Proceeds of sale of school site lost due to operation of reverter

The closure of a school prior to its sale meant the use for which the land had originally been given had ceased and so the proceeds of sale did not belong to the local authority.

This was the decision in Rittson-Thomas v Oxfordshire County Council, which concerned the redevelopment of a primary school in Nettlebed, Oxfordshire.  The case illustrates the complexity of nineteenth century legislation that is still relevant even now.

Background

The School Sites Act 1841 was one of a number of statutes passed to encourage land to be provided for charitable purposes. The incentive behind this legislation was that land might be gifted for charitable use but, if such use ceased, title would revert to the original owner or his heirs. Under the Reverter of Sites Act 1987, on reverter legal title remains with the current owner but the land is held on trust for the heirs of the original landowner who gifted the land for charitable use. 

Facts

Early last century a landowner gifted land under the 1841 Act for use as part of Nettlebed primary school. Title to the land ultimately became vested in Oxfordshire County Council. In the 1990s the council decided to relocate the school. That relocation was to be part-funded by the sale of the site on which the old school stood.

The new school was built, the children were moved into it and the old school site was sold. Between the children being moved out of the old site in February 2006 and its sale in September 2007, the old school was left empty.

The case was brought by some of the beneficiaries to the estate of the original landowner who had gifted the land for its use as a school. They claimed the closure of the school in February 2006 had triggered a reverter under section 2 of the 1841 Act.  Therefore they, and not the council, were now entitled to the vast majority of the proceeds of sale of the old school site.

Decision

The Court of Appeal had to consider two issues:

• the operation of section 14 of the 1841 Act, which provides that land given for charitable purposes can be sold or exchanged and the proceeds can be applied to the purchase of another site; and
• whether the charitable use of the land ceased in 2006 or whether it continued as a result of the council’s plan to sell the land and to use the proceeds to reimburse the cost of constructing the new school.

In its examination of section 14 the court referred to a report issued by the Law Commission in 1981. The Law Commission explained:

‘The power of sale under section 14 is exercisable only in order to enable the trustees to move the school: it does not allow the trustees to close the school, as an institution … In order to have the desired effect, a sale under section 14 has always had to be carried out before the closure of the school. This is because, once a reverter has occurred, the trustees have no title (or at least no beneficial title enabling them to employ the proceeds in furtherance of the purpose of the sale …)’

The court held it was clear that the statutory trust which arises on reverter can only be avoided when using the power in section 14 if that power is exercised before the reverter occurs.  It also stated that the wording of section 14 is sufficiently wide to allow for the purchase of a new school site before an existing site is sold, and it permits the use of the sale monies to reimburse the cost of development of the new site.

However, in the case of Nettlebed school, the operation of section 14 could be of no help to the council unless the sale had taken place before the old site ceased being used for the charitable purposes for which it had been given. If it had not, a reverter would already have occurred.

In this case, the sale of the old school site post-dated the removal of the school to the new site by more than a year.  The court therefore held it was unrealistic to say that the gifted land continued to be used as a site for a school or otherwise for the purposes of education.

In reaching its conclusion the court explained that the issue for its determination was whether the land continued to be used as the site for a school for educational purposes and not whether the site provided a means of reimbursing the local authority for its expenditure on the new school. By keeping the old site vacant pending a sale, the council had not continued to use the land as a site for a school or used it for educational purposes. Both required active use of the land for the education of children.

Conclusion

The effect of reverter meant almost £1.3 million was due to the beneficiaries of the original grantor’s estate and not to the council.

The logic and reasoning of the Court of Appeal is readily understood against the legal background to this case, but its practical implications must be of concern to any local authority planning redevelopment of a school site that is subject to reverter. Where that is the case, local authorities must expect to fund the development of any new site from their own resources and take great care to keep the old site in operation for educational purposes until the point of sale.

Rittson-Thomas v Oxfordshire County Council [2019] EWCA Civ 200