Deloitte partners Richard Hughes and Grant Sparks may have evaded regulatory scrutiny after agreeing to relinquish their appointments as administrators of entities within the Callide energy group.
In a brief hearing in the Federal Court yesterday draft orders were handed to Justice Roger Derrington providing for the retirement of Hughes and Sparks as general purpose administrators (GPAs) of IG Power (Callide) Pty Ltd (IGPC) and IG Energy Holdings (Australia) Pty Ltd.
The Deloitte duo, who’ve been under extreme pressure since IGPC shareholder Sev.En Gamma commenced proceedings late last year to have them removed, will also pay their opponent’s costs on an indemnity basis and without recourse to the IG Group’s assets.
But by falling on their swords and agreeing to pay indemnity costs the pair have cleared the way for two objectives to be met.
The first allows for FTI Consulting’s John Park and Ben Campbell to complete their investigations into the cause or causes of the two incidents at the Callide power station in May 2021 and October 2022 which led to a 10 per cent loss of power into the east coast grid network.
Federal Court judge Roger Derrington approved the appointments of Park and Campbell as the Group’s special purpose administrators (SPAs) in January following an application commenced by Sev.en Gamma in November 2023.
The SPA’s investigation has been running in parallel with another being conducted by forensic engineer Sean Brady, who was engaged by CS Energy Limited (CSEL) to report on the causes of the incidents in June 2021.
CSEL owns Callide Energy Pty Ltd (CEPL), which is IGPC’s joint venture partner in Callide C, the power plant at Biloela in Queensland where the incidents and shutdown occurred. CSEL in turn is wholly owned by the Queensland government.
In respect of the joint venture with IGPC, CSEL was the partner responsible for the operation, maintenance and repair of the Callide C infrastructure. Potentially, IGPC shareholders and creditors will have claims against its partner if it is shown that the failures were a result of CSEL breaching its obligations under the joint venture agreement.
Such a claim would also enhance the value of IGPC in terms of any sale, boosting the return to creditors.
But in the wake of the incidents the Queensland government through CSEL has sought to enforce its right under the Joint Venture Agreement to acquire ICPC’s interest, which would be a neat way of extinguishing CSEL’s liabilities and limiting investigations into whether some responsibility for the failures might lie with members of the current Labor government or bureaucracy.
In his January judgment Justice Derrington pointed at that “There is a not unreasonable inference that CSEL, as the entity having the management and control of the units, may have breached its contractual obligations or common law duties, and those breaches may have been, in some way, causative of the two units going offline.”
Sev.en Gamma has argued consistently that the GPLs failure to establish what if any claims IGPC has against CSEL diminishes the potential value of IGPC and the potential return to IGPC creditors in any sale or DoCA transaction.
The second objective relates to Hughes and Sparks getting themselves free and clear of what’s degenerated into a damaging scandal.
Hughes spent part of this week in the witness box being questioned by counsel for Sev.en Gamma about why the GPLs investigations into the 2021 and 2022 incidents were inadequate and why he and Sparks appeared to do little to oppose the proposed compulsory acquisition of IGPC by CEPL.
His examination was to continue on Wednesday but on Tuesday afternoon the parties told Justice Derrington that they needed a day to resolve certain matters.
When they returned to the court yesterday and announced that Hughes and Sparks had agreed to retire, Justice Derrington remarked that if the proceedings had continued he may have been required to do something he loathes: refer individuals to regulatory authorities.
In the context of the orders made the judge’s comments suggest that by agreeing to retire and relinquish their lien, Hughes and Sparks have avoided being referred to ASIC.
Free and clear? ASIC’s policy is based on consideration of published reasons rather than comments made in open court so it’s a definite maybe, assuming ASIC doesn’t take heed of the reasons the judge published when approving the appointment of the SPAs.
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Further reading:
Deloitte duo stumble again in Callide litigation
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