Spanish company accused of using light rail lawsuit to duck damages bill

NSW's transport agency has accused the Spanish company building Sydney's troubled light rail project of launching a $1.1 billion lawsuit against the state because the contractor is liable to pay “substantial sums” in damages for the project running late.

Transport for NSW also claims that Acciona knew before signing the construction contract in 2014 for the $2.1 billion light rail project that how to deal with underground utilities along the route of the line would not be fully known until well after the agreement was signed.

In its $1.1 billion lawsuit, Acciona has claimed that Transport for NSW painted a misleading picture of the work needed to win the agreement of utilities companies such as Ausgrid before contractors could shift underground cables along the route of the line.

But Transport for NSW has alleged in court documents that Acciona and its partners knew the project's designs would be subject to assessments of the utility services, and “any requirements” of companies such as Ausgrid, after the construction contracts were inked.

“It is only now, over three years after Acciona entered into the [design and construction] contract, and when Acciona ... will be liable to pay ... substantial sums by way of liquidated damages if it is late in completing its works ... that Acciona brings these proceedings,” it said.

Completion of Sydney's $2.1 billion light rail line is running a year late.Credit: Jessica Hromas

Acciona has estimated that it is exposed to liquidated damages of up to $147 million if it is late in completing the project. Under the most recent timeframe, the contractors do not expect to complete the line until March 2020, a year later than promised. 

The rest of Acciona's $1.1 billion claim for losses is based on costs such as $679 million to complete construction of the line and $175 million in overheads and management expenses.

But Transport for NSW said Acciona appears to have claimed all of its projected loss on the light rail construction “irrespective of whether that loss was caused by its own failures to properly resource, program and complete the project works”.

It challenged Acciona's claim that the consortium it was part of was prevented from communicating with Ausgrid about how utilities might be dealt with.

The transport agency said it was well known that a “significant issue” for light rail projects was dealing with utility services along the routes of lines.

And it rejected Acciona's claim that the agency misled the Spanish company into entering into the design and construction contract in December 2014 by failing to reveal that Ausgrid had not agreed to work on its utilities as “being the full and final scope of work”.

The case, which is due to return to the NSW Supreme Court in September, comes as a state parliamentary inquiry into the impact of construction of the light rail project on residents and businesses is due to hold its first hearing on August 20.

Retailers along the 12-kilometre light rail line from Circular Quay to Randwick and Kingsford in the city's south east have complained that their businesses have experienced major falls in revenue due to disruption from construction of the line.

An upmarket Swiss watch retailer is suing the state government for $4 million for losses it claims to have suffered from construction of the project on George Street in the central city.