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House of Assembly - Fifty-Third Parliament, First Session (53-1)
2014-09-23 Daily Xml
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SA Water

Mr PENGILLY (Finniss) (15:21): I raise the issue of SA Water in relation to BJ Jarrad Pty Ltd and Kangaroo Island contractors who have been left stranded by the company going into receivership. I quote from a letter that has been sent to minister Hunter:

The financial and emotional impact of this event on the subcontractors cannot be understated and given the advice by the Administrators Ferrier Hodgson that there will be little if any money available for distribution to unsecured creditors, the immediate financial viability of these subcontractors is at best uncertain and certainly precarious.

This is an important issue and one which seems to have been swept under the table. I have had private discussions with minister Hunter over this, but I believe it needs putting on the record in this place.

By way of background, when BJ Jarrad Pty Ltd was placed into voluntary administration in 2011, a shareholders agreement was executed giving Contura Mining 49.9 per cent of the shares of BJ Jarrad, while Barry James Jarrad holds the remaining 50.1 per cent of the shares. The advice of the Administrator is that the ASIC databases were not updated to reflect this shareholding change. The reason for this failure could be oversight but, given the current circumstances, one could well draw conclusions.

What is happening here is that around $250,000 is owing to a number of Kangaroo Island contractors, but those contractors include labourers who were not given the opportunity to be paid as wage earners and had to put in ABNs. I had contact last week from another contractor on the island who supplied sand to the company and who is owed $30,000, and one contractor is owed $80,000. A lot of these lads—and they were lads who were working for the company—have been left being owed $5,000, $8,000, $11,000, whatever. It is not good enough.

I believe, quite frankly, that SA Water has a responsibility and a duty of care to ensure that, prior to any contract being awarded to a contractor, they know the subcontractor who is being engaged and that the party who the contract is awarded to is financially sound. I seriously question whether SA Water have done due diligence on this. It seems to me that they have not, and it seems to me that the ones who are going to be held to account on this are getting away with a fair bit, that is, the principal, BJ Jarrad Pty Ltd.

My view is that SA Water did not do due diligence; I could not be in any way, shape or form convinced that they did. SA Water gave the company the tender. We do not know the details, and they need to come out. However, if they had done their homework they would have found out that this company had gone belly up a couple of years ago only to be reinvigorated and to get back into business.

There were phone calls made to SA Water, who assured subcontractors that payments would be made to Jarrads and assured that all payments would be made. Yes, I understand that, but if SA Water had one regular financial audit, which they are obliged to undertake, they would have known that subcontractors were not being paid. So, their assurances, under the circumstances, are, at best, a wilful disregard for their own obligation by arguably falling into the category of negligent misstatement.

It could be that the minister could argue that they are not responsible. Well, I think you are effectively responsible. The minister sits over a large organisation (SA Water) and he has a responsibility, in my view, to pull his SA Water staff in and say, 'Well, you've failed; you didn’t do it.' Despite the protestations of Mr Ringham in the media, when I raised this issue about three or four weeks ago (whenever it was; it is probably more than that now) still nothing has happened and these people are still left without getting any money. I quote from the letter:

The call is upon you the Minister for Water to request SA Water to do the right thing and compensate these sub-contractors for their losses associated with this contract…The amount owing is less than $250,000 which is an insignificant amount in the overall budget of SA Water, but on Kangaroo Island, the impact of this loss cannot be regarded as anything less than highly significant. SA Water's knowledge of the financial position of BJ Jarrad Pty Ltd, the ongoing audit obligations and their assurances in relation to the security of payment, among other factors all raise serious questions as to SA Water's liability.

I hope this is picked up by the minister and that he acts and does the right thing because I see no reason why good, ordinary South Australians should be left without getting paid and not being able to support their families.

Time expired.

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