The secret $53m Sydney land deal that has left NSW taxpayers with an even bigger clean-up bill

The NSW government paid three times as much as the Valuer-General's estimate for a parcel of highly contaminated land near Parramatta that earned a Sydney property developer a $15 million windfall in a matter of months.

In a series of transactions that has sparked calls for the state’s anti-corruption watchdog to investigate, property company Billbergia bought the six-hectare site at Camellia in November 2015 for $38 million. Just seven months later, the government bought it for $53.5 million – well above the $15.5 million the Valuer-General said the land was worth at the time.

The bill for taxpayers is compounded by costs associated with cleaning up the site, which will cost at least $48 million to prevent toxic chemicals from leaching out of the property.

The revelations come two months after the so-called Leppington triangle scandal. That controversy began when the federal Auditor-General released a scathing report into the purchase of land next to the new Western Sydney Airport after the Commonwealth government valued it at just $3 million, less than a year after buying it for $30 million.

Workers in protective gear at 6 Grand Avenue Camellia, which is a heavily contaminated site that will become the main stabling yard for Parramatta light rail.Credit: Brook Mitchell

Billbergia bought the land at 6 Grand Avenue in Camellia days before the government announced the preferred route for its multibillion-dollar Parramatta light rail project, which would make the site crucial as the designated depot for trams.

A joint investigation by The Sydney Morning Herald and ABC TV’s 7.30 into the government’s purchase of the highly contaminated land can reveal it came after an urgent “out of session” meeting of senior government officials, which resulted in a reversal of earlier plans to get the landowner to pay to remediate the site or seek compulsory acquisition of the property.

After he was contacted for this story, NSW Transport Minister Andrew Constance said he had asked the Auditor-General to review the matter.

“I expect full openness, transparency and accountability from Transport for NSW,” he said. “To give the community confidence and full transparency I have written to the NSW Auditor-General seeking her engagement to independently review this matter.”

The joint investigation obtained a cache of sensitive government documents as well as the testimony of whistleblowers at Transport for NSW, which runs the state’s major transport infrastructure projects including Parramatta light rail.

In the case of the Leppington triangle deal, the federal Auditor-General found public servants had not acted ethically, lambasting the appropriateness of the due diligence and the inflated price. It led to the Australian Federal Police launching an investigation into whether there was any fraud or corruption by public officials.

However, former NSW auditor-general Tony Harris said the Camellia land deal involved more money.

“Everyone talks about the Leppington triangle and the maybe $30 million worth of loss. Here we’ve got easily $100 million worth of loss. And ministers have not sent this off to police, unlike the Commonwealth with Leppington. Ministers seem to be happy with the deal for reasons they shouldn’t be or they don’t want it exposed and if ministers don’t want it exposed it’s a good reason to expose it,” he said.

“Without a doubt this should be referred to ICAC.”

Mr Harris said the NSW Auditor-General was not equipped to investigate the Camellia deal because it involved the private sector and therefore did not have the power to compel some crucial documents.

“The Auditor-General in NSW does not have the capacity either to follow the money or to undertake the kind of work the ICAC would undertake,” he said.

Former counsel assisting ICAC Geoffrey Watson, who is a director of the Centre for Public Integrity, said ICAC and the police needed to get involved.

“The NSW taxpayer has paid $53 million for a block of land which at most was worth between $15-$20 million – but meanwhile the NSW taxpayer has been saddled with a cost which could be $100 million. It could be as high as $200 million to remediate a site which is badly contaminated with carcinogenic chemicals,” said Mr Watson, whose work for the ICAC helped expose serious corruption or impropriety involving politicians on both sides of politics, including Eddie Obeid.

“This matter needs to be referred immediately to ICAC. The question is whether you go to ICAC or straight to the police.”

The land at 6 Grand Avenue has been described by an environmental expert as a “cocktail of highly toxic chemicals” including asbestos and hexavalent chromium, a carcinogen used in the manufacture of chrome at the site.

Dr Bill Ryall, one of NSW’s leading contamination experts, said the site was one of the worst contaminated lands in NSW.

Bill Ryall, one of NSW's leading contamination experts at 6 Grand Avenue Camellia.Credit: Brook Mitchell

“There are a cocktail of chemicals known in the groundwater, and in the soil. The most prevalent is chromium-6, which is a proven human carcinogen,” he said.

Hexavalent chromium gained notoriety as the contaminant in the “Erin Brockovich town” of Hinkley in the United States. It can result in lung cancer and is toxic to the marine ecosystem.

Dr Ryall, who has been involved in some of the city’s most significant contamination clean-ups at Homebush and Barangaroo, said the government’s plan to dig a wall into the bedrock around the tram depot’s perimeter to contain the contaminated groundwater, as well as build a plant to treat the water, was the right option.

‘‘It’s a containment of it, they’re not treating the chemicals, they’re not taking away any of the chemicals,” he said.

Dr Ryall said no one could reliably predict how long it would take to contain and treat the groundwater. “It might take 50 years - it might be more. No one knows at this stage,” he said.

“This costs a lot of money and if you start compounding that over 50 years, you will work out it will cost millions.”

Dr Ryall said plumes of groundwater contamination that may have been sourced on the property extended into a neighbouring site, and extra investigation was required. “This issue could become a liability for the government,” he said. “These compounds are toxic and some of them are carcinogenic, and they are volatile.”

He said hexavalent chromium had seeped into Parramatta River.

In 2018 environmental contractor Ventia entered a contract with Transport for NSW to remediate the property at a cost of $48 million, but internal sources suggest it could end up being much more.

George Silvino, a senior project engineer working on the project, posted on a social media account that he estimated the project at $65 million.

NSW Labor finance spokesman Daniel Mookhey said he had seen estimates that it could cost anywhere from $100 million to $700 million to clean it up, if the government becomes liable for remediating neighbouring land.

“The developer managed to flip this without ever technically owning it,” he said. “They bought it and then later sold it and made millions of dollars profit… and they didn’t have to clean it up,” he said.

The revelations come as the Berejiklian government has all but shelved the second stage of the light rail project, which involved extending the line for nine kilometres from Rydalmere to Olympic Park.

The government has been sitting on the final business case for that stage since at least late last year, and is considered unlikely to include funding for the line’s extension in the state budget on Tuesday.

The first stage from Westmead to Carlingford via Parramatta is budgeted to cost $2.4 billion, and be completed by 2023. A leaked government document in 2016 estimated the cost of the entire line, which included the second stage, at more than $3.5 billion.

The second stage has been complicated by the government’s signature $25 billion metro rail line from the Sydney CBD to Parramatta. Developers including Billbergia have been lobbying to build a train station for the Metro West line at Camellia - a move Mr Constance has resisted.

The trove of documents shows the NSW government had been interested in buying the Camellia site for a tram depot at least eight months before the preferred route for the light rail was announced in December 2015.

The landowner at the time, global industrial giant Akzo Nobel, hired CBRE to sell the land.

A business paper to Transport for NSW’s Finance and Investment Committee in March 2015 said it would pay $30 million for the land but noted the “site is contaminated” and listed on the Environment Protection Authority (EPA) register and the transport agency would negotiate a contract where remediation and associated costs would be the landowner's responsibility.

According to the confidential document, settlement of the contract would not occur until the land had been remediated and passed a site audit confirming it was suitable for commercial or industrial use and signed by an EPA-accredited auditor.

The government’s offer was rejected in favour of Billbergia, which exchanged contracts days before then-Premier Mike Baird, Mr Constance and Planning Minister Rob Stokes unveiled the preferred route for the light rail.

According to NSW property sales records, Billbergia paid $38 million. Other papers show Billbergia entered a mortgage agreement with Akzo Nobel, which the developer needed to settle by June 30, 2016.

The developer was busy at the time acquiring parcels of land at Camellia. In November 2015, Billbergia snapped up 3 Grand Avenue for $16.5 million. Two months later, it acquired 7 Grand Avenue for $7.75 million, and in April 2016 bought 9 Grand Avenue for $14 million.

It was a member of the Westline Partnership, a group set up in late 2014 to lobby for the fast-tracking of a light rail route along Sydney’s Olympic Park corridor, which would include Camellia. The group also wanted to build residential apartments at Camellia.

Billbergia said in a statement it had no knowledge prior to the announcement of the Parramatta light rail route, nor of any interest Transport for NSW had in the site at 6 Grand Avenue.

It said it intended to acquire the site to develop it for industrial purposes, but declined to release the terms of the sale citing confidentiality. “Should they [Transport for NSW] agree, we will provide our agreement to waive confidentiality for them to fully release all documentation,” it said.

The company said it “acted properly and ethically throughout these transactions and has openly provided information in response to media inquiries, within the limits of confidentiality constraints”.

“When approached to sell the property, we were a reluctant seller. We understood there was a risk of compulsory acquisition unless as requested by TfNSW, we agreed to a negotiated sale,” it said.

The negotiated sale would earn Billbergia a $15 million windfall, excluding stamp duty and other costs.

The developer released some correspondence with Transport for NSW where a CBRE director writes to Billbergia on April 13, 2016: “I have spoken to our national director and he can prepare a letter by the end of the week for $2500 - he understands what we need to achieve.”

Other emails sent days later from Transport for NSW to Billbergia indicate the asking price had blown to $75 million for the toxic land.

Around the time of negotiations, a “sensitive” government briefing document prepared for the Transport Minister recommended he approve the compulsory acquisition of the Camellia property from Billbergia.

“Compulsory acquisition of the land is required because it appears unlikely that an agreement on compensation will be achieved,” the briefing to Mr Constance stated.

The “sensitive” briefing paper said compulsory acquisition of the site would be “on an ‘as is’ basis with TfNSW dependent on the Valuer-General making an allowance for site clean-up and a site audit statement for a suitable use in the determination of compensation”. At that time the Valuer-General valued the land at $15.5 million.

A spokeswoman for Mr Constance said the minister signed the briefing note on April 28, 2016, approving the compulsory acquisition of land for the stabling facilities of Parramatta light rail on the advice of Transport for NSW.

Two weeks later, Transport for NSW did a U-turn.

A paper titled “out of session” in May that year requested Transport for NSW’s Finance and Investment Committee (FIC) approve $53.5 million for the purchase of the land, which was triple the cost of the Valuer-General’s 2016 valuation.

The committee was chaired at the time by Transport for NSW’s then secretary, Tim Reardon, who has since gone onto become the state’s top public servant, running the Department of Premier and Cabinet, under Gladys Berejiklian.

Under the deal, taxpayers would pay $53.5 million.

Out-of-session papers are unusual and are generally reserved for urgent matters. At the time of this out-of-session meeting, the final business case for the Parramatta light rail was still a year from being approved.

Mr Reardon declined to comment and referred all matters to Transport for NSW, which said it acquired the property on the basis that the site best met its needs. There is no suggestion Mr Reardon acted improperly.

The agency said the property was subject to a competitive expression-of-interest process in 2015 which it did not win. It subsequently negotiated with the new owners “having previously investigated other potential locations”.

It said the land was acquired in accordance with the Land Acquisition (Just Terms Compensation) Act 1992. “Transport for NSW proceeds with a compulsory acquisition if agreement cannot be reached with a property owner,” it said.

The decision to complete the deal through a commercial settlement rather than compulsory acquisition raised alarm bells for a number of senior bureaucrats inside the transport agency, who were concerned that the price of the land was excessive, remediation costs unknown and the business case for the Parramatta rail project had not been finalised or approved.

One whistleblower, who asked that their identity be protected, said the deal was clouded in secrecy. “Total acquisition for the site was unknown as the cost of the clean up for the contaminated site couldn’t be determined,” the whistleblower said.

Another whistleblower said it was unfunded in that year and should have waited until the new financial year to be considered.

“Why the urgency?” the insider asked.

“Anyone who tried to ask questions was shut down. The culture was one of bullying and intimidation.”

The out-of-session document in 2016 raises serious questions about the rushed nature of the purchase. It notes that an assurance review or investment-gating review had yet to be completed, which is required under Treasury rules.

Mr Watson said he could not understand why the transport agency needed to rush the purchase. “I’ve been through the timeline - I can’t see what the urgency was,” he said.

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Transport for NSW completed the land purchase on June 15, 2016, two weeks before Billbergia paid its mortgage to Akzo Nobel. The property flip produced a hefty profit of $15.5 million for Billbergia, excluding costs.

Labor has been asking questions in NSW Parliament since 2018 about the deal, and last year pushed for documents to be released to the upper house in an attempt to shed light on the acquisition.

“For two years I have been trying to get to the bottom of this because it stinks," Mr Mookhey said.

"When it comes to the second stage of the Parramatta light rail, the site that involves Camellia, the government has effectively gone to ground.

“Nobody knows whether or not the government’s going to keep their commitment. The government is deferring, delaying their decision about the second stage of the rail. Part of the reason is they now know that this site will cost a lot of money to clean up and the economics of the project no longer stack up.”

Watch ABC's 7.30 on November 16 for more on this story