Copyright is owned by the Author of the thesis. Permission is given for a copy to be downloaded by an individual for the purpose of research and private study only. The thesis may not be reproduced elsewhere without the permission of the Author. The Development of Security Intelligence in New Zealand, 1945 – 1957 A thesis presented in partial fulfilment of the requirements for the degree of Master of Defence Studies at Massey University, Manawatu New Zealand Miriam L. Wharton 2012 ii Abstract This thesis focuses on the development of security intelligence in New Zealand between the end of World War II in 1945 and the formation of the New Zealand Security Service in 1956-57. It provides an overview of how this development occurred at a government, senior executive and senior advisory level. There are three key questions that form its parameters: What were the key events and influences which shaped the development of New Zealand’s security intelligence from a predominantly police-oriented capability in 1945 into an independent capability from 1956-57? Who were the domestic and international parties contributing to that development? What is the significance of this period in New Zealand’s intelligence history? A qualitative and generally chronological methodology is applied to describe the process of maturation that security intelligence in New Zealand underwent during the period in question, beginning with a brief description of the arrangements in place before and during World War II. The majority of the thesis is concerned with describing and analysing how domestic and international influences shaped the progression of a security intelligence capability in New Zealand, culminating in the formation of the Security Service. In doing so it broadens understanding of the state’s intelligence history in the early to mid-twentieth century, while remaining aware of the complexity of intelligence as it is applied within a state context. iii Acknowledgements First in the list of those to thank must be Dr John Tonkin-Covell, whose efforts as supervisor have been consistent, persistent and patient. Among those organisations which have supported this project I particularly thank the New Zealand Security Intelligence Service for making available primary source documents which have formed the core of this thesis, the New Zealand Defence Force for covering most of the study costs, and Massey University’s Centre for Defence and Strategic Studies for managing, teaching and administering me through the entire degree. My family have endured long hours of silence and closed doors, accepting the necessity of study time at the expense of family time, over the past few years. In recognition of their ongoing support I would like to dedicate this piece of work to them. iv Table of Contents Abstract ii List of Tables vi Introduction 1 Chapter One Security Intelligence in New Zealand until 1945 9 Chapter Two International Influences and the Beginning of the Cold War 18 Chapter Three Threats and Targets 37 Chapter Four The Police Special Branch 61 Chapter Five In Search of a Security Intelligence Capability Solution 82 Chapter Six Creation of the New Zealand Security Service 95 Conclusion 122 Appendix A Timeline of Events 127 Appendix B The Internal Security Problem in New Zealand (Part 1) 129 Appendix C The Security Problem in New Zealand 131 Appendix D Charter of the British Security Service 132 Appendix E Directive for the Establishment and Maintenance of a Security Service [ASIO] 133 Appendix F Charter of the Australian Security Intelligence Organization 135 Appendix G Directive on Constitution and Operation of the New Zealand Security Service 137 Appendix H Order-in-Council 139 Appendix I Peter Fraser 140 Appendix J Ian Frank George Milner 141 v Appendix K Dr William Ball Sutch 142 Appendix L Desmond Patrick Costello 143 Appendix M Sidney George Holland 144 Appendix N Foss Shanahan 145 Appendix O Brigadier Herbert Ellery Gilbert 146 Glossary 147 Abbreviations 148 Bibliography 149 vi List of Tables Table 1 Relationship of Intelligence Types to End-States 2 Table 2 The Status Quo PSB Reporting Chain 86 Table 3 PSB Reporting Chain Reorganisation as Proposed by Samuel T. Barnett, 13 March 1956 86 Table 4 NZSyS 1956-57 Structural Diagram 108 Introduction Security intelligence (SyINT) is one of the key components of a state intelligence capability. The absence of security intelligence makes the state vulnerable to the subversive and espionage activities of other actors in the international community, and indirectly limits the state’s ability to project influence beyond its own borders. During the twentieth century a number of states, including New Zealand, accepted the necessity of building or enhancing existing security intelligence functions. Although both the armed forces and the police in New Zealand had been engaged in activities which might be described as intelligence functions prior to 1945, the post-World War II period gave government and senior public officials a new urgency to address how the capability was conceived and used. Between 1945 and 1957, security intelligence in New Zealand underwent a significant process of maturation. Several different organisational forms and functions were tried and, one after the other, were deemed to be inadequate for the purpose. Nevertheless, the trial-and-error method employed was not a wasted effort. Each developmental step brought the capability closer to an organisation suited to the task of security intelligence. Along the way both international and domestic influences helped to shape how that development occurred. Security intelligence as it exists in New Zealand today is a product of that often painstaking but necessary maturing process. Although intelligence is often considered a staple of state power, the lack of a single accepted definition of the term complicates both historical analysis and contemporary application within the field. It encompasses a diverse spectrum of information, activities and participants, all of which impose their own specificities on it. For the purposes of this thesis the parameters of intelligence in New Zealand are limited to that branch known as security intelligence, which encompasses all forms of intelligence collated for the purposes of security. It is usually defensive in nature, is intended to enhance internal security, and in this context is conducted by the state. Its counterpart, foreign intelligence collected for the purposes of external advantage, will not be addressed specifically. 2 Counter-espionage, counter-subversion and counter-terrorism are currently the three most common elements of security intelligence, although this has not always been the case. Counter-terrorism, for example, has only become a principal focus for security intelligence services in the latter half of the twentieth century. In any event, at its most basic level security intelligence is designed to assist its parent state in securing the safety and wellbeing of its population and its essential interests (including physical geography, social and cultural traditions and values, economic stability and the predominant political system). SECURITY INTERNAL INTELLIGENCE SECURITY FOREIGN EXTERNAL INTELLIGENCE ADVANTAGE Table 1: Relationship of Intelligence Types to End-States A capability with a short history and a small community, it is unsurprising that the historiography of intelligence (and specifically security intelligence) in New Zealand remains quantitatively and qualitatively deficient in comparison to other states. Michael Parker’s The SIS1 explores an organisational history of the institution which manages security intelligence. Parker’s strength is his characterisation of the institution and personalities populating his text. His sources, although not referenced to an academic standard, purportedly include key personalities such as Alister McIntosh who were involved in the events being described. Unfortunately Parker’s strength is also concurrently his weakness. His narrative is driven by a largely colloquial style which verges on semi-fiction in places, and the effect undermines the credibility of his work. 1 Michael Parker, The SIS (Palmerston North: Dunmore Press, 1979). 3 Moreover, his history is now over thirty years old and thus not particularly current, especially in the light of recently released primary sources relevant to the period of time his book covers. The Plot to Subvert Wartime New Zealand by Hugh Price2 suffers from the same failing as Parker’s book, in that he often writes in a colloquial style. However, he does appear to have gained access to a significant quantity of primary documentation to support his narrative. These sources are in themselves the most interesting part of the book. Graeme Hunt, a journalist, author and historian, wrote a detailed history of security intelligence in his book Spies and Revolutionaries: A History of New Zealand Subversion.3 The book reads as a public history of events and personalities, rather than an academic study. Hunt evidently had access to primary documents released by the New Zealand Security Intelligence Service (NZSIS) and made a great deal of effort to accumulate what facts he could to populate the text. What is missing from his book is an overarching narrative. He uses a largely compartmentalised methodology to explore his subject, rather than linking individual pieces together within a wider history. Other relevant sources include James McNeish’s The Sixth Man: The Extraordinary Life of Paddy Costello,4 George Fraser’s Seeing Red: Undercover in 1950s New Zealand5 and C.H. (Kit) Bennetts’ Spy: A Former SIS Officer Unmasks New Zealand’s Sensational Cold War Spy Affair.6 The former is a recent biography of Desmond Patrick Costello, perhaps New Zealand’s best-known hostile agent, and the latter two are autobiographies of intelligence activities in the mid-twentieth century. Reminiscences by Fraser and Bennetts about their personal experiences with intelligence in New Zealand are particularly interesting, the more so because the release of such accounts are usually discouraged by intelligence services. 2 Hugh Price, The Plot to Subvert Wartime New Zealand (Wellington: Victoria University Press, 2006).