Local Governments undergoing amalgamation are likely to have active contracts for the supply of goods and services on foot at the date of Commencement of the new Local Government.
The term Commencement in this article means the day of commencement of any amalgamation order made by the Governor on the recommendation of the Minister pursuant to section 2.1 of the Local Government Act 1995 (WA) (the Act).
The position of a Local Government in relation to a contract for goods and services is going to depend on the nature of the order made under section 2.1 of the Act. We have set out below some scenarios.
Where a Local Government takes over the whole of the area of an abolished District
This scenario is where the order has the effect of a Local Government remaining but taking over the whole of the area of an abolished District by boundary change. Alternatively it will also apply where a new District is created that takes over the whole of the area of an abolished District.
In this case the rights and liabilities under contracts entered into by the abolished Local Government will automatically become rights and liabilities of the remaining or newly created Local Government pursuant to Regulation 6 (4) (a) of the Local Government (Constitution) Regulations 1998 (WA) (the Constitution Regulations).
However, care will be necessary and contracts may need to be reviewed to see whether rights and liabilities and / or the operation of any particular contract may be affected by the abolishment of the contracting Local Government. The reason is that notwithstanding the operation of the Constitution Regulations there may be terms in the contract that alter the parties’ rights or provide grounds for termination. These rights will be effective and may bind the new Local Government.
The remaining or newly formed Local Government may well find themselves with duplicated obligations in relation to particular matters. For example the new Local Government may have multiple contracts with waste disposal providers. There will likely be a need to comprehensively review such multiple contracts with a view to perhaps terminating one contractor while at the same time expanding the operation of another contractor. Matters to be considered will be the ability of one contractor to perhaps take on further work, any penalties or other consequences in terminating contracts and the cost / benefit analysis of taking any actions under the affected contracts.
Where a Local Government takes over part only of the area of an abolished District
This scenario is where the order has the effect of abolishing a Local Government with 2 or more other Local Governments each taking over parts of the area either by boundary change or the creation of a new Local Government.
In this scenario the Constitution Regulations do not alter any rights.
However, there is an obligation under clause 11 (2) of Schedule 2.1 to the Act on all Local Governments affected by an amalgamation to negotiate as to any adjustment or transfer of contractual rights. If the Local Governments do not agree on what should happen and they cannot resolve the matter by negotiation then the Minister has power to resolve those disputes under section 9.63 of the Act.
Consequently the Governor has power under clause 11 (3) of Schedule 2.1 to the Act to give effect to the Minister’s decision.
Where a Local Government is not abolished but loses area
Where a Local Government, let’s call them (A) is not abolished but say loses part of its area to another local government, let’s call them (B) then rights and liabilities under contracts entered into by (A) prior to Commencement will still remain with local government (A) after Commencement.
Care will need to be taken as Local Government (A) may continue to have a contractual obligation to a contractor to service an area that it has now lost. On the other hand Local Government (B) will have an obligation to new ratepayers but may have no contractor in place on the date of Commencement.
In the short term the Local Governments involved may be able to form interim arrangements with contractors to ensure that services continue. However, the longer or ongoing term will necessarily involve a review of affected services to put in place more permanent or ongoing arrangements.
If you have any questions about the Effects of Amalgamation on Local Government Contracts for Goods and Services or the process to be followed, please contact Brenton Oakley or Philip Mavor on (08) 9321 3755.
The information published on this website is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.