MTR in wrangle over liability for project delay

PUBLISHED : Thursday, 15 May, 2014, 3:59am
UPDATED : Thursday, 15 May, 2014, 3:59am

The MTR Corp and the government are at odds over who is liable to provide extra funds for the delayed cross-border railway, with the Transport and Housing Bureau saying it was unlikely any more money would be provided.

In a statement to the stock exchange last night, the MTR Corp said major differences had emerged between the two sides over the interpretation of the company's responsibilities on the contract to build the Hong Kong section of the high-speed railway that will link the city to Guangzhou and Shenzhen.

The MTR said that on Tuesday it received a letter from the Transport and Housing Bureau that said the company "must strive to absorb all the costs pertaining to the project delay".

"It is very unlikely that the government will be able to provide any additional funding for the project," the bureau said.

But the MTR Corp said that according to an agreement in January 2010 for it to build the project, the government would bear full costs to contractors and consultants.

While the government had the right to make claims against the MTR Corp if it is found to have been negligent in performing its obligations, the corporation's liability was subject to a cap of HK$4.59 billion, the equivalent of a management fee due to the company, it said.

"Given that the government's view, as expressed in the letter ... differs from the [MTR's] understanding of the terms of the entrustment agreement, further discussions … will ensue regarding their respective rights [under the agreement]," the MTR said.

According to the corporation's statement last night, the updated assessment of the project budget "will not differ significantly from HK$68.4 billion", compared with the original budget of HK$65 billion.

The two-year delay has raised questions about the MTR Corp's management.

The government has been seeking legal advice on whether the MTR Corp should pay for the extra costs caused by the delay.

Jay Walder, its American chief executive, has come under fire and will leave the company when his contract expires next year.