Don’t Make Assumptions About the Assumption Fund

Last month I sent two freedom of information/access to information (FOIPOP) requests to the Port of Sydney Development Corporation.

One requested a detailed account of how the Port has been spending the $2.5 million left over from the $37 million Sydney harbor dredge, completed in 2012. (You can read about that FOIPOP here.)

The second asked for proof that the Port of Sydney had permission to spend that money — which had been earmarked for three items, chief among them new navigational aids for the harbor — on “business development.”

Here’s the response I received from Port of Sydney CEO Marlene Usher:

On the question of permission to use the funds for other port projects I have enclosed the minutes to the oversight committee who administered the dredge funds. In addition to this we received a legal opinion which supported our authority to utilize the funds for other port projects. Legal opinions are privileged information and therefore this opinion is not enclosed.

Let’s take a closer look at that, shall we?


Assumption Agreement

In May 2014, well after the completion of the dredge, the Dredge Project Steering Committee, which had overseen the project, met and decided to put the leftover funds in the control of the Sydney Ports Corporation, the predecessor of the Port of Sydney Development Corporation.

In attendance at that meeting were:

Marlene Usher (acting CEO, ECBC), Joe Shea (ECBC), Joe Cashin (ECBC), Tom Plumridge (ECBC), Joan McInnis (ECBC, recorder), Aubrey Rogers (SPC), Gary Campbell (Province of NS), Howard Lake (Province of NS), Jim Gogan (The Only Lawyer in Sydney), Brian Stanford (NSP).

According to the meeting minutes (which I received from an earlier ATIP to ACOA), it was:

Moved by Howard Lake and seconded by Joe Cashin to approve the transferring of the balance of the Sydney Harbour Dredge trust, in the amount of $2,514,185.61 plus interest into a restricted account in the name of Sydney Ports Corporation and to be disbursed according to the terms of the assumption agreement to the Sydney Ports Corporation. Motion carried unanimously.

The assumption agreement, drafted by Jim Gogan, listed the following purposes for which the leftover dredge funds were to be used:

Uses for leftover dredge funds, Assumption Agreement

Note that final clause: the monies could be spent on other projects “after satisfaction” of the three listed financial obligations — including the “construction and installation of marine aids to navigation.”

So, what would happen if SPC underwent a “change of control?” What if, say, its assets and liabilities were transferred to another entity? The assumption agreement states:

6.(c) In the event of a Change in Control of SPC, SPC, shall, as a condition of such Change in Control, ensure that new controlling party agrees to be bound by this agreement, including, without limitation, all obligations and restrictions with respect to the Trasnferred [sic] Funds, and to immediately notify ECBC or its designate of the Change in Controle as it relates to this Agreement.

Seems pretty clear — the Port of Sydney Development Corporation would be bound by the terms of the assumption agreement. But what if ECBC or SPC or SPC’s successor wanted to change the terms of the agreement? The assumption agreement has that covered too:

9.4 Amendment

The Agreement may be amended at any time mutual consent of the PARTIES. However, any amendment must be set forth in writing and signed by each of the PARTIES to the Agreement. It shall be deemed effective as of the day of its recording in a written instrument duly signed by the PARTIES.



Put it in writing

When I FOIPOPed the Port asking for proof that the PSDC had permission to spend assumption fund monies on business development rather than navigational aids, I assumed I would receive a copy of an amendment “set forth in writing and signed by each of the PARTIES to the agreement.”

But I didn’t. Which suggests there is no such written amendment.

Instead, Usher sent me a copy of the asset transfer agreement that saw all assets and liabilities (including the assumption fund) transferred to the Port of Sydney Development Corporation from the Sydney Ports Corp. That agreement is dated June 2015 and contains nothing of particular interest (I knew this transfer had taken place), although I was puzzled by the decision to have such an important document witnessed by a three-year-old.

In place of an amended assumption agreement, Usher cites a decision by the harbor oversight committee and a legal opinion.

Here’s the excerpt I received from the minutes of the relevant harbor oversight committee meeting:


First, I never feel sorry for Nova Scotia Power, but I do feel sorry for its customers who will have (you can be sure) absorbed the cost of that $1 million contribution to a dredge project that didn’t benefit the company at all.

Second, Joe Cashin stated “an amendment to the ACOA contract” was being considered to “reflect the name change from Sydney Ports Corporation to Port of Sydney Development Corporation and to cover the reallocation of the remaining funds.”

So, where is it? Where’s the amended ACOA contract (which I assume means the assumption agreement although assuming about an assumption probably makes an ass out of everyone within a 10-mile radius)?

When I asked ACOA spokesman Alex Smith in September 2016 whether ACOA had signed off on the assumption funds being spent on items other than navigational aids he responded by email:

Since the dredging of the Sydney harbour was completed in 2014, there have been unanticipated cost increases related to navigational aids.

Discussions surrounding navigational aids continue between all partners involved in the project.

Partners are also reviewing how the monies can best be allocated in support of future growth and development of the Port of Sydney facilities.

So, not only did he not direct me to an amended assumption agreement, he didn’t even seem to know that the oversight committee, which included representatives of ACOA, had voted to divert those monies to “business development” a year earlier.


Legal Opinion

Usher told me in an email that the legal opinion she cited (but could not share with me) about the redirection of assumption agreement funds came from Jim Gogan.

Gogan said the Port could legally spend the navigational aids money on other items — items, according to the “proposed budget” presented to the oversight committee at that September 2015 meeting, like these:

Click to enlarge.

To date, Gogan’s firm, The Breton Law Group, has collected $135,277 in legal fees from the Port, paid from the assumption fund.

Should that legal opinion, perhaps, have come from a different law firm?

And does it not seem like a step was skipped in this process? Shouldn’t redirecting the navigational aids money to “business development” have required a written amendment to the assumption agreement?

It’s kind of late, I know — they’ve spent over $800,000 from the assumption fund on “business development” — but I’d still like a second opinion.



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