Fraser Anor v Canterbury Diocesan Board of Finance & Anor

This is a further chapter in a dispute over who is entitled to the sale proceeds of premises where, for many years, St Philip’s Church of England School in Maidstone, Kent (“the Site”) had operated. The Site, Melville Road, was sold by the first defendant, Canterbury Diocesan Board of Finance (“CDBF”), to the second defendant, Integrated Services Programme (“ISP”), for £121,000. The sale was completed on 30 June 1995. Ten years later ISP sold the Site for £400,000. That later sale was completed on 1 April 2005.

Until very shortly prior to the hearing before me the effective issue was whether, as ISP maintained, the claimants were entitled to the £121,000 received by CDBF on the sale to ISP or whether, as CDBF maintained, the claimants were entitled to the £400,000 which ISP had received on the sale in 2005. The contention of the claimants was that it was the latter. It was common ground that it was one or the other and that the answer to the question depended upon correctly identifying the event which had triggered, or but for section 1 of the Reverter of Sites Act 1987 (“the 1987 Act”) would have triggered, the right of reverter set out in the third proviso to section 2 of the School Sites Act 1841 (“the 1841 Act”) (the terms and operation of which I explain later in this judgment) to which the Site became subject when the land in question was conveyed for use as a school by a deed dated 5 April 1866.

A few days before the hearing, CDBF sought for the first time to argue that, as a result of a scheme made in 1952 by which the legal estate in the Site had come to be vested in it, the Site ceased thereafter to be subject to the possibility of reverter under the 1841 Act. This was an entirely new point. I describe it as “the scheme point” and consider it later. ISP, alerted to the point, indicated that it too wished to rely on it. In the event, for reasons which will appear, CDBF took no part in the hearing before me and it was left to ISP, which appeared by Ms Francesca Quint, to run the point together with its argument that, if a right of reverter did survive the 1952 scheme, the triggering event was sale of the Site by CDBF in June 1995 (and not any later event) and therefore that the claimants’ claim lies against CDBF.

I must now set out the relevant background facts. In view of the decision of the House of Lords, given in relation to an earlier chapter in this dispute and to which I come later, I can do so fairly shortly.

By the deed dated 5 April 1866 certain land, of which the Site formed the larger part, was conveyed to trustees under the authority of the 1841 Act upon trust:

“…to permit the said premises and all buildings thereon erected or to be erected to be forever hereafter appropriated and used as and for a School for the education of Children and Adults of the labouring manufacturing and other poorer classes in the Ecclesiastical District of Saint Philip Maidstone aforesaid and for no other purpose…”

The deed also stated that the school should be in union with the National Society (the full name of which was the “National Society for Promoting the Education of the Poor in the Principles of the Established Church throughout England and Wales”). It set out provisions designed to secure the continued Church of England character of the school. The Site was thereafter used for St Philip’s School, as the school was known.

In fact, the school had already opened on the Site three years earlier, in January 1863. New school buildings were constructed and the school continued in operation on the Site until July 1995. Over the years it underwent various changes in governance and in the social profile of its pupillage intake.

On 10 March 1952 a scheme was made by the then Minister of Education in relation to St Philip’s School and a large number of other Church of England educational foundations in the Diocese of Canterbury. Among other things, the scheme vested “all land held in trust for the Foundations” in CDBF. It is common ground that this included the Site. It is the making of the scheme that has given rise to what I have described as the “scheme point”.

On 24 April 1995 CDBF sold the Site at auction to ISP for £121,000. The sale was completed on 30 June 1995. It was a term of the sale contract that ISP, as purchaser, should grant to CDBF, as vendor, a licence to occupy the Site in accordance with an agreed draft. On completion, on 30 June 1995, ISP granted the stipulated licence by which CDBF, as licensee, was granted the right “to use the Premises [ie the Site] for the Licence Period for the purposes of and ancillary to a school”. The licence period was expressed to run from the date of the licence until determined by at least a week’s notice which either side could give but which the licensor could not give before 14 July 1995. It is common ground that the licence continued until St Philip’s School closed on 21 July 1995. It is also common ground that the change in ownership and the licence back to CDBF to enable the school to continue caused no break in the continuity of the school's operations at any material time up to its closure on 21 July 1995.

At least from September 1996 ISP operated a special needs school on the Site. This continued until that establishment was also closed. That happened in or about March 2000.

On 29 June 2001 these proceedings were issued. The claimants (and others), claiming to be the persons who, but for the 1987 Act, would have been entitled to ownership of the Site by virtue of its reverter under the third proviso to section 2 of the 1841 Act, contended that the right of reverter had been triggered by the school’s closure in late July 1995 and that as a result (and having regard to amendments to the operation of the reverter effected by section 1 of the 1987 Act) the Site was held on trust for them. They contended that the sale of the Site by CDBF to ISP in June 1995 was irrelevant to the operation of the reverter. They sought declarations to this effect and consequential relief.

On 18 February 2005 ISP contracted to sell the Site for £400,000. By then the special needs school had long since ceased to operate. The sale was completed on 1 April 2005. This prompted further amendments to the proceedings in July 2006 to permit the claimants (by now confined to Mr Simon Fraser and Mr Nathan Fraser, the other original claimants having assigned their interests under the reverter to the Frasers) to seek an account by ISP of its dealings with the Site and, in particular, of the proceeds of sale that ISP had received for the Site, and payment to them of the amount found due on taking that account. CDBF and ISP both resisted these claims.

The purpose and operation of the 1841 Act, so far as it affects the issues which arise in these proceedings, is as follows. (Much of the ensuing summary is taken from the very helpful explanation set out in the skeleton argument of Mr Christopher Nugee QC and Mr Jonathan Davey who appeared for the claimants.)

The 1841 Act was passed in order to facilitate the provision by landowners of parcels of land and sites for local elementary schools. It was widely used during the remainder of the 19^th century, notably, but not exclusively, for Church of England schools promoted by the National Society. The most significant provision of the 1841 Act is section 2 which removed various obstacles to the granting of land for school sites. It enabled grants of land (of up to one acre) to be made as:

“…a Site for a School for the Education of poor Persons, or for the Residence of the Schoolmaster or Schoolmistress, or otherwise for the purpose of the Education of such poor Persons in religious and useful Knowledge …”

There were therefore three statutory purposes. The relevant purpose in the case of the 1866 deed was the first, namely as a site for a school for the education of poor persons: see paragraph 5 above.

As an encouragement to charitably minded landowners (see Sir Wilfred Greene MR in Re Cawston’s Conveyance [1940] Ch 27 at 33 to 34) the 1841 Act contained a statutory reverter in the third proviso to section 2 in the following terms:

“Provided also, that upon the said Land so granted as aforesaid, or any Part thereof, ceasing to be used for the Purposes in this Act mentioned, the same shall thereupon immediately revert to and become a Portion of the said Estate held in Fee Simple or otherwise, or of any Manor or Land as aforesaid, as fully as to all Intents and Purposes as if this Act had not been passed, any thing herein contained to the contrary notwithstanding.”

The effect of the third proviso was, so far as material as follows. First, the grantees of the land (the trustees of the school) did not acquire a fee simple absolute in the land but a determinable fee, that is to say an interest which would determine automatically on the reverter being triggered. Second, so long as the reverter had not been triggered, the grantor retained what was technically known as a “possibility of reverter”. This was not classified as an estate in land. On the reverter being triggered, the grantees’ determinable fee came to an end and the grantor’s estate automatically revived with the result that the grantor or his successors (the revertees) thereupon became entitled to ownership (and possession) of the land. Third, this position was unaffected by the 1925 property legislation in that, although in general a determinable fee could not after 1925 subsist as a legal estate but only as an equitable interest under a settlement, section 7(1) of the Law of Property Act 1925 made an exception for a fee simple liable to be divested under, inter alia, the School Sites Acts, treating it as a fee simple absolute for the purposes of the 1925 Act (and hence able to qualify as a legal estate) but providing that it remained liable to be divested as if that Act had not been passed. (See generally the judgment of Nourse J in Re Rowhook Mission Hall, Horsham [1985] Ch 62.)

Among the consequences of this legislative treatment were the following. First, the grantees’ interest and the revertees’ (potential) interest in the land constituted two quite separate interests: the grantees had a legal estate but one that would automatically determine on the reverter; the grantor retained a possibility of reverter which would ripen into a legal estate on reverter. But the revertees did not succeed on reverter to the rights of the grantees; rather, it was the grantor’s original estate which revived since he had granted away only a limited (ie determinable) interest. Second, the revertees’ rights were legal, not equitable. Third, the grantees’ interest was held on the trusts set out in the original deed of grant and, being educational, these were charitable in nature. By contrast, the revertees’ rights arose quite independently of the charitable trusts; they did not derive from the deed of grant but from the limited nature of the interest thereby granted. Fourth, it followed from the fact that the grantees’ interest determined on reverter that if the grantees remained in possession of the land after reverter they were trespassers. This had the result that after the lapse of sufficient time they could acquire a title against the revertees by adverse possession.

The 1987 Act was passed to amend the operation of the reverter. By section 1 it was provided that, on an event that would otherwise have caused a reverter, the land should not revert but should be held by the grantees on trust for sale for the revertees. (With the coming into force of the Trusts of Land and Appointment of Trustees Act 1996 the trust for sale was replaced by a trust of land with power to sell.) The practical effect of the section is therefore that where the reverter is triggered (for example, where a school is closed) the trustees will thereafter be able to give a good title to the purchaser.

The 1987 Act, which came into force on 17 August 1987, is retrospective in that it deems the trust to have arisen whenever reverter took place (either before or after the Act came into force). Section 1(4) expressly provides, however, that this does not confer any right on any person as a beneficiary, inter alia, in relation to any property in respect of which that person’s claim was statute-barred before the commencement of the 1987 Act. The effect of this is that in any case where a reverter takes place on or after 17 August 1975 the land is held on trust for the revertees but since trustees cannot bar their own beneficiaries by adverse possession the revertees will be entitled to the sale proceeds however long the trustees remain in actual possession (although there are provisions for barring their rights when the revertees cannot after due enquiry be found). By contrast, where the reverter has taken place before 17 August 1975 and the trustees have remained in possession for at least twelve years (ignoring cases where a revertee can take advantage of a longer limitation period) the revertees’ title will have been barred before the 1987 Act came into effect and, as a result, they will have no claim.

In the instant case, establishing if and when the reverter had been triggered was important since if it had occurred before 17 August 1975 it would have enabled CDBF to claim acquisition of title to the Site by adverse possession. In these circumstances the parties agreed, and Master Bowles so ordered on 28 January 2002, that a preliminary issue be tried, namely whether the reverter was triggered before 17 August 1975.

On 14 May 2003 Lewison J, before whom the issue came for decision, declared (see [2003] EWHC 1075 (Ch)) that no reverter had occurred at any time before 17 August 1975. His decision was reversed by the Court of Appeal, who held (see [2004] EWCA Civ 15) that reverter had occurred before 17 August 1975. On 27 October 2005, however, the House of Lords (see Fraser v Canterbury Diocesan Board of Finance (№ 2) [2005] UKHL 65; [2006] 1AC 377) reversed the Court of Appeal and restored the declaration made by Lewison J.

Three points of relevance to the issues which I have to determine emerge from the decision of the House of Lords. First, the test for deciding if a reverter has been triggered is whether there has been a cesser of the relevant purpose or purposes selected by the grantor of the land out of the three statutory purposes mentioned in section 2 of the 1841 Act and not, as the courts in certain earlier cases had supposed, a cesser of the specific (and, it may be, narrower) purpose (being one of those referred to in section 2) set out in the deed of grant. Or, as Lord Walker expressed it (at[58]):

“…If the grantor's stated purposes are narrower and more detailed and elaborate than the statutory purposes, non-compliance with them (in particular, by severance of a Church of England connection) will not necessarily result in the cessation of the statutory purposes, and consequential reverter. The reverter (after 1987, in equity) will only occur if the relevant statutory purpose is no longer being carried out. The first statutory purpose in section 2 is consistent with wholly secular (that is, non-religious) education, even if a grantor has made an express declaration that the school is to be run as a Church of England school. The third statutory purpose in section 2 cannot be used to alter the character of a grant which falls squarely within the first purpose.”

Second, the court should adopt a broad and pragmatic approach to the question whether land has ceased, in the words of the third proviso to section 2, “to be used for the purposes in this Act mentioned”. In the case of the Site this was whether the managers of the school on the Site were “still providing education for the poor of the parish” (see paragraph [46] in the speech of Lord Walker).

Third, if that question had been put at any time up to 1975, the answer would have been that it was. The argument which had been relied upon as indicating a contrary conclusion (and therefore that cesser of the relevant statutory purpose had occurred so as to trigger a reverter) was that the trustees of St Philip’s School had adopted an “all-comers” admissions policy.

Against that background, I now come to the issues argued before me. By his order dated 16 November 2006 Master Bowles directed the trial of two issues which, by agreement between the parties, may be summarised as follows. First, assuming that the claimants can prove their entitlement to the sale proceeds of the Site, is their claim against CDBF or is it against ISP? Second, if the claimants’ claim is against ISP, is ISP entitled to an indemnity from CDBF in respect of that claim? It was agreed that matters such as proof of title to the sale proceeds of the Site and quantification of the precise amount to which the claimants should be entitled would, failing agreement, be dealt with subsequently.

As I have mentioned, very shortly before this hearing was due to start, CDBF raised what I have described as the “scheme point”, namely whether as a result of the 1952 scheme the Site any longer remained subject to the possibility of reverter. CDBF wished to contend that it did not. Its wish to raise such an argument came as a considerable surprise to the claimants and their legal advisers, not least because, despite several years of litigation including the appeal to the House of Lords, no one had thought to suggest that, already since 1952, any possibility of a reverter had disappeared. Moreover, if it was a good point it necessarily meant that the hearing before Lewison J, the Court of Appeal and House of Lords had been a waste of time. In the event, CDBF and ISP came to terms over the latter’s indemnity claim, CDBF took no further part in the proceedings, and it was left to ISP, which had adopted it, to run the point.

Since logically the scheme point is anterior to the question when reverter occurred (whether by the sale of the school by CDBF to ISP, completed on 30 June 1995, or by the closure of St Philip’s school on 21 July 1995, or by some later event) I shall deal with this point first.

In their defences CDBF and ISP both admitted that the Site was subject to the possibility of reverter under the third proviso to section 2 of the 1841 Act. To be permitted to run the scheme point therefore involves withdrawing an admission. That in turn engages the provisions of CPR Part 14.1(5) which stipulates that the court's permission is required if an admission is to be withdrawn. The Practice Direction supplementing CPR Part 14 sets out various matters to which the court will have regard in deciding whether to give permission for an admission to be withdrawn. Plainly, the merits of the issue to which the withdrawal of the admission relates is a factor to weigh in the balance. Another is the fact that the wish to argue the point (and thus to withdraw the admission) has arisen at an extremely late stage in the proceedings and after the dispute had proceeded to the House of Lords on the assumption that the possibility of reverter continued to subsist (but had been triggered by a change of policy in relation to the provenance and social profile of the pupillage intake at the school). Given these circumstances, I shall first consider whether the point has any merit and then, in the light of my conclusion on that, decide how procedurally the matter should be treated. I start with the scheme itself.

The 1952 scheme is expressed to be framed by the Minister of Education under the Endowed Schools Acts 1869 to 1874 as applied by an order of the Minister dated 1 January 1952 made under section 86(1) of the Education Act 1944 as amended. Section 86(1), as it existed in 1952, empowered the Minister by order to direct that the provisions of the Endowed Schools Acts 1869 to 1908 should have effect in relation to an educational endowment where it appeared to the Minister that the purposes of that endowment included the provision of religious education in accordance with the tenets of a particular religious denomination and that it was desirable, for the purpose of enabling that denomination to participate more effectively in the administration of the statutory system of public education, that a scheme should be made under the Endowed Schools Acts. An order under section 86(1) thus enabled a scheme to be made in circumstances where, without such an order, such a scheme would not (or might not) have applied to the educational endowment in question. As St Philip’s School was established in union with the National Society and, as such, was required to educate its pupils in accordance with the principles of the Church of England, its educational endowment was within the purview of section 86(1).

Paragraph 1 of the scheme stated that it related to the various Church of England educational foundations specified in the schedule, of which St Philip’s School was one. Paragraph 2 provided that:

“Every Act of Parliament, Letters Patent, Statute, Deed, instrument or trust affecting the Foundations is hereby repealed and the provisions of this Scheme are substituted therefor …”

Paragraph 3 provided for the appointment of the CDBF as the governing body of the foundations referred to in the schedule and for the vesting in it of land held in trust for such foundations. (It is as a result of that paragraph that CDBF came to acquire its legal interest in the Site.) Paragraph 4 authorised the governing body (ie CDBF) to sell any of the premises of the foundations, subject to obtaining ministerial consent to the price. Paragraph 5 stated that, subject to the other provisions of that paragraph, the net sale proceeds of any such sale might be applied by the governing body in or towards the erecting, improvement or enlargement of any school as therein set out.

It is plain that the scheme had no effect whatever on the rights of revertees under the third proviso to section 2 of the 1841 Act. This is because the scope of the power of repeal exercised by the scheme is confined, by section 46 of the Endowed Schools Act 1869 Act (“the 1869 Act”), to any Act of Parliament, letters patent etc “relating to the subject matter of the scheme”. This takes one to section 9 of that Act which confines the scheme-making power of the Act to “any educational endowment”. That expression is defined by sections 4 and 5. In particular, section 4 defines the expression “endowment” as meaning “every description of property, real, personal, and mixed, which is dedicated to such charitable uses as are referred to in this Act”. Mr Nugee submitted that in the case of a school whose site was granted to trustees under section 2 of the 1841 Act, the only “property …dedicated to charitable uses” was the determinable fee vested in the grantees. The grantor's possibility of reverter is therefore not part of the endowment but stands entirely outside the charitable trust established by the deed of grant. It follows, he said, that a scheme under the 1869 Act could not affect the grantor’s rights under the reverter as such a scheme is limited to the endowment of the charity. The result, he submitted, is that “the subject matter of the scheme” for the purposes of section 46 is the endowment and that the 1841 Act, insofar as it provides for the statutory reverter, cannot be affected. I agree.

Moreover, it would have been odd if the right of reverter could be lost as a result of a scheme made pursuant to the powers contained in the 1869 Act, and without compensation, unless the Act clearly provided for this to happen. In this connection it is noteworthy that, elsewhere in the Act, care has been taken to preserve the rights of those potentially affected by a scheme. See, for example, section 13, requiring any scheme to provide for a saving or the making of due compensation for various vested interests, and section 14, making clear that a scheme could not interfere with certain endowments or other stated rights except with the assent of various named bodies.

It is all the more unlikely that, by means of an order under section 86(1), the rights arising on a reverter could be lost when the very next subsection, section 86(2), conferred power on the Minister expressly to disapply the third proviso to section 2 of the 1841 Act but only in stated circumstances and subject to stated safeguards. By that subsection the Minister was empowered to do so by order when it appeared to him desirable that a scheme made under the Endowed Schools Acts in relation to any educational endowment should provide for the sale of any land forming part of the endowment and for the sale proceeds to be applied in accordance with the scheme “but that such provision cannot be made” by reason of such proviso. The subsection then goes on to set out safeguards designed to protect the interests of revertees, the effect of which is that, if after due enquiry such persons can be found, no direction may be made disapplying the reverter unless either each such person in question has consented or adequate compensation is made to that person out of the sale proceeds as consideration for the loss of his rights.

What is more, as Mr Nugee pointed out, an almost identical point was decided by Russell J in Bankes v Salisbury Diocesan Council of Education [1960] Ch 631. That case concerned a school site conveyed under the School Sites Act 1836 (not the 1841 Act). The 1836 Act did not provide for a statutory reverter with the result that the interest granted was a fee simple absolute. But the grant that was made contained an express provision for the grant to be “void” on failure of the school whereupon a resulting trust of the land in question for the grantor would arise. As in the present case, a scheme had been made (it was in 1949) under the Endowed Schools Acts 1869 to 1874 whereby a large number of Church of England schools became vested in the defendant diocesan council. The school in question closed in 1956. The defendant contended that the grantor’s rights under the deed of grant had been ousted by the scheme, paragraph 2 of which was, so far as material, in identical form to paragraph 2 of the 1952 scheme. The decision dealt with issues which do not arise in the instant case and which I do not therefore need to mention. But, so far as the ouster point was concerned, Russell J, after setting out paragraph 2 of the scheme, said this (at page 653):

“This passage in the scheme [paragraph 2] of course relates back to section 46 of the Act of 1869. It is quite true that in one sense the deed of 1840 [the deed of grant], which is described in the schedule as ‘comprising’ the foundation, is a ‘deed or instrument …affecting the foundation’, but ‘affecting’ must be construed in some limited sense - a fact which is obvious when one considers the alternative of repealing every Act of Parliament affecting in any way the foundations or any of them. What is the criterion of such limitation? It seems to me that in the light of the whole legislation it must be, in relation to property and property rights, that only those parts of any deed and only those trusts which directly concern the educational foundation as such are repealed or abrogated.

I see no justification for saying that this provision (or the parallel provision in the statute of 1869 itself) is aptly worded to repeal or abrogate a trust in favour of a private individual to take effect upon a contingency or an event; such a trust affects him and not the foundation in the sense in which that word ‘foundation’ is here used.

It was suggested that a resulting trust ‘affects’ the foundation in that it deprives it in the event of endowment. I prefer the view that the only trusts ‘affecting’ the foundation are those which confer upon it an endowment for a period lasting as long as the school continues in operation as a school.

The substance of the matter is that just before the scheme the land was vested in trustees upon two trusts: (a) to permit the school to be carried on thereat for an indefinite period; (b) for the plaintiff absolutely and beneficially when and as soon as the school closed down.”

Mr Nugee submitted, correctly, that that decision was not strictly in point since it did not concern a grant of land made to trustees under the authority of the 1841 Act. But, as he pointed out, under the 1836 Act the legal fee simple absolute was vested in the diocesan council, albeit (as explained in the fourth paragraph of the passage cited from the judgment in that case) on two separate trusts; in the instant case, by contrast, the 1841 Act operated so as to vest in the grantees no more than a determinable fee. He submitted, and I agree, that the decision in the instant case may be considered to be a fortiori. Mr Nugee was therefore right to say that the decision in Bankes was, so far as material, indistinguishable from the 1952 scheme in relation to St Philip’s School.

Ms Quint was unable to persuade me that Mr Nugee’s analysis was incorrect. She made essentially three points. The first was that the expression “affecting” which appears in paragraph 2 of the scheme (and also in section 46 of the 1869 Act) was capable of extending to and thus of repealing the third proviso to section 2 of the 1841 Act. The second was that section 14 of the 1841 Act (which confers a restrictive power of sale or exchange in respect of lands or buildings acquired under, inter alia, the 1841 Act) had been abrogated by paragraph 2 of the scheme and replaced by paragraphs 4 and 5 of the scheme and that it was under those paragraphs, which were wider in scope than section 14, that the trustees had sold to ISP, the effect of which was that the third proviso to section 2 of the 1841 Act was simply not in play. The third, which sought to address the contrast between section 86(1) and section 86(2) of the Education Act 1944, was that the 1952 scheme was in fact made as much under section 86(2) as it was under section 86(1) with the result that, as section 86(2) provides, the scheme operated as if the third proviso to section 2 did not have effect in relation to land forming part of any endowment affected by the scheme.

Ms Quint’s first argument gives too wide a scope to the scheme-making power contained in the 1869 Act as explained by Russell J in Bankes in the passage set out above. The second argument is not open to Ms Quint in the light of paragraphs 18 and 36 to 39 in the judgment of the Court of Appeal in Fraser v Canterbury Diocesan Board of Finance [2001] Ch 669. (That case, which was between the same parties, other than ISP, as are parties to the proceedings before me but in relation to another school site, was criticised in the House of Lords in the instant case (see paragraphs [20], [58] and [59]) but in a respect which does not call into question the court's conclusions at paragraphs 36 to 39.) As regards Ms Quint’s third point, I need only say that there was not a shred of evidence to indicate that the 1952 scheme had been made under section 86(2): the scheme does not purport to have been made under that provision but refers simply to section 86(1), an omission which Ms Quint optimistically attributed to drafting error at the time; nor is there the least suggestion that any steps were taken to comply with the proviso to section 86(2), a matter which Ms Quint brushed aside by submitting that it must be assumed that the Minister had fulfilled the proviso’s requirements.

Having thus come to the conclusion that there is in any event no merit in the scheme point, I propose to dispose of the point simply by refusing ISP permission to withdraw the admission in its defence that the Site was subject to the possibility of reverter under the third proviso to section 2.

When did the Site cease to be used as a school for the education of poor persons? This, as I have mentioned, is the first of the statutory purposes set out in section 2 of the 1841 Act. It was the purpose which the grantors of the Site selected under their deed of grant in April 1866.

Cesser of use of the Site for that purpose had not occurred by August 1975: that was the conclusion of the House of Lords. Mr Nugee submitted that on the available evidence nothing changed after that date until St Philip’s School finally closed its doors on 21 July 1995 (at the end of the then summer term) and therefore that closure on that date was the triggering event which brought the reverter into play. He submitted that, as I shall explain below, a later date could possibly be a candidate, namely some time in March 2000 when the special needs school subsequently operated from the Site by ISP finally closed, but said that his primary contention was that St Philip’s School’s closure on 21 July 1995 was the relevant event: the closure was permanent and the Site was not thereafter used as a school for the education of poor persons in any way which could sensibly amount to the continuation of that statutory purpose.

Ms Quint submitted that if, as I have held, the possibility of reverter survived the making of the 1952 scheme, reverter occurred on or before the sale by CDBF to ISP on 30 June 1995 but not at any time later than the moment immediately prior to transfer to ISP of title to the Site. She sought to support this by two arguments, one which she described as her “technical” argument and the other as her “broad” argument. The “technical” argument was to the effect that, although St Philip’s School continued after the sale until 21 July 1995, it did not do so pursuant to the trusts established by the 1866 deed but pursuant to the licence entered into on completion of the sale on 30 June 1995. That licence arrangement, although it enabled the school to continue, was purely contractual in nature and, as such, was an entirely new basis in law for the continuance of the school. Her “broad” argument was that the sale was the point at which the decision of CDBF to close St Philip’s School and therefore to cease to use the Site for a school for the education of the poor became crystallised and irrevocable. It represented the culmination of a process involving a decision to relocate the existing pupils elsewhere and was followed by the actual process of sale. The fact that under the licence arrangement use of the Site as a school continued for a further three weeks was no more than the working out of the closure decision.

I am not persuaded by either of Ms Quint’s arguments. The first seems to be an impermissible attempt to revive a view of the law previously held but which the House of Lords in the current dispute said was wrong, namely that reverter occurs when the site is no longer used for the substantial purposes for which it had been directed by its grantor under the deed of grant made under the 1841 Act, rather than, as the House of Lords held, when the relevant statutory purpose (ie the purpose selected by the grantor) is no longer being carried out.

That apart, the short answer to both arguments is that they ignore the fact that the Site continued to be used as a site for a school for the education of poor persons until 21 July 1995 by which time, indeed since 30 June 1995, the Site was owned by ISP. Reverter occurred when the Site ceased to be used for the statutory purposes selected by the grantors under the 1866 deed, namely as a school for the education of poor persons. The only question therefore is when the Site ceased to be so used. That was plainly and unmistakably after the sale on 30 June 1995. It is irrelevant to the question that after that date the Site was used as a school by CDBF under the licence arrangement rather than as owner of the Site, whether upon the trusts set out in the 1866 deed or otherwise, or that the decision to cease using the Site as a school was crystallised, and the steps taken to give effect to that decision set irrevocably in train, by (at the latest) completion of the sale of the Site on 30 June 1995.

In my judgment, therefore, there is no arguable basis for contending that reverter occurred on 30 June 1995.

In any event, as Mr Nugee went on to submit, it does not help ISP to establish that reverter did occur at this time (but immediately before it acquired title to the Site from CDBF).

The effect of sections 1(1) and (2) of the 1987 Act is that from the moment of reverter, assuming it happened as ISP contended, the Site would have become vested in CDBF on trust for sale (reverter having taken place before the enactment of the Trusts of Land and Appointment of Trustees Act 1996) “for the persons who but for this Act [the 1987 Act] would from time to time be entitled to the ownership of the land by virtue of its reverter”. It would of course have been quite possible for trustees selling under a trust for sale to overreach the interests of the beneficiaries under the trust for sale (ie the revertees) and to have done so on the sale to ISP so that ISP would have taken free of those interests. But, to do so, it would have been necessary to comply with the requirements of section 27(2) of the Law of Property Act 1925 (“the 1925 Act”) which, before amendment by the Trusts of Land and Appointments of Trustees Act 1996, required that “the proceeds of sale or other capital money shall not be paid to or applied by the direction of fewer than two persons as trustees for sale, except where the trustee is a trust corporation …” with the consequence that, if not complied with, the conveyance of the legal estate in question could not overreach the equitable interests affecting that estate: see section 2(1)(ii) and (2) of the 1925 Act.

Whilst it is true that CDBF is a trust corporation, having been authorised to act as such by the then Lord Chancellor by an authority dated 2 November 1926 pursuant to the power in that behalf conferred by section 3(1) of the Law of Property (Amendment) Act 1926, that authority was expressed to be in relation to charitable, ecclesiastical and public trusts; it was not expressed to extend to acting in relation to a purely private trust. The trust arising under section 1(1) of the 1987 Act is a private trust; it is not a charitable, ecclesiastical or public trust. If therefore reverter was triggered in the way that Ms Quint submitted, CDBF was not a trust corporation in relation to the trust which thereby arose and could not therefore give a good receipt for the sale proceeds and, by so doing, overreach the beneficial interests of the revertees under the trust. This meant that ISP to whom the legal estate in the Site passed continued to hold it on trust for the revertees. Ms Quint had no answer to this submission.

That only leaves for decision just when reverter did take place. Mr Nugee’s primary submission was that this was when St Philip’s School closed on 21 July 1995. It is possible, as he accepted, that reverter might only have occurred when the special needs school closed in March 2000. It is not in dispute that if, as I have held, reverter did not take place before ISP became the owner of the Site, it occurred while ISP was its owner. The relevance of knowing just when reverter occurred goes to the date from which ISP must account to the claimants (assuming that they can demonstrate that they are the revertees) for an occupation rent for the Site (ie from the time of reverter until sale) as well as for the sale proceeds of the Site and any interest earned by such proceeds. Relevant to this is that it has not been suggested that the claimants’ interests as revertees were not overreached on the subsequent sale by ISP in 2005.

I can take this point fairly shortly. Reverter, in the case where the statutory purpose is use of the land as a school for the education of poor persons, is usually triggered when the school closes. But the closure must be permanent in nature. Closure made necessary by, for example, a fire and continuing until the fire damage can be made good will not suffice. In Re Chavasse (unreported) 14 August 1954 Harman J expressed the view, in a case where a school had been rendered unusable as a result of bomb damage in late 1940, that reverter did not occur until, at the earliest, when a compulsory purchase order was made in 1946 for the acquisition of the site in question for purposes other than for use as a school. He considered that the fact that between the time when the school had been rendered unusable by the bomb damage and the date of the making of the compulsory purchase order the site had not been used as a school did not justify a finding that reverter had occurred at some earlier date since throughout the period up to the making of the compulsory purchase order the intention had been to restore the school and the intention was and remained a practical possibility.

As the House of Lords in the instant dispute has made clear, the question as to when has reverter occurred must be approached in a broad and pragmatic manner. The question here is simply: when was the Site no longer used for the purpose of providing a school for the education of poor persons? (See paragraph [21] in the speech of Lord Hoffmann and paragraph [46] in the speech of Lord Walker.) Was this when St Philip's School closed on 21 July 1995 or was it when the special needs school closed in March 2000? The evidence, such as it is (and, surprisingly, ISP’s records of what happened are practically nonexistent), suggests that ISP acquired the Site for use as a special needs school but first had to effect various alterations to the building which took time to achieve so that the new establishment did not open its doors until around September 1996 which was well over a year after St Philip’s School had closed. That gap in time would not, in my judgment, be critical if the new establishment could properly be described as a school for the education of poor persons.

Without going in any detail into the evidence, I am of the view that the special needs school did not answer that description. It is sufficient to refer to a letter dated 15 December 2006 from ISP’s solicitors the accuracy of the contents of which there is no reason to question. In the course of that letter the following passage appears:

“The Maidstone Centre [as it appears that the special needs school was called] was used for a number of activities. It was a Centre for Foster Carers to get supervision and support. Therapy was available for children. Some of the children which came in for different types of therapy may well have been in mainstream schooling elsewhere in the area. Art therapy seems to have been carried out there together with child psychotherapy. The premises were used as a venue whereby children in Foster Care could have supervised contact with their birth families. LAC Reviews were carried out there with apparently regular six month meetings. LAC stands for “Looked After Children”. The Inspectorate of Schools did send Inspectors to visit the premises our clients have learned but they have no documentation in relation to such visits. Social Workers employed by the clients used the building as their offices.”

In the circumstances, I find that reverter occurred when St Philip’s School closed on 21 July 1995. There is no evidence that there was ever any intention thereafter to reopen the school on the Site as a school for the education of poor persons.