The state government's ability to undertake millions of dollars worth of public works at Barangaroo is in doubt after it lost its developer contributions battle with Lend Lease in the NSW Court of Appeal.
In a decision that potentially leaves NSW taxpayers hundreds of millions of dollars out of pocket, a three-judge panel on Thursday found in favour of Lend Lease in the long-running contract dispute, rejecting an appeal by the state-run Barangaroo Development Authority.
The government must now either get the money from somewhere else, such as by seeking a greater contribution from James Packer's luxury hotel-casino project, or curb public works at Barangaroo, including the much-touted headland park.
Taxpayers will now also have to pick up the tab for Lend Lease's legal costs during the appeal, likely to be tens of thousands of dollars.
In 2010, the former Keneally government promised that taxpayers would not have to pay extra for Barangaroo's headland park, which would instead be funded from commercial development at the south end of the site.
But a dispute then developed between the Barangaroo Development Authority and Lend Lease over how two commercial towers at Barangaroo South should be valued, and thus how much the government would receive in exchange for allowing public land to be developed.
The Barangaroo Delivery Authority argued that cash contributions from investors received by Lend Lease should be included when calculating the land values, because they formed part of the project's cash flow.
But Lend Lease said the contributions should not be included because they were a funding arrangement to finance construction costs.
On Thursday Justices Beazley, Leeming and Tobias upheld Lend Lease's claim. They also ordered the Barangaroo Authority to pay Lend Lease's legal costs.
A Lend Lease spokeswoman said the court's decision gave "clarity" to the payments dispute.
"The court has … delivered a decision which re-confirms Lend Lease's interpretation of the relevant terms in the contract," she said.
"Lend Lease … will continue to work constructively with the Barangaroo Delivery Authority and the NSW Government to ensure a great outcome for Sydney."
The authority's outgoing chief executive John Tabart had previously described the disagreement as "very serious".
He said on Thursday the authority was reviewing the "disappointing" decision.
The Barangaroo redevelopment would still provide NSW with "significant economic, social and long term financial benefits", Mr Tabart said, adding that the headland park, waterfront promenade and first commercial tower would open in the next year.
