Reference no: EM131982746 , Length:

Spanish builder claims state failed to reveal full facts on light rail By Matt O'Sullivan | The Sydney Morning Herald

The Spanish company building Sydney's $2.1 billion light rail line has accused the state government of misleading conduct in failing to reveal that it had not secured the agreement of power company Ausgrid on how crucial cables under the route should be handled.

Acciona's $1.2 billion claim for costs and damages against the state threatens to trigger a political nightmare for the Berejiklian government and further delay completion of a light rail line which had originally been promised early next year.

In documents filed in the NSW Supreme Court, the Spanish conglomerate accused Transport for NSW of engaging in "misleading or deceptive conduct" in the lead up to it signing a contract to design and build the 12- kilometre light rail line.

Acciona said it would not have signed the contract if it had known that Ausgrid had not in fact accepted a plan to deal with its electricity cables and pits beneath the route of the line, which includes George Street in Sydney's CBD.

That piled on significant additional cost to deliver the project, raised the risk of major delays and had "significant financial and reputation consequences" for Acciona.

So far, the project has cost Acciona $1.07 billion and it expects to burn through another $679 million before construction of the line is completed. It also estimates $175 million in overheads and management costs and potential liquidated damages of up to $147 million.

The company expects to receive $966 million from the state for the project, leaving its losses at $1.1 billion.
The state government has repeatedly declined to say when the line will be finished, and last month Transport Minister Andrew Constance accused the contractor of being unwilling to provide a "meaningful timeline" for completion of the project.

Well before construction started in 2015 on the line from Circular Quay to Randwick and Kensington in the city's south east, underground utility cables for electricity, gas and water services beneath the route had been expected to be one of the project's major challenges.

Acciona said it sought to negotiate with Transport for NSW during the bidding process in 2014 for a "satisfactory contractual mechanism" for how utility services beneath the streets would be dealt with during construction, and a plan was eventually agreed.

During those negotiations, Acciona claims Transport for NSW led it to believe that Ausgrid - which it was prevented from communicating with - had reviewed and accepted the handling of its utility services as set out in the plan.

However, the company claims that Ausgrid "had not in fact accepted the treatments for its services" set out in the plan.

Acciona became aware that the electricity company did not accept them only hours after financial close of the construction contract on February 27, 2015.

As it later turned out, the guidelines from Ausgrid over how its utilities should be handled "diverged to a significant degree" from the plan Acciona had with Transport for NSW. It meant 106 Ausgrid utilities were in "clear conflict", while a further 927 were "unclear".

On Friday, Mr Constance described Acciona's $1.2 billion claim as "simply outrageous", and said the government would "fight it hard in the courts".

"There is one message to the Spanish contractor - do your job. They have to stop their go-slow, get back to work and make sure they get on with the job," he said.

The legal tussle has prompted Labor leader Luke Foley to step up his attacks on the government, claiming a project that was originally expected to cost
$1.6 billion was now on a course to cost taxpayers $3 billion.

"We are now facing years of uncertainty. The centre of the city looks like a war zone and there's just no end in sight. Businesses are going broke," he said. "The Premier has to deliver a plan - she's led us into this mess."

Ms Berejiklian said this week that NSW would "not be held to ransom" by
the Spanish contractors.

The case will return to the Supreme Court for a directions hearing on May 25.

QUESTIONS

PART A

1. What are the basis in law for the claim by Acciona ? Refer to relevant cases and legislation

2. what would have to be established by Acciona to support their claim

3. What would Transport for New South Wales have to establish an opposition of their claim and any counterclaim

4. What is required for each side to prepare for the hearing and what sort of witnesses are required

5. Having regard to the problems encountered in this case what procedures would you formulate to cover to avoid problems of amendments in the course of construction and advice about the resolution of technical disputes and use of experts?

NOTE: Questions 1 -3 questions require an identification of the relevant legal principles of Contract and the application of these principles to the fact situation to indicate a possible outcome. Question 4 Requires a description of the court process and the desired input of a Construction Manger Question 5 requires the identification of the problems in the case example and having regard to the legal principles what action can be taken in planning to avoid these problems in the future

PART B

You are required to advise Acciona of the procedures required in the future if it wishes to avail itself of the payment process under the Building Industry Security of payment Act (Victoria). Detail the type of work under the contract that may be claimed and what is excluded. In your advice you should include what is required to ensure that a claim fall under the scheme of the Act and any issues as indicated in the cases referred to in the blackboard notes. Refer and discuss the relevant section of the Building Industry Security of Payments Act. (Victoria)

NOTE:

PART A requires evidence of the understanding of legal principles involved, the court process, and an understanding of the role of construction Manager in the Court Process

PART B requires how an application under the Security of Payments Act would proceed in the fact situation provided. Reference to the relevant section of the Act is required.

Attachment:- construction law.rar