Islwyn Borough Council & Anor v Newport Borough Council

An agreement between local authorities that is silent on withdrawal is not automatically terminable on reasonable notice. The court must infer the parties’ common intention from the agreement, its nature and its surrounding context. Expenditure-approval and arbitration machinery may support continuation for the expected life of a joint facility. A power to resume delegated functions does not permit unilateral withdrawal from genuinely joint functions. Statutory control of school premises may coexist with day-to-day community management by a joint committee where the governing body retains ultimate control.

Three local authorities agreed in 1977 to construct, fund and operate a leisure complex adjoining a comprehensive school. The agreement contained no express withdrawal provision. Newport later gave two years’ notice and sought to reduce its financial contribution. Pill J held that Newport could not withdraw and was not entitled to pay less than 25 per cent of the annual running costs; he dismissed Newport’s counterclaim.

On appeal, Newport relied on the agreement, sections 101 and 103 of the Local Government Act 1972, and section 42 of the Education (No 2) Act 1986. The central questions were whether the agreement was terminable on reasonable notice and whether section 42 had frustrated it by making joint management of the leisure centre unlawful.

1. Disposition. By a majority, the appeal was dismissed. Glidewell and Roch LJJ upheld the substance of Pill J’s decision. The second declaration was varied so that Newport’s obligation to pay 25 per cent of annual running costs was subject to agreement between the parties or use of the procedure in clause 17. Costs of the appeal were awarded against Newport. Leave to appeal to the House of Lords was refused.
2. Termination. Glidewell LJ held that the agreement was intended to continue for the likely life of the leisure complex. Clause 13, read with the arbitration provision, allowed disputes about expenditure and apportionment to be resolved without implying a right to withdraw. Section 101(4) did not assist Newport because Newport was not seeking to resume the function itself, but to cease participating in a joint arrangement.
3. Roch LJ held that the agreement was not terminable. In his view, an agreement silent on withdrawal was presumed to last for the lifetime of facilities created for the joint undertaking, unless sufficient factors displaced that presumption. Clauses 13 and 17 strengthened that conclusion. Section 101(4) did not apply to joint functions under section 101(5), because Newport could not resume a jointly exercised function as a single authority.
4. Section 42. Glidewell and Roch LJJ agreed that the leisure centre formed part of the school premises. They nevertheless rejected frustration. Glidewell LJ construed section 42(b), read with section 16(1), as enabling the local education authority to direct the governing body to delegate day-to-day management to the joint committee, while retaining control to protect the school’s educational requirements. Roch LJ held that the governing body had the final word over use, but need not undertake day-to-day management.
5. Hirst LJ dissented. He considered the agreement terminable on reasonable notice, applying the factors identified in Spenborough Corporation and Staffordshire Area Health Authority. He also considered section 42(a) made joint management unlawful from 1 September 1987, so that the agreement was frustrated by supervening illegality.

• Court of Appeal (Civil Division) — Appeal from Pill J’s judgment of 28 April 1992. The appeal was dismissed by majority, with the second declaration varied and costs awarded against Newport.
• High Court of Justice, Queen’s Bench Division — Pill J granted declarations in favour of Islwyn and Gwent, dismissed Newport’s counterclaim, and awarded costs below.
• House of Lords — Leave to appeal was refused.