Summary

A local authority which had sold land granted to it under the Schools Sites Act 1841 s.2 held the proceeds of sale on trust for the original grantor's descendants. Section 14, which prevented the statutory right of reverter, operated only where the land was continuing to be used for educational purposes within s.2: it did not a prevent a trust arising where the school had been closed and the site kept vacant pending its sale. A local authority's intention to use the proceeds of sale to meet part of the costs of constructing a new school did not amount to s.2 use for the purposes of education so as to engage s.14.

Facts

The appellants appealed against a decision that the respondent local authority did not hold money from the sale of land on trust for them.

The Schools Sites Act 1841 s.2 allowed land to be granted either as a site for a school or otherwise for the purposes of education and to revert to the grantor, or their successors, on a trust for sale when that use ceased. Under s.14, that statutory right of reverter was avoided where the land continued to be used for educational purposes. The appellants were the descendants of an individual who had conveyed land to the local authority in 1914 and 1928 for use as part of a village school pursuant to s.2. In the 1990s, the local authority decided to relocate the school. In 2003, it had borrowed around £2 million to build new and improved school facilities on land which it already owned, adjacent to the existing premises. The old school was closed in February 2006 and the children were transferred to the new premises. The local authority sold the original school site in August 2007 for around £1.3 million. The appellants claimed that the proceeds of sale were held on trust for them in accordance with s.2. The local authority, relying on s.14, denied that there was any reverter because it had always been its firm and settled intention to apply the sale proceeds towards the construction of buildings for the new school on the alternative site. The appellants issued proceedings seeking a declaration that the local authority held the sale proceeds trust for them, contending that the closure of the old school building on the original site in 2006 meant that it ceased to be used either as a site for a school or otherwise for the purposes of education within the meaning of s.2. The judge found that the vacation and subsequent sale of the old site should be considered as part of a composite scheme or arrangement which began as early as the 1990s when the local authority had first identified the possibility of using the new site for the village school. He accepted the local authority's submission that throughout the period from February 2006, when the old school buildings were vacated, until August 2007, when the old site was sold, the land continued to be used for the s.2 statutory purposes because it remained the local authority's intention that the sale proceeds should be used to meet part of the costs of constructing the new school: the old site therefore continued to be used for the purposes of the school, and s.14 operated to prevent a trust arising under s.2.

The issue was whether the land had ceased to be used for the statutory purpose within s.2 prior to its sale in 2007.

Held

Section 14 could be read as accommodating a prior purchase of the new site using, for example, borrowed money and the re-imbursement of that expenditure from the sale of the old site. The trustees could still be said in such circumstances to be selling the old site "for other land or building suitable to the purposes of their trust" and to apply the proceeds of sale of the old site "in the purchase of another site". However, giving s.14 that broad construction did not avoid the problem created by s.2. Unless the sale took place prior to the old site ceasing to be used for the specified statutory purposes, a reverter under s.2 would occur. In order to prevent a reverter occurring, it was necessary for the site to have remained in use for a statutory purpose under s.2 at the time of the sale, Dennis v Malcolm [1934] Ch. 244 applied. The Act was intended to encourage the conveyance of land for charitable educational purposes on terms that title to the land should revert to the grantor in the event that the use of the land no longer complied with the specified purposes. Since the sale of the old site post-dated the removal of the school to the new site by more than a year it was unrealistic to say, as a matter of ordinary language, even on a broad and practical approach to that issue, that the land continued to be used as a site for a school or otherwise for the purposes of education. Expenditure on the improvement of other premises used for the purposes of the trust was a permissible use of the proceeds from the sale of the existing school site under s.14, but that power was only exercisable up to the moment when the land ceased to be used for those statutory purposes. Whilst ancillary activities such as use of the site for a playground or for meals might amount to educational purposes falling within s.2, keeping the old site vacant pending a sale did not (see paras 11-12, 20, 22-23 of judgment).

Appeal allowed.