England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF
JUSTICE, CHANCERY DIVISION
(The Honourable Mr Justice Lewison)

		Royal Courts of Justice Strand, London, WC2A 2LL
		28 January 2004

Lady Justice Arden :

1. This is an appeal with the permission of the judge from the order of Lewison J dated 14 May 2003. The question before the judge was whether in the events which had happened proceeds of sale of part of the site of St Philip's School, Maidstone had become vested in the successors in title of the grantor pursuant to a deed of trust dated 5 April 1866 and section 2 of the School Sites Act 1841, as amended.
2. Section 2 confers a right of reverter. In material part it provides:-

"Any person, being seised in fee simple, fee tail or for life, of and in any manor or lands of freehold, copyhold or customary tenure, and having the beneficial interest therein, … may grant … any quantity not exceeding one acre of such land, 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 purposes of the education of such poor persons in religious and useful knowledge provided 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 to all intents and purposes as if this Act had not been passed, anything herein contained to the contrary notwithstanding."

3. Although section 2 provides that reverter takes place only if the land ceases to be used for a purpose mentioned in the Act, it has been held by this court that reverter takes place if the land ceases to be used for the purpose mentioned in the conveyance, provided that that purpose is itself within the Act: Fraser v Canterbury Diocesan Board of Finance (No.1) [2001] Ch.669. It is common ground that, if reverter occurs, it is automatic and irrevocable.
4. If land reverts to the grantor under section 2, but continues to be used by the donee, the grantor may at common law lose his rights under the reverter by virtue of adverse possession (Re Ingleton Charity [1956] Ch.585). This position was changed by the Reverter of Sites Act 1987. By virtue of this Act, once reverter occurs, the donees hold the land on trust for the donor or successors in title. The 1987 Act accordingly enhanced rights of reverter. It came into force on 17 August 1987. Accordingly, for the right of reverter in this case to have been lost by the donor by virtue of the doctrine of adverse possession, reverter must have occurred before 17 August 1975.
5. The detailed background is set out in the judge's judgment and I need only summarise it. The donor of one of the parcels of land which became the site of St Philip's School, Maidstone was a Mr Herbert Monckton. The respondents to this appeal, the claimants in the action, are his successors in title. By a deed of trust dated 5 April 1866, Mr Monckton donated the land in question on trust:-

"to permit the said premises … to be … 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 …"

6. The judge held that under the terms of the trust pupils had to live in the Ecclesiastical District of St. Philip (judgment, paragraph 59). There is no appeal from this part of the judge's holding. The judge used the term "qualifying persons" to denote pupils who were of the labouring, manufacturing or other poorer classes and resided in the Ecclesiastical District of St. Philip as it existed from time to time. I will use the same expression. The appellant is now the trustee of the trusts of the deed dated 5 April 1866.
7. It was common ground that well before 1975 education ceased to be provided by the school solely for children and adults of the requisite classes in the Ecclesiastical District of St. Philip for these reasons. First, the school educated children who came from social classes other than "the labouring, manufacturing and other poorer classes". Second, the school educated children from outside the Ecclesiastical District of St. Philip. So far as the education of adults at the school is concerned, there is in fact no evidence that the school provided education for adults, at least after 1903, but nothing turns on this.
8. The judge found as a fact that between 1931 and 1947, approximately 16% of pupils lived outside the parish. The judge also found that not all the children came from the poorer classes, although the majority did so. The judge could not be precise about the percentage (judgment, paragraph 70). The judge held that the trust was for the education of adults and/or children (judgment, paragraph 61). Accordingly, the school was being used for the purpose set out in the 1866 deed of trust, even though there was no provision of education for adults. There is no appeal on this point.
9. The fact that the trusts provided for the education of qualifying persons did not mean that no other pupil could enter the school:-

"If the aim or object of the school was to educate qualifying persons, the fact that a person ceased to qualify, but continued to be educated at the school, would not in my judgment alter the purpose of the school. It would be merely incidental to the achievement of the purpose" (judgment, paragraph 58).

10. Furthermore, in the judge's judgment, the use of the words "and for no other purpose" in the terms of the trust did not alter this conclusion:-

"63. … In my judgment [Mr Chapman] attributes to the phrase 'and for no other purpose' a meaning which it does not bear. It seems to me that the education of qualifying persons is the purpose for which the trust was created. For as long as the school continued to educate qualifying persons, it carried out the purpose of the trust. If the school educated children who were not qualifying persons that might or might not be a breach of trust. It would only be a breach of trust if the education of children who were not qualifying persons was a purpose of the school in the sense I have described." (Emphasis in original judgment, paragraph 63).

11. The judge then referred to Re Bathurst (unreported, 18 October 1978) in which HHJ Rubin sitting as a deputy judge of the Chancery Division held that the mere fact that a single child, who was not a qualifying person for the purpose of the trusts of the school site in question, was admitted to the school did not cause the trusts to fail by virtue of the proviso to section 2 of the School Sites Act 1841 set out above. The school continued to be used for the purposes in the trust deed. HHJ Rubin held that the mere fact that the trustees might have committed a breach of trust by admitting a non-qualifying child did not mean that the purposes for which the school site had been given had ceased.
12. The judge then made certain important factual findings:-

"66. Mr Chapman submits that that [the admission of a single non-qualifying child] is not this case. In the present case there is no evidence that the trustees had an admissions policy that restricted admission to qualifying persons. So far as the evidence goes, the trustees never rejected any pupil either on the ground that he or she lived outside the ecclesiastical district or on the ground that he or she was not a member of the relevant social classes. The school was simply open to any child who wished to attend it. Once the school simply became part of the state education system it ceased to be used for the purpose specified in the conveyance.

67. In my judgment Mr Chapman is correct to submit that the way in which the school was run indicates that its purpose was to educate not merely qualifying persons, but others as well. In my judgment it was a breach of trust for the school to have adopted a policy of educating children who were not resident in the ecclesiastical district of St Philip and who were not from the relevant social classes. Thus I do not accept Mr Nugee's submission that the school was not being used for a purpose other than that set out in the conveyance."

13. However, in the judge's judgment the purpose for which the school was actually being used did not amount to a different purpose from the education of qualifying persons or a cesser of the use of the land for the purposes set out in the trust deed:-

"If land is conveyed to be held on trust for purpose A and for no other purpose, and the trustees use the land for purpose A and also for purpose B, it seems to me that they are using it for two purposes, one of which is permitted by the trust and the other of which is not. What they have not done is to cease to use the land for purpose A merely because they are also using it for purpose B. … In my judgment, it would be a misuse of language to say that the school ceased to be used for the purpose of educating qualifying persons, in circumstances in which it educated both qualifying persons and others as well." (judgment, paragraphs 69 and 72)

14. The judge rejected a further argument that by becoming part of the state education system the school had ceased to be used for the purpose set out in the conveyance. In conclusion, he held that until St Philip's School closed in 1995 it continued to educate qualifying persons even if it also educated others who were not qualifying persons. Thus, it did not cease to be used for the purposes for which it had been established. Accordingly, there was no reverter before the coming into force of the Reverter of Sites Act 1987. The judge accordingly made a declaration that the ownership of the site of St Philip's Church did not revert pursuant to section 2 of the School Sites Act 1841 at any time prior to 17 August 1975.

Submissions

15. The argument of Mr Christopher McCall QC, for the appellant, is a very simple one. He submits that the judge's conclusion is inconsistent with his finding in paragraph 67 of his judgment. He there accepted the submission for the appellant that the way in which the school was run indicated that its purpose was to educate not merely qualifying persons, but others as well. In doing so he acknowledged the single purpose set out in the conveyance, whilst indicating that it was ignored. It was accordingly inconsistent with this finding for him to decide, as he did in paragraph 69, that there were two purposes and that the education of non-qualifying persons was a separate purpose. The judge had confused the purpose and the effect of the policy of the school. If the school had a policy of educating non-qualifying persons as the judge found at paragraph 67, the beneficiary class had changed and the original purpose had been disregarded. The original purpose would not have been disregarded if (for example) a non-qualifying child was admitted by accident or if the admission of a non-qualifying child was the exception. Here, however, the judge found that the purpose had changed. Accordingly, there was a cessation of the purpose stipulated in the trusts on which the land was held. It was not enough to show that the school continued to be used as a school until 1995.
16. On this basis the words "and no other purpose" are not critical in the present case. To take advantage of section 2 of the 1841 Act, the trusts had to be for one or more of the purposes specified in that Act. The subsequent adoption of a purpose not specified in the trust deed would constitute a breach of trust and could cause a cesser of the authorised purpose(s) under the proviso to section 2 of the 1841 Act.
17. Mr Christopher Nugee QC, for the respondents, makes the following submissions. He submits that the principle is that there has to be a cessation of the purpose for which the land was devoted. There must be an institutional change and he cites a number of authorities to illustrate this position. In Attorney-General v Shadwell [1910] 1 Ch.92 the school was required to be used as a day school. It was, in fact, also used as a Sunday school. Warrington J held that it had ceased to be used for the required purpose when the day school closed even though the Sunday school continued. In Habermehl v Attorney-General [1996] EGCS 148 the change was from use as a voluntary (Church of England) school to a provided (School Board) school as the result of a lease by the school by its trustees to the Board. There was, therefore, a lease of the premises to a separate institution of a materially different character. This caused the purposes to cease. Habermehl was approved by this court in Fraser v Canterbury Diocesan Board of Finance (No.1). Mr Nugee submits that the instant case is a novel and ambitious attempt to extend the principle of cesser to a case where there is no marked institutional change. This is a surprising result to derive from the casual admission of children who were not qualifying persons. The court should bear in mind that reverter is automatic and irrevocable. Moreover, in previous cases there had been closure of the school. Furthermore, if the appellant is right, the title of the trustees is precarious. The scheme of the 1841 Act was to provide an incentive to landowners to give sites for a school. The mischief to which it was directed was essentially the sale of the sites by the trustees. There is nothing in the legislation to suggest that reverter was also intended as a threat hanging over the trustees to ensure strict adherence to their trusts. As charity trustees, the trustees could be compelled to comply with their trusts in the last resort at the insistence of the Attorney-General or the Charity Commissioners. In Mr Nugee's submission it is most improbable that it would have been intended that the grantor should be concerned with the day to day administration of the school while it continued, as opposed to having an interest if the school closed.
18. Mr Nugee also points out that the model deed promulgated in the 1830s by the Committee of the Privy Council on Education for gifts of land for school sites provided that:-

"the trust should be for the benefit of labouring, manufacturing and other poorer classes in the … (Parish) or … (Ecclesiastical District) of … and for no other purpose."

19. The wording in section 10 of the 1841 Act (setting out an optional form of grant) was similar, as are the trusts in this case. Mr Nugee submits that this loose wording does not suggest that reverter is too readily to occur.
20. Mr Nugee further submits that the consequences of the appellant's submission are absurd. The school would have had to reject pupils who were not qualifying persons even if the school was not full. Moreover, the trustees might be relying on their own breach of trust to defeat revertees' right. However, Mr Nugee does not submit that there was a breach of trust in this case. He submits that the land did not cease to be used for the purposes specified in the trust. This would require a permanent discontinuance: see Re Chavasse's Conveyance (unreported, Harman J, 14 April 1954). There was no discontinuance of the school in this case. Finally, Mr Nugee relies on the passage in Re Bathurst relied on by the judge.
21. Mr Nugee dismisses the argument that, on the judge's reasoning, a school would still be within the trust if 10% only of its pupils came from the district. The vast majority of pupils were in fact qualifying persons. The purposes do not cease to be qualifying purposes if one child who is not a qualifying person is admitted. The grantor would not have been concerned if the school admitted non-qualifying persons in order to make up its numbers.

Conclusions

22. In his judgment, particularly paragraph 67, the judge clearly found as a fact that the school had ceased to be used solely for the purpose set out in the trust deed dated 5 April 1866. He was entitled to reach this conclusion. The question whether a purpose has changed or ceased is a question of fact. Here, for many years there were pupils who were not qualifying persons but persons from other districts. Approximately 16% of the children came from other districts in the years 1931 to 1947. In addition, a significant number of children came from classes who were not the poorer classes specified in the trust deed although the poorer classes were a majority. The new and wider purpose was the provision of a school for all comers, not only qualifying persons. Indeed, there is no finding that any priority was given to qualifying persons.
23. The judge then treated this wider purpose as two separate purposes in his analysis in paragraph 69 of his judgment. In my judgment, Mr McCall is right to submit that this was inconsistent with his findings of fact in paragraph 67. The judge was equating the purpose for which the school was run with the admissions policy it in fact followed, which policy involved the admission of qualifying and non-qualifying persons. The fact that the school admitted both groups of persons did not mean that there were two separate purposes, i.e. the purpose of admitting qualifying persons and second the purpose of admitting non-qualifying persons. On the judge's findings, there was a single purpose, namely the admission of all comers. Having made that finding, it was not open to the judge to avoid applying the proviso to the 1841 Act on the basis that the single purpose could be split into two purposes. The only conclusion which on his findings was open to the judge was that the purpose set out in the trust deed dated 5 April 1866 had ceased long before 17 August 1975. On that basis the appeal must, in my judgment, be allowed.
24. The situation where a school has two purposes is to be distinguished from the situation where a single purpose is carried out and in the course of carrying out that purpose acts are incidentally done which are outside the authorised purpose. These would not, in my judgment, cause the authorised purpose to cease. Likewise, the fact that a breach or breaches of trust have occurred does not necessarily mean that the authorised purpose has ceased to be the purpose for which the school is used.
25. As I have said, cesser of purpose is a question of fact. For my part I would not accept Mr Nugee's submission that the court has to find an "institutional" change. In my judgment, that is to put a gloss on section 2 which is not authorised by the section. The fact that in earlier cases cessation has taken the form of the closure of the school does not prevent another set of facts from constituting a cessation. Nor do I accept the submission that the construction which I place on section 2 makes the trustees' title precarious. It simply means that trustees must adhere to purposes permitted by the terms of the trust. Likewise, I do not accept the submission that the consequences of the appellant's construction are absurd. In my judgment, the school could have accepted non-qualified persons as pupils without necessarily departing from the purpose for which it was established.
26. The judge's proposition in paragraph 69 of his judgment, which I have set out in paragraph 13 above, concerning the addition of a new purpose (purpose B) was not, therefore, in point. In any event, the simplicity of his proposition is deceptive. If purpose B is inconsistent with purpose A, purpose A as properly understood may, in fact, have ceased as a result of the addition of purpose B. The judge's proposition is, therefore, not universally true and amounts to a false syllogism. Mr McCall gave the example of a music academy established for the purpose of teaching music to which a further purpose was added, for example that of teaching academic subjects. The correct conclusion on the facts may be that the nature of the establishment has so changed that the original purpose has plainly and permanently ceased.
27. I leave open the question whether, as a matter of statutory construction, the proviso to section 2 of the 1841 Act is triggered merely by the adoption of a new and unauthorised purpose. If this were the correct construction, the judge's proposition about the addition of a new purpose (purpose B) could never apply to section 2 of the 1841 Act. I would accept Mr McCall's submission, disputed by Mr Nugee, that a trust falls outside section 2 if it is originally established for an additional purpose not mentioned in the section. Section 2 provided a new gateway from the restrictions at common law on the disposal of land by limited owners and from the restrictions under the Charitable Uses Act 1735 on the reservation of rights of reverter. As I see it, Parliament did not intend to create any greater gateway than that for which section 2 makes express provision. But, without deciding the point, I doubt whether this means that a purpose ceases for the purposes of the proviso merely because the authorised purpose ceases to be the sole purpose. The addition of the new purpose, if significant, would be likely in practice to be a breach of trust. That could be rectified by means other than reverter and thus it would not necessarily have been the intention of Parliament that the draconian sanction of automatic and irrevocable reverter should follow in that event.
28. At one point in his submissions, Mr Nugee sought to persuade us that the words "for any other purpose" qualified the word "school" in the terms of the trust but not the words which followed it defining the terms of the trust. In my judgment, the terms of the trust must be read as a whole and this construction is untenable as well as tending to surprising results.
29. Accordingly, I consider that this appeal should be allowed. The reverter occurred automatically and irrevocably long before 17 August 1975. The fact that the revertees may not have known this cannot alter the position. (Indeed there is nothing to suggest that they could not have made enquiries). Nor can the trustees be precluded from claiming the proceeds by reason of their assertion of their own wrongful acts: any adverse possessor must rely on his own acts of trespass. The trustees acquired the land free of the respondents' right of reverter by virtue of adverse possession and are therefore entitled to the proceeds of sale. Mr McCall accepts that they have not acquired these proceeds of sale beneficially but as trustees of the trusts established by the trust deed dated 5 April 1866.

Mr Justice Wilson :

30. I agree.
31. As my Lady has explained, the proper analysis of the judge's findings is that, as clearly indicated in paragraph 67 of his judgment, the purpose for which the land was used became the education of persons regardless of the qualifications set by the deed of trust. That occurred long ago and triggered the reverter.
32. But, with great respect to him, even had the judge been justified in proceeding to separate that purpose into two purposes, the one being (so he held) permitted and the other not permitted, I personally would have found difficulty in subscribing to his conclusion. My difficulty would have arisen from the words "and for no other purpose" expressed in the deed of trust. In my view those words may very well be given proper value only if construed so to limit the permission for use of the land for the specified purpose as to endure only while no use is made of it for any other purpose. Were such a construction correct, the judge would in any event have been wrong to hold that, even after the land began also to be used for a purpose not permitted, the purpose, hitherto permitted, for which it had been used remained permitted still.

Lord Justice Potter :

33. For the reasons set out in the judgment of Arden LJ, I agree that this appeal should be allowed.

LADY JUSTICE ARDEN: In this matter, for the reasons handed down in writing, which are now available, this appeal is allowed. The order will be in the terms agreed by the parties. The application for permission to appeal will be dealt with by the court on paper.

Order: Appeal allowed; terms of order agreed by parties; application for permission to appeal to be dealt with on paper. (Order does not form part of the approved judgment)