Quantifiable Contingencies
The Schedule of Contingencies reports contingent liabilities in respect
of claims for damages/costs of $132.9m (2002: $127.5m). The amount represents
an estimate of the Department's liability based on precedent cases.
The Department is defending the claims.
The schedule also reports contingent assets in respect of claims for
damages/costs of $68.4m (2002: $108.7m). The Department is expecting
to succeed in claims against suppliers, although the cases are continuing.
The estimate is based on precedent in such cases.
Unquantifiable Contingencies
Two hundred claims for damages have been made by former members of
the crew (of approximately 974) of the former HMAS Melbourne
arising out of the HMAS Voyager/HMAS Melbourne collision of
10 February 1964. Further claims for damages will probably continue
to be made by other former members of the crew of HMAS Melbourne.
It is not clear how many more claims will be made. To date, 80 claims
have been settled.
A number of claims for damage by dependents of deceased former members
of the HMAS Voyager have been foreshadowed in respect of the
HMAS Voyager/HMAS Melbourne collision of 10 February 1964,
but are not currently the subject of any legal proceedings. It remains
unclear as to how many further dependency claims may be made in the
future. The additional but currently unidentified dependency claims
are unquantifiable at this time.
One claim for damages has been made by a former member of the crew
(complement of approximately 1,300) of HMAS Melbourne arising
out of the HMAS Melbourne/USS Frank E Evans collision of 3
June 1969. It remains unclear to what extent further claims might be
made in respect of that collision.
The RAAF Board of Inquiry, covering the desealing
and resealing of the F-111 fuel tanks at RAAF Amberley, has identified
health issues that may be subject to future claims. To complement the
inquiry, a comprehensive health study is currently being undertaken
by the Department of Veterans' Affairs. Seventeen common law damages
claims have been made to date. Completion of this study in 2003 may
result in further claims for damages. The report will not be released
until mid 2004.
On 5 May 1998 four crew members aboard HMAS Westralia died
due to an on board fire. The coronial inquest into the incident is nearing
completion. The Commonwealth has initiated proceedings in the Federal
Court of Australia against ADI Ltd, Park Enzed Technologies Ltd, Jetrock
Pty Ltd and Todd Hydrolics for damages relating to the fire. Confidential
mediation of the claim is currently underway however there is no indication
of the time frame for settlement.
There is an emerging pattern of claims of compensation from property
owners resulting from training activities by the RAAF, operational activities
at ordnance depots as well as firing range activities.
Defence redundancy obligations arise from known redundancy programs
and ongoing market testing of various Defence activities. Provisions
have been made for those redundancies already planned. Other redundancies
are generally contingent upon the results of market testing and/or group
restructures and cannot be quantified until a decision to outsource
or downsize has been made and the number and levels of positions are
identified.
Remote Contingencies
Defence carries an extensive range of guarantees, indemnities and undertakings,
normally of a short-term nature, relating to business, training activities
and other arrangements involving contracts, agreements and other Defence
activities. Indemnities issued cover potential losses or damages for
which the Commonwealth would be liable.
Contingencies relating to such guarantees, indemnities and undertakings
issued by Defence are considered too remote to be included in the Schedule
of Contingencies. Of these, there are 32 instances in the Defence Central
Indemnity Register (2002: 25) that are either unquantifiable or uncapped,
and 47 instances (2002: 6) of quantifiable contingencies to the value
of $1,124m (2002: $582.6m).
There are many indemnities that are incorporated into major acquisition
contracts. These uncapped indemnities, while remote, are potentially
large but unquantifiable.
In addition, as at 30 June 2003, there were 97 cases (2002: 44) of
remote or unquantifiable contingent losses arising from outstanding
claims against Defence, and 8 cases (2002: 3) of remote or unquantifiable
contingent assets. Of these 16 (2002: 37) are considered remote, with
assessed liability of $2.6m (2002: $6.9m) and four (2002: 3) are considered
remote with an assessed gain of $98.8m (2002: $0.022m). |
