(a) An Event of Default gives rise to various government remedies. However, it does not of itself give rise to an automatic right of termination.
(b) An Event of Default may occur if:103
(i) there is a serious Service Failure;104
(ii) during the contract term a representation or warranty given by the private party to government proves to be untrue (although this will be subject to a material adverse effect regime);
(iii) during the contract term there is fraud,105 collusive, misleading or deceptive conduct on the part of the private party or its subcontractors in the performance of the project or any part of it (including in respect of reporting in the form of financial and payment statements and invoices or other books and records or in respect of the master works program and sub-programs). This also includes fraud or breaching the Law in regard to awarding the contract;
(iv) there is any other breach by the private party of its obligations (that is not dealt with as a Default Termination Event or a breach of a KPI) in the project agreement or other specified contracts with government (although this will only be an Event of Default if the breach has not been remedied within a reasonable period, which is traditionally, 20 business days); or
(v) there is any breach of any other Project Contract (although this will only be an Event of Default if it has a material adverse effect on government or users of the facility or the private party's ability to perform its obligations).
(c) In addition to the above, government may also specifically list the following events as Events of Default:
(i) failure to achieve Technical Completion or Commercial Acceptance by their respective due dates106;
(ii) the independent expert determines (following a reasonable period after Financial Close) that there is no reasonable prospect the private party will achieve Technical Completion or Commercial Acceptance by their respective due dates;
(iii) the works not being commenced within such period after Financial Close where this is likely to have a material adverse effect on the ability of the private party to achieve Completion107 by the due dates;
(iv) a breach of the sub-contractor provisions, (see section 28.5 of Chapter 28 (Sub-contractors));
(v) a failure by the private party to obtain consent to or to cure an unauthorised Change in Control of a relevant company other than the private party (e.g. a material sub-contractor) within a reasonable time;
(vi) a breach by the private party of its assignment obligations;
(vii) failure of the private party to comply with its obligations in respect of a Probity Event108;
(viii) the private party failing to take out and maintain required insurances (subject to the uninsurability provisions set out in section 23.4 of Chapter 23 (Insurance));
(ix) failure by the private party to comply with its obligations to reinstate damage or destruction;
(x) the works not being commenced within a specified period after Financial Close as is likely to have a material adverse effect on the ability of the private party to achieve Commercial Acceptance by the Date for Commercial Acceptance;
(xi) where the private party assigns, transfers or otherwise disposes of any of its rights under the project agreement without the consent of government (other than in the permitted circumstances set out in section 34.3.1 of Chapter 34 (Restrictions on private party)) or, depending on the nature of the project, where a specified major subcontractor disposes of their interest in the relevant sub-contract; or
(xii) the private party's right to obtain finance or draw down funds under the finance agreements being terminated, withdrawn or otherwise materially restricted.
(d) Additional events should only be adopted where this is warranted by the unique features of the specific project.109
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103 These Events of Default are not intended to be exhaustive and will vary depending on the nature of the project. Breaches caused by a Relief Event or Force Majeure Event do not constitute an Event of Default to the extent that Relief is given from the relevant obligations.
104 A serious Service Failure is evidenced by the service fee being abated by a specified percentage, or performance points accruing beyond a specified level, within a specified period.
105 The State will seek to retain all its common law rights in relation to any fraudulent activity.
106 Although government will generally treat a failure to reach Technical Completion by the Date for Technical Completion as a separate event of default, it may consider waiving this requirement in circumstances where achievement of Commercial Acceptance is conditional on the private party having provided government with sufficient time to transition into and test the functionality of the facility. This period will be specified by government on a project-specific basis.
107 If commencement is subject to the provision of access, the time period may commence from the provision of access by government.
108 Although, depending on the severity, in some circumstances this may be a Default Termination Event.
109 The severity of the default on the particular project will need to be taken into account when determining whether such additional defaults should be categorised as Events of Default (and therefore be subject to a cure regime) or whether they should be categorised as Default Termination Events.