David Roberts Art Foundation Ltd v Riedweg

Sale of land – Contract – Rescission – Summary judgment – Claimant charity seeking declaration that contract for sale of land to defendant validly rescinded – Claimant applying for summary judgment – Defendant claiming contract unenforceable due to failure to comply with Charities Act 2011 – Whether defendant having real prospect of successfully defending claim – Whether case suitable for summary judgment – Application dismissed The claimant was a charitable company registered with the Charity Commission and the freehold owner of a property at 15a and 37 Camden High Street, London. The claimant entered into a contract for the sale of the property to the defendant on 5 May 2017 for £8,010,000 and the defendant paid a deposit of £410,000. The contract incorporated the Standard Commercial Property Conditions (Second Edition) and fixed a completion date of 31 October 2017. The defendant failed to complete the purchase on the due date and the parties entered into a deed of variation which made minor adjustments to the purchase price and provided for a new completion date on 15 December 2017. The claimant served notices to complete and subsequently gave notice of rescission in accordance with condition 9.5.2 of the Standard Conditions. The notice was accompanied by a letter of claim to which there was no response. Subsequently, the property was sold to a third party for £5,500,000. The claimant sought a declaration that the contract had been validly rescinded and that the deposit was forfeit, with judgment for the balance of the deposit under the terms of the contract and damages. The defendant alleged that the contract of sale of the property was unenforceable as a result of being invalid, void or ultra vires because the claimant failed to comply with the provisions of Part 7 of the Charities Act 2011 concerning the disposal of land by a charity. By her counterclaim the defendant sought the return of her deposit. The claimant applied for summary judgment on its claim pursuant to CPR 24.2 on the basis that the defendant had no real prospect of successfully defending the claim and there was no other compelling reason why the claim should be disposed of at a trial. Held: The application was dismissed. (1) Section 117(1) of the 2011 Act provided that no land held by a charity was to be conveyed, transferred, leased or otherwise disposed of without an order of the court or the Charity Commission. However, section 117(2)(b) enabled the sale of charity land to take place without obtaining an order from the court or the commission if certain requirements set out in section 119(1) were complied with. The claimant did not obtain an order from the court or the commission before serving notice to complete and, therefore, it was necessary to consider section 119 which set out the requirements that were forecast in section 117(2)(b). The charity trustees, before entering into an agreement for the sale of the land had to: obtain and consider a written report on the proposed disposition from a qualified surveyor instructed by the trustees and acting exclusively for the charity; advertise the proposed disposition for such period and in such manner as was advised in the surveyor’s report (unless it advises that it would not be in the best interests of the charity to advertise the proposed disposition); and decide that they were satisfied, having considered the surveyor’s report, that the terms on which the disposition was proposed to be made were the best that could reasonably be obtained for the charity. The trustees were required to “obtain”, “consider”, “advertise” and “decide”. There were difficulties, however, with the sequence in which those actions were to happen. The Act seemed to contemplate that the report, or reports, would be provided by a person. In practice, it would commonly be the case that the report was a report not of an individual but of a firm and might well be the work of more than one person. No doubt the draftsman did not intend that such niceties should be a ground for a transaction being declared void or being avoided. Section 122(2) and (3) of the 2011 Act dealt with additional requirements that were not part of the requirements arising under section 117. Under section 122(2), a contract for the sale, or for a lease or other disposition, of land held by a charity had to state: (a) that the land was held by or in trust for a charity; (b)whether the charity was an exempt charity and the disposition was one falling within section 117(3); and (c)if it was not, that the land was land to which the restrictions on disposition imposed by sections 117 to 121 applied. Absent any compliance with the statutory requirements, the default provisions applied and if there was no order from the court or the Commission, the charity was not entitled to dispose of the land. (2) In this case there had been partial compliance with section 119(1). A report was obtained, albeit that terms had been agreed in principle before it was produced. The requirements of section 119(1) had to be interpreted in light of the overriding test that emerged from section 119(1)(c), namely that the terms of the disposition were the best that could reasonably be obtained for the charity. However, the claimant fell short of discharging the burden that lay on it on an application for summary judgment because there was no evidence about the initial decision to put the property on the market and there was no evidence about what instructions were given to the agents or their advice or why the proposed disposition was not advertised. There was only minimal evidence about the steps taken to market the property and how thorough the exercise was. There was no evidence that the absence of advertising made no difference to the sale terms. It was a matter the claimant should have considered in the report. Its evidence about compliance with section 119(1)(c) was inadequate. Evidence was missing from at least one director saying in terms what it was they considered and what was their reasoning that led them to be satisfied with the offer. Accordingly, this was not a suitable case for summary judgment. There needed to be an investigation at a trial about the process of marketing the property and the decision-making process of the directors and disclosure would be required. ZoeBarton (instructed by Dentons UK and Middle East LLP) appeared for the claimant; Edward Meuli (instructed by Forsters LLP) appeared for the defendant. Eileen O’Grady, barrister Click here to read a transcript of David Roberts Art Foundation Ltd v Riedweg