Adelaide Steamship Company building,Currie Street,Adelaide in 1917 (built 1903, dem. 1986)The Adelaide Steamship CompanyCharles D'Ebro designed building inMelbourne during the early 1900s
TheAdelaide Steamship Company was an Australian shipping company, later a diversified industrial and logistics conglomerate. It was formed by a group ofSouth Australian businessmen in 1875. Their aim was to control the transport of goods betweenAdelaide andMelbourne and profit from the need for an efficient and comfortablepassenger service.[1] For its first 100 years, the company's main activities were conventional shipping operations on the Australian coast, primary products, consumer cargoes and extensive passenger services.
In the 1930s and 1940s, the company diversified into the airline operations, towage, shipbuilding, and the shipping of salt, coal and sugar.[2] Adelaide Airways was formed in 1935, and purchasedWest Australian Airways before merging with Holyman's Airways to formAustralian National Airways (ANA) in 1936. ANA was sold toAnsett Transport Industries in 1957.[3]
In 1964, the interstate fleet merged withMcIlwraith, McEacharn & Co, and the partnership developed the world's first purpose-builtcontainer ships.[3][4][5][6] In 1973, the company ceased its shipbuilding operations, and in 1977, in its 103rd year of operation, sold its shipping-related businesses and ceased its connection with ship owning and operating.[7] It did, however, retain its interests intugboat operations.
With the completion of the liquidation, on 30 April 1997 the company was renamed Residual Assco Group Limited[14] in order that the Adelaide Steamship name could be reused. Residual Assco was delisted on 24 December 1999.[3][15] In June 1997, the tug boat operations were floated on theAustralian Stock Exchange under the name Adsteam Marine.[3] In 2001, Adsteam Marine acquired its joint venture partner (and major rival as the premier Australian towage operator),Howard Smith. Adsteam Marine became the largest towage operator in Australia and the United Kingdom, with further extensive operations in the South Pacific.[16] In 2006, Adsteam Marine was acquired as the Pacific arm of the world's largest shipping company,AP Moeller-Maersk,[6][17] thus removing the Adelaide Steamship name from the Australian Stock Exchange and Australian Company registers.
The Adelaide Steamship Company wharf inBrisbane during the early 1900sThe Adelaide Steamship Company office inTownsville c. 1940TSMVManunda c. 1930 in Adelaide Steamship livery (buff funnel with black band at top)
The company was formed in September 1875 inAdelaide,South Australia, by a group of pastoralists and businessmen, some of whom already had steamship interests in theSpencer Gulf, namely Federal Wharf Co. Ltd, Port Adelaide Dredging Company Ltd, and Spencer Gulf Shipping Co. Ltd, and wasincorporated on 8 October 1875.[18]
Its promoters and founding directors includedAndrew Tennant,[19]Robert Barr Smith[20] andThomas Elder[21] ofElder Smith & Co Ltd. The first ship of the new company wasFlinders.[22] In July 1876 the company's leading promoters amalgamated their private ship-owning interests to form the Spencer's Gulf Steamship Co Ltd, trading in South Australian coastal waters. The two companies amalgamated in December 1882.[23] The fleet circled the coast fromDerby in northernWestern Australia toCairns in northernQueensland.[22] Shipping operations were supported by a large network of agency offices in almost every major Australian port.[3]
DuringWorld War I, several Adelaide Steamship Company ships wererequisitioned, as were several other privately owned ships;Grantala andWarilda as hospital ships andWandilla andWillochra as troopships.[24]Yankalilla andEchunga were also commandeered.[22]
Adelaide Steamship Company was liquidated and reconstructed twice for more efficient and profitable operation, first in 1900 and subsequently in 1920.[18] On 20 January 1915 they took over Coast Steamships Limited, and kept it running as a subsidiary that retained its own identity until 1968.[7]
By the start ofWorld War II, the company owned 30 ships.[7][24] With World War II, the company was again forced to surrender nine ships to the Navy, includingManoora andManunda which became an Armed Merchant Cruiser and a hospital ship.Manunda was in Darwin harbour during theJapanese bombing and was able to bring 260 military and civilian casualties to safety inFremantle.[24] During the war she carried about 30,000 sick and wounded back to Australia from theMiddle East andNew Guinea.[22] During the 1940s, a decline in trade necessitated the company to diversify and they began to acquire interests in other companies and projects. Consequently, after the war, the company diversified into towage, shipbuilding, and the shipping of salt, coal and sugar.[2][7]
On 1 January 1964, its interstate fleet was merged with that ofMcIlwraith, McEacharn & Co in a new company, Associated Steamships Limited, in which Adelaide Steamship Company held 40%. Also in 1964, the merged company developed the world's first purpose built container ship,MVKooringa.[3][25][26][27]Bulkships, in which Adelaide Steamship held a 40% interest in 1965, acquired all the shares in Associated Steamship Limited in 1968. In 1977 the company's interest in Bulkships was disposed of and Adelaide Steamship Company ceased its connection with ship owning and operating.[7] The company did, however, retain its interests in Tug boats and Tug boat operations and by the late 1980s, Adelaide Steamship was one of Australia's oldest surviving industrial companies.[28]
Adelaide Airways was formed as a subsidiary of the Adelaide Steamship Company on 3 July 1935 and commenced operations on 29 October. It had a number of different types of aircraft in its fleet, including theShort Scion, theGeneral Aircraft Monospar ST-25, and theDe Havilland DH.89A.[36][37][38]
Adelaide Ship Construction was set up as a subsidiary of the Adelaide Steamship Company in 1957, and was incorporated in July 1957. At the same time it was issued with the sole Australianlicence for the hydroconic hull design patented by Burness, Corlett & Partners of the United Kingdom. This hull design for tugs gave them greater bollard pull from a given horsepower. Adelaide Ship Construction had been set up especially to address the issue of Australia's ageing fleet of tugs. The yard was built on the historic Fletcher's slip site atBirkenhead.[39]
Thekeel for the first tug was laid 20 May 1958 and it was launched 12 February 1959. The shipyard site grew from two acres and one berth to four berths and 6½ acres in 1968, and to cater for vessels up to 425 feet long. At this time it employed more than 1,000 men. Adelaide Ship Construction had also acquired from Burness, Corlett and Partners the licence for their 'Towmaster' patent. Coupled with the Hydroconic hull design this enabled ever greater pull in its tugs.Hamersley Comet, built in 1968 had a bollard pull of 34.1 tons, the strongest to that time.[39]
However, by 1973 the yard was running at a loss of $3.4 million, and it closed in August of that year. Its last ship wasCape York.[39]
The Adelaide Steamship Company vesselST Uco in Fremantle Harbour c. 1929
A relatively minor sideline, started in the 1890s, was the company's tug boat operations. Gradually, tug boat operations extended over a number of ports, but until the middle of the 20th century they remained the poor relation of the more significant coastal shipping operations. With the decline of coastal shipping however, towage assumed more importance. By the 1960s, towage and associated operations represented a very significant part of the company's activities.[3]
In 1977 the company's interest in Bulkships was disposed of, and Adelaide Steamship Company ceased its connection with ship owning and operating. It had diversified into investment andproperty ownership, vineyard andwine production, optical goods manufacturing and distribution, engineering,share investment, and, until 1973, shipbuilding. Thus towage and associated operations continued to have prominence, even during the 1970s and 1980s when the Adelaide Steamship Company became the foundation for one the country's majorconglomerate organisations.[3]
AdSteam Marine logo
As this activity was happening, towage began to reassert itself as an important element of the company; From 1993 it exhibited a period of aggressive growth until the company had a fleet of 156 tug boats, and operated in over 40 Australian,Indian,Pacific Oceana and British ports.[16] Strengthened by a series of industry rationalisations –Brambles'Port Kembla, Sydney andNewcastle operations andP&O's towage operations in Western Australia – the towage division became a valuable candidate for asset disposal. In April 1997 the company changed its name to Residual Assco Group Limited and in June 1997 floated its marine division which was registered on theAustralian Stock Exchange as Adsteam Marine Limited.[3]
Once it became a publicly listed company in its own right, Adsteam Marine established a strong investor following. In addition to towage, the company developed shipping agency and tug barging activities. Adsteam Marine doubled its size in May 2001 when it acquired the towage interests ofHoward Smith, its partner in many towage ventures, for more than $500 million, making it the largest towage operator in Australia and the United Kingdom, together with operations in Papua New Guinea and Fiji. Other activities included barge operations in the United States, and ships agency services throughout Australia, New Zealand and India.[16]
After becoming chief executive of the Adelaide Steamship Company in 1977,John Spalvins built up one of Australia's largest industrial conglomerates and became one of the most feared takeover specialists in corporate Australia.[8][40][41] Spalvins transformed himself into an entrepreneur, using vast amounts of debt to launch a series of massive takeovers.[42] Adsteam "aggressively acquired significant shareholdings in a variety of companies in a number of fields including retailing, hotels, leisure industries and civil engineering."[28] "Adsteam's share price rose dramatically through much of the 1980s and it was hailed by some commentators as being entrepreneurial, well managed and with a highly disciplined reporting system."[43]
At its height, the Adsteam group includedWoolworths,David Jones,Tooth & Co,Petersville Sleigh,Farmers Union, Metro Meat, a stable of premium wineries and many others.[41][44][45][46] Also, at various stages, it held a 15% stake inWestpac,[40] a 20% stake in Bell Resources,[47] and numerous other "strategic" stakes and investments. During this period of aggressive growth, AdSteam also had 156 tug boats and operated in over 40 Australian, Indian, Pacific Ocean and British ports.[16] The company was Australia's fourth highest capitalised company during the 1980s.[3]
A characteristic of the AdSteam Group during this period was a complex Group Structure ofcross ownership where many of the companies of the group owned not-quite-50% of each other.[28] This served the dual purposes of making the elements of the group "take-over proof", but did not trigger the financial reporting requirements of a consolidated set of accounts. In the 1990 Adelaide Steamship Company Annual Report, the following companies were reported as "Principal operating subsidiaries" of the AdSteam Group, with the following cross ownerships greater than 5%:[48]
The Adelaide Steamship Company
100% Marine Interests (various)
100% Martin Wells Holdings – optical goods; acquired 1982[49]
100% Sellers Atkins – building supplies; acquired 1976[50]
100% Pioneer Property Group – House Building & Property Development[51]
100% WA Realty – real estate
49%David Jones – department stores and investments
Wineries, includingPenfolds,Wynns Coonawarra Estate, Seaview, Glenloth, Kaiser Stuhl, Barossa Co-op, Tulloch and Loxton Co-op, sold toSouth Australian Brewing Company in 1990.[44] Other wineries owned by group members at one time or another included Seppelts and Woodley Wines (IEL).[55]
Farmers Union – subsequently floated as part of National Foods
SAFCOL Food Processing – sold to Tropical Canning (Thailand) plc[56]
Vaniro – for some reason not explained, Vaniro is not included in the 1990 Annual Report Group Structure diagram. It does, however, feature significantly in the State Bank audit report.[55]
Dextran Pty Ltd – like Vaniro, another AdSteam subsidiary.[56] Dextran is the owner of IEL.[57]
During the 1980s, AdSteam instigated a number of "share plays",[55] and also made significant investments in a number of companies including:
All of this was financed by huge borrowings from about 200 banks. The lendings of just one bank, theState Bank of South Australia, are summarised in the following chart.[55]
The source of the above data (South Australian Government Auditor in 1993), in a comment dated 26 April 1990, states: "Papers also comment on 'off the record' discussions with Adsteam Group's major bankers and gives exposures of nine banks (including the Bank) which total $4,960M. There is little comment on this figure but an analysis of each company's results shows assets exceed liabilities in each company by a good margin... Paper also comments on recent press issues including potential worst case losses of $110.0M from Bell Resources investment – 'the impact of such a loss ..... is not considered a major concern'."[55]
A subsequent comment dated 26 July 1990 states: "Lending Credit Committee minute notes planned reduction in exposure through maturity of facilities. Also notes extension of other facilities to August 1991 which illustrates 'the continued level of confidence this Bank held in Adsteam's continuity'."[55] With the benefit of hindsight, further comments make interesting reading. Despite the assurances recorded in the board papers, from that point the State Bank of South Australia steadily reduced its exposure to the AdSteam Group.
The opaque nature of the AdSteam Group caused rising concern in a variety of circles. Although shareholders continued to enjoy bonus shares, rights issues, and significant dividends, the share price plateaued. Financial journalists started asking questions, and the share price faltered. After the 1990 Annual General Meeting and the announcement of the 25c dividend (per share) against a diminished share price, investor confidence deserted the company and the share price crashed from over $5 to under $1 in one day.
The previously "nervous" banks were far from happy, and started demanding the return of their capital, despite AdSteam having had this money invested in largely non-liquid assets. Also of course, the banks were not keen to force AdSteam into bankruptcy as such a situation would be unlikely to achieve the return of their assets. Hence, AdSteam organised an "arrangement" with the 200 banks, and in 1991 the Adsteam group was placed under an informal, receivership-type scheme of arrangement.[28][58] Under this arrangement, there was an orderly disposal of assets.
Nevertheless, not all of the disposals were made under ideal circumstances, and Adsteam's loss of $4.49 billion represented one of Australia's largest corporate collapses.[63][64]
However, the major lesson out of the AdSteam collapse was for the accounting profession; a newspaper report on its failure carried the sub-headline "Adsteam a humiliation for the accounting profession".[28][65][66] Adsteam was "an excellent instance of how the rule-book approach to consolidation accounting imposed by the law and the Accounting Standards at the time determined managerial actions".[43]
The "Adsteam saga" resulted in major changes to Australian accounting rules pertaining to consolidation and led to the issue of AAS 24 Consolidated Financial Statements by the accounting profession in June 1990 for application from 30 June 1991 (subject to a "legal impediment", see Deegan, 2005, p. 880)[67] and the issue of AASB 1024 Consolidated Accounts with statutory backing in 1991.[68][69]
Specifically, the definition of "control" for consolidation purposes was broadened beyond prescribed ownership interests to embrace control over an entity's financial and operating policies, making use of the notion of "substance over form" in determining the existence of a controlled entity.[28]
Several matters from the collapse are still ongoing – over 15 years after "the collapse". Industrial Equity Limited (IEL) is worthy of particular mention:[10][55][70][71]
IEL acquiredWoolworths in 1989 as a wholly owned subsidiary.
AdSteam investment company Dextran purchased IEL fromBrierley Investments in November 1989.
Dextran was one-third each owned by AdSteam, David Jones & Tooth.[57]
IEL challenged this ruling – the matter has been before the courts on and off ever since – "One of the largest and longest tax disputes in Australian history."[10]
In December 2007, IEL was given leave to challenge the ATO ruling.
"While prime assets such as Woolworths and Adsteam Marine were floated, IEL and its tax liabilities remained within the corporate shell of Adelaide Steamship when it was renamed Residual Assco Group Ltd in 1997 and delisted in 1999. Residual Assco has no operating businesses but remains active while several IEL tax disputes wind their way through the courts."[10]
Residual Assco's October 2007 annual report notes that the group holds $429 million "on deposit pending resolution of the outstanding matters between IEL and the ATO". At that time, the ATO were claiming $7.3 billion.
The dispute continues; the Chairman's address to the concurrent AGMs of Residual Assco, DJL and Tooth on 14 November 2008 is rather bleak.[72] The Tooth & Co. Ltd. Annual Financial Report to 30 June 2008 summarises the then current situation in detail.[73]
Other sources of information include "The Three Ugly Sisters", Australian Financial Review, 24 December 1999 andTooth and Co.#Decline.
The Adelaide Steamship Company was involved in two court cases which led to changes in the way theAustralian Constitution and Australian Law is interpreted.
Amalgamated Society of Engineers v Adelaide Steamship Co Ltd,[74] (commonly known as theEngineers' Case) was a landmark Australian court case decided in theHigh Court of Australia on 31 August 1920.[75] From a legal perspective, this case is widely regarded as one of the most important cases ever decided by the High Court of Australia, for it swept away the earlier doctrines ofimplied intergovernmental immunities andreserved State powers, firmly establishing the modern basis for the legal understanding offederalism in Australia andAustralian constitutional law.[74]: pp 141–2 In essence, this meant that decisions of the Commonwealth Conciliation and Arbitration Court were binding on State governments.[76] and that the constitution is no longer read in a way which attempts to preserve the power of the states.
Thelitigation was commenced by ASIC in April 1994 under section 50 of the ASC Law, in the name of the Adelaide Steamship Company (renamed Residual Assco. in 1997) and dragged on, unresolved, for 6 years before a settlement was agreed.
The essential allegation was that there had been an overstatement of profit in the company's accounts and that its investments in 4 subsidiary companies had not been accurately recorded. As a result dividends had not been paid out of profits.
The proceedings involved numerous decisions and important regulatory outcomes, including:
In May 1994 proceedings were brought by Deloitte under theADJR Act challenging ASIC'sdecision to begin and carry on the Adsteam proceedings. The ADJR proceedings took approximately two and a half years to be finally determined. ASIC's decision was ultimately upheld.[80]
"The Adelaide Steamship Co Limited and Australian Securities and Investments Commission v Janis Gunars Spalvins, Michael James Kent, Neil Leslie Branford, Kenneth William Russell, Michael Stevenson Gregg, Deloitte Haskings & Sells and Deloitte Ross Tohmatsu", more concisely referred to as "Adelaide Steamship Co Ltd v Spalvins",[81][82] This was an appeal by ASIC against an earlier ruling in favour of Spalvins et al. regarding client legal privilege. The appeal was only partially successful and ASIC were required to produce Counsel's advice on which privilege had been waived.
In June 1999 the High Court held that the constitution did not allow State judicial power to be vested in the Federal Court.[83] As a result, the Adsteam proceedings, which had been brought in the Federal Court, could not proceed because the Federal Court did not have jurisdiction to hear them.[79]
Following the introduction of theFederal Courts (State Jurisdiction) Act 1999 (SA),[84] which was intended to address some of the effects of the decision in Re Wakim, an application was made in the Supreme Court of South Australia effectively to have the Adsteam proceeding transferred to that Court. The validity of the relevant provisions of theFederal Courts (State Jurisdiction) Act was challenged by some of the defendant directors. On 25 May 2000 the High Court upheld the validity of section 11 of that Act.[85] (The application to have the matter transferred was still pending before the Supreme Court of South Australia at the time of the settlement.)
1993 Adsteam Marine created as the last remaining operational division of Adelaide Steamship Company.
1994 TheAustralian Taxation Office ruled to disallow IEL $524m of deductions regarding the Woolworth float
1994 "Adelaide Steamship Company (via ASIC) vs former Adsteam directors and auditors" commenced
1995 David Jones floated
1997 Adelaide Steamship Company renamed Residual Assco Group
1997 Adsteam Marine floated
1999 Liquidation of assets completed – Residual Assco Limited delisted – "Residual Assco has no operating businesses but remains active while several IEL tax disputes wind their way through the courts."
2000 "Residual Assco (via ASIC) vs former AdSteam directors and auditors" reached settlement
2007 Residual Assco's annual report notes that the group holds $429 million "on deposit pending resolution of the outstanding matters between IEL and the ATO"
SirRon Brierley – New Zealand investor, corporate raider, and chairman and director of a number of companies in Australia, New Zealand and the UK. He foundedBrierley Investments in 1961 and purchased his first shareholdings in Industrial Equity Limited (IEL) in 1964. IEL purchased Woolworths in 1989, and later in 1989 Brierly sold IEL to the AdSteam Group.
Francis Vivian Dunstan – father ofDon Dunstan; former Premier of South Australia; manager of the company'sFiji office from 1916 until the family's return to Adelaide in 1933[97][98]
Michael Stevenson Gregg – director (?-1990)[79][81][82]
Robert Holmes à Court – Australia's first billionaire; a feared corporate raider of the 1980s who set up Bell Resources, a company 20% owned by the AdSteam Group[47]
Malcolm McEacharn (1852–1910) – shipowner and partner of McIlwraith, McEacharn & Co which merged with the Adelaide Steamship Co in 1964[104]
Andrew McIlwraith (1844–1932) – shipowner and partner of McIlwraith, McEacharn & Co which merged with the Adelaide Steamship Co in 1964[105]
Hugo Muecke (1842–1929) – director of many companies, including the Adelaide Steamship[106]
Guy Packard (1884–1963) – Manager and later Director; also had financial interests in Australian National Airways[107]
Daniel PooleDCM &Bar (1882–1959) – recommended for theVC duringWorld War I; worked for both McIlwraith, McEacharn & Co and Adelaide Steamship Company[108]
^abResidual Assco Group Limited (RAG)Archived 12 May 2009 at theWayback Machine, 24 December 1999, Delisted Australian companies, delisted.com.au. Retrieved on 12 July 2009. A subsequent entry dated 3 April 2007 states:" company is an unlisted public company awaiting resolution of outstanding tax issues – it may then be wound up – shareholders are unlikely to receive any return but they can contact the company on 02 9258 8833 or Registries Ltd on 02 9290 9600".
^abAdsteam Marine (ADZ)Archived 6 July 2011 at theWayback Machine delisted.com.au Retrieved on 22 July 2009. "Delisted following compulsory acquisition by Svitzer Australasia Services Pty Limited 17 May 2007."
^abClarke et al. (2003).Corporate Collapse p. 159.
^abWineries acquired by AdSteam included:Penfolds,Wynns Coonawarra, Seaview, Glenloth, Kaiser Stuhl, Barossa Co-op, Tulloch and Loxton Co-op. These were sold toSouth Australian Brewing Company in 1990 who named them the Penfolds Wines Group and then in 1994, Southcorp Wines. They are currently owned by theFoster's Group.
^Jacinta Peachey, Elizabeth French, David Gianfrancesco and Brett Willey (2004).Southcorp LimitedArchived 6 July 2011 at theWayback Machine Case Studies. johnwiley.com.au. Retrieved 14 July 2009.
^DJL LtdArchived 5 May 2009 at theWayback Machine delisted.com.au Retrieved on 22 July 2009. David Jones Limited changed name to DJL Limited on 16 October 1995 and was "delisted at entity's request" on 24 December 1999 (at the same time as Residual Assco.) A note at delisted.com.au dated 9 January 2003 states: "company is an unlisted public company and part of the Residual Assco Group (see further details there) – according to our information DJL no longer has any operating entities but is an investor in Residual Assco Group Limited (42.2%), Tooth & Co Limited (44.2%) and Dextran Pty Limited (1/3) which in turn owns Industrial Equity Limited."
^Metro Meat Limited (MRM)Archived 9 August 2008 at theWayback Machine delisted.com.au Retrieved on 22 July 2009. – "name changed from Metropolitan Wholesale Meat Company Limited 23 March 1972" – "taken over by Central Timber Traders (1946) Limited 10/03/1982"
^Australian Securities Commission v Deloitte Touche Tohmatsu (Formerly Known As Deloitte Haskins and Sells and Deloitte Ross Tohmatsu)[1996] FCA 1733 (28 August 1996),Federal Court (Full Court).
Stapleton, A. (1975)."Festina Lente": the Adelaide Steamship Company's 100 years of service, Cargo Handling and Shipbuilding Quarterly, V.14, September 1975 .
