Summary

The Schools Sites Act 1841 s.2 allowed land to be granted as a site for a school and to revert to the grantor when that use ceased, unless s.14 applied and the land was sold or exchanged for a more eligible site. Section 14 did not mean that in order to avoid the statutory reverter, the sale or exchange always had to be carried out before, or at the same time as, the school was moved to new premises.

Facts

The claimants sought a declaration that the defendant local authority held money from the sale of land on trust for them.

The claimants were descendants of the grantor of the land, who had conveyed it to the defendant under the Schools Sites Act 1841 s.2 as a site for a school for children of the parish. The grantor's interest in the land would revert to him or his descendants when the land ceased to be used as a school. However, under s.14 the defendant could sell or exchange the land for a more convenient or eligible site, and apply the money arising from any such sale or exchange to purchase another site or improve other premises. In 2003 the defendant borrowed approximately £2 million to build a new school on an adjacent site which it already owned. It closed the original school in February 2006 and sold the land (including 93.7% of the land granted by the claimants' descendant). It proposed to use the proceeds of sale to repay some of the loan.

The claimants submitted that a notional reverter occurred in February 2006 when the school closed, and the defendant therefore held 93.7% of the proceeds of sale on trust for them.

Held

It was stated in Fraser v Canterbury Diocesan Board of Finance (No.2) [2005] UKHL 65 that the court should take a broad and practical approach to the question of whether a school had ceased to be used for the purposes mentioned in s.2. There was no reason why the same approach was not appropriate to the power of sale conferred by s.14, Fraser followed (see para.56 of judgment).

Neither s.2 nor s.14 should be considered in isolation. Whether the defendant's actions amounted to an exercise of the statutory power of sale turned on whether s.14 required that the land had to be sold first, and the money realised from that sale applied towards the costs of the new premises. Although a sale and exchange of one piece of property "for" another typically involved a transaction in which title in the first property was conveyed before or at the same time as title in the second property was acquired, that was not necessarily the case. The same applied to the concept in s.14 of applying the money "arising" from the sale of one property "in the purchase" or "improvement" of another. Those words did not require s.14 to be read as limiting the statutory power of sale or exchange so that it could only lawfully be exercised when the original trust property was sold or exchanged before or at the same time as the replacement property was purchased, or monies expended on improving it. The Law Commission working party report "Rights of Reverter", dated 6 April 1981, appeared to have considered that in order to avoid the statutory reverter in s.2, a sale under s.14 always had to be carried out before the closure of the school. However, that did not follow inexorably from the wording of those sections, whether considered separately or together, Dennis v Malcolm [1934] Ch. 244 considered (paras 59, 65-68).

There was tension between interpreting s.2 and s.14 in the way assumed by the Law Commission and fulfilling the wishes of grantors. Interpreting the sections in that way might encourage schools to resort to devices which were not desirable on educational grounds in order to avoid the reverter, such as keeping a single class on the old premises after the main move had taken place. If the trustees were required to keep the school in operation until the time of the move, that might cause practical difficulties and depress the price that they could realise from the sale, all of which would be to the detriment of the trust. Further, if such devices failed and reverter occurred, that might produce a windfall for the descendants of the grantor. There was no obvious reason why any such effects should be intended by the legislation. For those reasons, properly interpreted, s.14 did not require the trust property to be sold first and the money realised from that sale only then to be applied to the cost of purchase or improvement of other suitable land or buildings. That interpretation was not inconsistent with the Reverter of Sites Act 1987, even though the 1987 Act envisaged that the statutory power of sale or exchange be exercised before the statutory reverter occurred. The statutory power of sale could lawfully be exercised in the manner that the defendant sought to exercise it in the instant case, and in those circumstances s.6 of the 1987 Act prevented the trust that would otherwise arise under s.1 from arising (paras 70-73).

Judgment for defendant