Last month the Supreme Court handed down its judgment in Rittson-Thomas v Oxfordshire County Council, concerning ‘section 2 reverter’ under the School Sites Act 1841. The judges unanimously allowed the appeal, finding in favour of the Council.
School Sites Act 1841 (the 1841 Act)
The 1841 Act was enacted to allow landowners to donate land for educational purposes. Section 2 enabled landowners to do this in an easy way by means of a statutory charitable trust. The same section also provides that if the donated land ceased to be used for a school (or other educational purposes as set out in the 1841 Act), it would be returned to the landowner or their heirs by way of a statutory reverter.
Section 14 of the 1841 Act gives the trustees of the statutory charitable trust the power to sell or exchange the donated land in order to enable the school to move to a more appropriate site.
Facts of the case
In the early part of the 20th century, land was donated to Oxfordshire County Council (the Council) by a local landowner under section 2 of the 1841 Act to allow a school being erected. This became Nettlebed School.
In the 1990s the Council decided to relocate the school to a new building on an adjacent site. The school operated on the original site until 2006, when the pupils moved to the new building. The Council’s documented plan was to sell the original site to help finance the costs of the new school building. The original site was subsequently sold to a property developer in September 2007 for a sum in excess of £1.2m.
Following the sale of the land, a number of heirs of the original landowner came forward and claimed that the donated land had reverted back to them under the 1841 Act and that, consequently, they were entitled to the sale proceeds.
High Court and Court of Appeal decisions
The High Court dismissed the landowner’s heirs’ claim, but the Court of Appeal reversed this decision on appeal and held that on the true interpretation of the 1841 Act, the land had ceased to be used for the purposes of the 1841 Act prior to its sale, and that the trustees could not keep the site vacant pending sale and then seek to apply section 14. The Council appealed.
Supreme Court considerations
The question for the Supreme Court to consider relates to the sequence of events which must occur for the power in section 14 to arise. A sale or exchange under section 14 can only occur if there has not already been a section 2 reverter. It is clear that section 14 can be used if, at the time of the sale of the donated land, the school is still operating on this land. The question is whether section 14 can also be applied to the sale of land with vacant possession in order to apply the sale proceeds towards a new site after the school has moved to that new site.
On reading section 2 and 14 together, did the permanent closure of the school in preparation for the sale end the statutory charitable trust with the effect that the land had reverted to the landowner’s heirs under section 2, thereby preventing the operation of section 14?
Supreme Court conclusion
The Supreme Court found that when the school moved to its new adjacent site in 2006, the original land was not ceasing to be used for the purposes of the Nettlebed School. This was because there was an intention throughout, evidenced in Council meeting notes and other documentation, to apply the sale proceeds in the improvement of the new school premises. On the facts of the case section 14 applied and this permitted the original land to be sold with vacant possession and the proceeds to be used to pay off the costs of developing the new site. A section 2 reverter had not been triggered. The Council’s appeal was allowed.
The judgment contains interesting deliberations, but among the main reasons for the Supreme Court’s decision are the following considerations:
- In line with the House of Lord decision in Fraser v Canterbury Diocesan Board of Finance (No 2), the court must apply a broad and practical approach to both sections 2 and 14.The two sections must be read as a coherent whole and interpreted so as to further the purposes of the 1841 Act. The 1841 Act operates through the creation of a statutory charitable trust, and therefore the court should lean in favour of the charitable trust continuing rather than being ended by a section 2 reverter.
- To interpret the sequence of events as meaning that there had been a section 2 reverter, would frustrate the general policy of the Act. If it was the case, as argued by the landowner’s heirs, that a section 2 reverter could only have been prevented by implementing a more complex sale structure, such as selling the land subject to a licence allowing continued school use or a staggered move of the children into the new premises until after the sale of the original land, these are likely to have had undesirable effects, both financially for the Council and educationally for the children.This proposition goes against the purpose of the 1841 Act.
- There is nothing in section 14 that expressly or impliedly excludes the power to sell where the school site is being sold with vacant possession. We should note here that the judgement concludes that for section 14 to apply in this situation, the intention to use the sale proceeds for the purchase or improvement of other premises must be present prior to or at the time of the school being permanently moved from the former site and at the time that that site is sold.
The Supreme Court’s judgment will be welcomed by local authorities who find themselves in a similar position. However, it also highlights that local authorities should tread carefully to ensure that they stay on the right side of the interplay between section 2 and section 14 and that their intentions should be well documented.