The David Roberts Art Foundation Limited v Riedweg

The Chief Master refused the claimant's application for summary judgment under CPR 24.2 because there were real issues of fact and credibility about compliance with Part 7 of the Charities Act 2011. The principal legal issues were the consequences of non-compliance with section 119 (the requirement to obtain and consider a qualified surveyor's report, to advertise as advised in the report unless the report advises otherwise, and to decide that the terms are the best reasonably obtainable) and the effect of the omission of the section 122(2) statement from the contract.

The court held, as a matter of statutory construction, that omission of the section 122(2) "statement" did not automatically invalidate the contract; the statement is a subsidiary "flagging" requirement and Parliament cannot fairly be taken to have intended total invalidity in all cases for its omission. By contrast, non-compliance with section 119 may, in some cases, lead to lack of power to enter the contract, but that consequence depends on context and whether the charity can show the disposal nevertheless achieved the best price reasonably obtainable.

The claimant's evidence was insufficient to show there was no real prospect of the defendant successfully defending the claim: there were important evidential gaps about marketing, trustee decision-making and why advertising was not undertaken. The rectification claim also lacked the strong, convincing proof required. The application for summary judgment was therefore dismissed and the matter was directed to trial.

Background and parties

• The claimant is a charitable company and the registered freehold owner of property at 15a and 37 Camden High Street. The defendant agreed to buy the property by contract dated 5 May 2017 for £8,010,000 with a £410,000 deposit.
• The defendant failed to complete by the completion date; the claimant served notices to complete, purported to rescind under the Standard Commercial Property Conditions and sold the property to a third party for £5,500,000 on 23 February 2018.

Procedural posture and relief sought

• The claimant applied for summary judgment under CPR 24.2, relying on the argument that the defendant had no real prospect of successfully defending the claim. The claimant originally sought declarations and forfeiture/ damages and, following the defence, amended to seek rectification of the Agreement.
• The defendant pleaded that the contract was unenforceable, invalid or ultra vires because the claimant failed to comply with Part 7 of the Charities Act 2011; she counterclaimed for return of the deposit.

Issues framed

1. Whether the Agreement contained the statement required by section 122(2) of the Charities Act 2011 and, if not, whether that omission rendered the Agreement void, voidable or unenforceable.
2. Whether the claimant was entitled to rectification of the Agreement to cure any omission.
3. Whether the claimant complied with section 119(1) (surveyors' report, advertising as advised, and decision that terms are best reasonably obtainable) and the legal consequences of any failure to comply.
4. Whether the claimant could rely on section 42 Companies Act 2006 (not pleaded) and whether summary judgment under CPR 24.2 was appropriate.

Court's reasoning

• Statutory construction: applying the modern approach to consequences of non-compliance (as reflected in R v Soneji and Natt v Osman and other authorities cited), the court assessed whether Parliament intended total invalidity for omission of the statement required by section 122(2). The statement was characterised as subsidiary machinery (a "flagging" device) rather than a provision intended invariably to invalidate contracts if omitted. The court concluded omission of the section 122(2) statement does not automatically invalidate a contract.
• Section 119: the court analysed the chronological and practical operation of the verbs in section 119(1) (obtain, consider, advertise, decide). The report in this case was obtained after targeted marketing had already occurred and did not advise advertising; the trustees did not advertise the property as advised in a report obtained beforehand. The court found there was at least partial non-compliance with section 119, but emphasised that non-compliance will not always render a transaction void if the charity can show advertising would have made no difference and that the terms were the best reasonably obtainable. That requires cogent evidence.
• Evidence and procedural suitability: the claimant's evidence (largely from solicitors and lacking first-hand trustee witnesses) was inadequate to discharge the burden on a summary judgment application. Important factual issues remained: the decision-making of trustees, why the property was not advertised, the quality and timing of marketing, and whether advertising would have changed the outcome. The rectification claim lacked the convincing evidence required, and reliance on Companies Act section 42 was not pleaded.

Result

The claimant's application for summary judgment was dismissed because there are real prospects of defence and factual issues requiring trial and disclosure.

The claimant's application under CPR 24.2 for summary judgment is dismissed. The court held that omission of the section 122(2) "statement" did not automatically invalidate the Agreement, but that the trustees had not obtained prospective surveyor advice on advertising and had not advertised as required by section 119(1). Whether that non-compliance invalidates the contract depends on context (whether advertising would have made a difference and whether the terms were the best reasonably obtainable) and required cogent evidence which the claimant had not provided; rectification was not supported by the strong proof required. Trial and disclosure were required to resolve the factual disputes.