there had to be duties 43 outside of the ordinary duties of directors; correct? 44 A. If it's listed in the -- 45 46 Q. Just on that page 60 -- 47 A. In the advice, yes. .07/09/2017 (2) 97 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. They needed to be duties outside of the ordinary 3 directors' duties; correct? 4 A. Yes, and directors' duties are restricted there to 5 attending meetings, ASIC requirements, there's a statement 6 there in this advice, if I can find it. 7 8 Q. Mr Thompson, at that time, some of the RSL directors, 9 the non-specialists who were not getting consulting fees, 10 they were sitting on committees, weren't they? 11 A. Yes. 12 13 Q. They weren't being paid; correct? 14 A. Correct. 15 16 Q. They didn't have consulting contracts, correct? 17 A. Correct. 18 19 Q. In serving on those committees, they were serving as 20 part of their role as directors; correct? 21 A. They were serving on those committees. Whether they 22 were serving in that role as directors as defined in the 23 letter from - the legal advice, it's not covered. 24 25 Q. What other capacity could they have been serving on 26 those committees other than as directors? 27 A. Volunteers. 28 29 Q. Volunteers? Did you understand that the directors who 30 sat on committees were sitting as volunteers; is that your 31 evidence? 32 A. No, but you're trying to connect the role of a 33 director extending into a committee, and this advice states 34 that you can - there were three hurdles to go through: one 35 being sitting on a committee; the committee's role is 36 different to a Board; and that they have a specialist 37 skill. That's as I understood the advice. 38 39 Q. This advice, on page 60, does not say that they can be 40 paid for being on any committee, does it? It doesn't go 41 that far? 42 A. My understanding of the intent of this advice was that 43 it was appropriate to remunerate people to sit on 44 committees such as the strategic planning and property 45 development, the audit risk management and compliance and 46 the care and services committee, and other such committees. 47 Rightly or wrongly, that's what I thought. .07/09/2017 (2) 98 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. But you see the part that says "Procedures for Setting 3 up Committees": 4 5 The directors of the Board must convene a 6 meeting to resolve to establish a committee 7 for a particular purpose. 8 9 Those committees that you mentioned were already in 10 existence, weren't they? 11 A. Yes. 12 13 Q. They already had directors serving on them; correct? 14 A. Correct. I did not take it that it was compulsory 15 that new committees had to be created. 16 17 Q. That's what appears to be suggested by the passage 18 "Procedures for setting up committees", doesn't it? 19 A. I do not read that, as I said, that it had to be new 20 committees. 21 22 Q. In effect, you read this, did you, as being, "Well, 23 anybody who serves on any committee can be paid for that 24 because being on a committee is not part of being a 25 director"; is that right? 26 A. That's as I read the advice, yes. 27 28 Q. You would be aware that RSL (NSW) has committees; 29 correct? 30 A. I understand they do. I'm not very familiar with the 31 RSL (NSW) structure at all. 32 33 Q. But you know it has committees? 34 A. I do now. 35 36 Q. Did you not at the time? 37 A. I didn't put my mind to it. 38 39 Q. Didn't you know that some of the State Councillors who 40 were members of the LifeCare Board were on 41 RSL (NSW) committees? 42 A. I don't think so. 43 44 Q. Put aside this advice, did you have any view yourself 45 as to whether it was part of a directors' duty to serve on 46 committees? 47 A. As I said, I had a concern regarding the level of .07/09/2017 (2) 99 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 specialist skills, so I sought advice on that matter and 2 received a response. 3 4 Q. Could I take you to another document on this. I think 5 it is page 134. Do you see this letter of 26 May 2011? 6 A. Yes. 7 8 Q. If you turn over the page, it is from Mr White to 9 Mr Perrin. Do you see that? 10 A. Yes. 11 12 Q. It is RW.01.0000301. Over the page, at _0001, it is 13 recorded as being copied to you, do you see that? 14 A. Yes. 15 16 Q. Mr White on behalf of LifeCare is informing Mr Perrin 17 as State Secretary of RSL (NSW), he says - this is about 18 appointments to the Board of LifeCare, making nominations, 19 and over the page on _0001, "Together with other 20 responsibilities, all Directors are required to", do you 21 see that? 22 A. Yes. 23 24 Q. Do you see the third bullet point, "Attend all Board 25 meetings and effectively contribute to policy and other 26 business as a Director", do you see that? 27 A. I do. 28 29 Q. The one after that: 30 31 Be a member of Board sub committees as 32 appointed and attend those meetings as 33 scheduled. 34 35 Do you see that? 36 A. I do see that. 37 38 Q. Mr White then seems to have been of the view that it 39 was part of a director of LifeCare's responsibility to 40 serve on committees or subcommittees; correct? 41 A. It appears to read that way, yes. 42 43 Q. This was copied to you, wasn't it? 44 A. Yes. 45 46 Q. If you had appreciated this document, you would have 47 seen that Mr White, at least, was of the view it was part .07/09/2017 (2) 100 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 of their role to be on committees; correct? 2 3 MS GERACE: I object. 4 5 MR CHESHIRE: Q. Correct? 6 7 PUBLIC INQUIRER: Q. You may answer. 8 A. So the question was, I think, this is Mr White's view, 9 that he thinks directors should be on committees? 10 11 MR CHESHIRE: Q. That part of their role is to be on a 12 committee, correct? That's his view, as expressed in this 13 document? 14 A. It appears to be, yes. 15 16 Q. If that's right, if that view is correct, if somebody 17 is being paid to be on committee they're being paid for 18 part of their duties as a director; correct? 19 A. If Mr White's view is correct, I can see the link that 20 you're making. 21 22 Q. Yes, and this document was copied to you; correct? 23 A. Yes, it was copied to me, apparently, yes. 24 25 Q. Would that not have been a matter of some concern, 26 that it appears what was then put in place of having 27 consulting contracts for being on committees, may in fact 28 then have been payments for being a director? 29 30 MS GERACE: I object. 31 32 PUBLIC INQUIRER: I will allow it. 33 34 THE WITNESS: I don't know that I would have put my mind 35 to a two-page letter that I was copied on and the fourth 36 bullet point, noting what you have just said. 37 38 MR CHESHIRE: Q. Could you then have the directors' 39 handbook bundle which is exhibit 3, volume 1 of that. Are 40 you familiar, Mr Thompson, with the directors' handbooks? 41 A. Fairly familiar, yes. Yes. 42 43 Q. Did you have a role in putting them together? 44 A. Those handbooks, no. 45 46 Q. Did you have any input into them? 47 A. The handbooks were primarily completed by Sue Macri, .07/09/2017 (2) 101 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 and certain information that was around in the company, 2 such as the history, was collated and my assistant collated 3 that information for Sue Macri, but I didn't have any 4 strong input into the handbook. 5 6 Q. But you understood that it was an important document 7 for directors; correct? 8 A. I understood that, yes. 9 10 Q. And important that it was correct; correct? 11 A. Yes. 12 13 Q. Would you then turn to page 1, LFC.09.0000006. 14 I won't ask you to read this, but you can see how it is 15 made up. There is an introduction and on page 2 there is a 16 history. On page 3, villages and community care, and the 17 villages are listed? 18 A. Yes. 19 20 Q. And then at page 7 we come through to the corporate 21 structure and Board? 22 A. Yes. 23 24 Q. And you'll see in the penultimate paragraph it says: 25 26 This section of the Handbook sets out the 27 composition of the Board and its primary 28 functions and responsibilities. 29 30 Do you see that? 31 A. Yes. 32 33 PUBLIC INQUIRER: That's in the second-last paragraph, is 34 it? 35 36 MR CHESHIRE: I beg your pardon, the second-last 37 paragraph, I'm sorry. 38 39 Q. Then if you turn over the page, page 8, the Board of 40 directors, and then page 10 - do you have page 10? 41 A. Yes. 42 43 Q. Do you see that? 44 A. Yes. 45 46 Q. This is described as being committees of the Board. 47 Do you see that? .07/09/2017 (2) 102 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Yes. 2 3 Q. Do you see that this is the Audit, Risk Management and 4 Compliance Committee? 5 A. Yes. 6 7 Q. Membership, three directors; do you see that? 8 A. Yes. 9 10 Q. Including chair and one being the Treasurer? 11 A. Yes. 12 13 Q. Do you see that? 14 A. Yes. 15 16 Q. So this records clearly, does it not, that on that 17 committee there are to be three directors; correct? 18 A. Yes. 19 20 Q. And therefore, for those three directors, it is part 21 of their job as being a director to be on that committee; 22 correct? 23 24 MS GERACE: I object. 25 26 PUBLIC INQUIRER: Q. As you understood it? 27 A. As I read that, yes. 28 29 MR CHESHIRE: Q. Then over the page, page 11 is the 30 second page. Page 12 is the Remuneration Committee? 31 A. Yes. 32 33 Q. Membership, three directors; do you see that? 34 A. Yes. 35 36 Q. Over the page is the Strategic Planning and Property 37 Development Committee, membership is three directors 38 minimum? 39 A. Yes. 40 41 Q. Over the page, page 14, Residents Services Committee, 42 three directors minimum; do you see that? 43 A. Yes. 44 45 Q. Over the page, page 15, the North Coast Advisory 46 Committee, membership, three directors? 47 A. Yes. .07/09/2017 (2) 103 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. Over the page, page 16, Board Awards Committee, 3 membership is three directors, do you see that? 4 A. Yes. 5 6 Q. This handbook, and this is the 2008 version, this 7 version of the handbook suggests, does it not, that part of 8 the role of directors was to serve on those committees; 9 correct? 10 A. Yes. 11 12 Q. Was that also a matter that you did not notice in the 13 context of consulting fees? 14 15 MS GERACE: I object. 16 17 PUBLIC INQUIRER: Yes, that is rejected. 18 19 MR CHESHIRE: Q. If that impression is correct, that 20 directors were required to serve on committees, if they 21 were being paid for being on committees, they were being 22 paid for part of their ordinary services as a director; 23 correct? 24 25 MS GERACE: I object on a different basis. Isn't that the 26 point of the inquiry to determine that? It has been put as 27 a proposition. I don't have any objection to the witness 28 being asked what his view of it. That is the objection. 29 30 PUBLIC INQUIRER: Yes, I will allow it. You can put to 31 the witness his understanding. 32 33 MR CHESHIRE: Q. Mr Thompson? 34 35 PUBLIC INQUIRER: Ask him again, please. 36 37 MR CHESHIRE: Q. If the impression that those pages 38 give, that it was part of directors' duties to serve on 39 committees, is correct, and if they were being paid for 40 being on committees, they were being paid for part of their 41 ordinary services as directors; correct? 42 A. The impression on those pages is that directors need 43 to serve on subcommittees, therefore, they're being paid 44 for being - sorry -- 45 46 Q. Yes. If directors are required to be on committees or 47 subcommittees, if they're then being paid for being on .07/09/2017 (2) 104 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 those subcommittees, in effect, they are being paid for 2 part of their ordinary role as being directors; correct? 3 A. Yes, as described in the handbook, that's correct, and 4 what's in the handbook appears to be in conflict with the 5 legal advice, yes. 6 7 Q. Did you ever have any discussion explicitly with any 8 of the members of the Board about this issue? 9 A. No. 10 11 Q. You say that you relied upon this advice from 12 Mr Cannings in November 2006; is that right? 13 A. Yes. Sorry, when you said "this issue", what -- 14 15 Q. You say, as I understand it, that you were comfortable 16 that directors could be paid for being on committees; is 17 that right? 18 A. Yes, that's how I read the advice. 19 20 Q. When you say "the advice", that's the advice you had 21 from Mr Cannings in November 2006; is that right? 22 A. Correct. 23 24 Q. When you say the advice, is that the advice that I was 25 just showing you which is on page 58, dated 22 November 26 2006, LFC.02.0000473? 27 A. Sorry, what page? 28 29 PUBLIC INQUIRER: Page 58. 30 31 MR CHESHIRE: Q. Page 58. 32 A. Thank you. Yes. 33 34 Q. This was the advice that you were referring to when 35 you said you sent Mr Cannings an email and got this advice 36 back; is that right? 37 A. No. Subsequent to receiving this advice, I sent 38 Mr Cannings an email. 39 40 Q. You say you had a further written response from him? 41 A. An email response, yes. 42 43 Q. Do you have a copy of that email response from him? 44 A. I do. 45 46 Q. Am I right that you haven't - I don't say this 47 critically - produced that to the Inquiry yet; is that .07/09/2017 (2) 105 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 right? 2 A. I have produced it to the company's lawyers. 3 4 Q. Thank you. Is that with the email that you sent to 5 Mr Cannings? 6 A. Yes. 7 8 Q. Incidentally, at page 59 you will see Mr Cannings 9 also - this is LFC.02.0000474 - in the middle of the page 10 you'll see a paragraph, "In fulfilling their duty of care", 11 do you see that? 12 A. Yes. 13 14 Q. Did you notice that at the time? 15 A. I must have. 16 17 Q. Didn't that suggest to you that the directors 18 shouldn't have been voting in respect of their own 19 contracts? 20 A. I agree today they shouldn't have been voting in 21 respect of their own contracts. 22 23 Q. Didn't that occur to you around about this time in 24 2006 that there was a problem with these directors voting 25 about extending consultancy fees to cover all of them? 26 A. It did not occur to me at that time. 27 28 Q. Then the matter, I think, came back before the Board, 29 page 62, LFC.02.0000335 and that's 20 February 2007. 30 A. Yes. 31 32 Q. You're recorded as being in attendance. Do you 33 see that? 34 A. Yes. 35 36 Q. Then over the page, page 63, which is point 336, 37 specialist consulting fees. What's referred to is the 38 advice of Mr Cannings then is the advice of 39 22 November 2006; correct? 40 A. Correct. 41 42 Q. That's noted and approved. It is then resolved that 43 current persons receiving specialist consulting fees would 44 receive new and revised contracts; do you see that? 45 A. Yes. 46 47 Q. But other persons interested in receiving specialist .07/09/2017 (2) 106 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 consulting fees would contact Mr Thompson? 2 A. Yes. 3 4 Q. Going forward, the specialist consulting contracts 5 would be for one year duration; do you see that? 6 A. Yes. 7 8 Q. With that second part of the resolution, other persons 9 interested in receiving specialist consulting fees would 10 contact Mr Thompson"? 11 A. That's what the Board resolved, yes. 12 13 Q. Did you understand that as being, in effect, it is up 14 to the individual, if you want consulting fees, you can 15 have them? 16 A. That's how I understand the resolution. 17 18 Q. Do you accept that that doesn't sound like 19 particularly good corporate governance? 20 21 MS GERACE: I object. 22 23 PUBLIC INQUIRER: Noted. 24 25 THE WITNESS: Looking at it here today, I agree with your 26 statement. 27 28 MR CHESHIRE: Q. You were present at the meeting. 29 Did it not occur to you to say something? 30 A. It must not have. 31 32 Q. Likewise, there's a conflict of interest, again, isn't 33 there, in the directors voting on this? 34 A. Yes. 35 36 Q. You didn't raise anything, did you? 37 38 MS GERACE: I object. 39 40 PUBLIC INQUIRER: Noted. 41 42 THE WITNESS: No. 43 44 PUBLIC INQUIRER: Q. I presume they didn't raise 45 anything with you either? 46 A. Raise - sorry? 47 .07/09/2017 (2) 107 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. They didn't tell you they had a conflict of interest? 2 A. No, Madam Inquirer. 3 4 MR CHESHIRE: Q. Do you recall there ever being any 5 dissent or serious debate about this issue? 6 A. As I said, anything to do with specialist consultant's 7 fees, there was very minimal discussion in the open part of 8 the Board meeting that I attended. 9 10 Q. Yes. My question to you is whether you recall 11 anybody, whether in a meeting, outside of a meeting, in an 12 email, a telephone call, in any forum, expressing to you, 13 or you overhearing, some dissent or disagreement with this 14 course of action? 15 A. No, not - not in the - not before the last year. 16 17 Q. And in this context do you recall there being any 18 discussion about whether, in fact, the company should have 19 external consultants sitting on its committees? 20 A. No. 21 22 Q. Indeed, if you were going to have external consultants 23 sitting on these committees, you could have had people who 24 were external consultants and not directors; correct? 25 A. And that has - yes, that's correct. 26 27 Q. And was there ever any discussion that, "Well, rather 28 than having these directors sit on committees, why don't we 29 have specialists?" 30 A. I don't recall any discussion. 31 32 Q. What about the terms of these contracts, was there any 33 discussion about what the terms were to be? 34 A. So 2007, I don't believe there was any discussion 35 about the terms of the contract. 36 37 Q. And so this was the resolution and to your 38 understanding Mr Cannings drafted the contracts; is that 39 right? 40 A. That's right. 41 42 Q. And what, were they then provided to you in respect of 43 each individual? 44 A. Yes. 45 46 Q. And you signed them on behalf of the company? 47 A. Yes. .07/09/2017 (2) 108 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. Was there ever any direction from the Board for you to 3 execute those contracts on behalf of the company? 4 A. Other than the resolution here? 5 6 Q. Yes. Well, the resolution doesn't say for you to 7 execute a contract, does it? 8 A. Well, I read that the Board has approved for all 9 directors to receive specialist consulting contracts. 10 11 Q. Yes, but a contract is more than just receiving 12 specialist fees, isn't it, it has various terms and 13 conditions; correct? 14 A. Yes. 15 16 Q. And so how did you understand that you were authorised 17 to say on behalf of the company, "The company should be 18 entering into this contract on these terms"? 19 A. I was provided a contract by John Cannings and part of 20 that - the role that I played was to review their ability 21 to provide the specialist skills as defined in his 22 subsequent email. 23 24 Q. What about the other terms of the contract? 25 A. They were sitting on subcommittees as another primary 26 matter to receive the fees. 27 28 Q. You can turn to page 66, LFC.02.0000293. This is 29 Dr Macri's contract? 30 A. Yes. 31 32 Q. And you will see, for instance, that there are the 33 duties in clause 3 which refer to the various committees? 34 A. Yes. 35 36 Q. The specialist advice - I think you were referring to 37 that in (b)? 38 A. Yes. 39 40 Q. But then things such as confidentiality, in 5 and 6, 41 ending the agreement in 7, those matters? 42 A. Yes. 43 44 Q. What was your understanding of you being authorised to 45 execute the contract? Was it your decision? Was it for 46 you to consider whether this was in the interests of the 47 company to sign? .07/09/2017 (2) 109 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Ultimately, I'd have to say yes, I took legal advice 2 and I asked the lawyer to draft a contract, so based on 3 that I proceeded. 4 5 Q. And your understanding was anybody involved in the 6 drafting of the contract with Mr Cannings, any of the 7 directors? 8 A. In 2007, no. 9 10 Q. So the Board make this resolution on page 63. 11 Mr Cannings then drafts the contract in 66 and it simply 12 gets signed; is that right? 13 A. 10 years ago I can't recall, but my normal practice 14 would have been to review the contract. 15 16 Q. And the Board meeting at which this was voted for 17 anybody who was interested to contact you, was 18 February 2007? 19 A. Yes. 20 21 Q. But you'll see this period of contract has a 22 commencement date of 24 October 2006. Do you see that? 23 A. The Sue Macri one? 24 25 Q. Yes, page 66, LFC.02.0000293? 26 A. Sorry, yes. Yes. 27 28 Q. You will see that it is dated 17 April 2007, so it is 29 backdated. Do you see that? 30 A. Yes. 31 32 Q. Does any of your handwriting appear on this page 66? 33 A. The commencement, the "24/10/2006" looks like it's my 34 handwriting. 35 36 Q. Can you explain why then you backdated it? 37 A. No. 38 39 PUBLIC INQUIRER: Q. Isn't that the date that the doctor 40 became a director? 41 A. No, she became a director in 2001. 42 43 Q. And so each year she was confirmed as a director or -- 44 A. Yes, that would have been the date that she would have 45 been confirmed as a director, in October, sorry. 46 47 Q. Yes, so she would be confirmed in October? .07/09/2017 (2) 110 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Sorry, yes. 2 3 Q. Is it probable that you put the date that she was 4 confirmed as a director? 5 A. The history has been that the consulting fees are 6 reviewed at the same time as the Annual General Meeting, so 7 that would be the link, yes. 8 9 PUBLIC INQUIRER: Yes, thank you. 10 11 MR CHESHIRE: Q. Dr Macri had been there for some time, 12 but there were a number of - for instance, 13 Mr Crosthwaite -- 14 A. Yes. 15 16 Q. I am sorry, just give me a moment. Mr White was 17 getting a consultancy agreement for the first time, 18 wasn't he? 19 A. Yes. 20 21 Q. I can find this for you if necessary, but it appears 22 that -- 23 A. Page 69. 24 25 Q. -- a number of -- 26 27 PUBLIC INQUIRER: Q. Page 69, is that what you said? 28 A. Yes. 29 30 MR CHESHIRE: Q. Yes. Thank you. If you look at 31 page 69, in respect of Mr White - this is LFC.02.0000465 - 32 you say at the bottom: 33 34 I have received a signed specialist 35 consultancy agreement from [Mr] Crosthwaite 36 ... When do you want to start paying him 37 from? 38 39 And Mr White responds: 40 41 Bob has advised me ... 42 43 That's presumably Bob Crosthwaite? 44 A. Yes. 45 46 Q. 47 Bob has advised me he believes he would .07/09/2017 (2) 111 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 like to have it backdated to when the Board 2 resolved to adopt this matter, he and 3 I think it was at Cherrybrook in 4 August [2006]? 5 6 Do you see that? 7 A. Yes. 8 9 Q. And then a directive from you: 10 11 Please arrange to pay Bob specialist fees 12 dating back to September 1, 2007. 13 14 I think that must mean 2006? 15 A. Yes. 16 17 Q. And that's what happens? 18 A. Yes. 19 20 Q. Am I right that with the new people, again, it was up 21 to them for them to say when they would like their contract 22 to start from? 23 A. I sought instructions from the Chairman. 24 25 Q. From Mr White? 26 A. Yes. 27 28 Q. And from this document Mr White appears to be saying, 29 "Well, he would like it backdated, so that's what we'll 30 do"; is that right? 31 A. Yes, I took instructions. 32 33 Q. Did you discuss with Mr White whether that was 34 appropriate? 35 36 MS GERACE: I object. 37 38 PUBLIC INQUIRER: Noted. 39 40 THE WITNESS: I can't recall. 41 42 MR CHESHIRE: Q. Going back to the agreement on page 66, 43 LFC02.0000293, did you have any discussion in relation to 44 clause 3, as to the duties, as to whether in fact they 45 would be on those committees and remain on those 46 committees? 47 A. In section (a)? .07/09/2017 (2) 112 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. Yes, or were these simply presented to you by 3 Mr Cannings? 4 A. I think that part was completed by me. Section (b) 5 was definitely completed by me. 6 7 Q. And Dr Macri, I think, at this time was already on the 8 Residents' Services Committee; correct? 9 A. Yes. 10 11 Q. Before this agreement came into force, she wasn't 12 being paid for that, was she? 13 A. No, she had been being paid since -- 14 15 Q. I beg your pardon, I'm sorry, I withdraw that. The 16 length of contract is described as being 12 month. Do you 17 see that? 18 A. Yes. 19 20 Q. Are you able to explain why it was only for 12 months? 21 A. No. 22 23 Q. It is right, isn't it, that there was no renewal of 24 the contract at any time until the further agreements came 25 into force in about 2012; correct? 26 A. Correct. 27 28 Q. They simply rolled over, with the people staying on 29 committees and the moneys continuing to be paid; correct? 30 A. Correct. 31 32 Q. Did you say that you filled in the skills in 3(b) at 33 the top of page 67? 34 A. I think so. 35 36 Q. But again, as with the previous contracts I've shown 37 you, it was providing advice to the committees; correct? 38 A. Yes. 39 40 Q. And (c) was providing written reports to the 41 committees; correct? 42 A. Yes. 43 44 Q. So it was all about being on the committees; correct? 45 A. Yes. 46 47 Q. That was your understanding of what they were being .07/09/2017 (2) 113 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 paid for; correct? 2 A. Yes - so when I said I wrote (b), I mean the bullet 3 points. 4 5 Q. Yes. 6 A. The opening stanza, "Provide specialist advice and 7 input to the committees commensurate with your background", 8 was provided by the lawyer. 9 10 Q. Did you discuss those areas with the individual? 11 A. It's hard to recollect, but I would have either 12 discussed them or it would have been relatively 13 straightforward to define their abilities. 14 15 Q. It is right, isn't it, that some of them had a greater 16 breadth of experience than others; is that correct? 17 A. Yes. 18 19 Q. And some of them had a greater depth of experience; 20 correct? 21 A. Yes. 22 23 Q. And it is right, isn't it, that they all received, at 24 least at this stage, the same fee; correct? 25 A. Yes. 26 27 Q. And likewise, the fee didn't depend upon whether they 28 sat on one committee or four committees, did it? 29 A. No. 30 31 Q. It didn't, in fact, depend upon if they happened to be 32 sick and missed a few committee meetings, they still got 33 paid; that's right, isn't it 34 A. It was the nature of the retainer arrangement that was 35 set up, yes. 36 37 Q. Was it ever discussed, to your recollection, why they 38 were being paid a retainer rather than a fee for services? 39 A. Not - no, it was set up in 2001 that way. 40 41 Q. But at this time it is being extended to other people 42 who weren't previously getting a fee; correct? 43 A. Correct. 44 45 Q. And it may well have been in the company's interests 46 for there to be a fee for service rather than a retainer; 47 correct? .07/09/2017 (2) 114 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. It may have been. 2 3 Q. It appears nobody ever turned their mind to that; is 4 that correct? 5 A. I think that's correct. 6 7 Q. Would you just give me a moment. I asked you earlier 8 about conflicts of interest. Would I be right in saying 9 that, other than the requirement in the Constitution, there 10 was no policy that set out how conflicts of interest were 11 to be managed; is that correct? 12 A. There was no policy of conflicts of interest, no. 13 14 Q. And there was no register of interests, I think, 15 until -- 16 A. 2016. 17 18 Q. -- 2016. At this time am I right that none of the 19 State Councillors were, in effect, threatening to resign; 20 is that right? 21 22 PUBLIC INQUIRER: From the Board? 23 24 MR CHESHIRE: Q. From the Board? 25 A. No, I had never heard that. 26 27 Q. And none of them were threatening to stop serving on 28 committees unless they were paid; correct? 29 A. I don't think they threatened to stop serving on 30 committees, no. 31 32 Q. They just said they wanted to be paid; correct? 33 A. I think the inference is there, yes. 34 35 Q. And it appears that nobody ever turned their mind to 36 whether that was in the best interests of the company, to 37 extend payment to the non-specialists; is that correct? 38 39 MS GERACE: I object. 40 41 PUBLIC INQUIRER: Noted. 42 43 THE WITNESS: I turned my mind to whether the matter was 44 legal or not and sought legal advice and acted based on 45 that legal advice. 46 47 MR CHESHIRE: Q. My question was slightly different - .07/09/2017 (2) 115 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 not about whether you could do it, but about whether the 2 company should do it; in other words, whether it was in its 3 best interests? 4 A. I understand the difference, and no, I did not 5 consider that, to the best of my knowledge. 6 7 Q. And from what you've seen, it appears that nobody 8 appears to have considered that issue; correct? 9 A. I think that's a fair comment. 10 11 MR CHESHIRE: Thank you. Is that a convenient time, 12 Madam Inquirer? 13 14 PUBLIC INQUIRER: Q. You have said to me that you wanted 15 to get the legal advice because of your concerns and 16 I presume that you went to Mr Cannings each time that you 17 were concerned; is that right? 18 A. Yes. 19 20 Q. The option when you had some people being paid and 21 some people not being paid, that created difficulties, 22 I presume? 23 A. It didn't create difficulties for me. 24 25 Q. What about the Board? 26 A. As I said, there was extremely little discussion about 27 consultants' fees, or payment of any fees, in the open part 28 of the Board meeting. 29 30 Q. But the flavour of the meetings, do you not understand 31 that there was some difficulty having a two-tiered 32 structure of the Board, half of them being paid and half of 33 them not? 34 A. I think your first question was had I heard those 35 discussions, no, but I can understand that a two-tiered 36 structure like that could easily cause difficulties, yes. 37 38 Q. And did it? 39 A. I didn't see difficulties emanating from a Board 40 meeting. 41 42 Q. So it was just as easy to then stop paying specialists 43 and have them all honorary? 44 A. That could be possible if the specialists would stay 45 on without being remunerated. 46 47 Q. Was it ever discussed? .07/09/2017 (2) 116 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Not to my knowledge. 2 3 PUBLIC INQUIRER: Mr Thompson, we are going to break for 4 lunch now, if you would step down. Yes, I will adjourn 5 until two. 6 7 LUNCHEON ADJOURNMENT 8 9 PUBLIC INQUIRER: Come back to the witness box, please, 10 Mr Thompson. Yes, Mr Cheshire. 11 12 MR CHESHIRE: Q. Mr Thompson, I was asking you about the 13 director's meeting on 20 February 2007 and the contracts 14 that were put in place soon thereafter. I think your 15 evidence was that the areas of specialism in one of the 16 clauses, you inserted those; is that correct? 17 A. Yes. Could I have the document? 18 19 PUBLIC INQUIRER: Yes, we will put it back before you, 20 Mr Thompson. 21 22 THE WITNESS: Yes, that's correct. 23 24 MR CHESHIRE: Of the LifeCare, volume 1, page 67, 25 LFC.02.0000294. 26 27 PUBLIC INQUIRER: It is page 67, Mr Thompson. 28 29 THE WITNESS: Thank you. Yes. 30 31 MR CHESHIRE: Q. As I recall your evidence, you had a 32 concern about whether all of these directors could in fact 33 justify being of sufficient specialisation; correct? 34 A. Yes, so I emailed Mr Cannings. 35 36 Q. You understood that the decision of the Board was that 37 all of the directors could receive consulting fees if they 38 wanted them; correct? 39 A. Yes. 40 41 Q. So you were not, as it were, forming a view on behalf 42 of the company whether they were sufficiently specialised 43 to receive fees, were you? 44 A. I saw it as my role to look at whether they did have 45 specialist skills. As I said previously, there were three 46 hurdles to come through, the first two were relatively 47 straightforward, the third one was specialist skills, so I .07/09/2017 (2) 117 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 emailed John Cannings requesting advice on how to assess 2 specialist skills. I received that advice and have made 3 the assessments based on that advice. 4 5 Q. That was in the context, wasn't it, Mr Thompson, not 6 of assessing the skills but in completing the contract? 7 A. Yes. 8 9 Q. What I want to suggest to you is you understood that 10 all of the directors were going to be paid consulting fees 11 and your job was simply to make sure that the contract was 12 completed and signed. Do you accept that ? 13 A. Part of my job was to complete that contract and by 14 completing that contract, I had to put in their skills. 15 16 Q. But it wasn't your role to, as it were, say, "Oh, 17 well, this person doesn't have sufficient skills, so I'm 18 not going to give them a consultancy agreement"; that 19 wasn't part of your role, was it? 20 A. It would have been very difficult for me to do that. 21 22 Q. Yes. So you saw the completing of the areas in 3(b) 23 not as being assessing the specialisation, but in putting 24 in something there that could justify what was said in 3(b) 25 as "provide specialist advice and input"; correct? 26 A. That was relevant to that person, yes. 27 28 Q. So your job was to justify the decision that the Board 29 had already made; correct? 30 A. Justify, but also try to make sure that there was some 31 skill base there at least. 32 33 Q. In one sense it's easy for anybody to claim some form 34 of expertise in relation to something, isn't it? 35 A. Under the definition provided to me at a base level, 36 there was a low bar, yes. 37 38 Q. Indeed, I think Mr Carlson - do you recall the 39 category "General Management Experience"? 40 A. I don't recall, but I presume that's what is written 41 there. 42 43 Q. That doesn't sound like much of a specialisation, 44 does it? 45 A. No. 46 47 Q. Mr Rowe, to your recollection, did he have any .07/09/2017 (2) 118 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 particular relevant specialisation? 2 3 MS GERACE: I object. 4 5 PUBLIC INQUIRER: I am sorry? 6 7 MS GERACE: I object. 8 9 PUBLIC INQUIRER: Yes. Is that on the usual basis? 10 11 MS GERACE: Just the general objection. 12 13 MR CHESHIRE: Q. Mr Rowe, to your understanding, did he 14 have any relevant specialisation? 15 A. Other than veteran knowledge, no. 16 17 Q. Veteran knowledge there would be the case of anybody 18 who was involved with RSL (NSW), wouldn't it? 19 A. Correct. 20 21 Q. So, judged on that basis, any of the State Councillor 22 appointments would become specialists; correct? 23 A. That was my understanding of what the Board's 24 direction was, but when I had a concern about particular 25 directors I sought advice. 26 27 Q. Your concern was not about whether they should be 28 getting consulting fees; your concern was about what you 29 were going to put in the contract; correct? 30 A. My concern, when I emailed John Cannings in 2006, in 31 November - late November 2006 - was what his contract - 32 sorry, his advice, his advice said "Specialist consulting 33 fees". I asked him to define what - "Specialist consulting 34 services", I asked him to define what he meant by that and 35 to give me some guidelines, particularly with regards to 36 RSL State Councillors who did not have aged care or 37 retirement living experience. 38 39 Q. But the question as to whether -- 40 A. Sorry. 41 42 Q. Sorry, had you finished? 43 A. Yes, sorry. 44 45 Q. The question as to whether in fact each individual was 46 or was not a specialist, that's not a matter for legal 47 advice, is it? .07/09/2017 (2) 119 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. I think it is, yes. 2 3 Q. If you wanted to raise the fact, if you wanted to say, 4 "I don't think LifeCare should be paying, let's say, 5 Mr Rowe. He doesn't have sufficient specialisation", that 6 would be a matter to raise not with Mr Cannings, but with 7 the Board; correct? 8 A. With Mr Rowe - I did raise the issue of Mr Rowe with 9 Mr Cannings and Mr White. 10 11 Q. In the context of what, he didn't have sufficient 12 specialisation? 13 A. My concern with Mr Rowe was that one of the hurdles 14 was that the person sat on a committee and Mr Rowe did not 15 sit on a committee, so he did not pass one of the tests. 16 17 Q. What was he then being paid for? 18 A. Prior to entering into a contract, I mentioned this in 19 person to Mr White and on a separate occasion I contacted 20 John Cannings on the phone. Both of those people gave 21 similar but different answers along the lines that Mr Rowe 22 had significant veteran experience, and sat on a number of 23 veterans committees and could bring that sort of advice, 24 that sort of knowledge to RSL LifeCare. 25 26 Q. To the Board of RSL LifeCare; correct? 27 A. In practice, that would be the case, correct. 28 29 Q. So at least in respect of Mr Rowe, he was then being 30 paid for his service on the Board of LifeCare; correct? 31 32 MS GERACE: I object. 33 34 PUBLIC INQUIRER: Noted. 35 36 THE WITNESS: He certainly didn't sit on the committees, 37 and that was his major function in RSL LifeCare, to attend 38 Board meetings. 39 40 MR CHESHIRE: Q. He then is being paid for being on the 41 Board of LifeCare; correct? 42 A. Under the way you describe it, yes. 43 44 Q. You say that you relied upon a telephone conversation 45 with Mr White and Mr Cannings; is that right? 46 A. In person meeting with Mr White and a separate 47 telephone conversation with Mr Cannings. .07/09/2017 (2) 120 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. Those conversations were about what you were going to 3 put in the consulting agreement for Mr Rowe; correct? 4 A. It was first, "Don Rowe wants a consulting agreement. 5 I have a concern because he does not sit on a committee. 6 Do you think it's appropriate that he gets that consulting 7 agreement?" 8 9 Q. Who were you talking to at this time? 10 A. Both of them separately, but the conversations went 11 similarly. 12 13 Q. What did Mr White say to you? 14 A. He was in favour of Mr Rowe receiving a consulting 15 agreement because of the veteran experience and sitting on 16 veterans committees. 17 18 Q. But that still means, doesn't it, on that basis, 19 Mr Rowe is being paid for being on the Board of LifeCare; 20 correct? It doesn't alter that fact, does it? 21 A. It doesn't alter the fact, no. 22 23 Q. Mr Cannings, what did he tell you? 24 A. Words to similar effect. 25 26 Q. So neither of them could give you comfort that Mr Rowe 27 was being paid other than for being on the Board; correct? 28 A. They both advocated for Mr Rowe to receive consulting 29 payments and the major thing Mr Rowe did was sit on the 30 Board of RSL LifeCare. 31 32 Q. Therefore, what Mr White and Mr Cannings were saying, 33 they may have been advocating for him to receive the 34 consulting fees, that they could have given you no comfort 35 against the fact that Mr Rowe was receiving fees that were 36 actually prohibited by the Constitution; correct? 37 38 MS GERACE: I object. 39 40 PUBLIC INQUIRER: Noted. 41 42 THE WITNESS: I understand what you're saying. I did not 43 see that it necessarily flowed that payments were directly 44 for him being a director. 45 46 MR CHESHIRE: Q. But you say that you had a concern. 47 A. Yes. .07/09/2017 (2) 121 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. You raised that with Mr White and Mr Cannings and you 3 say that they advocated for him to have a consulting fee, 4 but that can't have allayed your concern, and so what I'm 5 suggesting to you then is if you had that concern and it 6 had not been allayed, why didn't you pursue it in some way? 7 8 MS GERACE: I object. 9 10 PUBLIC INQUIRER: Yes. That is rejected. That is 11 rejected, you don't have to answer that. 12 13 MR CHESHIRE: Q. Was your concern that Mr Rowe was being 14 paid for being on the Board? 15 A. No. 16 17 Q. So what was your concern? 18 A. My concern was that he was seeking consulting payments 19 and under the advice of 2006, one of the criteria for 20 receiving consulting payments was to sit on a committee. 21 22 Q. Yes. 23 A. That was my key concern. 24 25 Q. Did it not occur to you then, in that context, that if 26 he wasn't being paid for sitting on a committee, he must be 27 being paid for being on the Board, which was prohibited by 28 the Constitution? Did that occur to you? 29 A. I understand the flow, but that did not occur to me at 30 the time. What I understood was that he was bringing 31 veteran knowledge and experience and also the - sitting on 32 other veterans committees, that information back to 33 RSL LifeCare. 34 35 Q. This was all about justifying the decision to pay them 36 consulting fees, wasn't it? 37 A. I wouldn't put it that way, but -- 38 39 Q. There was no assessment as to whether they should or 40 shouldn't get consulting fees; correct? 41 A. Well, I just expressed that I had a concern, so I 42 sought advice, so I thought that was an assessment. 43 44 Q. But your concern was not in the context of whether in 45 fact this was prohibited by the Constitution; correct? 46 A. Correct. 47 .07/09/2017 (2) 122 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. You understood, didn't you, that this resolution of 2 the directors, or what they had agreed, was intended to 3 apply on an ongoing basis; correct? 4 A. That's my understanding, yes. 5 6 Q. So that would continue to apply to anybody who became 7 a director of LifeCare; correct? 8 A. In the future, yes, yes. 9 10 Q. And those directors of LifeCare were continuing to be 11 appointed by RSL (NSW); correct? 12 A. Correct. 13 14 Q. So RSL (NSW) could appoint somebody to the Board of 15 LifeCare who might have no specialist skills; correct? 16 A. Correct. 17 18 Q. Yet, this decision of the Board effectively meant that 19 that person would continue to get paid; correct? 20 A. I think they would have to pass to me. They would 21 have to pass the test provided to me by John Cannings. 22 23 Q. As you said, it's a very low bar to pass that test; 24 correct? 25 A. I did say it was a low bar, yes. 26 27 Q. Going back to Mr Riddington and Dr Macri, you 28 understood that the Board had wanted to bring in those 29 people because they had particular expertise; correct? 30 A. Correct. 31 32 Q. That then extended to Mr Longley, Mr Kells and 33 Mr Magee; correct? 34 A. Correct. 35 36 Q. Indeed, for the benefit of LifeCare, it was important 37 to ensure that they had good people performing the various 38 duties in the company; correct? 39 A. Correct. I think it's beneficial to the organisation 40 to have people with professional skills on the Board. 41 42 Q. And on the committees; correct? 43 A. Yes. 44 45 Q. It might well be the case that if you have some people 46 on the Board who do not have particular expertise, that the 47 committees would be better served by having somebody .07/09/2017 (2) 123 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 external rather than one of the directors; correct? 2 A. Yes. 3 4 Q. But there was no discussion about whether in fact the 5 committees would be better served by not having some of 6 these directors on them; correct? 7 A. Yes, there was no discussion, to my knowledge. 8 9 Q. There was no process of perhaps advertising for people 10 to be on the committees; correct? 11 A. No advertising, no. 12 13 Q. So there was no, as it were, competition between 14 directors and external people as to whether they should 15 serve on the committees; correct? 16 A. Correct. 17 18 Q. It was just automatically taken that if you became a 19 director, you went on a committee and you got paid; 20 correct? 21 A. In practice, that's what happened. 22 23 PUBLIC INQUIRER: Q. But in Mr Rowe's case he became a 24 director, didn't go on a committee and got paid? 25 A. Correct. 26 27 Q. Was that the case throughout his time on the Board? 28 A. Yes. 29 30 PUBLIC INQUIRER: Thank you. 31 32 MR CHESHIRE: Q. You are aware, aren't you, and you were 33 aware, that the members of RSL LifeCare were its directors 34 and RSL (NSW); correct? 35 A. Yes. 36 37 Q. Obviously, the State Councillors of RSL (NSW) who were 38 on the Board of LifeCare knew that they were getting 39 consulting fees, but are you able to assist as to whether 40 the State Councillors of RSL (NSW) who were not on the 41 Board of LifeCare, whether they were aware that consulting 42 fees were being paid to all the directors? 43 A. I can't assist. I have very - sorry, up to 2015 I 44 can't assist because I had very little visibility to 45 RSL (NSW). In 2015, I did a presentation to RSL 46 State Council and in that presentation one of the slides 47 highlighted the fact that directors of RSL LifeCare who are .07/09/2017 (2) 124 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 consultants receive consultants' fees. 2 3 Q. That slide - say that again - said that all 4 directors -- 5 A. I can't - I'd have to look at the slide, but it 6 certainly mentioned consultants' fees being paid to 7 directors; I can't recall the exact words. 8 9 Q. Do you recall any discussion about that issue? 10 A. I specifically raised it and paused and asked if there 11 were any questions and there were no questions. 12 13 Q. What about any other discussions? Did you have any 14 other discussions with State Councillors as to whether they 15 were or were not aware of the consulting fees being paid? 16 A. In 2016, at a meeting that Bill Riddington and I 17 attended with John Haines, the then Acting State President 18 or State President, I'm not sure, there was a discussion 19 about a few matters and then at the end I specifically 20 asked him if there was any issue about consulting fees, did 21 we need to talk about that, and he said no, he was fine. 22 23 PUBLIC INQUIRER: Q. He said - "he" being? 24 A. John Haines. 25 26 MR CHESHIRE: Q. If you would turn to page 79, 27 LFC.01.0000001, you'll see a Board meeting of 21 August 28 2007 and you are recorded as being in attendance. Do you 29 see that? 30 A. Yes. 31 32 Q. Then over the page, 02, at page 80, 3.5. 33 A. Yes. 34 35 Q. You will see in the second bullet point there is an 36 increase for fees from $18,000 to $19,000 per annum. Do 37 you see that? 38 A. Yes. 39 40 Q. It appears that nobody absented themselves from that 41 discussion; correct? 42 A. Correct. 43 44 Q. So that was a number of the directors voting for an 45 increase in their fees at that time; correct? 46 A. Correct. 47 .07/09/2017 (2) 125 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. Nobody questioned that at the time; is that right? 2 A. No. 3 4 Q. So that is right? 5 A. That is right. 6 7 Q. Thank you. 8 9 PUBLIC INQUIRER: Q. Mr Longley is in attendance at that 10 meeting. At that stage he was a consultant, was he not? 11 A. There must have been a period when the director 12 appointments generally started from October. 13 14 Q. Yes. 15 A. So he must have returned to the organisation, came 16 back on as a consultant but did not come on as a director 17 until October. I can't be certain, but that's -- 18 19 Q. You think that's -- 20 A. Yes. 21 22 PUBLIC INQUIRER: Thank you. 23 24 MR CHESHIRE: Q. I am sorry, I should have asked you 25 this before: the fee that ended up in the agreements, the 26 $18,000, where did that figure come from? 27 A. It was resolved by the Board. 28 29 Q. Just go back to page 63, that's the resolution and 30 that's the meeting of 20 February 2007. That's the 31 resolution about consulting fees. It next came back before 32 the Board in August, as I was just showing you. 33 A. Mmm-hmm. 34 35 Q. Do you see on page 63, which is LFC.02.0000336, there 36 is no reference there to the $18,000, is there? 37 A. There is no reference there. I'd have to check, but 38 was there a reference - actually, in 2006 they were paying 39 specialist fees of $18,000; that was this morning; I think 40 in August, August 2006. 41 42 Q. So you understood, did you, then, that it was just 43 taken as read that the State Councillor, or, rather, sorry, 44 the directors who were not getting directors' fees and then 45 were going to get it for the first time, that they were 46 going to get it on the same terms as the others; is that 47 right? .07/09/2017 (2) 126 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. The same contract, the same terms and conditions. 2 3 Q. Then going back to page 80, the next bullet point is 4 that the Board have discretion to pay certain approved 5 specialist consultants an additional fee over and above the 6 base specialist consultant fee. Do you see that? 7 A. Yes. 8 9 Q. Just hold on to that for a moment. You prepared, as I 10 apprehend, a number of papers that went to the Board; 11 correct? 12 A. Correct. 13 14 PUBLIC INQUIRER: In respect of consulting fees? 15 16 MR CHESHIRE: Q. Yes, in respect of consulting fees. 17 A. In respect of consulting fees, I prepared them on 18 instruction, yes. 19 20 Q. When you say "prepared them on instruction", who gave 21 you the instruction? 22 A. Generally the Chairman; yes, I'd say the Chairman. 23 24 Q. And the Chairman told you to prepare a paper; correct? 25 A. I do recall approximately from this period on - 26 whether it was this year or the year after - there would be 27 a paper roughly every year on a fee increase for specialist 28 consultants. 29 30 Q. When you say he instructed you to prepare it, did he 31 also tell you what should be in the paper? 32 A. There was a discussion and the reference - advice from 33 him, I do remember a paper where there was a blank - blanks 34 for numbers which was filled out, I presume by the 35 directors. 36 37 PUBLIC INQUIRER: Q. You prepared the paper with the 38 blanks in it and gave it to the directors? 39 A. In one year like that, yes. 40 41 MR CHESHIRE: Q. If you turn back two pages to 42 page 77 - I don't know whether this is the one that you are 43 thinking of. 44 A. Yes. 45 46 Q. You prepared this document; is that right? 47 A. Yes. .07/09/2017 (2) 127 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. And you put in blanks because -- 3 A. I was leaving it for the Board to determine. 4 5 Q. What about in (c): 6 7 That the Board have discretion to pay 8 certain approved specialist consultants an 9 additional fee ... 10 11 A. I must have been instructed about that. 12 13 Q. And you say instructed by Mr -- 14 A. I would generally say Mr White; it would probably be 15 Mr White or Mr Riddington. 16 17 Q. At the final bullet point on that page it says: 18 19 At subsequent Board meetings there has been 20 discussion regarding the need to provide a 21 higher level of remuneration for certain 22 specialist consultants, reflecting the 23 higher consulting workload being undertaken 24 by those people. 25 26 Do you see that? 27 A. Yes. 28 29 Q. Going back to page 80, put aside Mr White for a 30 moment, we'll come back to him, at the bottom of page 80, 31 which is LFC.01.0000002, Mr Riddington is to receive an 32 additional $5,000; correct? 33 A. Correct. 34 35 Q. Then over the page, Dr Macri to receive an additional 36 $5,000? 37 A. Correct. 38 39 Q. Mr Riddington and Dr Macri were the first consultants 40 who became directors; correct? 41 A. Correct. 42 43 Q. To your understanding, the reason why they were then 44 being paid more is because they'd always been receiving a 45 consulting fee; correct? 46 A. No. 47 .07/09/2017 (2) 128 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. Did you understand that Mr Riddington and Dr Macri in 2 fact were engaging in a higher consulting workload? 3 A. My understanding as to why there was a differential in 4 fees was that they were chairs of subcommittees. However, 5 I do note Mr Riddington was not a chair of that other 6 subcommittee at that time, so my understanding was not 7 fully correct. 8 9 PUBLIC INQUIRER: Q. But you did think he was at the 10 time, did you? 11 A. That's my understanding. Obviously, he wasn't chair 12 of the committee, but I - over the years my understanding 13 is that there's a deferential in fees because of being 14 chair of the committee, but it's not correct on this 15 occasion. 16 17 MR CHESHIRE: Q. Mr White, then -- 18 A. Mr White was Chair of the Strategy, Planning and 19 Administration Committee which split into two. He remained 20 chair of the Strategic, Planning and Property Development 21 Committee. 22 23 Q. So he's chair at this time of one committee; is that 24 right? 25 A. That's right. 26 27 Q. Dr Macri is chair of one committee? 28 A. That's right. 29 30 Q. So why does Mr White get double the amount of 31 Dr Macri? 32 A. I don't know. 33 34 Q. Mr White was Chair of the Board of LifeCare; correct? 35 A. Correct. 36 37 Q. You recall that when you went to Mercer for advice 38 about paying directors, they gave you advice that a 39 chairman is generally paid more on a Board than ordinary 40 members; correct? 41 A. I think that's what the advice said, yes. 42 43 Q. You understood, didn't you, that Mr White was being 44 paid because he was Chairman of the Board of LifeCare; 45 that's why he got his additional $10,000; correct? 46 47 MS GERACE: I object. .07/09/2017 (2) 129 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 PUBLIC INQUIRER: Noted. As far as you were aware. 3 4 THE WITNESS: Before going back and reviewing this, as 5 I said, my understanding was that people received 6 additional fees for sitting on - sorry, for being chairs of 7 committees. That understanding is flawed, looking at this, 8 and I do note that Mr White is Chairman and Mr Riddington 9 is Deputy Chairman, so there could be a connection there 10 that I hadn't previously become alive to. 11 12 PUBLIC INQUIRER: Q. You are saying Chairman and 13 Deputy Chairman of LifeCare? 14 A. Of the Board, yes. 15 16 MR CHESHIRE: Q. I think you said there that were four 17 committees; is that right 18 A. In 2001 there started off to be four committees. That 19 went down to about two committees in about 2004 and in 2007 20 or 2008 it went back up to three committees, and has since 21 grown further, since that time. 22 23 Q. Was there any discussion as to how the figures of 24 $5,000 and $10,000, how those figures were arrived at? 25 A. I don't recall any discussion and, as I say, there was 26 extremely little discussion about these fees, or 27 consultancy agreements in the open part of the Board 28 meeting. 29 30 Q. Whether in the Board meeting or outside of the Board 31 meeting, but in your presence, was it ever discussed with 32 you how those figures of $5,000 and $10,000 for additional 33 fees were calculated? 34 A. I must have been told because that was in the paper. 35 I can't recall any significant discussion; I can't recall. 36 37 Q. Again, it appears that Mr White, Mr Riddington and 38 Dr Macri were all present and voted on that resolution for 39 them to have additional fees; correct? 40 A. That's correct. 41 42 Q. If you could turn forward to page 84, this is 43 November 2007. This isn't your document, but it's 44 LFC.12.0000003. You'll see on the second page it is signed 45 by Mr Ham? 46 A. Yes. 47 .07/09/2017 (2) 130 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. Have you seen this letter before? 2 A. I must have seen it at the time, and I have seen it 3 recently. 4 5 Q. You were aware, if you turn to the first page, of the 6 conflicting views expressed in relation to directors' 7 remuneration? 8 A. Whereabouts, sorry? 9 10 Q. The very first paragraph. Do you see that? 11 A. Yes. 12 13 Q. What were those conflicting views that were being 14 expressed? 15 A. As I understand it, it's the points that have been 16 made in the rest of the letter. 17 18 Q. The first point there that is raised is described as 19 "Fees paid to Directors for specialist services", so that's 20 what we have described as consulting fees; correct? 21 A. Correct. 22 23 Q. As Mr Ham says, they are specifically quarantined away 24 from any connection for them being a director's fee as 25 such. Do you see that? 26 A. Yes. 27 28 Q. That suggests that, at least for Mr Ham, there was 29 some sensitivity in keeping any suggestion that the 30 consulting fees were directors' fees, keeping that 31 suggestion away; correct? 32 A. Yes. 33 34 Q. Was that also a matter of concern to you? 35 A. Well, I think that we made sure, as far as Peter and I 36 were aware, that we quarantined away from any connection to 37 them being a director's fee. 38 39 Q. Except possibly with Mr Rowe? 40 A. I understand what you're saying, yes. 41 42 Q. Then it says in the next bullet point: 43 44 The question now being asked is whether 45 Directors can participate in the Company's 46 Salary Packaging Plan ... 47 .07/09/2017 (2) 131 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 What, in effect, the directors were seeking to do here is 2 to receive their consulting fees on a tax-free basis; 3 correct? 4 A. I do recall that. 5 6 Q. Was that a matter of concern to you? 7 8 MS GERACE: I object. 9 10 PUBLIC INQUIRER: That is noted. 11 12 THE WITNESS: Again, if there was an issue and a concern, 13 we sought advice and this time Peter sought the advice. 14 15 MR CHESHIRE: Q. So, on the one hand, the directors then 16 are seeking to have their consulting fee tax-free, and then 17 also the directors are trying to get more by way of their 18 out-of-pocket expenses; correct? 19 A. They sought to be supplied with computer hardware. 20 21 Q. So in addition to their consulting contracts, they 22 wanted to have computer hardware for serving on the Board; 23 is that right? 24 A. They wanted to have computer hardware. Whether it was 25 for serving on the Board - well, it was put by a director 26 at the last Board meeting, so, yes, serving on the Board. 27 28 Q. The consulting agreements didn't include any provision 29 for them to be paid expenses in addition, did they? 30 A. At that time, I don't believe so. 31 32 Q. Then you received the advice that's at page 86, 33 RW.01.0000270. The advice you receive is that 34 non-executive Directors cannot be employees and so cannot 35 participate in the Salary Packaging Plan; correct? 36 A. Correct. 37 38 Q. This was directed to Mr Ham, but you would have seen 39 it at the time; correct? 40 A. Yes. 41 42 Q. You'll see that in (1) Mr Cannings repeats: 43 44 As are aware the Company's Constitution 45 prohibits the payment of Directors fees to 46 Directors ... 47 .07/09/2017 (2) 132 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Do you see that? 2 A. Yes. 3 4 Q. He reiterates his advice of 22 November, so he 5 attached that again; correct? 6 A. Yes. 7 8 Q. He goes on to talk about out-of-pocket expenses; do 9 you see that? 10 A. Yes. 11 12 Q. He say in his penultimate paragraph: 13 14 I have intentionally kept this advice 15 general ... 16 17 A. Yes. 18 19 Q. And then: 20 21 Finally, I note that we have previously 22 advised that if the Company were to resolve 23 to pay directors, that in addition to 24 amending the Company's Constitution, 25 application would need to be made under the 26 Charitable Fundraising Act 1991 seeking 27 Ministerial approval ... 28 29 Do you see that? 30 A. Yes. 31 32 Q. You would have seen that at the time? 33 A. Yes. 34 35 Q. Was this advice, to your understanding, provided to 36 the Board? 37 A. I believe so. 38 39 Q. It appears that Mr Cannings is perhaps reiterating his 40 advice about the possibility of amending the Constitution; 41 correct? 42 A. I don't - that we are thinking of - that the Board was 43 thinking of amending the Constitution again? I didn't read 44 that. 45 46 PUBLIC INQUIRER: Q. No, in the last paragraph it seems 47 that Mr Cannings is reiterating his advice about the change .07/09/2017 (2) 133 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 to the Constitution? 2 A. Correct, yes. 3 4 MR CHESHIRE: Q. So, as you understood it, the directors 5 were being paid for being on committees; was that still 6 your understanding? 7 A. Yes. 8 9 Q. That they were not being paid for the hours that they 10 provided as Board members; correct? 11 A. Correct. 12 13 Q. Are you able to explain, after the resolution whereby 14 all of the directors could seek contracts for consulting 15 fees, Ms Mulliner and Mr Rowe didn't take that up 16 immediately. Do you recall that? 17 A. Yes. 18 19 Q. Are you able to explain why, or the circumstances in 20 which, they didn't take it up initially, but then did come 21 to take it up? 22 A. I think there was a level of reticence; I'm not sure. 23 24 Q. Was that discussed with you? 25 A. I can't recall a specific conversation, no; I'm just 26 making a presumption. 27 28 Q. At some stage, did they come to you and suggest that 29 they should then have contracts? 30 A. They must have, yes. 31 32 Q. That didn't go back before the Board, did it? 33 A. No. 34 35 Q. Did you consider that that was bound by the previous 36 invitation, that anyone interested could just come and 37 approach you? 38 A. That was my understanding, yes. 39 40 Q. I asked you earlier about New South Wales and its 41 awareness of these consulting fees. Did it ever occur to 42 you that the consulting agreements perhaps ought to have 43 been approved at a general meeting of LifeCare? 44 45 MS GERACE: I object. 46 47 PUBLIC INQUIRER: Noted. .07/09/2017 (2) 134 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 THE WITNESS: In 2010 or 2011, I became aware of the 3 conflict and mentioned it - I raised it with John Cannings. 4 There was discussion between me and John about that. He 5 agreed that they should not be, directors should not be 6 approving the fee increases and he said that he would raise 7 it with, I believe, the chairman. There was discussion 8 about that and that's how the March 2012 resolution 9 happened where it was delegated to the CEO. At that time 10 his advice was that it could not go to the members because 11 the members were the directors. There was a conflict 12 there. 13 14 MR CHESHIRE: Q. When you say his advice at that time, 15 you mean Mr Cannings' advice? 16 A. Mr Cannings' verbal advice, yes. 17 18 Q. It was just verbal, was it? 19 A. Just verbal. 20 21 Q. That was an important matter, wasn't it -- 22 A. Yes. 23 24 Q. -- as to whether it should go to the members, so why 25 didn't you seek that advice to be confirmed in writing? 26 A. I regret that I didn't. 27 28 Q. You said he gave you advice that it couldn't go to the 29 members because the directors were the members; is that 30 right? 31 A. I think it would be more fair to say that the conflict 32 would remain the same. 33 34 Q. One of the members was RSL (NSW); correct? 35 A. Correct. 36 37 Q. So RSL (NSW) could have appointed somebody who was not 38 in receipt of a consulting fee from LifeCare; correct? 39 A. I put my mind to that a lot over this last year and I 40 agree. 41 42 Q. Do you agree that at some stage this ought to have 43 been put to a meeting of the members? 44 A. That's my current view, yes. 45 46 Q. But at the time, at least until 2011, it didn't occur 47 to you; is that right? .07/09/2017 (2) 135 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. I awoke to the conflict in 2011, and just accepted the 2 advice that it wouldn't work going to the members because 3 they were conflicted as well. 4 5 Q. What prompted you to wake to the conflict in 2011? 6 A. I can't be sure, but I would make an assessment that 7 by that stage, when all directors were receiving consulting 8 fees, I awoke to the conflict then. 9 10 Q. The first year in which there was the increase - just 11 give me a moment. Do you recall I was showing you a moment 12 ago that in the '07/'08 financial year there were 13 additional fees that were paid to a number of the 14 consultants; correct? 15 A. Yes. 16 17 Q. Are you aware that prior to that year, the financial 18 statements recorded who got what sum. By way of a 19 consulting fee, each director was identified and the amount 20 that that director got. Are you aware of that? 21 A. Over the last year when I have gone back and looked at 22 the financial statements, I did note that initially they 23 were all listed separately and then they were combined, at 24 some point in time. 25 26 Q. They were combined, I can tell you, in the '07/'08 27 financial year, so the 30 June 2008 financial statements 28 were the first with a single composite figure. 29 A. Okay. 30 31 Q. That was the year in which an additional fee was paid 32 for the first time? 33 A. Okay. 34 35 Q. Are you able to assist as to whether it was put in as 36 a single composite figure in order to hide the fact that 37 certain people were getting higher fees than others? 38 A. I can't recall any conversation like that and I think 39 I would have if I had - if that had been put to me like 40 that. 41 42 Q. Were you involved in the preparation of the financial 43 statements? 44 A. Not strongly. I certainly looked at them before they 45 were finalised, but we have a chief financial officer. 46 47 Q. Were you involved in the decision to present the fee .07/09/2017 (2) 136 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 in 2008 as being a single composite figure? 2 A. Not to my recollection. 3 4 Q. Who, to your understanding, would have been involved 5 in that? 6 A. The financial statements are primarily the domain of 7 the financial officer and the auditors. 8 9 Q. And the financial officer being, at this time, in 10 2008? 11 A. I think that was Peter Ham. 12 13 Q. Mr Broadhead then became in early 2010; is that right? 14 A. Around then, yes. 15 16 Q. If you go forward to page 115, LFC.01.0000123 -- 17 A. Yes. 18 19 Q. -- this is February 2010. You'll see you were present 20 at this meeting? 21 A. Yes. 22 23 Q. Then at page 116, there is a resolution at 6.7. Do 24 you see that? 25 A. Yes. 26 27 Q. Again, it appears that they all voted for the increase 28 of the fee for the following year; correct? 29 A. Correct. 30 31 Q. Indeed, increases in the additional consulting fees; 32 correct? 33 A. Correct. 34 35 Q. And also in respect of the introduction of a 36 three-years tools of trade. Do you see that? 37 A. Yes. 38 39 Q. Where did the suggestion come from for these directors 40 also to receive a tools of trade allowance? 41 A. I can recall some level of discussion from a few 42 directors about this, and I was requested to write a paper. 43 44 Q. Is that paper what we see at page 112, LFC.02.0000454? 45 A. Yes. 46 47 Q. Tools of trade is dealt with on page 114. .07/09/2017 (2) 137 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. Yes. 2 3 Q. In fact, 113 on to 114. This paper is all to do with 4 specialist consulting fees, correct, as we see from its 5 heading on 112? 6 A. Yes. 7 8 Q. What was being proposed is that in addition to the 9 annual increase in the consulting fee, the directors were 10 also going to receive, as part of their consulting 11 arrangements, a tools of trade allowance; correct? 12 A. Yes. 13 14 Q. As you say on page 114, to cover matters such as 15 mobile phone, computer and printer; correct? 16 A. Yes. 17 18 Q. Was this your idea or was this suggested to you by 19 somebody else? 20 A. It was not my idea. 21 22 Q. Who suggested it to you? 23 A. There were directors there. I recall Sue Macri and 24 Bob Crosthwaite talking about it, but I don't think they 25 were the only directors advocating it. 26 27 Q. Was that at the meeting or was that prior to the 28 meeting? 29 A. It would have had to have been prior to the meeting 30 because the paper - it might have been a previous meeting, 31 or some discussion there, because the paper would be 32 prepared before the meeting. 33 34 Q. Did you have contact with many of the directors on a 35 fairly frequent basis? 36 A. Yes. 37 38 Q. It's right, isn't it, that the directors were entitled 39 to expenses for serving on the Board; correct? 40 A. Reimbursement of expenses, yes. 41 42 Q. The sorts of things that they might have required for 43 sitting on the Board might have included a mobile phone, 44 computer and printer; correct? 45 A. It might have, yes. 46 47 Q. So the additional expenses required for serving on a .07/09/2017 (2) 138 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 committee above and beyond serving on a Board, would have 2 been minimal, wouldn't they? 3 A. Yes, but I don't recall directors claiming those sorts 4 of expenses. 5 6 Q. No, but the fact they weren't claiming them doesn't 7 mean that they then were entitled to claim them for serving 8 on a committee; correct? 9 A. Yes. 10 11 Q. If a director has a computer and he uses it for Board 12 meetings, the fact that he's also using it for committee 13 meetings doesn't mean that he can claim the full cost of 14 that computer as part of his expenses of serving on the 15 committee; correct? 16 A. If you put it that way, yes. 17 18 Q. Am I right that, in effect, tools of trade really was 19 being used as a way of giving directors reimbursement for 20 their expenses whether incurred in relation to the Board or 21 committees? 22 A. My understanding was that it was an allowance for the 23 matters noted there - internet access, computer documents, 24 printing and stationery, phone calls, mobile telephone 25 access and having a home computer. 26 27 Q. For both their service on committees and on the Board; 28 correct? 29 A. They wouldn't have separate computers or phones, yes. 30 31 Q. Yes. This was a way of reimbursing them for their 32 position as both serving on boards and on committees; 33 correct? 34 A. I had not seen it that way. 35 36 Q. But, in the light of what I just put to you, that 37 would seem correct? 38 A. I can follow your logic, yes. 39 40 Q. Did that not occur to you at the time? 41 42 MS GERACE: I object. 43 44 PUBLIC INQUIRER: It's noted. 45 46 THE WITNESS: No. 47 .07/09/2017 (2) 139 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 MR CHESHIRE: Q. What I want to suggest to you is rather 2 in the same way as the expenses were being paid to cover 3 serving on boards and committees, that really was the 4 reality of the consulting fees - they were for serving on 5 committees and on the Board; do you accept that? 6 7 MS GERACE: I object. 8 9 PUBLIC INQUIRER: Noted. 10 11 THE WITNESS: I understand the close link, but I made sure 12 that the fees were for committee services under the way the 13 contract was structured. 14 15 Q. In relation to the fee of $5,000 every three years, 16 how was that calculated? 17 A. I think the fee was given to me; I can't be sure. 18 19 Q. So, in effect, this paper that you prepared for the 20 Board was not really coming as your recommendation, it was 21 just you putting into a paper what the directors wanted to 22 happen; is that right? 23 A. Can I just refresh myself with the rest of the paper? 24 25 Q. Yes. 26 A. If you look at the two recommendations, the top two 27 recommendations under section 6, which I think is the crux 28 of what you're talking about, yes, I was following 29 instructions from directors. 30 31 Q. So the position then is that the directors tell you 32 what they want to be in the paper, which you then put into 33 the paper and they then consider and adopt at a Board 34 meeting; correct? 35 A. On this occasion, yes. 36 37 Q. Indeed, going back to page 116, we have, in addition 38 to the base fees, the additional fees, the tools of trade 39 is introduced, annual fees for membership of the Institute 40 of Company Directors and travel expenses outside of the 41 metropolitan area, they are all added in; is that right? 42 A. Yes. 43 44 Q. They are added in as part of specialist consulting 45 fees; correct? 46 A. Under that resolution, yes. 47 .07/09/2017 (2) 140 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. But, to your understanding, the contracts were already 2 in force; correct? 3 A. Yes. 4 5 Q. So if there was a contract in force without, 6 for instance, tools of trade, what did you understand? Did 7 you understand there was going to be a further contract 8 variation or a further contract to include the $5,000? 9 A. I saw this as the contract variation. 10 11 Q. Wasn't it in fact the case, what was actually written 12 in the contract really didn't matter; what mattered was the 13 annual resolutions of the Board; correct? 14 A. The fees - at this point in time the fees for 15 consulting services were set by the Board, yes. 16 17 Q. Yes. And therefore, what mattered in relation to the 18 consulting services was simply what the Board resolved 19 every year; correct? 20 A. In terms of the payments, yes, they - I've said that 21 they resolved the payments, yes. 22 23 Q. And the contract, really, was an irrelevancy, 24 wasn't it? 25 A. I didn't view it that way. 26 27 Q. It was a justification for what was going to happen; 28 correct? 29 A. There was a contract there for people to sit on 30 committees and receive fees. 31 32 Q. But if you understood that the contract was rolling on 33 every year then it needed variation to include the tools of 34 trade, didn't it? 35 A. This was a variation that didn't get put into the 36 contract, but it probably should have. It was 37 incorporated, I think, in the 2012 contract. 38 39 Q. At the top of page 117 it is suggested that you, under 40 the guidance of the Chairman - that's Mr White; correct? 41 A. Yes. 42 43 Q. Would review the level of fees for the following year; 44 correct? 45 A. Yes. 46 47 Q. .07/09/2017 (2) 141 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 ... including seeking appropriate external 2 assistance ... to provide the Board with 3 assistance when determining the rates ... 4 5 Do you see that? 6 A. Yes. 7 8 Q. Then what was being suggested is that you put together 9 some assistance for the Board as to what the rates should 10 be for the following year; correct? 11 A. Yes. 12 13 Q. To do that under the guidance of Mr White; correct? 14 A. I don't - this is 2010? 15 16 Q. Yes. 17 A. I don't think there was a fee approval in 2011, and 18 then in 2012 there was a change - a situation whereby the 19 fees were determined by the CEO. 20 21 Q. What was being suggested at this time was that you 22 would; correct? 23 A. This was what was resolved or agreed by the Board, 24 yes. 25 26 Q. It was suggested that you might seek assistance from 27 Mr Cannings; correct? 28 A. Yes. 29 30 Q. But in setting an appropriate fee, an appropriate 31 annual fee, what has legal advice got to do with that? 32 A. I agree. I'd suggest - I can't recall. I suggest 33 Mr Cannings - it was suggested to him because of his 34 writing of the specialist contract and his original 35 suggestion as to how we proceed on this route. 36 37 Q. But not as to the fee; correct? 38 A. He hadn't been setting the fee prior, no. 39 40 Q. So isn't it the case that, to your understanding, the 41 Board were always concerned that their consulting fees 42 might in fact amount to directors' fees? 43 44 MS GERACE: I object. 45 46 PUBLIC INQUIRER: Noted. 47 .07/09/2017 (2) 142 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 THE WITNESS: I don't think so. 2 3 MR CHESHIRE: Q. Isn't it the case that they were 4 concerned and so they wanted every step, as it were, to go 5 via John Cannings, so if there was any issue they assumed 6 that he would raise it; isn't that right? 7 A. I don't see that connection on this occasion. 8 9 Q. Indeed, it would have made more sense, in the context 10 of seeking advice on fee levels, to go back to somebody 11 like Mercer; correct? 12 A. Mercer and PwC and other professional organisations 13 have remuneration advisers and, yes, Mercer would have been 14 a sensible choice as well. 15 16 Q. When you say PwC, though, you were aware that PwC 17 includes both consultants and lawyers; correct? 18 A. Yes. 19 20 Q. When you use PwC in that context, you are referring to 21 PwC consultants, aren't you? 22 A. Yes. 23 24 Q. Would you then go forward to page 129, which is 25 LFC.02.0000457. 26 A. Yes. 27 28 Q. You'll see a proposal in October 2010? 29 A. Yes. 30 31 Q. Which then, on page 131, a meeting on 28 October 2010, 32 you're recorded as present on page 132, that's 33 LFC.01.0000162, and page 132, which is 0000164. 5.3, do 34 you see that? 35 A. Yes. 36 37 Q. At this stage the resolution appears then to be in the 38 light of the paper at page 129; correct? 39 A. Yes. 40 41 Q. Did you prepare that paper? 42 A. I would have, yes. 43 44 Q. And again, were the fees suggested to you? 45 A. I can't recall on this occasion, but I would have - it 46 was suggested to me, or it looks like I based it on - 47 I gave them a couple of percentages to look at. .07/09/2017 (2) 143 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. On what would you have based 4 to 6 per cent as being 3 appropriate? 4 A. I can't recall. 5 6 Q. Is it likely that that was suggested to you? 7 A. Look, it's possible; I can't recall. 8 9 Q. You'll see on 129 we have the review of rates, then we 10 have expenses, the tools of trade -- 11 A. Yes. 12 13 Q. -- and then over the page on 130, now not only do we 14 have tools of trade plus the other matters, travel out of 15 Sydney, we now have additional services: 16 17 It is noted that the Specialist Consulting 18 Fees are for general advice and support in 19 the normal course of business. In the 20 event that a Specialist Consultant provides 21 services over and above the normal course 22 of business, additional fees may be paid to 23 the Specialist Consultant. 24 25 Was that suggested to you? 26 A. I can't recall but it must have been. 27 28 Q. Again, this is a matter - the additional services were 29 not in the contract; correct? 30 A. It reads that way. 31 32 Q. From the company's perspective, if it's got a contract 33 in place, it's not in the company's interest to say, "Well, 34 we'll just pay for some other things in addition to that"; 35 correct? 36 A. They are talking about additional services, though, so 37 if the additional services were of use to the company, one 38 could argue that it could be of benefit to the company. 39 40 Q. But these were additional services as a specialist 41 consultant; correct? 42 A. Yes. Yes. 43 44 Q. And the company had elected to pay a retainer; 45 correct? 46 A. Yes. 47 .07/09/2017 (2) 144 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. So that meant one might win from that or lose from 2 that, in the sense that if a director didn't provide very 3 much, they would still get their retainer; correct? 4 A. I understand your point now. 5 6 Q. It should still be the case that even if they provided 7 a lot of services, it still should have been kept within 8 that retainer; correct? 9 A. Yes, I agree. 10 11 Q. In the last few documents that I've shown you, we 12 started off with a consulting fee, we added in a tools of 13 trade, we added in payment for membership of the Institute 14 of Company Directors, we added in travel expenses outside 15 of the metropolitan area, and now it looks as if we are 16 adding in additional services. Did that not strike you as 17 a matter of concern? 18 19 MS GERACE: I object. 20 21 PUBLIC INQUIRER: Noted. 22 23 THE WITNESS: The reality is that apart from one small 24 occasion, I don't think additional services were paid. 25 26 MR CHESHIRE: Q. If it was just happening on one 27 occasion, the very fact that it was being included 28 suggests, doesn't it, that these are directors who are 29 simply trying to increase matters and get more and more 30 money out of this company; correct? 31 A. You can read it that way. 32 33 Q. Yes. Didn't that occur to you at the time as a matter 34 of some concern? 35 36 MS GERACE: I object. 37 38 PUBLIC INQUIRER: Noted. 39 40 THE WITNESS: No. 41 42 MR CHESHIRE: Q. Again, it's all voted upon by the 43 directors who are receiving the fees; correct? 44 A. Correct. 45 46 Q. That still didn't occur to you at that time, as a 47 matter of concern; correct? .07/09/2017 (2) 145 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 MS GERACE: I object. 3 4 PUBLIC INQUIRER: Noted. 5 6 THE WITNESS: So it's 2010 - 2010 or 2011 I became alive 7 to it. 8 9 MR CHESHIRE: Q. Are you aware that there was 10 correspondence between the company and a number of these 11 directors about the fact that they didn't have an ABN? 12 A. I don't think so. 13 14 Q. Were you aware that a number of the directors supplied 15 what was called a statement by a supplier justifying why 16 they did not have an ABN? 17 A. I'm not involved in that. 18 19 Q. Are you aware that when Mr Broadhead commenced, in 20 about 2010, rather than having invoices produced by the 21 contractor, the company produced recipient created tax 22 invoices? 23 A. I am aware that recipient created tax invoices were 24 provided, yes. 25 26 Q. Were you involved in the decision to do it that way? 27 A. I've never heard of them before, no. 28 29 Q. But at the time when the decision was taken, were you 30 aware of it at that time? 31 32 MS GERACE: I object. 33 34 PUBLIC INQUIRER: Noted. 35 36 THE WITNESS: I was either aware at the time or shortly 37 thereafter. 38 39 MR CHESHIRE: Q. Did you have any discussions about 40 whether it was permissible for the company to issue those 41 recipient created tax invoices? 42 43 MS GERACE: I object. 44 45 PUBLIC INQUIRER: Noted. 46 47 THE WITNESS: As I understand it, it was put forward, or - .07/09/2017 (2) 146 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 I don't know who put it forward, but the chief financial 2 officer managed it, so I presumed he had it under control. 3 4 MR CHESHIRE: Q. Did you have any discussions with him 5 or anybody else about whether you were allowed to issue 6 RCTIs? 7 8 MS GERACE: I object. 9 10 PUBLIC INQUIRER: Noted. 11 12 THE WITNESS: I can't recall having any conversation like 13 that, and I don't know that I would. 14 15 MR CHESHIRE: Q. When you then go forward to page 251. 16 This is the minutes of a Board meeting on 1 March 2012. 17 You are recorded as being in attendance; correct? 18 A. Yes. 19 20 Q. If you turn to page 253, you received delegations at 21 5.9? 22 A. Yes. 23 24 Q. "The documentation was reviewed and discussed", and 25 then, "Board Resolution: It was resolved to approve the 26 following delegations". If you then turn over the page to 27 254, you will see the heading: 28 29 Previously not in place and now ratified. 30 31 Do you see that? 32 A. Yes. 33 34 Q. This is LFC.01.0000228 at 236. You see there: 35 36 1. Any transaction involving a director 37 other than payment of specialist consulting 38 fees or out-of-pocket expenses must be 39 considered by the Board. 40 41 2. Out-of-pocket expenses of Directors are 42 to be reviewed by the Chairman. 43 44 3. Specialist consulting fees will be 45 determined by the CEO in conjunction with 46 review and advice from appropriate 47 organisations such as PwC. .07/09/2017 (2) 147 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Do you see that? 3 A. Yes. 4 5 Q. You understood, did you, that the fixing of the fee 6 was to be delegated to you; correct? 7 A. The setting of the fees, yes. 8 9 Q. But not any other terms of the contract; correct? 10 A. Correct. 11 12 Q. "Review and advice from appropriate external 13 organisations", that was a suggestion that you should seek 14 some form of independent input as to appropriate rates; 15 correct? 16 A. Yes. 17 18 Q. And PwC - did you understand whether that was 19 contended as consultants or lawyers? 20 A. Well, I read it as first going to John Cannings, which 21 I did. 22 23 Q. But again, in the context of setting the fee, what 24 input can John Cannings give you about what would be an 25 appropriate fee? 26 A. Well, prior to writing the subsequent paper, I sat 27 down with John, asked him how to go about this. He gave me 28 an outline and the outline was how the paper came about. 29 30 Q. This is all in the context of setting a fee; is that 31 right? 32 A. Setting the fee, yes. 33 34 Q. When you say a "paper", is this the paper that we see 35 on page 267, WIN.01.0000016? 36 A. Yes. 37 38 Q. You say, do you, that before you prepared this, 39 you sat down with Mr Cannings; is that right? 40 A. Yes. I went through it in detail - I didn't go 41 through it because I hadn't written it, but I went through 42 the - I asked him for assistance and talked about the 43 concept of how we'd write a paper like this. 44 45 Q. Then you put forward the various hours? 46 A. I made a - so there's - what we have tried to do on 47 this paper is to take a retainer and then put a description .07/09/2017 (2) 148 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 of hours and dollars around that to seek to fit it into a 2 retainer arrangement. 3 4 Q. When you say to fit into a retainer arrangement, do 5 you mean into a new contract? 6 7 MS GERACE: I object. 8 9 PUBLIC INQUIRER: Noted. 10 11 THE WITNESS: I think that whilst there was a new contract 12 that was entered into at this time, I think the fee system 13 remained the same, in terms of it being a retainer 14 arrangement. What we were trying to do was to put some 15 maths around that retainer arrangement to see whether the 16 retainers generally could be supported. 17 18 MR CHESHIRE: Q. The figures on page 268, 19 WIN.01.0000016_001, the "Benchmarking Fees", where did they 20 come from? 21 A. They were estimates that John and I worked through 22 ourselves. 23 24 Q. Why didn't you go back to Mercer? 25 A. That could have been another option. 26 27 Q. Why didn't you go to PwC, one of the consultants 28 there? 29 A. We did in 2015. 30 31 Q. Yes, but this is 2012, so why, when you are preparing 32 this, do we have you, who has been working for LifeCare for 33 the previous 11 years, and Mr Cannings who is a lawyer, 34 setting out benchmarking of appropriate fees for 35 consultants for LifeCare? 36 37 MS GERACE: I object. 38 39 PUBLIC INQUIRER: Noted. 40 41 THE WITNESS: That's the way it occurred. 42 43 MR CHESHIRE: Q. You came up with fees on page 273. 44 A. Yes. 45 46 Q. At that time, Mr White, Mr Riddington, Dr Macri and 47 Mr Kells were all receiving an additional fee above the .07/09/2017 (2) 149 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 others, weren't they? 2 A. Yes. 3 4 Q. Ms Mulliner was not, was she? 5 A. No. 6 7 Q. Under your calculations, that should have remained the 8 case, except for Ms Mulliner should have moved into the 9 additional category fee; correct? 10 A. I don't know that Ms Mulliner should have. Why? 11 12 Q. Well, look at it. You say, "It is recommended that", 13 so on the basis of your calculations, you have a figure for 14 Ms Mulliner being $34,000, being the same as Dr Macri. Do 15 you see? 16 A. Okay. 17 18 Q. Do you see that? 19 A. Yes. I wonder whether that's an error because I don't 20 know that it actually happened. 21 22 Q. No, it didn't, Mr Thompson, it did not happen. 23 A. No. No, I hadn't picked up that error previously. 24 25 Q. It may not be an error. What I'm suggesting to you is 26 that on the basis of your calculations, you recommended 27 that Ms Mulliner should be in the category where she was 28 receiving an additional fee; correct? 29 30 MS GERACE: I object. 31 32 PUBLIC INQUIRER: Noted. 33 34 THE WITNESS: I see that there, but the only people that 35 were receiving additional fees were people who were sitting 36 as chairs on committees, and Ms Mulliner wasn't. 37 38 MR CHESHIRE: Q. Exactly. So this document, in trying 39 to work out the hours they were providing, had nothing to 40 do with actually trying to calculate proper fees; it was 41 trying to justify a fee structure that was already in 42 place; that's right, isn't it? 43 44 MS GERACE: I object. 45 46 PUBLIC INQUIRER: Noted. 47 .07/09/2017 (2) 150 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 THE WITNESS: I think I've already said it was retaining - 2 continuing the current retainer arrangement and trying to 3 put some maths around it. 4 5 MR CHESHIRE: Q. If that is right, are you able to 6 explain when Ms Mulliner, when you had recommended her to 7 get $34,000, in fact only got $27,000, being the same as 8 the other directors who were at the bottom of the range? 9 A. Because that had always been my intention and until 10 now nobody's picked up this error. 11 12 Q. It had always been your intention for Ms Mulliner not 13 to receive an additional fee; correct? 14 A. Correct, because the additional fees were for being 15 chairs of committees and she wasn't a chair of a committee. 16 17 Q. If, in fact, this was all about simply being chair of 18 a committee, what was then the point of doing all these 19 calculations, if they weren't going to make any difference 20 at the end of the day? 21 A. Overall -- 22 23 MS GERACE: I object. 24 25 PUBLIC INQUIRER: Noted. 26 27 THE WITNESS: Overall, the fees - as I said, the maths and 28 the mathematical construct around this was to support the 29 continuance of a retainer arrangement. There may have been 30 individual inconsistencies, but overall the quantum could 31 be justified through this exercise, in my opinion. 32 33 MR CHESHIRE: Q. My point to you, then, Mr Thompson, was 34 that this was trying to justify what had always been the 35 case, rather than working out what would be a fair 36 structure; that's right, isn't it? 37 38 MS GERACE: I object. 39 40 PUBLIC INQUIRER: Noted. 41 42 THE WITNESS: I don't see it that way. 43 44 MR CHESHIRE: Q. Are you then able to provide any 45 explanation as to why Ms Mulliner, you having calculated 46 that she should get - recommending, indeed, on the basis of 47 your calculations - $34,000, she was the only one who was .07/09/2017 (2) 151 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 not adopted and she was given instead $27,000? 2 3 MS GERACE: I object on a different basis. The witness 4 has already said on two occasions that he believes it's an 5 error, so when he is asked again can he provide any 6 explanation; he has. 7 8 PUBLIC INQUIRER: Yes. Mr Cheshire, I gather it is an 9 asked and answered objection. 10 11 MS GERACE: Thank you. 12 13 PUBLIC INQUIRER: Are you pressing on? 14 15 MR CHESHIRE: No, I won't press on with that. 16 17 Q. When you prepared these estimates of time, these were 18 your estimates that you put together; correct? 19 A. Yeah, they were prospective estimates, yes. 20 21 Q. You didn't seek any input from the directors; correct? 22 A. I shared it with directors and sought their feedback. 23 24 Q. When you say you shared it, you, first of all, put 25 together the estimates; is that right? 26 A. Yes. 27 28 Q. Those estimates, to your recollection, weren't changed 29 by any of the directors; correct? 30 A. I don't believe so, no. 31 32 Q. In providing these estimates, you took standard 33 figures, for instance, for matters such as travel, 34 didn't you? 35 A. Yes. 36 37 Q. Did you actually consider whether all of the directors 38 would need the same amount of travel time as each other? 39 A. I thought it should be standard because, you know, I 40 thought it should be a standard level of hours. 41 42 Q. So regardless of the fact that one of these directors 43 might not have needed to travel two hours, you thought it 44 appropriate to calculate their fee on the basis of them 45 travelling two hours; is that right? 46 47 MS GERACE: I object. .07/09/2017 (2) 152 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 PUBLIC INQUIRER: Noted. 3 4 THE WITNESS: I'm just trying to have a look, sorry. 5 Everyone, I believe, except maybe Bill Riddington, would 6 have spent at least an hour travelling each way, or one 7 way. 8 9 MR CHESHIRE: Q. My point is, Mr Thompson, I am 10 suggesting to you, you didn't actually assess, given that 11 you didn't actually talk to these directors and find out 12 how long they were actually preparing with their 13 preparation, with their travel allowance, by using 14 standardised figures, you weren't actually trying to 15 calculate what each individual director was actually 16 spending on these tasks? 17 A. That's correct. We were continuing a retainer 18 arrangement; that was my understanding. 19 20 Q. So a retainer arrangement was based then upon, 21 effectively, a standardised estimate of what you thought 22 could be justified that a director might spend on those 23 tasks; correct? 24 A. It was - yes. 25 26 Q. In terms then of the company's interests, the 27 company's interests are in making sure that the retainer is 28 paying an appropriate fee for what is actually provided; 29 correct? 30 A. And I think that's what this did. 31 32 Q. But without actually seeking input from the directors 33 in advance and saying, "How long do you actually spend", 34 how is this a proper estimate of what the value is of the 35 services that each of these directors is actually bringing 36 to the company? 37 38 MS GERACE: I object. 39 40 PUBLIC INQUIRER: Noted. 41 42 THE WITNESS: I thought this was a better way of assessing 43 the work output of the consultants than had previously been 44 done, understanding that we were working within the 45 constraints of a retainer arrangement for people to be paid 46 on similar levels, and this was an exercise to see whether 47 reasonable hours could be supported by this retainer .07/09/2017 (2) 153 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 arrangement. 2 3 MR CHESHIRE: Q. The involvement of being a 4 chairperson - Dr Macri was a chair of one committee; is 5 that right? 6 A. Yes. 7 8 Q. So, in effect, the difference is that if you serve as 9 a chairman, you get an extra $7,000 on your retainer; is 10 that right? 11 A. If that's what the maths is, yes. 12 13 Q. How did you calculate that a chair would necessarily 14 spend that much more time? What was that based upon? 15 A. Well, if you look at - so we have additional 16 1.5 hours, I think, for being a chair of a committee, if 17 I'm reading this correctly now. 18 19 Q. All right. 20 A. Yes. I thought that was a reasonable assessment, 21 given the additional workload of a chair on a committee. 22 I used my own judgment. 23 24 Q. What committees have you been a chair of? 25 A. I have been chairman of the Board of Hope Health Care. 26 27 Q. Is that it? 28 A. Outside this organisation, that would be about it. 29 30 Q. I am sorry, you said chairman of the Board; is that 31 right? 32 A. Yes. 33 34 Q. But not chairman of a committee? 35 A. I wasn't on a committee at Hope Health Care, no. 36 37 Q. These calculations were, weren't they, calculations of 38 being a chair of a committee, not being chair of a Board; 39 isn't that right? 40 A. Correct. 41 42 Q. You'd never served as a chair of a committee, so how 43 could you give an estimate as to what was a fair additional 44 sum? 45 A. It's a judgment call that a chair does take more time 46 on a committee. 47 .07/09/2017 (2) 154 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. But you didn't ask them. Why didn't you go to them 2 and say to Dr Macri, "How much time do you actually spend"? 3 A. No, I didn't ask them. 4 5 Q. And for an additional one and a half hours for each 6 meeting, that seems, on your calculation, to lead to an 7 extra $7,000 a year; is that right? That's how you move 8 from $27,000 to $34,000? 9 A. There's an hour's calculation and it has been kept 10 consistent with, I think, the prior year as well, the 11 increase, following the previous retainer arrangement that 12 was in place. 13 14 Q. What you're saying is what these calculations do is 15 achieve an increase which is similar to the increase in the 16 previous year; is that right? 17 A. It maintains the retainer arrangement that was in 18 place in the previous year and there is a fee increase. 19 20 Q. In other words, this is a way of achieving figures 21 that are similar to the figures of what was actually paid 22 the previous year, with just a small increase; is that 23 right? 24 25 MS GERACE: I object. 26 27 PUBLIC INQUIRER: Noted. 28 29 THE WITNESS: As I said, my understanding was to continue 30 the retainer arrangement and to put some maths around this 31 to support the hours and the dollars of the specialist 32 consultants' fees. 33 34 MR CHESHIRE: Q. Are you aware that RSL (NSW) had what 35 were called State Councillors' volunteer hours forms? 36 A. I became aware of this last week when those packs 37 became available to me. 38 39 Q. Did you never hear of it being suggested that 40 State Councillors recorded their volunteer hours? 41 A. No, I'd never heard that. 42 43 Q. You didn't think it would have been sensible to ask 44 the directors at LifeCare to prepare forms actually setting 45 out, recording how much time they actually were spending at 46 that time? 47 .07/09/2017 (2) 155 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 MS GERACE: I object. 2 3 PUBLIC INQUIRER: Noted. 4 5 THE WITNESS: I did not think that at the time. I did not 6 think of that at the time. 7 8 MR CHESHIRE: Q. You sent this paper then to 9 Mr Cannings; correct? 10 A. Yes. 11 12 Q. If you turn to page 274, LFC.02.0000462, you'll see at 13 the bottom of the page you say: 14 15 Your review and comment on the above 16 please. 17 18 A. Yes. 19 20 Q. 21 I would appreciate your consideration of 22 whether you are comfortable at endorsing 23 the report. 24 25 Then the response is simply: 26 27 ... I have now had the opportunity to 28 review the attached proposal and confirm my 29 agreement to the contents as written and as 30 such I endorse the Proposal for submission 31 to the Board. 32 33 A. Yes. 34 35 Q. Did you understand from that that Mr Cannings was 36 endorsing each and every estimate, or simply the tenor, or 37 the matter from a legal perspective? What did you 38 understand? 39 A. As I said previously, I went through the construct of 40 this paper and sought guidance from Mr Cannings, so he was 41 involved in how it would be prepared and produced. 42 I sought to follow the guidelines and also have my own 43 input into it, and so my understanding is that he had 44 reviewed the whole document and was in agreement with the 45 whole document. 46 47 Q. So you understood that he as a lawyer was endorsing .07/09/2017 (2) 156 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 your estimates of the amount of time that each individual 2 was spending on these committees; is that what you 3 understood? 4 A. Yes, in his professional capacity, yes. 5 6 Q. In his professional capacity as a lawyer; yes? 7 A. Yes, but he's had a lot of experience as well. He's 8 certainly got more experience than me, so, yes. 9 10 Q. When you say more experience, he wasn't sitting on the 11 committees, was he? 12 A. No, he wasn't sitting on the committees. 13 14 Q. When you describe his professional experience, he is 15 not a professional consultant in the sense of estimating 16 hours, is he? 17 A. No, that's correct. 18 19 Q. Then in the supplemental bundle at page 103, which is 20 JL.03.0000072, you'll see this is an email from you dated 21 31 July 2012; do you see that? 22 A. Yes. 23 24 Q. Do you see that's an email from you to the directors; 25 correct? 26 A. Yes. 27 28 Q. Who is Penny Joy? 29 A. My assistant. 30 31 Q. You were attaching to that a paper that I've just 32 taken you to; correct? 33 A. I believe so, yes. 34 35 Q. Your understanding was that the setting of the fees 36 had been delegated to you; correct? 37 A. I think that was clear under the March 2012 -- 38 39 Q. Yes. You then say: 40 41 Please find attached a paper detailing the 42 rationale behind fees paid ... for the 43 2012/2013 year commencing on 1 October 44 2012. 45 46 Please also note that this document has 47 been prepared by the CEO and reviewed by .07/09/2017 (2) 157 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 John Cannings and will NOT be considered at 2 a future Board meeting. 3 4 A. Yes. 5 6 Q. You understood that that was then because the matter 7 had been delegated to you; correct? 8 A. The instructions - yes, it was, and the instructions 9 by John that, given the conflicts, that they should not be 10 considering it at a Board meeting. 11 12 Q. You then quoted what Mr Cannings has said, what I took 13 you to in the email? 14 A. Yes. 15 16 Q. But, in fact, Mr Cannings endorsed the proposal for 17 submission to the Board. Do you recall that was the 18 content of his email? 19 A. That was the content of his email. That differed to 20 his advice about how this should be managed. 21 22 Q. And that's why you removed the words "for submission 23 to the Board"; is that right? 24 A. Yes. 25 26 Q. After setting out the rates, you say: 27 28 Whilst this document will not be reviewed 29 at a board meeting, you are more than 30 welcome to discuss the contents with me 31 individually or as a group of consultants 32 who wish to meet with me. 33 34 Do you see that? 35 A. Yes. 36 37 Q. So, in effect, this was a proposal from you to the 38 Board members; correct? 39 A. Yes, to the consultants who happened to be Board 40 members, yes. 41 42 Q. And therefore, if they wished to say, "No, that's too 43 low", or, "too high", then you were leaving that up to them 44 to come back to you; correct? 45 A. There could be negotiation, yes. 46 47 Q. In the context of that negotiation, you depend, for .07/09/2017 (2) 158 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 your ongoing employment by LifeCare, upon the Board of 2 directors, don't you? 3 A. There's a conflict, yes. 4 5 Q. Did you appreciate that at the time? 6 A. I appreciated that there was a conflict, as I was told 7 my conflict was lesser than the directors and it should be 8 managed by external advice. 9 10 Q. Who did you raise that with and who told you that your 11 conflict was lesser? 12 A. John Cannings. 13 14 Q. When did he tell you that? 15 A. It must have been around March 2012 when the 16 resolution came through. 17 18 Q. That's why, is it, that you framed this email, not in 19 terms of "Your fee will be X", but, "This is what I'm 20 proposing. If you wish to discuss it with me, you can"? 21 Is that why you phrased it in that way? 22 A. No. I would phrase it that way, "This is what I'm 23 proposing. If you have an issue, let's meet about it 24 before we finalise, but this is what I'm proposing." 25 26 Q. What is the difference between putting a proposal to 27 the Board members in an email such as this and saying, "Let 28 me know if you wish to discuss", and giving it to them in a 29 formal Board meeting for them to discuss? 30 A. They are not resolving it themselves. It's being 31 determined by the CEO. Prior to finalising any agreement, 32 they may have input if they want to, which is what I think 33 it would have with other consultants as well. 34 35 Q. But in their capacity as Board members, if they had 36 come back to you and said, "Actually, we think those fees 37 are too low, we think the fees should be X", you would have 38 taken direction from them, wouldn't you? 39 A. I would have considered it. I would have had to seek 40 advice as to what action to take. I think you are 41 referring to the obvious conflict of interest? In 2015, 42 that became - that was an issue. It was an issue in that I 43 was becoming increasingly uncomfortable in the setting of 44 fees, not because of any specific action, so I determined 45 to finish the 2015 fees and not be involved on any further 46 occasion. 47 .07/09/2017 (2) 159 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. What I'm suggesting to you is that at least as at 2 2012, with this procedure of you drafting a paper and then 3 sending it to them by email, it was really no different 4 from the previous regime of you providing them with a 5 document for their consideration at a Board meeting, the 6 only difference was one's done formally at a Board meeting 7 and one is done informally by an email. Do you accept 8 that? 9 10 MS GERACE: I object. 11 12 PUBLIC INQUIRER: Noted. 13 14 MR CHESHIRE: Q. Do you accept that? 15 16 PUBLIC INQUIRER: Just wait. I will have it asked again. 17 You were distracted by that objection. Ask it again, 18 please. 19 20 MR CHESHIRE: Q. What I want to suggest to you is that 21 the process which existed beforehand, whereby you drafted a 22 paper and gave it to the Board, which they considered at a 23 formal Board meeting, was really no different from this 24 process - namely, you prepared a paper and sent it to them 25 by email and they considered it outside of a Board meeting. 26 Do you accept that? 27 A. There are similarities, yes. 28 29 Q. The only difference is that then it is not, in this 30 context, recorded in a formal Board minute; correct? 31 A. Correct. 32 33 Q. What that does is effectively hide the conflict of 34 interest that the directors had in voting for their own 35 fees; correct? 36 37 MS GERACE: I object. 38 39 PUBLIC INQUIRER: Noted. 40 41 THE WITNESS: I don't agree with that. 42 43 PUBLIC INQUIRER: Q. This email tells every consultant 44 what every other consultant is to receive, doesn't it? 45 A. Yes. 46 47 Q. Is that usual? .07/09/2017 (2) 160 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. I can't say it's usual, no. 2 3 Q. You can understand why counsel assisting is suggesting 4 to you that the character of the document seems to suggest 5 that it's similar to, really, a Board resolution by email? 6 Do you understand that he's putting something similar to 7 you, along those lines? 8 A. I can see - I think I've already I conceded the 9 similarities, yes. 10 11 Q. If you are just going to disclose to everyone what 12 everybody else's fees are, why would they have an interest 13 in it, other than being a collective Board? Do you see 14 that? 15 A. Yes. 16 17 Q. But you accept that everyone was riddled with 18 conflict? 19 A. Riddled? I certainly see that they were highly 20 conflicted. I think my conflict was not as great, but I 21 definitely had a conflict and that's why I wanted to exit 22 at the end of 2015. 23 24 Q. You said a little earlier to me that if you wanted to 25 raise a question about the fee, it would be very difficult 26 for you? Do you remember telling me that? 27 A. I can't recall the context, sorry. 28 29 Q. You were being asked after lunch about the 30 justification and the low bar that was set. 31 A. Yes. 32 33 Q. You were being asked about whether you would raise it 34 if you had a concern, and you said that it would be very 35 difficult for you to do that. Do you recall that? 36 A. I'm sorry, I don't, but in terms of the bar, I raised 37 the issue with John Cannings. 38 39 Q. Yes. 40 A. And that was his response. 41 42 Q. You had no difficulty raising any problems with the 43 Board? 44 A. If I had an issue, I would tend to go to 45 John Cannings. 46 47 Q. And the reason for that, rather than the Board? .07/09/2017 (2) 161 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. The Board tended to not discuss specialist 2 consultants' fees in the open part of the Board meeting, so 3 I tended to, if there was any issue - I would actually go 4 to John. 5 6 Q. Was that because you understood that it was off 7 limits, or what? 8 A. Well, there's a conflict there, so I would try to go 9 through John. 10 11 PUBLIC INQUIRER: Yes, thank you for that. 12 13 MR CHESHIRE: Q. That paper was July 2012 that you 14 prepared. If you go to page 269 of volume 1, and keep the 15 supplementary, you will need that in a moment, I took you 16 to the table at page 269, which was your estimates? 17 A. Yes. 18 19 Q. The estimates gave rise to the fees and the 20 recommendations that you made on page 273; correct? 21 A. Yes. 22 23 Q. Sorry, this is WIN.01.000016_002. If in fact you had 24 become aware that the amount of time actually being spent 25 was considerably less, then that's a matter that you would 26 then have needed to revisit, the fees; correct? 27 A. These were put in place as an estimate to assess the 28 fees. There was no review of those - of this in detail 29 until 2015. 30 31 Q. No. But if, for instance, Mr Riddington had come back 32 and said to you, "No, no, 148, there's no way I spend that, 33 it's more like 30 hours", then you would have wanted to 34 revisit the fees; correct? 35 A. If a director came and said that, yes, that would open 36 up the revisiting of the fees. 37 38 Q. Because that would suggest that the company was paying 39 that individual too much for their consulting fees; 40 correct? 41 A. Correct, but bearing in mind it's a retainer 42 arrangement that was in place. 43 44 Q. But the retainer, as you are calculating in this 45 paper, is based upon your estimate of the time that they 46 spend; correct? 47 A. It is putting - trying to put maths around what is a .07/09/2017 (2) 162 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 general retainer. 2 3 Q. Yes, but a general retainer based upon the hours that 4 each of them spends; correct? 5 A. Correct. 6 7 Q. So if, for instance, Mr Riddington had come to you and 8 said, "No, no, I don't spend that amount, I probably only 9 spend about 30 hours a year", you would understand that the 10 retainer then for Mr Riddington would have been set far too 11 high; correct? 12 A. We would have had to renegotiate the retainer down, 13 yes. 14 15 Q. Yes, from the point of view of the company it would be 16 paying too much; correct? 17 A. Correct. 18 19 Q. Do you see in that document on page 270, Mr Longley is 20 recorded as being 108 hours per annum? Do you see that? 21 A. Yes. 22 23 Q. In fact, I think there is an error in your 24 calculations. If you look at 2, under "General Role", you 25 see there is 12, then 36, and 24 and 18? Do you see that? 26 A. Yes. 27 28 Q. On my maths, 36 plus 12 is 48, and 24, and 72 and 18 29 is 90; do you see that? So I think the total, rather than 30 78, should be 90 hours? 31 A. Yes. The maths need revision. 32 33 Q. So the total in fact should be 120 rather than 108; 34 correct? 35 A. If you add that up, yes. 36 37 Q. If you then keep hold of that and turn to the 38 supplemental bundle, page 101, do you see there at the 39 bottom - and we read up because they are emails - an email 40 from Mr Longley to you dated 22 June 2012, shortly before 41 that paper was dated? 42 A. Yes. 43 44 Q. Mr Longley says: 45 46 Does RSL LifeCare have any interaction with 47 this Agency ... .07/09/2017 (2) 163 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 And that's the Ageing, Disability and Home Care Agency; 3 correct? 4 A. Correct. 5 6 Q. 7 ... which I'm about to become ... 8 9 Is that "chief executive of"? 10 A. I think so, yes. 11 12 Q. 13 (This goes to conflict of interest). 14 15 I will have to declare my 'private paid 16 work', i.e. consultancy to RSL LifeCare. 17 How many hours per week is this?! 0 or 2 18 (= 1 day per month) ... 19 20 Do you see that? 21 A. I see that. 22 23 Q. Above that is a response to the question does it have 24 any interaction with the agency, you say: 25 26 I am sure the answer is no. 27 28 Do you see that? 29 A. Yes. 30 31 Q. Then back to page 100: 32 33 Thanks, Ron... 34 35 This is from Mr Longley: 36 37 Carolyn please confirm ... 38 39 So that's in relation to the interactions: 40 41 Do you have a thought on the hours 42 question?? 43 44 Thanks, Jim. 45 46 A. Yes. 47 .07/09/2017 (2) 164 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. He then says, I think: 2 3 The interesting question is that it is not 4 the directorship which is private work but 5 the consultancy? If you are happy with 6 1 ... 7 8 I beg your pardon. I missed one out. Your response was: 9 10 Oh you would have as good a guess as me. 11 Perhaps one hour per week??? 12 13 A. Yes. 14 15 Q. Do you see that? 16 A. Yes. 17 18 Q. His response: 19 20 The interesting question is that it is not 21 the directorship which is private work but 22 the consultancy? If you are happy with 1 23 that will do me. 24 25 Your response at the top: 26 27 Groovy. 28 29 Do you see that? 30 A. Yes. 31 32 Q. Mr Longley there is estimating his time being a 33 consultant as opposed to being a director is one hour a 34 week; correct? 35 A. That's come from, I guess, me, as well, prior to 36 completing this document. 37 38 PUBLIC INQUIRER: Q. But you are just being asked is 39 that what he said? He estimates one hour a week; do you 40 see that? 41 42 MR CHESHIRE: Q. I withdraw that, and I will actually 43 put it to you. In fact, the estimate first comes from 44 you, perhaps one hour a week; correct? 45 A. With three question marks. 46 47 Q. He then says: .07/09/2017 (2) 165 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 If you are happy with 1 that will do me. 3 4 So he adopts that; correct? 5 A. Yes. 6 7 Q. One hour a week is 52 hours per annum; correct? 8 A. Yes. 9 10 Q. On 22 June, you and Mr Longley were discussing that 11 the amount of time that he actually spent as a consultant 12 was 52 hours per annum; correct? 13 A. Yes. 14 15 Q. In that specialist consultant document of July 2012, 16 which you sent to Mr Cannings on 8 July - so that's 16 days 17 later - your estimate for Mr Longley is 108 hours; correct? 18 A. Correct. 19 20 Q. In fact, on your calculations, it was 120 hours; 21 correct? 22 23 MS GERACE: I object. It hasn't yet been established. 24 There is an error - sorry, excuse me for speaking while 25 sitting. It was in his calculations, in fact he calculated 26 108. There is an error, but we haven't established what 27 was intended. 28 29 MR CHESHIRE: Q. I'm happy to stick with the 108. I 30 will put the question to you again in that context. On 31 22 June, the estimate that you and Mr Longley discussed and 32 hit upon for his hours per annum as a consultant were 52, 33 whereas 16 days later the figure that you put in a table 34 for those hours was 108; correct? 35 A. Correct. 36 37 Q. Do you accept that it was then not appropriate to 38 calculate his fees on the basis of 108 hours? 39 40 MS GERACE: I object. 41 42 PUBLIC INQUIRER: Noted. 43 44 THE WITNESS: I don't agree. 45 46 MR CHESHIRE: Q. Why do you say that it was appropriate 47 for you to proceed with 108 hours, given that you discussed .07/09/2017 (2) 166 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 52 hours? 2 3 MS GERACE: I object. 4 5 PUBLIC INQUIRER: Noted. 6 7 THE WITNESS: The 22 June email chain was completed 8 without putting our minds to it to any significant degree. 9 The subsequent review had had a focus and attention on the 10 matters. I also come back to the whole retainer 11 arrangement, and this was trying to look at a maths 12 equation that gave an idea of whether the retainers were 13 reasonable and fair or not. Overall, on a quantum basis 14 for all the specialist consultants, I maintained that 15 that's the case. 16 17 Certainly, where consultants are only sitting on one 18 committee, there is a problem. 19 20 MR CHESHIRE: Q. You understood from the emails with 21 Mr Longley that he was going to declare this information to 22 the Department of Ageing, Disability and Home Care; 23 correct? 24 A. Yes. 25 26 Q. That would be a serious matter; correct? 27 A. Correct. 28 29 Q. You would understand that it was important that he 30 puts in place something that was an accurate estimate; 31 correct? 32 A. And if a subsequent more accurate estimate came 33 through in this document, it would be up to him to revise 34 that estimate. 35 36 Q. But your estimate, as you told us in that document on 37 page 269, was not based upon directors' input; that was 38 your estimate of what could be justified for being on those 39 committees; correct? 40 A. It was my estimate, yes. 41 42 Q. If you know that in fact the estimate that the 43 individual puts on it themselves is significantly lower, 44 then you ought to have taken that into account, ought you 45 not? 46 47 MS GERACE: I object, because Mr Longley didn't put in an .07/09/2017 (2) 167 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 assessment himself. He said zero or two, which would be 2 between zero and 104, on my calculation. 3 4 PUBLIC INQUIRER: Mr Cheshire? 5 6 MR CHESHIRE: Q. Mr Thompson, you accept that you gave 7 him the figure of one hour per week in that email; correct? 8 A. That's what the email says, with three question marks 9 after it, so I think it's obvious that I was not sure. 10 11 Q. Why didn't you say that to him, "I'm not sure, let's 12 try and work it out"? 13 A. That could be an alternative, but I think three 14 question marks certainly suggests that I have not put my 15 mind to it to any large degree. 16 17 Q. When you gave you the example a little earlier, with 18 one of the other directors and I said if in fact you'd come 19 to know that they were spending less time, what would you 20 have done? You said that you would have needed to 21 renegotiate the contract; correct? That's what you said? 22 A. Yes. 23 24 Q. On the face of it, you have 52 hours a week from the 25 email and 108 from your figure. So why did you not then go 26 back to Mr Longley, even if only to say, "Hang on a minute, 27 what about your 52 hours a week that we estimated 16 days 28 ago"? 29 A. The first example you gave suggested that a director 30 came to me saying that the hours were too high. This 31 example is different to that example and, as I said, the 32 emails around 22 June were a few weeks, at least, before 33 this paper was circulated. The paper would have only been 34 completed, I think, after this document. I'd previously 35 said I did not put my mind strongly to this email and the 36 three question marks, I think, support that. So I did not 37 think of connecting the two calculations. 38 39 Q. Your email to Mr Cannings was on 8 July enclosing the 40 table? 41 A. Yes. 42 43 Q. You would have been working on that for some time; 44 correct? 45 A. You said previously there are 16 days between this 46 email and when I sent this to John Cannings. 47 .07/09/2017 (2) 168 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. Yes. My point is that when you sent it to 2 John Cannings, you would not have just prepared this table 3 that day; you would have been working on it for some time, 4 correct? 5 A. It would have been worked on for at least a few days 6 or a week. I don't know that it would have been worked on 7 for months. In fact, I'm sure it wasn't worked on for 8 months. 9 10 Q. The difference between then, when you were having this 11 email exchange with Mr Longley and when you were preparing 12 the table, was maybe a week or so apart; correct? 13 A. One to two weeks, definitely. 14 15 Q. In preparing your table, you've completely ignored it? 16 A. That's assuming that I would recall this email. 17 18 Q. You see, isn't it the case that this exercise you were 19 doing, in preparing these hours, was not trying to estimate 20 what any of these people were actually doing; it was more 21 just trying to justify the figures that they were already 22 being paid for their consulting fees? 23 24 MS GERACE: I object. 25 26 PUBLIC INQUIRER: Noted. 27 28 THE WITNESS: I have already said that the consulting fees 29 were a retainer arrangement and this exercise was to look 30 at the maths around that to assess the quantum, the total 31 quantum, that we were paying for the consultants. 32 33 MR CHESHIRE: Q. In looking at what the quantum should 34 be for the year ahead, the exercise you were doing in 35 July 2012 should not have been simply trying to justify 36 what you were already paying them, it should have been 37 looking at what you should pay them in the year ahead; 38 isn't that right? 39 A. I think that's what this exercise is trying to do. 40 41 Q. I'm suggesting to you it wasn't. What you were doing 42 was trying to justify the fees that you were already paying 43 them; that's right, isn't it? 44 45 MS GERACE: I object. 46 47 PUBLIC INQUIRER: Noted. .07/09/2017 (2) 169 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 THE WITNESS: I don't agree. 3 4 PUBLIC INQUIRER: Q. Can I just get an idea of the 5 timing. I'm sorry. You were delegated with the task of 6 setting the fees in the March of that year? 7 A. Yes. 8 9 Q. March 2012? 10 A. Yes. 11 12 Q. You then had a discussion with Mr Cannings at some 13 stage in which he told you that your conflict was less than 14 the conflict of all the Board members? 15 A. Just to -- 16 17 Q. Can I ask you when that conversation was? 18 A. Yes. Prior to March 2012 there was certainly a 19 discussion between me and John, I can't recall all the 20 details - there might have been other people in the room, 21 I'm not sure - talking about how the directors were 22 conflicted and should not complete this task any more. 23 We went through that, rightly or wrongly, the directors 24 were members, so that was no use. Whilst it was not ideal 25 me being given the task, I was the least conflicted and to 26 overcome that level of conflict, to have somebody external 27 review it. So that was prior to March 2012. 28 29 Q. I see. 30 A. Subsequent to March 2012, I sat down with John to try 31 and work out the way to write this paper. 32 33 Q. Do you recall when that was? 34 A. After March 2012. 35 36 Q. And that may have been -- 37 A. I'm struggling to remember, sorry. 38 39 Q. Yes, a long time ago. The question that was raised 40 with you where Mr Cannings identified for you that everyone 41 had conflicts, but you had a lesser one, as he put it, was 42 prior to the March date? 43 A. Yes, that's why it led to that decision. 44 45 PUBLIC INQUIRER: Yes, thank you. 46 47 MR CHESHIRE: Q. Not in the supplemental, but the main .07/09/2017 (2) 170 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 volume 1, page 670, I think I'd taken you to the table at 2 672, is the beginning of that paper. 3 4 PUBLIC INQUIRER: I think you have the wrong numbers. 5 6 MR CHESHIRE: I'm sorry, 267, WIN.01.0000016. You'll see 7 under 2 it says, "The draft consultancy contract defines", 8 et cetera. Do you see that? 9 A. Yes. 10 11 Q. In March of 2012, what was delegated to you was the 12 setting of the fees; correct? 13 A. Setting of fees only. 14 15 Q. How did it come that there was a draft consultancy 16 contract being prepared? 17 A. It's difficult to recall, but I would assume that it 18 was a suggestion from John Cannings that it was time to 19 review the contract. 20 21 Q. To your understanding, then, was it John Cannings who 22 drafted the definition of "services" that you've included 23 in there? 24 A. The 2012 contract was definitely drafted by PwC, with 25 John Cannings - led by John Cannings. 26 27 Q. With any input from any of the directors of LifeCare? 28 A. There was a draft contract put out. I remember there 29 was discussion about matters such as whether they were 30 called consultants or advisors, and a lot of what I would 31 consider minor matters like that. 32 33 Q. I'll come on to that, what happened subsequently. 34 A. Sorry. 35 36 Q. You said that a draft came out. All that we've seen 37 is in March 2012 you're delegated to set the fee and then 38 suddenly there is a draft consultancy contract. Is it your 39 understanding that Mr Cannings took it upon himself simply 40 to prepare a further contract? 41 A. Well, he would not take it upon himself directly. 42 He would suggest it's time to review the contract. 43 44 Q. Who would he have had that conversation with? 45 A. It would be me and possibly the chairman. I can't 46 recall. 47 .07/09/2017 (2) 171 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. Do you have any recollection of any conversation in 2 2012 about preparing further contracts? 3 A. In terms of that contract - sorry, do we need to have 4 a new contract? 5 6 Q. Yes. 7 A. I can't recall that specifically, but we ended up with 8 one, so we must have had a conversation. 9 10 Q. What was the reason why new contracts were needed? 11 A. As I said, I can't recall the conversation, so I'm not 12 sure. I'm not sure. 13 14 Q. At this time, mid-2012, there was no change in how 15 this organisation worked as between the Board and the 16 committees, was there? 17 A. Not to my knowledge, no. 18 19 Q. The previous contracts that I've shown you defined 20 what was required of the consultants in terms of sitting on 21 committees; correct? 22 A. Yes. 23 24 Q. You understood, didn't you, that that's what these 25 consultants were being paid for; correct? 26 A. Yes. 27 28 Q. When you look at what is in this box as being the 29 definition of "services", it's changed significantly from 30 simply being by reference to committees, hasn't it? 31 A. It still talks about being on a subcommittee. 32 33 Q. But when I showed you the contracts in 2010, they were 34 exclusively for serving on a subcommittee; correct? That's 35 all it was about? 36 A. I accept that. 37 38 Q. When you look at this, we have (a) being: 39 40 Upon invitation, attendance at specific 41 executive or Board subcommittee 42 meetings ... 43 44 So not being required to be on a committee, but just 45 attending certain meetings: 46 47 ... providing written reports as .07/09/2017 (2) 172 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 required ... 2 3 That's not now confined to any committees, just any written 4 report. Then: 5 6 ... specific specialist consultancy 7 services in one or more of the areas. 8 9 A. Yes. 10 11 Q. If they are defined as being specialist consultancy 12 services, albeit "in one or more of the following areas", 13 that doesn't really define what's being expected of the 14 consultant, does it? 15 A. I'm not sure. I'm not understanding. 16 17 Q. Previously services was defined as what they were 18 required to do was to serve on committees. What is now 19 being suggested is what they have to do is just provide 20 specialist consultant services. That's circular, in 21 effect, isn't it? 22 A. Yes. I didn't read it that way, and I don't believe 23 any of the consultants read it that way. The intent was 24 still to serve on committees. 25 26 Q. So the intent was not to change the way in which the 27 consulting agreements operated; is that right? 28 A. I'm not aware - it stayed the same. 29 30 Q. So your understanding was that it still was serving on 31 committees; correct? 32 A. Yes, that's my understanding. 33 34 Q. Are you able to explain why there was this apparent 35 change in the way services was going to be defined from 36 specific serving on committees to this non-specific way? 37 A. Until you pointed that out to me, I actually did not 38 read it that way, so I can't explain it. In practice, the 39 consultants continued to serve on committees, and the way 40 the fee structure managed - it looked primarily at sitting 41 on committees as the primary function. 42 43 Q. If you then go to the - sorry to make you jump 44 around - the supplementary volume, 104, in the bottom email 45 of 21 August 2012 -- 46 A. Sorry, what page? 47 .07/09/2017 (2) 173 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 Q. 104, JL.03.0000081. 2 A. Yes. 3 4 Q. That is an email from you to the directors 21 August, 5 2012. It says: 6 7 Thank you to those attending the meeting 8 last week to discuss specialist 9 consultants. 10 11 So there were meetings, were there, between you and the 12 Board members about the new agreements; is that right? 13 A. I can't recall, but reading that email it looks like 14 there was a meeting where we discussed the specialist 15 consultants agreement. 16 17 Q. Bearing in mind that the only thing that had been 18 delegated to you was the setting of fees, why was the 19 content of those agreements and terms of those 20 agreements not dealt with at a formal Board meeting? 21 A. The contracts had always been signed by me from 2001, 22 so I didn't really note that there was a difference there. 23 24 Q. But the actual fixing upon the terms of those 25 agreements, you understood, was a matter for the Board; 26 correct? 27 A. The Board hasn't determined other contracts. 28 29 Q. Well, if all that had been delegated to you was the 30 setting of the fee, who then was it that was supposed to be 31 determining the other terms of those agreements? 32 A. The Board delegated to me the setting of the fees in 33 March 2012. 34 35 Q. Yes. 36 A. In 2001, when I started, I was given a contract for 37 specialist consultants, and that was completed for those 38 people by myself. Then in 2007, when the contract was 39 reviewed, the same thing happened. I didn't see any 40 difference in a new contract coming in in 2012. 41 42 Q. But you recognise that there were differences in the 43 two contracts; correct? The terms were different? 44 A. The contract was much more lengthy. 45 46 Q. Yes. So who, to your understanding, was deciding upon 47 what the terms of that contract should be? .07/09/2017 (2) 174 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 A. The overall contract had been written by Mr Cannings. 2 The consultants were raising what I considered minor points 3 that didn't go to the heart of the contract, and I did not 4 want to deal with that, so I suggested that if they were 5 minor points, they go through those with Mr Cannings and 6 try to resolve any minor points. The one thing that I do 7 remember is they wanted the name changed from "consultants" 8 to "advisers". I didn't see that as an issue. 9 10 Q. Why did they want that, to your understanding? 11 A. My recollection was that Graham Kells saw that as a 12 difference in title, and I couldn't see any difference. 13 14 Q. In putting together the terms of the contract, that, 15 as you understood it, was Mr Cannings; correct? 16 A. Mr Cannings or his team wrote the original contract, 17 yes. 18 19 Q. And when you say the original contract, the 2012 20 contract? 21 A. The 2012 contract, yes. 22 23 Q. You understood he was doing that on behalf of 24 LifeCare; correct? 25 A. Yes. 26 27 Q. Then in this email you say: 28 29 I'm requesting John to contact each 30 specialist consultant individually and 31 offer to discuss any individual aspect of 32 the contract, including providing some 33 basic advice regarding personal tax and 34 pension issues as well as other options, 35 such as a reduced rate of service fees. 36 37 Do you see that? 38 A. Yes. 39 40 Q. You understood that Mr Cannings was then going to 41 approach the directors and offer to give them advice; 42 correct? 43 A. It was ancillary, but yes. 44 45 Q. So Mr Cannings was preparing the contracts and giving 46 services to LifeCare and, at the same time, giving advice 47 to the individual directors about the implications of that .07/09/2017 (2) 175 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 contract; is that right? 2 A. My understanding, he was listening to any queries 3 directors had on terms of the contract and either 4 explaining those terms or, if there was a suggestion for a 5 change, he would then come back to me with a suggestion for 6 a change. 7 8 Q. Mr Thompson, look at the words three lines up from the 9 bottom of that paragraph numbered 3. It says: 10 11 ... including providing some basic advice 12 regarding personal tax and pension issues 13 as well as other options. 14 15 A. Yes, you are correct. 16 17 Q. So he was going to be giving advice to the directors, 18 isn't he? 19 A. Yes, yes. 20 21 Q. That sounds like a conflict of interest, doesn't it? 22 A. Mr Cannings -- 23 24 Q. Mr Cannings providing advice to both the company and 25 to the directors; it doesn't sound right, does it? 26 A. Reading it today, no. 27 28 Q. Did it ever occur to you that perhaps LifeCare ought 29 to seek advice on the contracts independent of Mr Cannings? 30 31 MS GERACE: I object. 32 33 PUBLIC INQUIRER: Noted. 34 35 THE WITNESS: No. 36 37 MR CHESHIRE: Q. Then over the page at 105, at the 38 bottom of the page, an email from you to the directors. 39 A. Yes. 40 41 Q. It refers to PwC amending the agreements in line with 42 the discussions held? 43 A. Yes. 44 45 Q. That is what you were giving some evidence about a 46 moment ago, discussions and amendments; correct? 47 A. Yes. .07/09/2017 (2) 176 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 2 Q. So that's all about consulting agreements; correct? 3 A. Yes. 4 5 Q. Then Mr Longley responds to that by saying: 6 7 I am always happy. 8 9 Correct? 10 A. Yes. 11 12 Q. You respond to that by: 13 14 My low maintenance director. 15 16 Do you see that? 17 A. Yes. 18 19 Q. This is a discussion about consulting fees, isn't it? 20 A. Yes. 21 22 Q. By calling him "my low maintenance director", you are 23 saying that you draw no distinction between Mr Longley 24 being a director and a consultant; correct? 25 26 MS GERACE: I object. 27 28 PUBLIC INQUIRER: Noted. 29 30 THE WITNESS: No. 31 32 MR CHESHIRE: Q. You don't accept what I put to you, or 33 you do accept what I put to you? 34 A. I don't accept what you put to me. 35 36 Q. If that's right, then in the context of Mr Longley's 37 specialist adviser agreement or consulting agreement, what 38 you effectively would have said would have been "my low 39 maintenance consultant", or my "low maintenance adviser". 40 41 MS GERACE: I object. I don't think the propositions are 42 even open on the document that the witness is being 43 questioned about. 44 45 PUBLIC INQUIRER: Yes, Mr Cheshire. 46 47 MR CHESHIRE: Q. Mr Thompson, I put to you that you drew .07/09/2017 (2) 177 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 no distinction between Mr Longley's position as a 2 consultant and as a director; do you accept that? 3 4 MS GERACE: I object. 5 6 PUBLIC INQUIRER: Yes, that's noted. 7 8 THE WITNESS: No, I don't accept that. 9 10 MR CHESHIRE: Q. You therefore drew no distinction 11 between these people getting consulting fees rather than in 12 fact them being directors' fees; do you accept that? 13 14 MS GERACE: I object. 15 16 PUBLIC INQUIRER: Noted. 17 18 THE WITNESS: I don't accept that. I have been through 19 previously how the fees were for attending committee 20 meetings. 21 22 MR CHESHIRE: Is that a convenient time? 23 24 PUBLIC INQUIRER: Yes. 25 26 Q. Mr Longley was a special director, I understand, in 27 that you took the view he was to mentor you; is that right? 28 A. He did provide a level of mentoring and, if I may say, 29 he would be one of the most astute directors. 30 31 Q. But you included in your assessment of the hours that 32 he was going to mentor you as a CEO? 33 A. Yes. 34 35 Q. You put that as part of his consulting arrangement, as 36 opposed to his directorial duties? 37 A. Yes. 38 39 Q. So you took the view that he was providing you, 40 outside the Board meetings, with your mentoring? 41 A. Yes. 42 43 Q. I see. When did that mentoring commence? 44 A. Possibly earlier, but around that time, 2012. 45 46 PUBLIC INQUIRER: That's the end of the examination for 47 today. I'm afraid you'll have to come back tomorrow. So .07/09/2017 (2) 178 R B THOMPSON (Mr Cheshire) Transcript produced by DTI

1 if you step down and be back here tomorrow just before 10, 2 that will be helpful. Thank you, Mr Thompson. I will 3 adjourn until tomorrow at 10am. Thank you. 4 5 AT 4.07PM THE HEARING WAS ADJOURNED TO 6 FRIDAY, 8 SEPTEMBER 2017 AT 10AM 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 .07/09/2017 (2) 179 R B THOMPSON (Mr Cheshire) Transcript produced by DTI