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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-09-08 Daily Xml
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UNITED WATER

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (15:24): I seek leave to make a ministerial statement.

Leave granted.

The Hon. K.O. FOLEY: Can I start by saying that the Liberal Party Whip must have a sense of humour putting the member for Morphett between the member for Davenport and the member for Bragg. Maybe Marty can give him some UN peace-keeping skills.

Mr GRIFFITHS: I rise on a point of order, Mr Speaker.

Members interjecting:

The SPEAKER: Order!

Mr GRIFFITHS: The Treasurer has sought the leave of the parliament to make a ministerial statement but he chooses to speak on everything other than that.

Members interjecting:

The SPEAKER: Order! The Deputy Premier has been given leave. He should stick to what he intends to say. It is not in my hands, but it is in the hands of any member of the house to withdraw leave. The Deputy Premier.

The Hon. K.O. FOLEY: Thank you, sir. I do apologise humbly, as always. On 31 August 2009, SA Water filed proceedings in the South Australian Supreme Court against United Water alleging—

Ms Chapman interjecting:

The Hon. K.O. FOLEY: It doesn't matter how far she goes down, sir. She still just picks up the octaves. You're hiding behind the bills there, so we don't see you when you yell. I will start again.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: On 31 August 2009, SA Water filed proceedings in the South Australian Supreme Court against United Water alleging misleading and deceptive conduct and breach of contract. The claim for damages concerns past charges invoiced by United Water under the contract entered into by the former Liberal government on 18 December 1995. The contract sets the lump sum prices for the first five years, with reviews to be undertaken each five years. The first lump sum price review under the contract—

An honourable member interjecting:

The Hon. K.O. FOLEY: Sorry?

Mr Williams: Keep going.

The Hon. K.O. FOLEY: Well, it's a serious matter. I'm trying to inform the house.

Mr Williams interjecting:

The SPEAKER: Order! The member for MacKillop will come to order!

The Hon. K.O. FOLEY: We've mismanaged the contract? Gee, you're not bad. The first lump-sum price review under the contract took place in 2001 under the former Liberal government.

Members interjecting:

The Hon. K.O. FOLEY: Let's just wait and listen. The new pricing arrangements applied from 1 July 2001 and were agreed by both SA Water and United Water in a letter of confirmation that was finalised prior to the Labor government coming into office. Importantly, because the price variation was conducted within the mechanisms provided in the original contract, there was no need for the contract to be varied.

On 27 September 2001, a briefing minute was sent to the then Liberal minister for government enterprises, Dr Michael Armitage, to note that the 2001 pricing review negotiations had proceeded in accordance with the appropriate clauses of the agreement. In accordance with the 2001 pricing review agreed with the former Liberal government, United Water commenced invoicing the new prices from 1 July 2001. SA Water paid those invoices from that time. During and subsequent to the 2001 price review, SA Water and United Water engaged in discussions about additional services and enhanced service levels.

Those discussions were ultimately documented in 2003 in a variation to the contract. As part of that variation, SA Water considered that, whilst not legally required, it was practical to refer to the price changes agreed to back in 2001 under the former Liberal government. The opposition has suggested that the 2003 variation presented an opportunity for SA Water to renegotiate the prices agreed to in 2001 by the then Liberal government. Crown law advice is that this is incorrect.

Mr Williams interjecting:

The Hon. K.O. FOLEY: Do you honestly think I would mislead the parliament on such an important issue? I mean, honestly.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: If the member for MacKillop, who was disloyal to the past leader and the current leader and stays at number three on the front bench—says a lot about that lot over there—

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: But, sir, there is a suggestion that I am misleading the house; that is unparliamentary.

Mr Williams interjecting:

The Hon. K.O. FOLEY: So I am not misleading the house?

Mr Williams interjecting:

The SPEAKER: Order! Perhaps the Deputy Premier could ignore interjections.

The Hon. M.J. Atkinson interjecting:

The SPEAKER: The Attorney-General!

The Hon. K.O. FOLEY: Crown law advice is that this is incorrect and that, under the contract, SA Water was legally bound to pay the prices agreed to in 2001 by the former Liberal government until the next price review in 2006. Of course, had the Labor government been aware in 2003 that United Water had engaged in misleading and deceptive conduct, we would have taken action there and then. However, United Water's conduct only came to light years later. That is the very nature of being misled and deceived: one only finds out later that it has occurred. Under our action we are claiming that the former Liberal government was misled and deceived, as was this government up until 2006 when our suspicions were such that we undertook further action.

Ms Chapman: For the last three years?

The Hon. K.O. FOLEY: We've been in dispute for three years.

Ms Chapman interjecting:

The SPEAKER: The member for Bragg will not interject!

Members interjecting:

The SPEAKER: Members on my right as well.

The Hon. K.O. FOLEY: The government has been in dispute for three years. The true circumstances—

Ms Chapman: You don't get out of this one so easily.

The Hon. K.O. FOLEY: I don't get out of this one easily? We are suing them for overcharging under their government because of their contract.

Members interjecting:

The SPEAKER: Order!

Ms Chapman interjecting:

The SPEAKER: Order, the member for Bragg!

The Hon. M.J. Atkinson interjecting:

The SPEAKER: Order, the Attorney-General! It's going to be a long 18 days if it's going to be like this. Members will not interject, and they will not interject by way of mumbling to themselves either, which is a sign of madness. The Deputy Premier.

The Hon. P.F. Conlon: She interjects immediately.

The Hon. K.O. FOLEY: Yes, interjects immediately as you sit down, sir.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: We are claiming damages right back to the beginning of the contract is my information and my understanding, much of which claim resulted from the former Liberal government being misled and deceived because of the inadequacies of its contract.

Ms Chapman interjecting:

The SPEAKER: Order! I warn the member for Bragg. The Deputy Premier.

The Hon. K.O. FOLEY: Mr Speaker—

Mr Pengilly interjecting:

The SPEAKER: That is not an opportunity for the member for Finniss to play tag team. I warn the member for Finniss! The Deputy Premier.

The Hon. K.O. FOLEY: The government has up to six months in which to serve this action, but I can assure the house that serving will occur in the very near future unless United Water is prepared to accept the government's terms for a settlement, which is the appropriate recovery of massive overcharges in the order of tens of millions of dollars. We do not, under any circumstances, suggest that we will not be serving. I would have thought that, as a lawyer and as a shadow attorney-general, she would fully understand processes of litigation such as this.

I will repeat that last paragraph: United Water's conduct only came to light years later. That is the very nature of being misled and deceived: one only finds out later that this has occurred. The true circumstances of the misleading and deceptive conduct have only become apparent more recently during ongoing negotiations to determine the lump-sum charges for the 2006 price review. One of the key reasons for this is that United Water has adopted a systematic approach of stonewalling requests for information about the breakdown of its charges under the contract.

Members interjecting:

The Hon. K.O. FOLEY: Members opposite may condone this type of behaviour; we do not. On no less than 17 occasions, between when the negotiations commenced on 16 December 2005 and 16 March 2009, United Water has refused, sidestepped or deflected SA Water's requests for more information—on no more than 17 occasions. Upon becoming aware of United Water's conduct, SA Water has sought comprehensive legal advice from the Crown Solicitor's Office and it has retained external Queen's Counsel.

In addition, SA Water has undertaken comprehensive financial analysis and modelling to determine the true extent of the damage caused to South Australian water users by United Water's conduct. Because of the size and complexity of the contractual arrangements, and because of United Water's approach of obstruction, deflection and delay, this has been a task that has taken many months of dedicated effort. However, it was essential for SA Water to be in a position to demonstrate a very strong case through the court proceedings before the claim was lodged with the Supreme Court.

Due to the confidentiality requirements and in order to avoid any potential compromise to SA Water's position in the ongoing litigation, I am advised by crown law that I am unable to disclose any further detail of the nature of the conduct complained of or of the precise details of how it has come to SA Water's attention. These matters could be fully disclosed to the parliament when disclosure will not jeopardise the ongoing court claim.

SA Water's claim is in the order of some tens of millions of dollars. As further information becomes available from United Water during the court proceedings, a more precise amount will be specified. The 2006 lump sum price review has not yet been finalised. SA Water is strongly of the view that the court proceedings do not have any effect on the ongoing day-to-day management of the contract.

United Water has publicly confirmed that its operations under the contract will not be affected and that United Water will continue to deliver services to customers in metropolitan Adelaide. The government and SA Water emphasise that they will continue to have full confidence in United Water's South Australian workforce providing the on-ground services to its customers.

I have previously stated in press conferences and in the media that it is highly unlikely, given the time of some 15 or 16 years, that this government will bring water service back into public control and ownership. I have already made that public over the last two weeks. The government has made an in-principle decision that we will go out to public tender for this contract, and preliminary work has begun on the procurement process.

May I add to the statement further by saying that this action by the government is on the advice of the board of SA Water, which is largely a private sector comprised board, on the advice of crown law, and some of the most senior QCs in South Australia. This action is designed to recover in the order of tens of millions of dollars for deceptive and misleading conduct by United Water that go back to the very signing of this privatisation contract. We are claiming as much for damages under the former Liberal government as we are under the Labor government.

For us not to have acted, for us to have ignored crown law advice, would have been to have been derelict and negligent in our responsibilities as a government. I find it shameful and quite unbelievable that a Liberal opposition would be attacking this government for fixing up the mess that it created.

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