Contingent liabilities — unquantifiable
Attorney-General’s
Native title agreements — access to geospatial data
The Australian Government has entered into agreements with state and territory government bodies and/or their agents to access their geospatial data. The data is essential to support the National Native Title Tribunal in achieving its outcome. Under these agreements, the Australian Government provides indemnities against third party claims arising from errors in the data.
Native title costs
The Australian Government has offered to assist the states in meeting compensation costs associated with native title. The amounts that might be paid by the Australian Government will be subject to the terms of financial assistance agreements being negotiated with the states, and liabilities arising from the 1998 amendments to the Native Title Act 1993. The Australian Government’s liability cannot be quantified due to uncertainty about the number and effect of compensable acts, both in the past and in the future, and the value of native title affected by those acts. Similarly, it is not possible to quantify the liability for compensable acts for which the Australian Government may be directly liable.
The Australian Government has also offered to assist the states with the costs of bodies performing native title functions under state legislation. The extent of this assistance will depend on the existence of such bodies, the timing of their recognition and the extent of their use.
Southern Ocean surveillance
The Australian Government has entered into contractual arrangements with P&O Maritime Services for the provision of maritime charter services until June 2006 to facilitate the Australian Customs Service and the Department of Agriculture, Fisheries and Forestry armed patrols of Australia’s exclusive economic zone in the Southern Ocean.
The Australian Government will indemnify P&O Maritime Services against certain claims arising from the discharge of firearms or munitions, or where a steaming party is deployed to crew a seized vessel back to an Australian port. Whether those indemnity arrangements are maintained once the measure Southern Ocean surveillance — continuation is in place will depend on the outcome of contractual negotiations for the continued provision of maritime charter services.
Communications, Information Technology and the Arts
Art Indemnity Australia
Art Indemnity Australia is a programme through which the Australian Government indemnifies cultural objects loaned to exhibitions displayed in Australian museums and galleries. The exact amounts involved will vary with the exchange rate applying at the time any claim for loss or damage to an artwork or heritage object loaned from overseas is paid, and the extent of any loss or damage. Most of the Australian Government risk in indemnifying exhibitions is insured through Comcover. Uninsurable risk continues to be borne solely by the Australian Government.
Defence
ADI Limited — officers and directors’ indemnities
Under the sale agreements for ADI Limited, the Australian Government had indemnified the directors, officers and employees for claims and legal costs associated with assistance related to the sale of the Australian Government’s shares in the company. The Australian Government has provided an indemnity to ADI Limited for uninsured losses relating to specific heads of claims.
ASC Pty Ltd — Australian Government indemnities provided to Electric Boat Corporation under the Services Agreement
In early October 2002 the Department of Defence entered into a Services Agreement with Electric Boat Corporation (EB) and its subsidiary Electric Boat Australia (EBA) to provide technical and commercial support to ASC Pty Ltd as it transitioned from being a producer of submarines to an agency for through-life support. EB/EBA staff commenced at ASC Pty Ltd on 14 October 2002. The Services Agreement will run for three years with up to four annual extensions.
Under this agreement, EB and EBA were provided with a warranty by the Australian Government and ASC Pty Ltd that they had the right to provide EB/EBA with confidential and other information and the Australian Government provided an indemnity to EB and EBA against claims arising from a breach of that warranty.
The Australian Government also indemnified EB and EBA against claims arising from property loss or personal injury resulting from a defect in the operation or performance of a Collins Class submarine, other than caused by unlawful conduct, gross negligence or wilful misconduct of EB or EBA, against claims exceeding the greater of US$1 million or profit earned by EB under the agreement.
HMAS Melbourne and HMAS Voyager damages claims
Former crew members of HMAS Melbourne have instituted legal proceedings against the Australian Government claiming damages for injuries allegedly caused by the HMAS Voyager/HMAS Melbourne collision on 10 February 1964. One hundred and twenty seven claims remain current. Eighty six of the current claims are statute barred under applicable state laws. In those cases, the plaintiffs will require an extension of time prior to progressing their claims for damages. A number of dependency claims arising from that collision have also been foreshadowed by the dependants of deceased former members of the crew of HMAS Voyager. Further claims are likely to be made in connection with the collision.
Litigation cases
The Department of Defence is involved in a wide range of litigation and other claims for compensation and/or damages that may result in litigation where the matters have yet to be finalised by negotiation or, where required, litigation. Various claims, the subject of cases that have yet to be heard, are part heard or are subject to an appeal, await a decision on what (if any) damages and/or costs should be paid to the claimant. The litigated and non-litigated claims include common law liability claims and claims arising from complaints to the Human Rights and Equal Opportunity Commission. The litigation includes asbestos claims and claims from injury resulting from the F-111 Deseal/Reseal programmes. Claims have been received for damage caused by the use of Defence Practice Areas and from the presence of unexploded World War II ordnance. In total there are about 400 claims at present, with a value in excess of $145 million. There is identified potential for claims within the above from known incidents of non-military asbestos exposure and the F-111 Deseal/Reseal project of some 130 claims with a value of some $30 million.
Military Superannuation and Benefits Scheme — indemnity
The Military Superannuation and Benefits Scheme (MSBS) provides occupational superannuation benefits for members of the Australian Defence Force. Much of the day-to-day administration associated with the MSBS is conducted by ComSuper. Under the Military Superannuation and Benefits Act 1991 the actions of ComSuper and its Commissioner are deemed to be those of the Military Superannuation and Benefits Board (MSB Board). Defence will indemnify the MSB Board for certain specified claims that are made in relation to acts of ComSuper and/or its Commissioner that are not recoverable elsewhere.
Education Science and Training
Australian Nuclear Science and Technology Organisation — indemnity
The Australian Government has indemnified the Australian Nuclear Science and Technology Organisation and its officers from liability that might be incurred from the conduct of activities authorised under the Australian Nuclear Science and Technology Organisation Act 1987. This indemnity is additional to the commercial insurance covers obtained from the Comcover Insurance Pool and other insurers.
Finance and Administration
Australian Industry Development Corporation — board members’ and management indemnity
The Australian Government has indemnified the Corporation’s board members and management against civil claims relating to employment and conduct as directors and management of subsidiary companies. Liability is subject to the terms of the indemnities.
ASC Pty Ltd — Australian Government shareholding
The Australian Government has indemnified Barry AC Hilson and BACH Pty Ltd in relation to liabilities arising from assistance provided to the Australian Government during the conduct of a review of the Australian Government’s shareholding in ASC Pty Ltd. This indemnity is ongoing.
ASC Pty Ltd — directors’ indemnities
The Australian Government has indemnified the members of the board of ASC Pty Ltd for any claims and all legal costs arising from the result of the directors acting in accordance with the board’s tasks and responsibilities as defined under the indemnity.
The Australian Government has indemnified the ASC Directors for any claim made against them as a result of complying with ASC’s obligations under the Process Agreement between the Electric Boat Corporation (EBC), the Australian Government and ASC; and under the Services Agreement between ASC, the Australian Government, EBC and Electric Boat Australia.
Australian Technology Group — directors’ indemnities
The Australian Government has indemnified Australian Government officials appointed as directors of the Australian Technology Group for liabilities relating to any action taken in their capacity as a director of the company. This includes any reasonable legal costs and expenses incurred by a director even after they have ceased to be a director.
ComLand Limited — directors’ indemnities
Ongoing indemnities have been provided to former directors of ComLand Ltd, the former General Manager of ComLand Ltd and to DBYB Pty Ltd, against liabilities incurred in respect of assistance provided to the Australian Government during the ComLand scoping study and subsequent sale process.
ComLand Limited — site contamination
Footscray Land Limited is indemnified until 31 December 2019 in respect of certain contamination claims exceeding $7.5 million in aggregate at its Edgewater (Maribyrnong) site. St Marys Land Limited is indemnified until 31 December 2024 in respect of certain contamination claims and costs exceeding $25 million in aggregate at its St Marys (western Sydney) site.
Employment National Limited — board members’ and Chief Executive Officer’s indemnity
Indemnities by the Australian Government have been provided to Employment National Limited board members and the Chief Executive Officer to protect against civil claims relating to their employment and conduct as directors. These indemnities are ongoing.
Indemnities for the Reserve Bank of Australia and private sector banks
Under agencies’ contracts for transactional banking services, the Australian Government has indemnified the Reserve Bank of Australia and contracted private sector banks. These banks are indemnified against loss and damage arising from error or fraud by the agency, or transactions made by the bank with the authority of the agency.
Potential claims relating to superannuation benefits
On 4 March 2005, the Supreme Court of the Australian Capital Territory found against the Commonwealth of Australia on a claim for negligence and breach of contract relating to superannuation benefits for a former employee of the Department of the Interior. This is considered to be a test case for several hundred named potential plaintiffs. In addition there is potential for more claims to arise from other former employees. An appeal against the decision of the ACT Supreme Court was lodged in March 2005.
Sydney Airports Corporation Limited, Bankstown, Camden and Hoxton Park Airports — directors’ indemnities
The Australian Government has indemnified each member of the board of directors of Sydney Airports Corporation Limited, Bankstown Airport Limited, Camden Airport Limited, and Hoxton Park Airport Limited against claims and costs incurred arising from the conduct of the directors in relation to the sale, or scoping study for the sale, of these airports. Where certain company insurances or indemnities exist for the directors in relation to a claim, the Australian Government indemnity cannot be called upon.
Tuggeranong Office Park Pty Ltd — shareholder indemnity
As part of the arrangements for Tuggeranong Office Park, the Australian Government can acquire the shares of the Tuggeranong Office Park Pty Ltd for $100 subject to certain conditions. In its capacity as purchaser of the shares, the Australian Government has indemnified each Shareholder for all ‘losses, liabilities, costs, expenses and damages’ incurred by virtue of their shareholding. If a capital gains tax liability were to accrue to the Shareholders, the Australian Government may be required to reimburse the Shareholders. The Department of Finance and Administration will be seeking advice from the Australian Tax Office on this issue.
Indemnities relating to other former asset sales, privatisations and IT outsourcing projects
Ongoing indemnities have been given in respect of a range of asset sales, privatisations and IT outsourcing projects that have been conducted by the Department of Finance and Administration (Finance), and the former Office of Asset Sales and Commercial Support and its predecessors. The probability of an action being made under one of these indemnities diminishes over time. Details of indemnities in respect of the other asset sales and privatisations have been provided in previous Budget and Mid-Year Economic and Fiscal Outlook papers, and previous annual reports for Finance and the Office of Asset Sales and Commercial Support.
Indemnities (including the year they were raised) are still current for: ADI Ltd (1998), Australian Airlines (1991), Australian Industry Development Corporation (1996), Australian Multimedia Enterprise (1997), Australian National Rail Commission and National Rail Corporation Ltd (1997 and 2000), Commonwealth Accommodation and Catering Services (1988), Commonwealth Bank of Australia (1993 to 1996), Commonwealth Funds Management and Total Risk Management (1996 to 1997), Essendon Airport Ltd (2001), Federal Airports Corporation’s Airports (1995 to 1997), Home Loans Insurance Commission Ltd (1996), Health Insurance Commission (2000), National Transmission Network (1999), Telstra (1996 and 1999), Wool International (1999). The Department does not currently expect any action to be taken in respect of these indemnities.
Foreign Affairs and Trade
Export Finance and Insurance Corporation — board members’ and senior management indemnities
The Australian Government has provided certain indemnities to Export Finance and Insurance Corporation (EFIC) board members and senior management to protect against civil claims and legal expenses for unsuccessful criminal claims relating to the implementation of EFIC’s alliance/divestment of its short-term export credit insurance business.
Health and Ageing
Blood and blood products liability cover
A National Managed Fund (NMF) has been established which pools the liability risks associated with the supply of blood and blood products by the Australian Red Cross Blood Service (ARCBS) between the Australian Government, the ARCBS and the states and territories. The NMF is covered by a Memorandum of Understanding (MoU) between the Australian Government, states and territories, and the ARCBS. This will be amended to incorporate the operations of the Jurisdictional Blood Committee (JBC) and the National Blood Authority. The MoU provides for the parties to contribute to the NMF taking into account potential claims payments; the level of funds in the NMF and investment earnings; and a prudential allowance for liabilities incurred but not yet the subject of claims. If there are insufficient funds to cover claim costs, the JBC considers a report provided by the National Funds Manager to determine the level of funds required. Each party must contribute funds, as determined by JBC, in accordance with allocation provisions prevailing at the time. Under the MoU, the blood and blood products liability cover for the ARCBS remains in force until all parties agree to terminate the arrangements from an agreed date.
CSL Limited
CSL Limited is indemnified against claims made by persons who contract specified infections from specified products and against employees contracting asbestos-related injuries. CSL Limited has unlimited cover for most events that occurred before the sale of CSL Limited on 1 January 1994, but has more limited cover for a specified range of events that occurred during the operation of the Plasma Fractionation Agreement, from 1 January 1994 to 31 December 2004. Where alternative cover was not arranged by CSL Limited, the Australian Government may have a contingent liability. Given the open-ended nature of some of the indemnities, damages and risk cannot be quantified. No similar indemnities have been given to CSL Limited in the new Plasma Products Agreement operating from 1 January 2005.
Medical Indemnity Exceptional Claims Scheme
In May 2003 the Prime Minister announced the Medical Indemnity Exceptional Claims Scheme to assume liability for 100 per cent of any damages payable against a doctor that exceeds a specified level of cover provided by that doctor’s medical indemnity insurer, currently $20 million. These arrangements will apply to payouts related to either a single large claim or to multiple claims that in aggregate exceed the cover provided by the doctor’s medical indemnity insurer, and will apply to claims notified under contracts-based cover since 1 January 2003.
Indemnity relating to smallpox vaccine
On 12 December 2002, the Australian Government took possession of an initial shipment of 50,000 doses of smallpox vaccine. This vaccine, to be used only in emergency situations, was the only type available for large-scale purchase and was manufactured using older style technology. The Government granted an indemnity to the manufacturer covering possible adverse events that could result from the use of the vaccine.
Immigration and Multicultural and Indigenous Affairs
Separation of Aboriginal children from their families in the Northern Territory
Earlier laws, policies and practices in relation to the Australian Government’s administration of the Northern Territory led to the separation of certain Indigenous children from their families. There are currently over 2,000 plaintiffs with claims pending against the Australian Government for (unspecified) damages in relation to alleged forcible and wrongful separations (mostly by the children of those allegedly forcibly and wrongfully removed). Two claims have proceeded to trial. Both were unsuccessful.
Claim of unlawful detention on Nauru
On 16 December 2003, 325 plaintiffs claiming to be detained on Nauru commenced an action in the Supreme Court of Victoria. The claim alleges that the plaintiffs have been detained at the request of, or by agents of, the Australian Government, and that the detention amounts to false imprisonment. The plaintiffs seek a declaration that they have been falsely imprisoned by the Australian Government, an injunction to restrain the Australian Government or its agents from continuing to detain the plaintiffs, and damages. The case has not yet been listed for hearing.
Industry, Tourism, and Resources
Liability for damages caused by space activities
Under the United Nations Convention on International Liability for Damage Caused by Space Objects, the Australian Government is liable to pay compensation for damage caused to nationals of other countries by space objects launched from, or by, Australia. The Australian Government requires the responsible party for a space activity approved under the Space Activities Act 1998 to insure against liability for damage to third parties for an amount not less than the maximum probable loss, up to a maximum of $750 million. Under the Space Activities Act, the Australian Government also accepts liability for damage suffered by Australian nationals, to a maximum value of $3 billion above the insured level.
Litigation
The Department of Industry, Tourism and Resources is involved in litigation concerning the Textile, Clothing and Footwear (TCF) Strategic Investment Programme (SIP). The TCF SIP is an entitlement-based programme that provides grants to support eligible capital investment and product innovation by TCF firms. The litigation relates to disputed claims of eligibility under the TCF SIP. There are potential risks associated with flow-on claims and the risk cannot yet be accurately quantified.
Snowy Hydro Limited — directors’ indemnities
The Australian Government has, together with the co-shareholder Governments of New South Wales and Victoria, indemnified the members of the board of Snowy Hydro Limited for liabilities arising from entering into agreements to implement corporatisation of the Snowy Mountains Hydro-Electric Scheme, and from liabilities to Snowy Hydro Limited at corporatisation. The indemnity will apply to liabilities arising within five years of corporatisation, and for which a claim is notified to the Governments within eleven years of the corporatisation date of 28 June 2002.
Snowy Hydro Limited — water releases
The Australian, New South Wales and Victorian Governments have indemnified Snowy Hydro Limited for liabilities arising from water releases in the Snowy River below Jindabyne Dam, where these releases are in accordance with the water licence and related regulatory arrangements agreed between the three Governments. The indemnity will apply to liabilities for which a claim is notified within 20 years from 28 June 2002.
The Australian, New South Wales and Victorian Governments will provide financial support to the company, if this is necessary, to avoid the company breaching its loan covenants to fund the cost of civil works required to address a cold water pollution offence. The undertaking applies for seven years from 28 June 2002.
Transport and Regional Services
Deep vein thrombosis action
The Civil Aviation Safety Authority (CASA) has been named in a number of writs, which allege that CASA was negligent in not making air travellers aware of the risks of deep vein thrombosis during long periods of immobility. There have been 484 writs issued against CASA, spanning 1995 to 2002. The Australian Government’s exposure is limited to claims for the years 1995 to 5 July 1998, as CASA was covered by a Commonwealth Deed of Indemnity in relation to the performance of its regulatory functions. Ninety‑nine writs have been issued against CASA which are covered by the Deed of Indemnity. The remaining writs are covered by CASA’s commercial insurance.
A test case (Povey v Qantas and British Airways and CASA) is currently before the High Court on appeal from the Victorian Supreme Court. However, until the High Court proceedings have been finalised, it is not possible to determine what (if any) liability CASA may have in relation to deep vein thrombosis.
Maritime Industry Finance Company Limited — board members’ indemnity
Indemnities for Maritime Industry Finance Company Limited board members have been provided to protect them against civil claims relating to their employment and conduct as directors.
Tripartite deeds relating to the sale of Federal leased airports
Tripartite deeds apply to 12 Federal leased airports (Adelaide, Alice Springs, Bankstown, Brisbane, Canberra, Coolangatta, Darwin, Launceston, Melbourne, Perth, Sydney and Townsville). The tripartite deeds between the Australian Government, the airport lessee company and financiers provide for limited step-in rights for the financiers in circumstances when the airport lease is terminated to enable the financiers to correct the circumstances that triggered such a termination event.
Treasury
Housing Loans Insurance Corporation — guarantee
The Australian Government sold the Housing Loans Insurance Corporation (HLIC) on 12 December 1997 and has assumed all residual contingencies. The principal amount covered by the guarantee and the balances outstanding are unable to be reliably measured. The guarantee relates essentially to the HLIC’s contracts of mortgage insurance and any borrowings approved by the Treasurer up to the time of sale.
Terrorism insurance — commercial cover
The Terrorism Insurance Act 2003 (the Act) established a scheme for replacement terrorism insurance covering damage to commercial property including associated business interruption and public liability. The scheme plans to accumulate approximately $300 million from reinsurance premiums paid to the Australian Reinsurance Pool Corporation (ARPC) to help meet administrative expenses and future claims. The Commonwealth guarantees to pay any liabilities of the ARPC, but the Treasurer must declare a reduced payout rate to insureds if the Commonwealth’s liability would otherwise exceed $10 billion.