Islwyn Borough Council & Anor v Newport Borough Council [1993] EWCA Civ 28

Three local authorities jointly funded and operated a leisure complex under a 1977 agreement. Newport sought to withdraw, claiming the agreement was terminable on reasonable notice. The Court of Appeal held the agreement was not terminable without consent, as the parties intended it to last for the facility's lifetime.

Facts

In 1977, Islwyn Borough Council, Gwent County Council, and Newport Borough Council entered into a Memorandum of Agreement for the joint construction and operation of a leisure complex at Risca, adjacent to a comprehensive school. The complex was designed for dual use by school pupils and members of the public. The agreement established a Joint Committee to manage the facility, with each authority contributing to capital and running costs. Newport Borough Council purported to withdraw from the agreement in 1988, giving two years’ notice, arguing the agreement was terminable.

Background to the Agreement

The leisure complex formed part of the Risca Comprehensive School premises, with facilities including a recreation block and all-weather pitch. The expected lifespan of the facilities was 60 years. The agreement contained provisions for expenditure approval by all councils and an arbitration clause for disputes regarding apportionment of expenses.

Issues

The central issues were: (1) Whether Newport could lawfully terminate the 1977 agreement by giving reasonable notice; and (2) Whether Section 42 of the Education (No 2) Act 1986 frustrated the agreement by rendering the Joint Committee’s management of the leisure centre unlawful.

Judgment

Terminability of the Agreement

Lord Justice Glidewell, delivering the leading judgment, held that the agreement was not terminable on notice. He applied the principle from Spenborough Corporation v. Cooke Sons and Company Ltd that where an agreement is silent on termination, the court must ascertain the common intention of the parties from all the circumstances.

“In my view the inclusion of this agreement of the arbitration clause, which enables the Defendant to propose at any time that the amount of the total expenditure which it should bear in the ensuing year should be reduced, and for any dispute about this to be referred to arbitration, points strongly towards the conclusion that the agreement that the three parties should be members of the Joint Committee was intended by them all when entered into not to be terminable.”

Lord Justice Roch agreed, stating:

“I start with this proposition that prima facia every contract is permanent and irrevocable and it lies upon a person who says that it is revocable or determinable to show either something special in the contract itself, or something in the nature of the contract which it is reasonably to be implied that it was not intended to be permanent and perpetual.”

Section 101(4) of the Local Government Act 1972

Newport argued that Section 101(4) permitted withdrawal from the Joint Committee arrangements. Lord Justice Glidewell rejected this, finding that Section 101(5), governing joint arrangements, did not incorporate Section 101(4), and that Newport was not seeking to exercise delegated functions itself but rather to cease participation entirely.

Frustration under Section 42 of the Education (No 2) Act 1986

The court held that the leisure centre formed part of the school premises. However, Lord Justice Glidewell and Lord Justice Roch concluded that Section 42 did not frustrate the agreement. The Local Education Authority could direct the Governing Body under Section 42(b) to delegate management to the Joint Committee.

“Nevertheless, in my judgment section 42(b) clearly provides that a Local Education Authority is empowered to give directions to a Governing Body which will ensure continued use of the leisure centre outside school hours by members of the public generally.”

Lord Justice Hirst dissented on both issues, finding the agreement terminable and frustrated by Section 42.

Implications

This case establishes important principles regarding the terminability of joint agreements between local authorities. It confirms that where parties enter into long-term joint ventures without express termination provisions, courts will look to the nature and circumstances of the agreement to determine common intention. The inclusion of dispute resolution mechanisms and provisions for varying contributions supports an inference of permanent commitment. The case also clarifies that Section 101(4) of the Local Government Act 1972 does not apply to joint functions under Section 101(5), meaning local authorities cannot unilaterally withdraw from joint committee arrangements simply by invoking statutory powers regarding delegation.

Verdict: Appeal dismissed. The Court of Appeal (by a majority of 2-1) upheld Pill J’s judgment, declaring that Newport Borough Council was not lawfully entitled to withdraw from the Risca Area Joint Committee without the consent of the other parties, and was not entitled to refuse to pay less than 25% of the annual running costs. The second declaration was amended to acknowledge the arbitration procedure. Leave to appeal to the House of Lords was refused.

Source: Islwyn Borough Council & Anor v Newport Borough Council [1993] EWCA Civ 28