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Schools can be governed in different ways but I would make a formal complaint to the governing body of the school which will be either the board of governors or local education authority.
Every organisation must have a formal complaints procedure. This will hopefully guarantee both your grand daughter and other children in a similar position better care and treatment.
I do not understand the concern regarding the school keeping the Junior books or anything sinister in this. A child can change school and/or require some evidence of achievement.