Page 3881 - Week 10 - Thursday, 28 August 2008
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the value of Rhodium. The board did not at any time protest to or advise the voting shareholders that cost-recovery pricing for that arrangement was against the best commercial interests of the company.
It is wrong to suggest that Rhodium should have been compensated for the loss of profit realised under the pre-existing, uneconomic pricing arrangement that had prevailed under TotalCare. That arrangement had meant that the ACT government agencies had been paying monopoly prices to Rhodium at the expense of the general taxpayer. Clearly, in this instance cost-plus pricing would have removed any incentive for Rhodium to improve efficiency and, indeed, may actually have presented a perverse outcome in rewarding inefficient activities.
The claim in the committee report that the voting shareholders failed to establish and communicate their expectations to the company is not correct. The evidence shows that the voting shareholders did indeed relay their expectations about the course that Rhodium should adopt at regular intervals. The shareholders provided guidance to the board not only before the company was formed but in responding to each draft of corporate intent that has been tabled every year in the Legislative Assembly. There is no legal basis whatsoever contained in the committee’s report to support the conclusion that the voting shareholders failed in their duty. Legal advice provided by the Government Solicitor and Actew indicates that the suggestion that the voting shareholders failed in their duty is seriously flawed.
We are disappointed that during the course of the inquiry the committee did not take the opportunity to follow up on a suggestion that their report resolve quite clearly the potential confusion about the respective roles and responsibilities of voting shareholders and directors of TOCS. Perhaps if the committee had done so it would have avoided many of the shortcomings in the report.
Finally, I would like to make a brief statement about recommendation 12 of the committee report, which states:
… that the Treasurer explain to the Legislative Assembly … why the ACT Government required Rhodium to take a contract against its best commercial interests without providing it with compensation as set out in the Territory-owned Corporations Act 1990.
The government did not require Rhodium to enter into a contract against its best commercial interests. Rhodium sought the government’s agreement to directly enter into a contract based on benchmark pricing. At the time, it was Rhodium’s view that this course of action was in the best interests of the company and Rhodium and the government mutually agreed on the terms of the contract. At no time did Rhodium advise the voting shareholders that the agreed contract was not in the best interests of the company. No direction was issued to the company by the voting shareholders as there was no requirement to do so under the TOC Act. Hence there was no requirement to provide Rhodium with compensation under the Territory-owned Corporations Act.
I trust this statement clarifies the government’s position on this matter for the benefit of the committee. (Time expired.)
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