R (on the application of Rochdale Metropolitan Borough Council) v Secretary of State for Education and Employment

Paragraph 7 of Schedule 1 to the Education Act 1946 gives the Secretary of State a broad discretion to determine what payment is just, having regard to the value of the interest conveyed.

It does not impose a compulsory formula based on the local education authority’s historic expenditure, nor provide an index-linked guarantee. The Secretary of State may consider original expenditure, the passage of time, current property value and the actual proceeds of sale. A legally permissible evaluative approach is not unlawful merely because another valuation method is available.

Rochdale Metropolitan Borough Council appealed against Hooper J’s dismissal of its application for judicial review. The application challenged the Secretary of State’s refusal to make a further determination under paragraph 7 of Schedule 1 to the Education Act 1946 concerning proceeds from the sale of former school playing fields.

The Council argued that the statutory phrase “the value of the interest so conveyed” required a valuation based on the local education authority’s historic cost of providing the replacement school, adjusted for the passage of time. The Secretary of State adopted a broader approach, having already made a determination under paragraph 8. The central issue was whether that approach involved an error of law.

The Court of Appeal unanimously dismissed the appeal. Laws LJ gave the leading judgment. Buxton LJ agreed and added observations on the statutory scheme. Thorpe LJ agreed with both judgments.

1. Scope of paragraph 7. Paragraph 7 does not require the Secretary of State to apply a formula or an exactly focused rule. He must determine what amount it is just to pay to the local education authority, having regard to the value of the interest conveyed. The statutory language gives him a broad discretion.
2. Meaning of value. It was open to the Secretary of State to treat “the value of the interest so conveyed” as referring to the property’s value when he considered the matter. Historic expenditure may be relevant, but it is not controlling. He may also consider the passage of time, current value and the actual purchase price received, including any apparent windfall. The Council’s proposed historic-cost and uplifted-value formula would impermissibly constrain the discretion and was not required by the statute.
3. Statutory context. The First Schedule to the Education Act 1946 must be read with Part II of the Education Act 1944. The local education authority provides a site as part of its overall responsibility for securing education and within a partnership with voluntary-school bodies. It is not simply donating assets to the school trust. That context supports the discretionary mechanism in paragraph 7.
4. The reference in paragraph 7 to section 14 of the School Sites Act 1841 merely assimilates the payment to a payment applied in purchasing a school site and confirms that no breach of trust is involved. Paragraph 8 and the distinction between controlled and voluntary schools provided no separate basis for the Council’s construction.

There was no error of law in the Secretary of State’s letters of 7 October 1998 and 4 January 1999. The appeal was dismissed with costs, and permission to appeal was refused.

• Court of Appeal (Civil Division) — In [2001] EWCA Civ 248, the court unanimously dismissed the appeal, ordered the Council to pay the costs, and refused permission to appeal.
• High Court of Justice, Queen’s Bench Division — Hooper J dismissed the Council’s application for judicial review on 2 March 2000.