Government staring at $4bn legal threat as new RAH stakes soar
TAXPAYERS face a countersuit of up to $4 billion if the Government tears up the new RAH contract, as industry warns that an “unprecedented” legal fight over the project has created “sovereign risk” over future investment in SA.
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TAXPAYERS face a countersuit of up to $4 billion if the State Government delivers on a threat to tear up the new Royal Adelaide Hospital contract, as industry warns that an “unprecedented” legal fight over the project has created “sovereign risk” over future investment in SA.
The Advertiser can reveal that banks financing the $2.1 billion construction project have delivered their own blueprint for finishing the build to Health Minister Jack Snelling, after he triggered court action last week by rejecting one penned by the SA Health Partnerships consortium.
Mr Snelling’s rejection of the SAHP “cure plan”, which he said was over safety concerns for patients at the new hospital, is now being challenged in the Supreme Court.
A further court hearing is scheduled for tomorrow. It is understood the Government will have grounds to seek a termination of the contract if Mr Snelling’s decision is upheld and he also rejects the cure plan from banks, which was submitted late on Monday.
Mr Snelling told Parliament last week that terminating the contract was an option that’s “certainly on the table” but was a last-resort move that’s “not something that we are pursuing at present”.
Such a step would also likely force the Government to appoint a new builder to finish the hospital, further placing in doubt the chance of it opening before late next year.
Sources close to the project have rejected Mr Snelling’s claim the hospital is unsafe, and say the Government is seeking to renegotiate the purchase price it agreed to in 2011.
One industry source yesterday confirmed that investors in the new RAH would move to recover up to $4 billion in damages from the taxpayer if the contract was terminated. They said it could be argued the Government acted in bad faith over the build, in litigation that could run for years.
It is understood the Government has sought a $600 million payment as compensation for claimed defects in the new RAH, in addition to $1 million per day being saved by the build running late.
Mr Snelling said: “We have received the banks’ cure plan and it’s being reviewed. Our contract is very strong and protects the taxpayers”.
It can also be revealed that industry group Infrastructure Partnerships Australia, which has both business and interstate government figures on its board, has written to Premier Jay Weatherill warning of dire long-term consequences for SA from the standoff and asked him to step in.
“Your Government’s approach appears designed to achieve outcomes other than a speedy resolution of outstanding construction challenges,” IPA chief executive Brendan Lyon writes.