Chandon, if the school are doing this, it breaks the 'equal preference' rules, and will be grounds to win an appeal.
This is true up and down the country.
The HT is talking out of their arse.
I am under Essex LEA - is it the same LEA, or a different SE one?
The equal preference rules mean this :
The LEA look at your first choice. If you meet the admission criteria, but all the places are filled with people who meet the criteria but are closer, or you don't meet the admissions criteria, then you will not be allocated that school. You WILL however be put on the waiting list for that school.
The LEA then look at your second choice. BUT they treat it as if it had been your first choice. if you meet the criteria but all the places are filled by people who also meet the criteria but live closer than you, then you won't be allocated that school. You WILL however be placed in the waiting list.
The LEA then look at your third choice. BUT they treat it as if it had been your first choice. They see that you meet the admission criteria for that school, there are places left, so you get offered that school.
So what would happen in the case above is that on allocations day (1st March), you would get offered your third choice, but be placed on a waiting list (administered according to those school's admission criteria) for your first and second choice school.
You may be offered a place in your first or second choice school up until the 1st September - and sometimes later.