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NSW ticketing fiasco a winner for lawyers

Sydney Morning Herald

Wednesday February 24, 2010

Elisabeth Sexton

Ten years on, the failed Tcard project is finally heading to court, writes Elisabeth Sexton. Sydney has a new blueprint for public transport. It does not have a new ticketing system for it. On Friday, when the NSW government was applying the finishing touches to its Metropolitan Transport Plan, Justice Robert McDougall noted in the NSW Supreme Court that its attempts to introduce an integrated ticketing system have been "so far unsuccessful".Unlike many cities around the world, Sydney has no single, cashless card for trains, buses and ferries, with cheaper trips for those who switch from one mode to another, shorter queues at ticket offices and greater efficiencies for transport operators.Justice McDougall was not occupied with the shortlist announced last year for a fare smartcard, but with a legal battle spawned by the failure of the previous attempt, the award of a tender to ERG Ltd in 2001 and its termination seven years later.The Public Ticketing Transport Corporation sued ERG for damages of $90 million for failing to fulfil its contract obligations, while ERG counter-sued the statutory authority seeking $215 million for wrongful termination of the contract.ERG's largest financial backer, Duncan Saville, is not an investor who writes off a loss and walks away. His Ingot Capital funds management group ran one of the largest and longest legal claims for compensation for stockmarket losses in recent years.Ingot's damages suit over its $40 million loss when the reinsurance company New Cap Re collapsed in 1998 met its final roadblock in September last year, when the High Court refused an application by Ingot for leave to appeal against a loss in the NSW Court of Appeal.The case over the failed Tcard project is shaping up to be another complex, hard-fought battle. It has been running for 22 months and now the fruits of extensive pre-trial exchange of documents and work on legal strategies and tactics are appearing as procedural skirmishes emerge in open court.A central document will be a letter written by the chairman of ERG, Colin Henson, to his counterpart at the PTTC, Elizabeth Crouch, on October 22, 2007.By that stage the company was on notice that the government required it to complete several "milestone events" identified in the contract within 20 business days.Justice McDougall was told last week the letter was written after ERG took advice from the lobbying firm Hawker Britton and was intended to show that ERG was prepared to "wear a hair shirt" and "do a mea culpa".The judge said as he understood it, the aim of the letter was that ERG "should accept responsibility for what the NSW government perceived as the unsatisfactory state of affairs, make grovelling apologies and provide a realistic timetable for completion of the project".The company told the court that it had left out of the letter many of the real reasons for the delay, because its goal was to be given an extension of time and avoid termination of the contract. It could have included, but for that reason chose not to, its arguments about why it was not in default of the contract, it said.The significance of the letter emerged because ERG tried, but failed, to join Hawker Britton as a defendant in the case.Justice McDougall dismissed ERG's application for leave to sue Hawker Britton for contributing to its loss of the contract on Friday.He also refused to allow the company to widen its case against the PTTC by alleging it was "set up" by the government to admit fault in Henson's letter. The company will now proceed with its original case, arguing that the government was not entitled to terminate the contract, and had "materially caused or contributed to the delays and difficulties in the project".The government's alleged shortcomings included failure to implement reform of the 70 types of fares charged in the greater Sydney area and failure to secure the co-operation of transport operators including RailCorp, the State Transit Authority and the Bus and Coach Association.For example, ERG has filed accusations of an unnamed RailCorp employee interfering with a trial of new ticket machines by the simple act of holding a thumb over an electronic sensor. It claims RailCorp then filed a "misleading and unclear" report to the PTTC, saying the test results showed the machine was incapable of coping with jammed tickets.Last week's dispute over whether the case could be widened also brought to light a new part of the government's case, which it will base on documents it received through the court-ordered process of each side producing relevant material from its own files.Part of ERG's response to the order was delivering to the government's lawyers copies of an internal review it conducted in October 2007.Justice McDougall said on Friday the PTTC will argue that the material shows the company "became aware of a number of very serious problems" with the Tcard project."PTTC says that [ERG] was obliged to disclose those fundamental quality problems in monthly status reports but failed to do so," the judge said."In those circumstances, PTTC says, any admissions that [ERG] did make through the chairman's letter and the remedial program were defective because they said nothing whatsoever about the fundamental quality problems."In December, the PTTC amended its claim to include allegations based on the internal review, conducted by two ERG engineering executives, Peter Bouhlas and David Jacobs.Although the PTTC did not know about the review when it terminated the contract, it will argue that the review proves "there were sufficient breaches of contract to entitle it to terminate at common law".The PTTC will argue that ERG knew by October 2007 the conclusions of the engineering executives, including that "the quality of the system [ERG] had so far developed was poor," that "development work at the onset of the Sydney project caused major defects within the central system", and that "a large staff turnover had resulted in the loss of large amounts of intellectual property pertaining to the project due to lack of documentation".In addition, the project system architect, Julian Dingley, had concluded that "the system was not maintainable, sustainable or supportable in its current form," that "device architecture for the system was broken and therefore not suitable for automated fare collection systems" and that "unconfirmed transactions from the operation of the system as developed would generate an operations nightmare".The PTTC's statement of claim says the Tcard project "had been expected to produce significant efficiencies and financial benefits to bus, rail and ferry and other public transport operators in the greater Sydney area and significant advantages to public transport customers in that area".There will be little dispute about that statement. The question is where the blame lies for the fact that more than a decade after the government first called for tenders, those benefits are still to be delivered.

© 2010 Sydney Morning Herald

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