Case Note 02/2017 – Liverpool City Council v Irwin (1977) A.C.239 – Terms Implied in Law

”Ian Watts – providing legal services in Gibraltar since 2002”

CASE NOTE (REVIEW): LIVERPOOL CITY COUNCIL (as successors to the Lord Mayor, Aldermen and Citizens of the City of Liverpool) (RESPONDENTS) v. IRWIN (A.P.) AND ANOTHER (A.P.) (APPELLANTS [1977] AC 239)

By Ian Watts – Barrister at-Law & Acting Solicitor

Synopsis

In this case note, Ian Watts reviews the seminal decision of the UK House of Lords in Liverpool City Council v. Irwin (“the Liverpool Judgment”) concerning terms implied into contracts at common law. The Liverpool Judgment provides a classic example of the distinction to be drawn between terms implied in fact and terms implied in law.

Lord Wilberforce, at p.251F stated:

“My Lords, this case is of general importance since it concerns the obligations of local authority, and indeed other, landlords as regards high rise or multi-storey dwellings towards the tenants of those dwellings”.

TOPICS COVERED: LAW OF CONTRACT – TERMS IMPLIED AT LAW

Facts of the Liverpool Judgment

The case concerned a tower block in Liverpool occupied by about 70 tenants, two of which were the defendants in the proceedings – husband and wife (occupying a maisonette comprising the ninth and tenth floors). Access to the maisonette was via a common staircase and a lift. The tower block however was in a very bad state of repair and many of the problems in the building were due to acts of vandalism; often, the lifts were inoperative and the staircases had no lighting.

The defendants tenancy agreement was a simple one with obligations imposed upon them; conversely, there were no express obligations contained therein on the part of Liverpool City Council.

In 1973 however, the defendants, including other tenants in the block effectively conducted a ‘rent-strike’ and stopped paying rent. Consequently, Liverpool City Council commenced legal proceedings for possession of the premises. The defendants however, counterclaimed in damages for breach of the statutory implied term under s.32 of the Housing Act 1961; for breach of the covenant for quiet enjoyment on the part of Liverpool City Council and breach of a covenant implied at common law to keep the common parts of the tower block in repair. The defendants also sought an injunction to restrain Liverpool City Council from entering into possession of the premises.

The trial of the matter was heard at first instance before Liverpool County Court and the judge found in favour of Liverpool City Council by ordering possession of the premises although he gave £10 to the defendants as nominal damages on their counterclaim. The judge also held that there was an implied covenant at common law by Liverpool City Council as aforesaid and a breach of s.32 of the 1961 Act.

Liverpool City Council accordingly appealed to the Court of Appeal and by majority, their appeal was allowed against the counterclaim. The Court of Appeal however ruled by majority that there no implied covenant at common law to repair the common parts; furthermore, that whereas there was a statutory implied term under the Housing Act 1961, there was no evidence that Liverpool City Council had breached it. It should be noted that counsel for the defendants did not pursue the point in relation to the breach of the covenant of quiet enjoyment (neither was it pursued on further appeal).

The defendants then appealed to the House of Lords.

Review of the decision

The UK House of Lords decided, inter alia, that there was indeed an implied term of the defendant’s tenancy agreement with Liverpool City Council that the Council was to take reasonable care to maintain the common parts of the building: however, the House did not find that Liverpool City Council had breached such a term.

Notwithstanding the foregoing, the decision of the UK House of Lords was important in that it established that terms implied in law are not based on the parties’ intention; rather, they depend on the nature of the contract in question. Lord Cross, at pp.257H-358 to 258A-B, said:

“When it implies a term in a contract the court is sometimes laying down a general rule that in all contracts of a certain type- sale of goods, master and servant, landlord and tenant, and so on – some provision is to be implied unless the parties have expressly excluded it. In deciding whether or not to lay down such a prima facie rule the court will naturally ask itself whether in the general run of such cases the term in question would be one which it would be reasonable to insert. Sometimes, however, there is no question of laying down any prima facie rule applicable to all cases of a defined type but what the court is being in effect asked to do is to rectify a particular often a very detailed contract by inserting in it a term which the parties have not expressed. Here it is not enough for the court to say that the suggested term is a reasonable one the presence of which would make the contract a better or fairer one: it must be able to say that the suggested term is a reasonable one the presence of which would make the contract a better or fairer one: it must be able to say that the insertion of the term is necessary to give as it is put ‘business efficacy’ to the contract and that its absence had been pointed out at the time both parties assuming they would have been reasonable men would have agreed without hesitation to its insertion” [my emphasis].

The Liverpool Judgment’s “necessity test’’ has since been followed in relation to terms implied in law (as opposed to terms implied in fact) – see: for example, the decision of the Privy Council in Tai Hing Cotton Mill Ltd v Liu Chog Hing Bank Ltd [1985].

Gibraltar follows the common law of England and Wales (subject to local modifications). English Judgments such as that of Liverpool City Council v Irwin are binding on the Gibraltar Law Courts. For further information and/or advice on Gibraltar Law, please contact Ian Watts.