Posted on June 29, 2016 by Sue Puckeridge

New Councils – Transfer of Assets, Rights and Liabilities

My previous article (19 new amalgamated Councils for NSW),  focused on material operational matters for those new Councils created by the Local Government (Council Amalgamations) Proclamation 2016 and the Local Government (City of Parramatta and Cumberland) Proclamation 2016 of 12 May 2016 (‘Proclamations‘).  This article identifies issues relating to the transfer of assets, rights and liabilities to the new councils, provision for which is set out in Division 5 of the Proclamations.

In summary, the Proclamations seek to preserve existing contracts and other instruments. An instrument is a formal written legal document which creates or limits rights and will include a deed, agreement, covenant or statute.

The Proclamations do this in the following ways:

• For new councils created under the Local Government (Council Amalgamations) Proclamation 2016, all assets of a former council are automatically transferred to the new council by virtue of the proclamation.  There is no need for any further conveyance or  assignment.
• For councils created pursuant to Local Government (City of Parramatta and Cumberland) Proclamation 2016:
  • the fixed assets and associated rights and liabilities located in the area of the new council are transferred to the new council,
  • the new councils can agree as to the other assets and liabilities of the former councils (other than an altered council) that are to be transferred to the new councils,
  • any specified assets, rights and liabilities of a former council that is an altered council, are transferred to the new council if the altered council and the new council agree.
• rights and liabilities of the former council become the rights and liabilities of the new council.
• all proceedings relating to assets, rights or liabilities commenced before 12 May 2016 or pending immediately before 12 May 2016 are taken to be pending or against the new council.  With respect to legal proceedings commenced against a former council, a Court order is required to change the name of the former council to the new council.  The Land and Environment Court has advised that  any request made after 8 June 2016,  may be directed to be made by notice of motion.
• a reference in any statute or instrument to a former council is taken to be a reference to a new council.
• the new council has all the entitlements and obligations of the former council in relation to the assets, rights and liabilities of the former council, even if those entitlements and obligations were only potential entitlements and obligations and the time of transfer.
• leases continue to operate according to their terms and there is no need for a lessee to acknowledge that the new council can rely upon the same terms and conditions of lease as the former council.

The Proclamations specifically provide that the the provisions relating to the transfer of assets, rights and liabilities contained in the Proclamations are not to be regarded as:

• a breach of contract or confidence,
• a breach of a contractual provision which prohibits, restricts or regulates the assignment or transfer of assets, rights or liabilities,
• giving rise to any remedy contained within or termination of an instrument because of a change in the beneficial or legal ownership of the asset, right or liability, or
• an event of default under any contract or other instrument.

If there is any doubt in relation to the transfer of a particular asset, right or liability, the Minister is empowered to give written confirmation as to such transfer.  Such a notice is conclusive evidence of the transfer.

While contracts and other instruments continue to operate according to their terms, new councils should still review these instruments to determine whether they remain suitable for their needs or if variations are required to ensure that they operate effectively for the new council.