More about our Master Spy

Some time ago I wrote up the story of Wally Clayton, who lived at Salt Ash. At the time of writing, he had been unmasked by Mark Aarons as a long time spy for the Russians. Aarons had retrieved a cassette tape where Clayton unknowingly admitted his guilt to Aarons’ late father who secretly taped the confession at Clayton’s Salt Ash home. He had long been suspected of espionage but was never charged despite years of surveillance and hounding by ASIO and other security services. There was a reason for this and the recent release of British top secret MI 5 documents places Clayton at the centre of an espionage ring which conveyed to the Japanese and Russians information about battle plans and troop movements. Had Clayton been convicted of this during the war years he could very well have been put up against a brick wall and shot. The declassified documents tell us why this didn’t happen. 

Australia did not have a security service during World War 11 and sensitive military secrets were freely passed on to our government by both the United States and Britain. They assumed that this information was in safe hands. 

It was the cracking of the Russian military code that sent shock waves through both of  our allies’ security services and put an end the sharing of secrets with Australia. This led to the formation of ASIO and, ironically, ensured Walter Clayton’s freedom.

American codebreakers working on the ‘Venona’ project partially deciphered the Russian secret code and it soon became apparent that major security breaches were coming from Canberra. High ranking officials were sent out to trace the culprits and no more classified information was passed on to Australia.  

Three government officials, Ian Milner, Jim Hill and Ric Throssel were identified as the source of the leaks and Walter Seddon Clayton, code named Klod or frequently as ‘K’ was seen as the agent who recruited  spies, collected the secret documents and passed them on to the Soviets.  

After being told of this, an embarrassed government set up its own security service (ASIO). Its highest priority was to regain credibility by getting rid known and suspected spies from government departments and to do something about master spy Wally Clayton.

The government officials’ careers came to an end. They were quietly shuffled sideways into dead-end jobs and denied access to classified documents. But what to do about Clayton? To haul him before the courts would mean that they would have to admit that they had cracked the top secret Soviet code to identify him. This was unthinkable. It was more important to keep getting secrets from the Russians than to lock up Clayton.  

ASIO, under the control of former army officer Brigadier Charles Spry, decided to nail Wally Clayton another way. They would hound him relentlessly, gather incriminating evidence and force a confession from him. This is why he ended up living amongst us as an isolated fisherman on Broughton Island off Port Stephens.

Simply known as ‘The Case’, the operation to expose Clayton became the biggest ever mounted by ASIO, consuming vast resources and countless thousands of man-hours. Government agents infiltrated the Communist Party of which Clayton was an active member; his phone was tapped; he was shadowed. Such was the intimidation by ‘heavies’ from ASIO knocking on his door that the Communists provided him with a bodyguard in the form of a well built waterside worker. Despite relentless pressure over many years and a forced appearance before the Royal Commission into espionage Wally didn’t crack. He found his escape from the relentless pressure working as a humble fisherman at Port Stephens. Fishing had been a lifetime passion for him and he became very good at it, being known locally as ‘The Snapper King.’ ASIO still kept an eye on him however, employing local professional fishermen to report on his activities.         

With the collapse of Communism, the hunt for ‘reds under the bed’ and secret agents faded but in recent times the name Walter Seddon Clayton keeps popping up. He featured in the declassified MI 5 documents and the SBS documentary ‘I Spry’ screened ASIO film footage of Wally and his wife Peace.

Apart from stories of Wally Clayton handed down to the younger generation of fisherfolk at Port Stephens, the memory of the master spy still lingers for residents of the Tilligerry Peninsula.  

Former hardware store owner George Robinson recalls delivering materials to Wally’s somewhat modest home in Hideaway Estate [sic] Salt Ash; Elderly lady golfers remember being entertained by Peace at her home and Mallabula doctor Ross Devine cared for the couple in their declining years.

“They were a devoted couple,” he said. “They showed great interest in alpacas and travelled around the countryside inspecting them.”