38 Contingent liabilities and contingent assets
Contingent Liabilities
In addition to the liabilities included in the financial statements, there are the following contingent liabilities:
Litigation in progress
Quantifiable Contingencies
Leighton Contractors Pty Ltd, the contractor engaged by the PTA to design and construct the City portion of the Southern Suburbs Railway, has commenced Supreme Court actions against the PTA. Two of the actions relate to contractual disputes between the PTA and Leighton Contractors, on Leighton Contractors' alleged entitlements under the rise and fall and contaminated material provisions of the contract. The estimated value of these two claims is $64 million. The PTA has denied all liability and is vigorously defending the action.
The amount that has been claimed by John Holland Pty Ltd, the contractor engaged by the PTA to construct a package of three stations on the Southern Suburbs Railway, but rejected by PTA, which is now subject to dispute, is $6.89million. PTA is defending the claims.
The amount that has been claimed by RailLink Joint Venture, the contractor engaged by the PTA to construct the civil, rail and structures portion of the Southern Suburbs Railway, but rejected by PTA, which is now subject to dispute, is $2.62million. PTA is defending the claims.
PTA has issued indemnities to parties to Cross Border lease transactions for the financial obligations and performance of the lessees and deposit takers. In the event of default by the lessees or deposit takers to pay for obligations when due or perform functions required of them PTA as issuer of the indemnity is required to meet the liabilities, losses, costs and charges of the indemnity and to other parties to the contracts. In the event of default the maximum obligation at 30 June 2007 is $18.9 million for lessee obligations and $26.3 million for deposit taker obligations. There have been no notifications of default.
PTA has entered into an agreement with the City of Wanneroo which will require the PTA to pay $3 million to the City of Wanneroo plus the increase in CPI from the quarter ending September 30, 2003 to the date the Government of Western Australia approves the allocation of funds to PTA to extend the passenger railway line north of Clarkson.
Unquantifiable Contingencies
As at 30 June 2007, PTA has a number of claims lodged against it by several contractors engaged in construction of the Southern Suburbs Railway. One significant claim is from Leighton Contractors on allegations of misleading and deceptive conduct in relation to the contracts work insurance effected by the PTA pursuant to the contract. PTA has denied liability and is defending the claim. It is not possible to estimate the amount of any eventual payments in relation to these claims at balance sheet date.
PTA has issued indemnities to Cross Border lease parties in respect to taxation resulting from changes in law, taxation administration determinations or as a result of loss of railcars which result in loss of economic benefits to parties to the leases or result in increased costs. There are no notifications of adverse taxation circumstances. It is not possible to estimate the amount of any payments that may arise from these indemnities at balance sheet date.
Contaminated sites
Under the Contaminated Sites Act 2003, the PTA is required to report known and suspected contaminated sites to the Department of Environment and Conservation (DEC). In accordance with the Act, DEC classifies these sites on the basis of the risk to human health, the environment and environmental values. Where sites are classified as contaminated – remediation required or possibly contaminated – investigation required, the PTA may have a liability in respect of investigation or remediation expenses.
During the year the PTA reported 43 suspected contaminated sites to DEC. Two sites previously reported have been classified contaminated – remediation required. Of the 43 sites reported during the year the PTA has professional advice that 13 sites are contaminated and will be classified as contaminated – remediation required. A provision has been recognised to cover for remediation of the 15 sites. The PTA is unable to assess the outcome of the classification process for the remaining 30 sites, and accordingly, it is not practicable to estimate the potential financial effect or to identify the uncertainties relating to the amount or timing of any outflows. Whilst there is no possibility of reimbursement of any future expenses that may be incurred in the remediation of these sites, the PTA may apply for funding from the Contaminated Sites Management Account to undertake further investigative work or to meet remediation costs that may be required.