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 lodged claims against the PTA totalling $238 million which have been rejected by PTA.
Leighton Contractors has commenced four Supreme Court actions against the PTA relating to certain components of its $238 million claim, being alleged entitlements under the rise and fall and contaminated material provisions of the contract, concerning PTA’s obligation to effect contract works insurance for the project on certain terms and obligations relating to dewatering and recharge of the City Project site. PTA has denied all liability and is vigorously defending the actions. A trial has been held in respect of the rise and fall claim and the parties are waiting for a judgement to be delivered. The estimated value of the quantifiable parts of these four claims, as they stand after the trial of the rise and fall claim, is $49.4 million, plus legal costs of approximately $8 million.
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, is $102 million. The claims are without basis and a significant number of claims have already been assessed and rejected.
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 to other parties to the contracts. In the event of default the maximum obligation at 30 June 2008 is $11.6 million for lessee obligations and $43.1 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 ended September 30, 2003. The PTA will be obligated to make the payment to the City of Wanneroo when the Government of Western Australia approves the allocation of funds to PTA to extend the passenger railway line north of Clarkson.
Unquantifiable contingencies
One of the Supreme Court actions commenced by Leighton Contractors includes an allegation of misleading and deceptive conduct in relation to the contracts work insurance effected by the PTA pursuant to the City portion of the Southern Suburbs Railway. PTA has denied liability and is defending the claim. It is not possible to estimate the amount of any eventual payments in relation to this part of the claim 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 13 known or suspected contaminated sites to DEC (a total of 56 sites). Four sites previously reported have been classified contaminated – remediation required, and seven sites as Possibly Contaminated - Investigation Required. A provision has been recognised to cover for investigation and remediation of 15 sites. The PTA is unable to assess the outcome of the classification process for the remaining 41 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.