Warwickshire College v Malvern Hills District Council
| Jurisdiction | England & Wales |
| Judge | Mr Simon Gleeson |
| Judgment Date | 01 August 2023 |
| Neutral Citation | [2023] EWHC 2008 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: PT-2022-000455 |
[2023] EWHC 2008 (Ch)
Mr Simon Gleeson
Case No: PT-2022-000455
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMPANIES COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Galina Ward KC (instructed by Eversheds Sutherland (Intl) LLP) for the Claimant
James Hanham (instructed by Bevan Brittan LLP) for the Defendant
Hearing dates: 14 June 2023
APPROVED JUDGMENT
This case concerns the future of the building formerly occupied by Malvern Hills College. This college was established in 1886 as the Malvern School of Art, and relocated to its current building in 1928 as the Malvern Technical College and School of Art. That building (the “Property”) was sold by the Defendant Malvern Hills District Council (the “Council”) to Evesham and Malvern Hills College (“EMHC”) in 2008 (the “Transfer”) for £850,000. By clause 12.4 of the Transfer EMHC as Transferee covenanted with the Council as Transferor in the following terms:
“The Transferee hereby covenants with the Transferor such that the burden of this covenant will be annexed to and run with the Property:
12.4.1 not to use the Property other than for a Further Education College and ancillary uses thereto without the prior written confirmation of the Transferor that the Transferor is satisfied either:
12.4.1.1 that the Learning and Skills Council (or any successor in function) has properly determined that there is no longer a functional need for a college in Malvern; or
12.4.1.2 the further and higher education and training provided at the Property immediately prior to such relocation as hereinafter mentioned (or education and training at least equivalent in variety quality and quantity) has been relocated to an alternative site within or adjacent to Malvern as previously approved in writing by the Transferor for that purpose (such approval not to be unreasonably withheld or delayed)”
This is referred to herein as the “Covenant”.
EMHC and Warwickshire College merged in August 2016 to form the Claimant (the “College”), and ownership of the Property was therefore transferred to the College. Pursuant to that Transfer, the Council and the College entered into a deed of covenant dated August 2016 whereby the College covenanted to observe and perform the covenants in the Transfer, including clause 12.4.
The College provides a variety of different types of courses at a variety of sites in the Malvern area. Two types of courses were provided at the Property: government funded courses for younger students and short courses for older students — predominantly retirees. The latter have always constituted the larger part of the activities at the Property, and account for the majority of the income from the Property. The College says that it has proved impossible to persuade those attending the latter type of course to pay fees consistent with the cost of providing those courses, and as a result the courses provided at the Property have been loss-making for some years. Prior to the Covid lockdown the running rate of losses was around £0.2m per annum on a turnover of £0.6m. The Property was closed in 2020, and the provision of funded courses for younger students has been transferred to another venue operated by the College (20 miles away from Malvern). The Property is currently empty and unused.
The College is left with a vacant but valuable asset. It therefore wishes to sell that asset in order to apply the proceeds to finance its educational activities on other sites and increase the provision of education services locally (as an educational charity, it can do nothing else with them). The Council has declined to provide the written confirmation required by 12.4.1, so no change of use can be effected, so as to facilitate a sale. It should be noted – although it is probably not relevant to the issues before me — that in the event of any such sale the Council would be entitled to 50% of the increase in value of the Property since its initial transfer, so the Council's refusal to provide this confirmation is against its own economic interest.
The College has obtained a determination from the Education and Skills Funding Agency (“ESFA”), which it says is the functional successor to the Learning and Skills Council (the “LSC”). It says that the effect of that determination is that there is no functional requirement for a college in Malvern. The College therefore says that the Council is obliged to provide the written confirmation necessary to allow the Property to be sold. The Council says that it cannot do this for a number of reasons. Those reasons are that:
i) It does not accept that the ESFA is the functional successor to the LSC;
ii) It does not accept that the statement of the ESFA's conclusion which the College has obtained satisfies the requirement for a “Determination” for the purposes of the clause;
iii) It is not satisfied that the determination made by the ESFA is properly made, on a variety of grounds; and
iv) Even if it were satisfied on the previous three grounds, it says that there is nothing in the contract which obliges it to provide the confirmation, and the question of whether or not to provide such a confirmation is entirely within its discretion, which it can legitimately decide not to exercise.
I therefore think that there are four broad points which I have to decide:
i) Is the ESFA a functional successor to the LSC?
ii) Does the ESFA determination constitute a Determination of the question of whether there is no longer a functional need for a college in Malvern?
iii) If it does, is the Council entitled to conclude that it was not properly arrived at?
iv) If the Council were satisfied on the three previous points, would it be under any contractual obligation to provide the prior written confirmation specified in the Covenant.
I note that both sides take pleading points on these issues. The College says that the Council's case up until trial has been simply that the ESFA is not a true successor to the LSC, and that the determination which it has made does not satisfy the requirements of the Covenant. It therefore says that the Council should not be allowed at this late stage to introduce the argument that, even if the determination is proper, it has a discretion to determine that it was not properly arrived at. Conversely, the Council says that the College's pleadings seek only a declaration that the determination was properly made, and do not address the question of what basis there might be for requiring it to grant the written confirmation.
I accept that pleading points of this kind cannot be simply dismissed. As Lewison LJ said in Prudential Assurance Co Ltd v HMRC [2016] EWCA Civ 376 at [20],
“It is inimical to a fair hearing that a party should be exposed to issues and arguments of which he has had no fair warning. If a party wishes to raise a new point, he should do so by amending a statement of case. We were told that by the time that skeleton arguments for trial were served each party would know what points were in issue. We do not regard that as sufficient.”.
However, it seems to me that in this case neither side has been disadvantaged by the other's failure to set these points out in writing, and they were addressed before me by both sides in some detail. I am therefore happy to treat them as having been properly raised, and address them.
I. Is the ESFA a functional successor to the LSC?
The administrative structure of the provision of education services in the UK has been frequently reorganised, and the issue of identifying the successor to the LSC is not entirely straightforward.
The LSC was established by section 1 of the Learning and Skills Act 2000 (“the 2000 Act”). Its main functions under the 2000 Act were set out in sections 2 and 3. At the date of the Transfer s.2 provided as follows:
“2. – Education and training for persons aged 16 to 19.
(1) The Council must secure the provision of proper facilities for—
(a) education (other than higher education) suitable to the requirements of persons who are above compulsory school age but have not attained the age of 19,
(b) training suitable to the requirements of such persons,
(c) organised leisure-time occupation connected with such education, and
(d) organised leisure-time occupation connected with such training.
(2) Facilities are proper if they are—
(a) of a quantity sufficient to meet the needs of individuals, and
(b) of a quality adequate to meet those needs.”
“Higher education” in this context means education provided by means of a course of any description mentioned in Schedule 6 to the Education Reform Act 1988, which lists various types of course of first degree level and above. Compulsory school age is defined in section 8 of the Education Act 1996: essentially it runs from the school year in which a child turns 5 to the school leaving day in the year in which they turn 16.
At the date of the Transfer, s.3 provided as follows:
“3. – Education and training for persons over 19.
(1) The Council must secure the provision of reasonable facilities for—
(a) education (other than higher education) suitable to the requirements of persons who have attained the age of 19,
(b) training suitable to the requirements of such persons,
(c) organised leisure-time occupation connected with such education, and
(d) organised leisure-time occupation connected with such training.
(2) Facilities are reasonable if (taking account of the Council's resources) the facilities are of such a quantity and quality that the Council can reasonably be expected to secure their provision.”
The LSC's functions at the time of the Transfer were therefore:
i) Under section 2 of the 2000 Act to secure the provision of proper...
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