If the school has said that it can cope with 20 more pupils, it is accepting that it will not be caused prejudice by admitting 20 more. It would be unlawful for it to cause prejudice to its existing pupils by taking more than it can manage. In effect, it is saying that the PAN is incorrect, possibly (which often happens) because it is out of date. Therefore it must in law take the first 20 off the waiting list.
Appeals are won because there has been a failure in terms of the admission allocations process; or because the panel does not consider that the school would be prejudiced by taking more pupils; or because it is satisfied that the school would be prejudiced by taking more pupils but that prejudice to the appellant pupil outweighs that. Sometimes appeal panels make their findings on the basis that the PAN does not reflect the school's capacity, e.g. because of building works.
Sure, this school would possibly not have admitted to being able to take 20 more pupils if no-one had appealed, but the fact is that they have. In effect, they have said that the PAN is incorrect. It is not open to the school to say that admitting more pupils will cause prejudice but they are prepared to accept that prejudice.
Yes, there are cases where panels have found that the school had not proved its case as to prejudice and therefore all appeals will be allowed. That is because that is what is required of the panel, and is all that the panel has jurisdiction to do. However, what we have here is a different situation where the school has accepted that it can take more before the panel starts to sit.
Think about the position of the parents of no. 1 on the list, perhaps living extremely close by and having to travel miles to a school they didn't want, but they didn't appeal because they correctly did not think they could argue that that in itself constituted a valid ground of appeal. They hear, the day before the appeal hearing, that the school can in fact take 20 more pupils without any prejudice being caused, but their child isn't going to get one of those places because they will probably go to people who have appealed (and it is obviously too late for them to appeal for this round). They then hear that people who appealed despite having a case with even less merit than theirs have won places, just because there were 12 appellants the panel deemed to have yet weaker cases. Or, in particular, think about the position if there had been only 20 appellants, in which case each and every appellant wins their case even if it is wholly without merit and they actually live a very long way from the school. Remember, in this situation the appeal has to be granted even if the child lives 200 miles away: admittedly unlikely, but appeal panels do get these appeals when the parents say they are going to move.
Previously these the parents of no. 1 would have a place if just one pupil left but were at risk of having to wait for, say, 6 pupils to leave if another 5 families satisfied the appeal panel on valid grounds that they should have places. However, they are now in the position of having to wait for 21 pupils to leave.
Do you think that family might have a case for arguing that the admission process has been administered unlawfully or irrationally?