The builders of Melbourne's East West Link are guaranteed compensation even if their contracts are declared void, the Victorian opposition insists.

A letter signed with developers East West Connect promised compensation – reportedly as high as $1.1 billion – should a court rule the contracts invalid, former treasurer Michael O’Brien says.

Mr O’Brien on Thursday released the previously-secret letter but said it only confirmed what was already in the contract.  New Treasurer Tim Pallas is calling the document “treason and treachery” and against Victorian taxpayers’ interest.

Labor promised to dump the controversial $6.8 billion road tunnel project before being elected in November.  Mr O’Brien said legal advice from Allan Myers QC showed the state government had full authority to sign the contract.

“The advice also demonstrates that the reckless promise made by Daniel Andrews, days before the election, that the contract is not worth the paper it is written on is entirely baseless and wrong,” Mr O’Brien said.

The letter said the compensation money would be calculated up to three months after the project was dumped, or a court ruled the contract unenforceable.

Mr Pallas said legal advice to Labor before the election insisted the previous government did not have the executive power to sign the contract.

He said the government believed the letter was also not legally binding.

“It’s not binding in our view,” he said.

“We live in a Westminster democracy … ultimately the action of executive government is responsible and answerable to the courts.”

Mr Pallas said the government had not asked the solicitor-general or any other government lawyers their opinion on the validity of the contract.

The state government’s contribution to building the East West Link would have been $2 billion.

Labor released a business case soon after taking power, showing the project would only return 45 cents for every $1 spent on it.

Mr Pallas said negotiations with East West Connect about dumping the project were continuing and he hoped to release the contracts soon.


By Angus Livingston