A London council has told of the “keenly felt human cost” of having to meet a seven-figure compensation demand over a school site row, saying services for “vulnerable children and adults” will take the hit.
Lambeth could be forced to pay out millions for leisure and accommodation facilities on the site of the former Durand Academy, in south London.
There will be a real and keenly felt human cost if Lambeth were to have to meet the demand of compensation
It follows Durand Education Trust, the school’s sister charity, bringing a judicial review against the government’s decision to order it to give up the land free.
The charity claims it is entitled to compensation for increasing the value of the site, despite any development being completed six years before it was set up.
In the Court of Appeal this week, Jonathan Auburn, representing Lambeth, pointed to the authority’s “tightly stretched budgets” and said there could be an impact on its services for “vulnerable children and adults” if it had to pay.
“There will be a real and keenly felt human cost if Lambeth were to have to meet the demand of compensation.”
He also said Durand had suggested Lambeth “could pay compensation to it by reserves or increasing council tax or taking the mortgage over the land”, but said councils were prohibited by law to mortgage individual assets.
Durand Academy became Van Gogh primary school in 2018 after the government terminated its funding agreement. At that point the school land and buildings were handed to Van Gogh’s sponsor, the Dunraven Educational Trust.
But Durand Education Trust (DET), a charity set up by the school’s governors in 2010, kept hold of land occupied by a private leisure centre and accommodation, including the top floors of the school’s main building.
The court heard that DET finally handed back the land and buildings on October 9, and struck a deal for its trading arm, London Horizons, to run the facilities for another 18 months.
But during this week’s hearing, DET argued that it was due compensation for the “enhanced value” of the commercial land.
The trust claims the decision not to award compensation was disproportionate, and that there was no “fair procedure” in place to determine whether payment was due. It also argued the decision violated its right to peaceful enjoyment of property and its right not to be discriminated against.
DET has not said how much it is demanding, but Schools Week reported last month that it is thought to want about £3 million.
Jonathan Moffett, acting for the Department for Education, said the land and buildings were public assets. There was “no evidence that DET did anything that enhanced the value of the site, and there is no evidence that DET has been left out of pocket”.
He said the leisure facilities were built with the help of a £100,000 grant from the London Residuary Body, and said no investment had been made in the buildings since 2004.
But Andrew Sharland, acting for DET, said the assertion nothing was invested after 2010 “fails to have proper regard to the funds invested which were generated from the commercial exploitation of the leisure land alone”.
The court heard how Durand became a grant-maintained school in 1995, giving its governors control over the land. Parts of the school building were converted into residential accommodation, and a freestanding accommodation block and leisure centre were later built on the site.
Governors incorporated London Horizons Ltd in 1997 to run the leisure facilities. Profits were then put back into the school.
In 1999, the school became a foundation school, and its governors formed a foundation trust. Durand Education Trust was formed in 2010 shortly before the school converted to an academy, at which point it took on the land and buildings.
Moffett said that for a few years after conversion, things “went as planned”, with DET funding improvements to school buildings and providing money to the Durand Academy Trust.
But funding “dried up” in 2015, shortly after the school’s unusual governance structure came to light in a high-profile National Audit Office report andt public accounts committee hearing.
Sharland insisted that DET had continued to invest in the school, in particular its satellite boarding site St Cuthman’s in West Sussex, which has since been sold.
He urged judges to quash the government’s direction, and said the DfE should publish guidance “setting out a fair procedure for the assessment of compensation”.
“It promised to do this over a decade ago, so it only has itself to blame that there is no such guidance.”
A judgment is expected in the coming weeks.