New Royal Adelaide Hospital legal battle could cost taxpayers billions in compensation

TAXPAYERS face “billions of dollars” in compensation claims if the consortium behind the new RAH is forced into receivership by State Government legal action, a court has heard.

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THE $2.3 billion new Royal Adelaide Hospital is “complete” if not open, but taxpayers face “billions of dollars” in compensation claims if the consortium behind it is forced into receivership by State Government legal action, the Supreme Court has heard.

There now are four separate legal actions underway over the hospital, which is almost a year behind schedule and still has no opening date.

The actions centre around whether the State Government reasonably rejected the cure plan to fix problems, actions over specific defects, scheduled mediation and applications for arbitration.

The hospital was supposed to reach technical completion on April 4, but the consortium notified the State Government on January 27 that this would not be achieved.

Other deadlines have since been missed, and this month the Government rejected a revised “cure plan” to fix the mess citing concerns over patient safety.

Banks financing the deal have weighed in with their own cure plan.

In Thursday’s hearing before Justice Malcolm Blue, challenging the Government’s rejection of the cure plan, Neil Young QC for the SA Health Partnership consortium (Project Co) said the group had continued to spend money and keep working on the project regardless of the legal action.

“The project will achieve technical completion before March 17 — we are on track to do that,” he said.

Mr Young said the hospital was complete and fully fitted out — as shown by photographs of completed internal areas of the hospital — and work underway now was quality checks.

He accused the government of using the rejection of the cure plan as ‘code for a demand for compensation above and beyond the cure plan’.

It is understood the government is seeking $600 million in compensation.

Mr Young said the Government is protected financially from delays by not having to make loan and service payments to the consortium of more than $1 million a day under the 30 year contract until after commercial acceptance.

He said this would amount to $390 million in savings due to a year of delays so far.

“We are trying to get this resolved as quickly as we can in the interests of all parties,” he said.

He warned if the State Government continued to reject the consortium’s cure plan it would cause ‘irreparable harm to my client’.

If the consortium was “ousted from the project” and forced into receivership it would seek “termination damages in the order of billions of dollars”, Mr Young told the court.

He sought interim orders to maintain the contract’s status quo while matters go to arbitration.

Justice Blue put the matter over for mention on Monday.

The new Royal Adelaide Hospital is not yet ready for handover, with four different legal actions surrounding its construction. Picture: Dylan Coker

Outside the court Opposition health spokesman Stephen Wade said there were now “more lawyers than builders” working on the hospital.

“The nRAH is sinking in a legal quagmire, in what has become a battle of the silks — the government needs to accept an increasingly toxic legal environment is not the way to protect taxpayers,” he said.