The David Roberts Art Foundation Ltd v Riedweg

Failure to comply with statutory requirements governing charity land disposals does not automatically invalidate the contract. The consequence of non-compliance is determined by statutory construction, having regard to the purpose and importance of the requirement within the statutory scheme.

The statement required by section 122(2) of the Charities Act 2011 is subsidiary machinery intended to alert purchasers. Its omission does not make the contract void, voidable or unenforceable. The requirements in section 119(1) have greater significance. Partial compliance may be sufficient where the charity can provide cogent evidence that the transaction achieved the best price reasonably obtainable. Whether that was established was unsuitable for summary judgment.

The claimant, a charitable company, contracted to sell land to the defendant. The defendant failed to complete, and the claimant rescinded the contract and sought judgment for the deposit and damages.

The defendant alleged that the contract was invalid because the claimant had failed to comply with Part 7 of the Charities Act 2011, including the requirements concerning a surveyor’s report, advertising and the statutory statement. The claimant sought rectification and summary judgment under CPR rule 24.2.

The central issues were whether omission of the section 122(2) statement invalidated the contract, whether the contract could be rectified, whether the section 119(1) requirements had been met and what consequences followed from any failure.

1. Section 122(2). The draft transfer was incorporated into the contract. Information required by section 122(2) could be contained in separate parts of the contractual documents, provided that, on a careful reading, the required information was stated. However, the omission of the statutory statement did not invalidate the contract. The statement was a subsidiary, purchaser-protection mechanism and a flagging procedure, unlike the statutory certificate, which attracted express saving provisions.
2. Rectification. Although unnecessary to the result, the rectification claim had no real prospect of succeeding. The evidence did not approach the standard of convincing proof required, and there was no evidence of a shared express intention to include the omitted statement.
3. Section 119(1). The requirements were generally chronological: the trustees should consider the proposed disposal, obtain the surveyor’s report, consider it, advertise in the advised manner unless advice against advertising was given, receive an offer and decide, having considered the report, that the terms were the best reasonably obtainable. The report might require supplementation depending on the circumstances.
4. The claimant had failed to advertise on the basis of surveyor’s advice, or to obtain advice dispensing with advertising. However, the omission did not inevitably make the contract void, voidable or unenforceable. Bayoumi Women’s Total Abstinence Union Ltd was distinguishable because there had been no attempt at compliance in that case. Where there had been partial compliance, the controlling question was whether advertising would have made a difference and whether the charity could show that the transaction achieved the best price reasonably obtainable. Cogent evidence was required.
5. Summary judgment. The claimant had not discharged its burden under CPR rule 24.2. There were material evidential gaps concerning the decision to market the property, the reasons for not advertising, the extent of marketing, whether advertising would have affected the price and the directors’ reasoning under section 119(1)(c). Those matters required disclosure and trial.
6. The claimant could not rely on section 42 of the Companies Act 2006 because it was not part of its pleaded case.

The application for summary judgment was dismissed. Directions for trial and consequential matters were to be considered when judgment was handed down.