2011 
2012 The Developer's Contract
Lang Walker, Kew
Development Corporation &
Ted Baillieu, Premier of Victoria
It
is January 2012.
It is still not too late to
achieve a better outcome at
Kew Cottages, because the
Government still owns the
land.
BUT,
and it is a big but... Baillieu's
Government does not yet appear to
be up to the challenge.
Despite
all their huffing and puffing
about ending spin and secrecy
while in Opposition, many of
Baillieu's relevant Ministers seem
to be remarkably slow in
coming to grips with the Developer's
Contract now that they are
in Government.
A clear public understanding of
what is in the Baillieu
Walker Contract is
important because the
Ministers including Andrew
McIntosh, David Davis, Mary
Wooldridge, and Matthew Guy
all continue to blame the Contract
for their failure to implement
their Kew Cottages Election
Pledge.
So are the terms and
conditions of the Developer's
Contract really so onerous on
the State of Victoria ?
Is the Contract really to
blame for the Baillieu
Government paralysis ?
Or do Baillieu's Minister's
just need a bit of help to
address the long standing
questions about the Kew
Cottages Developer's Contract,
and
to take up the challenge for
change that
they promised ?
For example:
1.
Why are the 'Secret Arrangements'
still Secret ?
By January 2011, after three years
complaining about what they called
'secret arrangements' in the
Brumby Walker Contract any of
Baillieu's new Ministers who
wanted to find out precisely what
those secrets were, had only
to cite Clause A28.3(d) on p.62 of
the Contract which at face value
guarantees Ministers access to all
the Contract information that they
require.
Similarly, those Minister's such
as the former Chair of the Public
Land Development Inquiry, David
Davis, who had fought hard for
public scrutiny of the Developer's
Contract in opposition would also
have been pleased to be able to
tell their colleagues that Clause
A28.6 of
the Contract confirmed that the
Government also had all the power
it needed to publish the
Contract in full online
on
the Victorian Contracts Publishing
System (CPS).
Indeed, the Developer's Contract on
p.3 of Schedule 14, not
only acknowledges that the
Government as 'Vendor' of the Kew
Cottages Public Land is legally
obliged to publish the full text
of all contracts worth over $10m
on the CPS, but that the
Government is also obliged to
record all the related contracts
(including the Main Drive Kew
House/Land sale contracts) over
$100k on the CPS.
Twelve months down the track,
however, in January 2012, the
public is still waiting.
The Baillieu Government has
disclosed nothing new about its
Kew Cottages contracts, despite
its obligation
to do so. (See Ombudsman's
Recommendation 11)
What
the Brumby Government kept secret
from the public, remains secret.
2. Why is the Baillieu
Government still the "Owner,
Developer, and Planning
Authority" ?
At the Kew Cottages
Public Meeting at the Kew
Civic Centre in February 2011,
Andrew McIntosh,
the Local Member for Kew, and
Baillieu's Minister
responsible for the
establishment of an
anti-corruption commission,
spoke very strongly of his
objection to what he termed:
"the
abomination" of the State
Government being both the
owner. the developer, and
the planning authority at
Kew Cottages.
Indeed
the Minister went on to
say that for the
Government to continue to
be
"the owner, planning
authority, and ultimately
the developer is a recipe
for disaster" !
The Mayor of Boroondara Council,
Nicholas Traegas agreed, and told
the Public Meeting he had already
requested Baillieu's Planning
Minister, Matthew Guy, to
return Planning Authority to
Boroondara Council.
However, 12 months later, in
February 2012 nothing has changed,
the Baillieu
Government is still the Kew
Cottages "Owner, Developer, and
Planning Authority" !
It would seem to be stretching a
long bow to blame the Developer's
Contract for this delay. On the
contrary the Contract appears
neutral on the matter, and on page
16 simply says that:
" Planning
Authority means (as applicable):
(a)
the Minister for Planning as the
responsible authority for the
Site under the Planning Scheme;
and
(b)
the authority under the Planning
Scheme responsible for
certification of any Plan of
Subdivision.
So, at face value, as the
certification authority is
already Boroondara Council,
the cause of the Baillieu
Government's delay in
responding to the local
member's and Boroondara
Council's long standing
concerns would not appear to
be found in the Developer's
Contract.
3. Why is DHS
apparently still trying to hide
the costs of the Development ?
The publicly available text of
the Developer's Contract
contains extensive detail on
both the nature and form of
financial reporting required by
the Government, and the need for
the Developer to obtain prior
Government approval for all
proposed contract works,
planning permit applications,
variations etc.
It is most strange, therefore,
that after protesting so much at
their lack of access to this
information while in opposition,
Baillieu Government Ministers
appear to have made little
effort to scrutinise the
Development data available
to them now that they are in
power.
The Department of
Human Services also
appears to have been
strangely reluctant to
scrutinise the costs
involved.
The Victorian
Ombudsman considered the
financial reporting
problem and found in June
2010 that:
There is
uncertainty on the final
financial outcome for
the State Government.
The revenue from the
proceeds of the Kew site
will possibly fall short
of the capital and
project management
outlay. In this regard,
I consider that the
Department of Human
Services should track
the overall expenditure
to ascertain the final
cost to the State
Government.
(p.62)
It is even more
strange, then to find that over 18
months later in January
2012, there appears
to be no mention of this
finding by the Ombudsman
in the DHS 2011 Annual
Report.
The Department of
Human Services appears to
have either simply ignored
or forgotten to report on
the specific
recommendation (R.10)
from the Ombudsman that
DHS "report on the
financial return to the
State Government from the
Kew Residential Services
project in it Annual
Report."
4. Why have $300,000
of hidden cuts in the new
Hamer Centre
Budget not been restored ?
Baillieu's Ministers
appear to have shown little
interest in trying to amend
the Developers Contract
despite their Election Promise
regarding the rebuilding of
the Hamer Recreation Centre.
A brief reading of the
publicly available part of the
Contract, however, would
give them all the evidence
they need to show that the
Developer's Contract is,
at face value just like any
other agreement, open to
amendment and variation if the
Government and the Developer
so choose.
Indeed the original October
2006 Principal Agreement has
already been amended
once (in August 2009). As was
said at the time in the
preface "in
order to resolve a number of
outstanding issues which have
arisen under the Principal
Agreement".
Looking back at
Baillieu's pledge to rectify
the Developer's demolition of
the 'Hamer Recreation
Centre'* the public had
a right to expect some quick
answers once they elected him
. Namely:
-
How did the Developer justify
demolishing the Hamer Centre
immediately after the bushfires
in 2009,
when demolition was in clear
breach of
Clause B15
of the Principal Agreement
? and
-
How did the Developer with only
the stroke of a pen in August
2009, appear to
suddenly cut $300,000 from
the Contract Development Budget
for rebuilding the Hamer
Centre
?
Subject
to the still 'secret arrangements'
as referred to above, the evidence
that $300,000 has mysteriously
been cut from the Development
Budget without proper explanation
appears clear. Clause B15.3 Cost
Allowances
(p.14) in the Deed of
Variation (2009) states:
(a)
The Developer has included in
its Development Budget an
allowance of $3,000,000
(plus GST) for the construction of
the
Recreation Centre and an
allowance of $3,000,000 (plus GST)
for the design, site
preparation and building costs
associated
with the repair of the
Heritage Buildings.
However,
this 'revised' 2009 budget for the
Recreation Centre (above) is
actually $300,000 less than
the 2006 budget in Clause B15(d)
of the Principal Agreement which
clearly showed an allocation
of $3,300,000 for the
Recreation Centre ie:
(d)
That the Developer has
included an allowance of $3,300,000
(plus GST)
for construction of the
Centre in its Development
Budget (p.95)
This does not include the allowance
of $3,000,000 for the restoration of
the
Heritage Buildings which may
also be used if the Recreation
Centre is
located wholly or partly in the
Heritage Buildings..
5. Why has Mary
Wooldridge as the Responsible
Minister, failed
to investigate appropriate Terms
and Conditions for Terminating the
Developer's Contract ?
The February 2011 Public Meeting
called on the Baillieu
Government to terminate the
Developer's Contract.
Government Ministers including
Andrew McIntosh, Matthew
Guy, and Mary Wooldridge,
responded by saying that
termination was simply not
possible because of what they
termed 'Sovereign Risk'.
However, the Ministers do not
appear to have at any stage
defined precisely what they mean
by 'Sovereign Risk' in the
unusual context of Kew Cottages.
The dictionary defines
'sovereign' in normal business
context as meaning beyond
external control' for example
'The
risk of owning the
security of an issuer in a
country other than the one
in which the investor
lives. For example, an
investor residing in the
United States incurs
sovereign risk in
purchasing a bond issued
by the government of
Brazil. This risk stems
from the fact that a
foreign country may
nationalize its private
businesses, stop paying
interest, or repudiate its
debt."
The normal usage of 'Sovereign
Risk', therefore, obviously does
not apply to the Kew Cottages
Developer's Contract which is
subject to State and
Commonwealth law in Australia in
the normal manner.
Nor do Baillieu's Ministers
appear, despite our repeated
requests, to have investigated
at what point, on what terms,
and at what cost termination of
the Kew Cottages Developer's
Contract would be the best
outcome for the State of
Victoria.
The Developer's Contract is
helpful in addressing the
Ministers' vagueness.
Clause A22 'Termination"explains
precisely the terms, conditions,
and consequences that apply when
the State terminates the
contract. It would appear to be
a relatively simple task,
therefore, for the Baillieu
Government to provide the public
with an appropriately detailed
independent assessment of the
cost to the Government of
terminating the Developer's
Contract in accord with Clause
A22 .
Moreover, following
questions raised by the Victoria
Ombudsman's Report into the
probity of the Kew Cottages
Development, the Baillieu
Government would appear to be in
a strong position in negotiating
reasonable terms for termination
in accord with Clause A22.
For example,
our readers will be aware of the
furore that commenced following
The Age's front page March 2007
story by Royce Millar revealing
the backstage lobbying over Kew
by former Senator Graham
Richardson "on behalf of
one or both of the Sydney based
developers Walker Corporation
and Mirvac". That story
led to the Select Committee on
Public Land Development Inquiry,
which in turn led to a further
inquiry by the Victorian
Ombudsman. The Ombudsman
reported on the matter to
Parliament in June 2010.
The Ombudsman examined Walker's
2006 request to transfer the
development to Mirvac, and
revealed in his Report (p.42)
that the Developer Contract defines as a
'Termination Event" a Developer
breach of clause A18.1 , and
that:
Clause A18.1 Assignment
(a)
states:
Prior
to completion of Stage 1 and
Stage 2, the Developer shall
not assign, novate or transfer
all or any part of its Rights
or Obligations relating to the
Project under this Agreement without
the prior written consent of
the State which consent may be
granted or withheld in the
State's absolute discretion. (p.22
emphasis added)
The Ombudsman
concluded that:
...
Mr Richardson was unable to
convince Mr Theophanous
to consent to the transfer and
on 11 May 2007, Major Projects
Victoria wrote to Walker and
Mirvac to advise of the State
Government’s position. The
letter stated:
In
accordance with its rights
under the project Development
Agreement the State has
determined that it will not
consent to an assignment [from
Walker to Mirvac] until both
Stage 1 and 2 have been
completed. Accordingly, the
State hereby gives you notice
that it does not consent to
any proposed assignment of the
Project Development
Corporation Pty Ltd to Mirvac
prior to Stages 1 and 2 being
completed.
The Major Project's letter noted
by the Ombudsman makes all the
more intriguing not only a statement
7 days later on 18 May 2007 to The Age by
Mirvac managing director
Greg Paramour, that he
expected the Government to
approve his company taking over
the later stages of the housing
project, but also a subsequent Mirvac release to the
Australian Stock Exchange some 3
months later on 21st August 2007
where Mirvac clearly listed
among its acquisitions 301
Kew Residential lots (at Kew
Cottages), apparently without
any qualifications whatsoever
regarding the Victorian
Government's position on the
lots.
It appears at face value,
therefore, that the important
question of whether the
Developer may at any stage
already have triggered a
'Termination Event' by breaching
Clause A.18.1 of the Developer's
Contract still remains to be
answered.
The
Developer's Contract
Major Projects Victoria Contract
- 3669
Kew Residential Services
Development Agreement
Documents
1.
Part
1 Deed of Variation signed
28 August 2009 .pdf
(5210 KB, PDF)
2.
Part
2 Deed of Variation signed
28 August 2009.pdf
(4074 KB, PDF)
3.
Part
3 Deed of Variation signed
28 August
2009.pdf
(5483 KB, PDF)
4.
Part
4 Deed of Variation signed
28 August 2009.pdf
(4329 KB, PDF)
5.
Section
1.pdf
(4500 KB, PDF)
6.
Section
2.pdf
(4895 KB, PDF)
7.
Section
3.pdf
(6109 KB, PDF)
8.
Section
4.pdf
(5235 KB, PDF)
9.
Section
5.pdf
(3709 KB, PDF)
10.
Section
6.pdf
(1809 KB, PDF)
Public Land
Development Committee Recommendations
2008
Victorian Ombudsman's Recommendations
2010
Video Interviews
Baillieu's
Ministers:
- Andrew McIntosh,
Minister responsible for the
establishment of an anti-corruption commission. Recorded July 2011
- David Davis,
- Minister for Health, & Former
Chairman, Select Committee on Public Land
Development. Recorded
June 2009
*
The Hamer Centre was named
after former Victorian Liberal
Premier Sir Rupert Hamer, who
together with Graham
Perkin, Editor of The
Age Newspaper implemented the
innovative "dollar for dollar"
funding model associated with
the Kew Cottages Minus
Childrens Public Appeal in
1975.
For further information
just follow the links...
(Note: Your PDF software
may require you to manually enter some of the PDF Page
Reference Numbers provided. )
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