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
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
Where a Local Government takes over the whole of the area of an
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
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
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
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
Consequently the Governor has power under clause 11 (3) of
Schedule 2.1 to the Act to give effect to the Minister's
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
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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