| SPOTLIGHT |
Malvern Hills District Council does not have a veto over the future of a college building it once owned, the High Court has ruled.
Judge Simon Gleeson heard the case of Warwickshire College v Malvern Hills District Council [2023] EWHC 2008 (Ch) concerned a building formerly occupied by Malvern Hills College, which was sold to it by the council in 2008 for £850,000.
A covenant stated the property could only be used as a further education college unless the council was satisfied either that the Learning and Skills Council (LSC) or its successor in function had properly determined there was no longer a need for a college in Malvern; or the education provided has been relocated to an alternative nearby site approved by the council.
Malvern Hills College and Warwickshire College merged in 2016 with the covenant terms remaining in force.
Courses for retired people had long outnumbered those for younger students and the college found it impossible to persuade the former to pay an economic fee leaving it with a £200,000 annual loss immediately before the pandemic. The building closed in 2020 and remains empty.
The college wants to sell the building but the council declined to provide the written confirmation required, which has effectively blocked this even though a sale would see the council entitled to 50% of the increase in value of the property since its initial transfer.
A determination from the Education and Skills Funding Agency (ESFA), which says it is the LSC’s functional successor found no requirement for a college in Malvern.
The college therefore argued the council was obliged to provide the written confirmation necessary to allow the sale.
But the council refused on the basis that it does not accept that the ESFA is the functional successor to the LSC, does not accept that the ESFA's conclusion satisfies the requirement for a ‘determination’ and was not satisfied that the determination was properly made.
The council also argued that even if it were satisfied on the previous three grounds, nothing in the contract obliges it to provide the confirmation, something that was entirely within its discretion.
Judge Gleeson said he had to decide: is the ESFA a functional successor to the LSC; does the ESFA determination constitute a ‘determination’ of whether a college is needed in Malvern; if so, is the council entitled to conclude that it was not properly arrived at; is the council under any contractual obligation to provide the prior written confirmation specified in the covenant?
He said the council’s arguments “do not, individually or collectively, provide any reasonable basis for concluding that the ESFA is not the functional successor to the LSC”.
There was no doubt the ESFA had issued a determination and given it had concluded the provision of education at Malvern did not merit the use of its resources, “I cannot see how it would be possible for the ESFA to conclude that there is a positive need for such provision”.
The council said it could not be satisfied the ESFA’s determination had been properly arrived at until it had the opportunity of considering the basis on which it was made.
Judge Gleeson said: “This seems to me to be back to front. Where a public authority makes a determination, other public authorities are entitled to assume that that public authority has properly exercised its functions unless the facts indicate otherwise.
“I cannot see that the council have the slightest grounds to suggest that the ESFA's comprehensive review was not properly undertaken.”
He added that he was “unable to find any ground on which the council could have rationally concluded that there were procedural defects in the ESFA's determination”.
Judge Gleeson dismissed the council’s case that the conclusion a college was unnecessary in Malvern was one no rational decision-maker could have arrived at.
He said: “The historic record of the college pre-Covid demonstrates beyond doubt that its continuation in its current form was not a viable option.
“Put simply – and brutally – the users of the college had in practice determined that its services were not necessary, since they were not prepared to pay enough for their courses to cover its operating costs.”
Provision for younger students had been moved elsewhere.
Although the covenant did not oblige the council to provide the written confirmation needed before a sale “the question here is therefore as to whether a provision obliging it to provide such confirmation is implied into the contract”.
He said that if the covenant had intended to give the council a veto over the building’s sale it would have said so.
The covenant gave the council a review power but “it necessarily implies that the council's discretion is exhausted when the determination has been reviewed.
Judge Gleeson concluded: “The whole purpose of the clause is to ensure that the relevant determination is made by a specialist public body with access to the available information.
“It is not an arbitration clause, but its effect is to vest the making of the decision in an independent third party, and clauses of this kind generally carry an implication that both sides will abide by that determination and act in accordance with it.”
Mark Smulian
