CHAPTER EIGHTEEN
STYLE AND ELEGANCE

I want to try and do all those things that I can do, to try and do them with as much style and with as much success as I possibly can, to the very limit.

Gordon Barton, 1970

In 1971, Barton’s Tjuringa group identified a deal with the potential to be highly profitable. Of four exclusive English-style gentlemen’s clubs in Sydney—the Australian, the Union, the Warragul and the New South Wales—the last, at 31 Bligh Street, was the only one whose original nineteenth century building had survived. The Union Club, once across the street, had been torn down in 1966 and relocated to make way for the bland Wentworth Hotel.

The five-level New South Wales Club, erected in 1887, had been designed by architect William Waddell. The sandstone edifice was a mag nificent example of Italian renaissance palazzo architecture. The adjacent much-loved Savoy picture theatre (then owned by Alan Bond) opposite the Wentworth Hotel was another city landmark and famed for its art-house foreign films.

Using the code name ‘Forsyte Saga’, Tjuringa formed a partnership with a developer to acquire four adjacent CBD sites—the New South Wales Club and Savoy Theatre on Bligh Street, as well as another building and an area of open space closer to O’Connell Street. The developer wanted to build a 31-level office tower on much of the site. Tjuringa’s part in the deal was extremely shrewd. Its masterstroke lay in new town planning laws that allowed it to sell the right to develop one building’s airspace to another. Tjuringa would sell the airspace above the club to the developer so it could build its neighbouring office tower. Bill Pursche recalls Tjuringa made some $5 million on the deal.

The project did require demolishing the historic Savoy Theatre and the rear two wings of the club. However, the main club building and façade would be retained. Here again, Tjuringa’s strategy in gaining council approval was masterly. It pledged to restore the grand club along guidelines laid down by the National Trust as well as offer the trust an 80-year annual lease for a peppercorn rent of $1, provided it subleased it to Barton’s company for the same sum.

Sydneysiders were dismayed at losing the Savoy, but at nearly $500 per square foot the deal set a new record in CBD real estate. Barton’s aim was to create the most handsome and conveniently located group of directors’ offices in the country. It would become the new headquarters of the Ipec Holdings–Tjuringa group, although Barton’s estimated restoration cost of $250,000 would balloon to around $1 million.

At the time Alison Main was a young architect in an established Sydney firm. Graham Cooke recommended her to Barton for the restoration. Main recalls that no budget was ever specified.

Work commenced in July 1975. The 1935 iron-grille lift and the boardroom panelling had to be replaced. Floors were raised to put in plumbing, rewiring was done and gas pipes installed. Stone work, slate, plasterwork, leadlights, marble work and stencilling were painstakingly restored. Elaborate stencil decoration—a rich combination of greens, creams and terracotta in six individual friezes—were rediscovered beneath layers of cream paint. These were carefully reproduced in wallpaper with the help of the renowned Florence Broadhurst and enriched by additional hand stencilling. Barton purchased three antique chandeliers from the palace of Peter Janson’s great friend the Maharajah of Baroda as well as several sets of nineteenth century brass wall lights. All had to be restored, cleaned, reassembled, wired for electricity and appropriate shades found.

Alison Main and Liz Weeding would be regularly dispatched to source and install appropriate heritage furnishings. A series of Cedric Emanuel prints were acquired for the restored space. Antique English grandfather clocks, one dating from 1750, would grace the hallways. Italian leather chairs were purchased for the huge boardroom table and wing-back armchairs for Barton’s office. Barton even located a valuable portrait of Sir Joseph Banks done for the 11th Earl of Somerset.

Visitors and staff alike entered the Bligh Street building by way of a stone bridge with balustrades and ornamental lamp standards up stone steps to a huge bevelled and panelled door. A spacious marble-floored lobby featured ornamental columns and an intricately painted ceiling. Through another pair of ornate glass-panelled swing doors was the reception, framed by a stained-glass window in the northern wall. A pair of bronze temple lions greeted the visitor, reflected in an antique gilded wall mirror.

Gordon Barton, Greg Farrell and their corporate staff moved in early in 1976, although it was over a year later before the renovation was complete. Barton and Farrell would share the huge ground floor office— once the club’s dining room and reminiscent of a gentlemen’s smoking lounge—stretching over 13 metres from end to end with a marble fireplace against the western wall. Along the eastern wall three elongated arched windows faced out onto Bligh Street. From the ceiling more than 5 metres above hung elegant lamps on curlicued brass frameworks. A burnished brown leather chesterfield lounge suite lay in the room’s middle ground in front of a marble fireplace. Beside it nestled an exquisite round table of coloured marble inlaid with a floral and bird motif. Huge Persian rugs lay on top of wall-to-wall carpet. At either end of the long room sat a leather-topped antique mahogany desk, each accompanied by two wing-backed leather visitor’s chairs. One end was Barton’s, the other Farrell’s. Oak bookcases lined the walls either side of each desk. Next to his desk Barton sat an elephant’s foot dustbin, a gift from Peter Janson.

The first floor was reached via the restored lift or the main staircase with its ornamental wrought-iron balustrades. Again this floor had high ceilings, marble fireplaces and dozens of leather armchairs, huge desks with gilt-studded leather inlay, marble urns and even an oriental panelled screen. On the second floor were five offices. Up the staircase to the third floor lay a magnificent cedar-panelled boardroom, boasting a centrally recessed ornamental ceiling, an adjoining cedar bar and separate catering kitchen. This level also boasted a wine cellar and a marble fireplace. Two hundred-odd Norman Lindsay etchings had been discovered in the Angus & Robertson basement and these were now hung along the boardroom walls. The boardroom and its kitchen enjoyed regular use—every Tjuringa and IPEC board meeting commenced with a three-course meal in this grand space. Old-fashioned values were important here. The tea-lady served morning and afternoon tea from a Royal Doulton service. She would often prepare lunch for Barton and Greg Farrell—sometimes a salad, sometimes a hot meal.

Business visitors such as TNT’s auditor Colin Green can recall being ‘totally blown away by the extravagance and opulence’. The offices had an unrivalled sense of style. Never before had a nineteenth century High Victorian building been so successfully restored to accommodate modern office needs. There was huge excitement amongst architects and the business community alike at this step away from the common architectural blandness that was beginning to kill old Sydney.

The four-year project would make Main’s career as a restoration architect, garnering her an award from the Royal Australian Institute of Architects in 1978. The jury wrote, ‘The restoration . . . is a heartening sign of a new understanding of our architectural heritage and a new sophistication in attitudes of restoration . . . thus reinstating one of the most exciting interiors in Sydney’.

With the Federal Hotel reduced to rubble, Peter Janson had eventually discovered a more appropriate space. The Windsor—a 170-room hotel on Spring Street opposite Melbourne’s Parliament House—was recognised as one of Australia’s last nineteenth century grand European-style hotels. Built in 1884 and initially called the Grand, it had a mid-Victorian elegance and standard of service. Favoured by visiting dignitaries and Hollywood luminaries, its guests had included Gregory Peck, Katharine Hepburn and Muhammad Ali. Former Prime Minister Robert Menzies regularly stayed in Suite 306.

Janson heard that a large section of the upper floor under and adjacent to the two centre towers—neglected old servants’ rooms—were never used. He soon convinced hotel executive John Haddad to let him have the space rent-free. He moved into Room 403, corralling friends into helping him knock out internal walls. In Chrystopher Spicer’s 1993 book Duchess: The Story of the Windsor Hotel, Janson would recall:

We couldn’t believe it had never caught alight. It was a rabbit warren of little servants’ rooms full of junk . . . just rotting away up there. So we cleaned them all out, rebuilt the floors, knocked out a few walls, put some more beams in the ceiling and began to install my own fittings and furniture such as leather chairs from the Menzies, and some panelled cedar doors from the Federal.

Windsor manager Alan Carruthers was horrified when he discovered the secret renovation works. He called in his boss John Haddad to see with his own eyes what his tenant had done. ‘He was very naughty’, Haddad recalls. ‘Peter had cleared out about another fourteen rooms and made himself a whole new apartment. Extraordinary man. Without me I think he would have been in gaol.’

Like a bowerbird decorating its nest, the renovation became a never-ending process for Janson. One of his reclaimed rooms was entered via a closet door, opening out into a sizeable bedroom. Barton loved the hidey-hole bedroom, so it would become known as his room and he would stay in it on his regular visits. Eventually Janson’s labyrinth of renovated rooms extended over nearly half the under-roof space. Chrystopher Spicer records Janson saying:

we created something of a Walter Mitty world up there, if you like; it was something that people would have liked to do, but never had the chance. The tower windows were so high they had to have these enormous drapes; we would open those windows right out, walk out on to the roof, have a few drinks looking at the city lights and then go to bed.

Janson’s new home would soon house a growing collection of Victoriana. Barton described it as ‘something between a rabbit burrow in Alice in Wonderland and Aladdin’s Cave, furnished in a style which can only be described as Janson Unique’. Muskets, tiger-skin rugs, prints, etchings and leather couches competed for space with mounted animal heads including a buffalo wearing a bowler hat and a sign ‘Please don’t feed or disturb’. There was an elephant’s foot, Persian carpets, junk and photographs of Janson with famous friends—Prince Charles, Omar Sharif, the Duke of Beaufort. One prized possession was a stuffed wolf— reputedly the last French wolf, shot outside Paris in 1860 by the Duke of Beaufort’s grandfather, and gifted by the duke to his friend Janson. For many years an Alpine dingo known as Lad (apparently an acronym for Love A Dingo) had the run of the apartment until it leapt to its death over the parapet.

Barton had always been a fan of elegance. He could see the Windsor as the perfect environment in which to establish a sophisticated Monte Carlo-style casino. Working independently of Federal Hotels and with Michael Muschamp, in about 1975 Barton gave the order that three smaller properties—a garage, an office block and a neighbouring warehouse which backed on to the hotel in Windsor Place—were to be purchased. This would allow the Windsor’s ground floor to be extended to the size needed for a grand casino.

After meetings with the Victorian premier, Rupert Hamer, Barton obtained tacit approval for the project. However, when Hamer took it to parliament, Muschamp recalls the enabling legislation was blocked by marginal seat MPs. The properties Muschamp and a colleague had bought had to be rapidly sold.

The Windsor Hotel was the key asset of a publicly listed company of the same name. By the end of 1976 Windsor Hotel Ltd shareholders had not been paid an ordinary dividend for four years. There had been net losses for the previous two of these. A plan for a $12 million office tower on half the Windsor site had been proposed, but the Victorian government was blocking it. So the owners begged the government to buy the hotel out on a leaseback arrangement. When it refused, the Windsor directors threatened to go into voluntary liquidation and sell the property for demolition and development.

The threat worked. Rupert Hamer’s Liberal government confirmed it would purchase the Windsor, sparing the hotel from the wrecker’s ball. The government insisted on a competitive tender for the lease. Given his recent efforts to establish a casino there and Janson’s ongoing residence, Barton knew the Windsor well by now. Taken with its opulent architecture as well as its famed level of service, he was smitten. He pushed the Federal Group to bid with an enticing 50/50 cut on profits with the Victorian government. In June 1977 Barton and Greg Farrell’s hotel group were running the nation’s most luxurious old-world hotel.

Talking about Peter Janson in an article in The Australian magazine, Barton confessed to journalist Chris Ashton: ‘It got to the point where nothing surprised me. Nothing. I discovered that he rarely paid for his long-distance calls. He would send the [Windsor Hotel] switchboard girls flowers and chocolates. He behaves outrageously and gets away with it, which is no mean feat in Melbourne.’ Hotel manager John Haddad tolerated Janson as he was good for business.

Entertaining was what Janson did in style—usually with other people’s money, often Barton’s. He was known to call in a small fleet of red double-decker buses and London taxis to transport his guests around Melbourne. A monarchist through and through, Janson loved acquiring titled friends. The Marquis of Blandford, the Duke and Duchess of Marlborough, Lord Beaverbrook and Hugh Mackay, later to become Lord Reay, were all Peter’s guests at different times.

Unfortunately Janson’s tenancy had never been detailed on paper. As was typical of Barton, it had been a gentleman’s agreement. In 1980, once Federal Hotels lost the Windsor lease to the Oberoi Group, Janson was no longer welcome. When asked to vacate on Christmas Eve of 1980, he argued that his agreement with the former leasees gave him permanent occupancy rights—basing this on his unencumbered long-term residency and the $500,000 he had spent on improvements.

Oberoi took legal action. Janson’s next strategy—like the man himself—was unusual. He petitioned Her Majesty the Queen. This was only possible given an anomaly in the title deed wording. Instead of being in the name of a government minister, the hotel’s title documents had been placed in the name of the Queen’s representative—the Governor of Victoria. The legal battle dragged on. In desperation the Oberoi Group decided to cut its losses—it paid Janson $3 million and $80,000 in removal costs to shift him.

It was English lawyer Laurie Fletcher who convinced Barton that Ipec Insurance should extend its reach. Fletcher had been the insurance company’s general manager since 1965. His concern was that with looming government restrictions, domestic insurance would not maintain its profitability in the long term. According to Fletcher there was excellent money to be made in international re-insurance, especially the catastrophe business known as LMX (London Market Excess of Loss). While Ipec Insurance had used re-insurers since 1965, it was an area in which Barton had no experience. However Fletcher—an ex Grenadier Guardsman—seemed as conservative and low-risk as they came. Barton and Farrell trusted his advice.

Insurance companies regularly reviewed the large assets they insured—commercial properties and passenger aircraft, for example—to assess their level of risk in particular markets. When exposure to the risk of high claims looked too great, re-insurance companies would contract to ‘take over’ part of an insurer’s liability, effectively insuring the insurer. Underwriter A would re-insure his risk with underwriter B, who then obtained cover with underwriter C. Then C re-insured some of his exposure with A again, and so on, creating a spiral of liabilities. A frantic game of pass-the-parcel began, with the syndicate at the end of the line being exposed to taking a huge hit. A re-insurer might agree to underwrite 10 per cent of a particular company’s insurance in return for part of the premium. A keen re-insurer could quickly bring in quite massive premium payments. Given clients paid premiums every year, the coffers of a new re-insurer rapidly rose. As the premiums were in effect ‘money in trust’ until insurance contracts expired, re-insurance premiums could not be touched, no matter how large they grew.

To Barton and Greg Farrell, fast asset growth signalled that plenty of money was there to be made—and they wanted a big slice of the action. Consequently, in 1974 they located an appropriate company shell—Southlands—and registered it in Bermuda, gaining a re-insurer licence. Laurie Fletcher was given the go-ahead to recruit sales staff in the world’s major re-insurance market—London. Given Southlands had no assets of its own, the Australian-listed Ipec Holdings acted as guarantor for the business. The problem was that Southlands was taking on claims with unlimited liability, meaning it could find itself having to pay millions.

Brian Grey, a partner with IPEC auditors KPMG, had previously done a lot of work for the London insurance market. One of his auditors, Bob Miller, remembers being at a lunch with Grey and Barton around 1975. Grey had said, ‘Gordon, you don’t know what you’re doing in this re-insurance business, you’ve got to get out of it’.

Barton had always been an optimist and he had his mind made up. ‘No, Brian, you don’t understand. It’s good business. All you’ve got to do is keep pedalling and the money keeps on building up—the claims come three years downstream and while ever you keep on pedalling you’ve got money to meet the claims.’

‘I don’t know who told you that, Gordon, but that’s not right. That’s not how it works,’ Grey warned.

By January 1975, IPEC’s half-yearly report announced that its new re-insurance business had made a small profit and was ‘already well-established in the international re-insurance market’. Barton confidently claimed, ‘ultimately they will be the source of substantial profitability’. In a few short years he would eat his words.

Risk and due diligence had to be properly assessed. With an overzealous sales team, Southlands started to take on the business its larger competitors would not touch. In its first four years income from premiums continued to grow, while payouts were non-existent. In 1978 Barton’s annual review stated Southlands to be ‘well placed to become a considerable profit centre in the intermediate and long term’. That year it wrote over $9 million in re-insurance. The next year the business expanded, moving to larger, fancier premises in the centre of the London re-insurance market close to Lloyds. Here it wrote another $13 million in new business.

While Southlands’ annual reports assured investors that all underwriting surpluses were being set aside to provide for future claims, no-one had any idea of the extent to which its insurance agents had misjudged the risk. It is unclear now exactly who Laurie Fletcher had employed to cut the deals. Whoever it was, they were clearly wet behind the ears when it came to risk assessment. Says accountant Bob Miller, ‘They copped every bit of high-risk business that was written in the London re-insurance market for about three or four years’.

On 27 March 1977, two Boeing-747s, one owned by Pan Am and the other by KLM, had both been diverted to Tenerife airport in the Canary Islands after a terrorist bomb attack at their intended destination, Las Palmas. A combination of fog, misunderstood communications and radio static led the KLM plane to plough into the taxiing Pan Am aircraft during takeoff. The disaster killed some 583 passengers and crew—the worst single accident in aviation history. By early April it was already clear it would almost certainly involve the highest insurance claims of any non-natural disaster with a payout estimated at $240 million. Survivors in California had already filed a class action suit for nearly $2 billion against KLM, Pan Am and Boeing. It was rumoured that Southlands was to be landed with a significant proportion of the final re-insurance bill.

Alarm bells started ringing at IPEC head office in Bligh Street. It became clear, even to Barton, that IPEC was in well over its head. Apart from business already committed to, Southlands’ London-based agents were instructed to stop writing business. The only positive was IPEC’s ability to keep its growing liabilities out of Australia’s financial press.

Large insurance payouts take several years to filter through to re-insurers but as the decade closed, the claims were monstrous. The insurance market began to have serious doubts about the ability of IPEC to meet its claims.