The David Roberts Art Foundation Ltd v Riedweg

Factual and Procedural Background

The Plaintiff, a charitable company registered with the Charity Commission, owned a property located at 15a and 37 Camden High Street, The City, registered under title number LN206404. On 5 May 2017, the Plaintiff entered into a contract ("the Agreement") to sell the property to the Defendant for £8,010,000, with a deposit of £410,000 paid. The contract incorporated standard commercial property conditions and set a completion date of 31 October 2017. The Defendant failed to complete by this date, leading to a deed of variation on 23 November 2017, adjusting the purchase price and setting a new completion date of 15 December 2017.

The Plaintiff served notices to complete on 15 December 2017 and 5 February 2018. On 23 February 2018, the Plaintiff gave notice of rescission under the contract conditions. The property was subsequently sold to a third party for £5,500,000 on the same date. The Plaintiff issued a claim on 25 April 2018 seeking a declaration that the contract was validly rescinded, forfeiture of the deposit, and damages. The Defendant, in her defence and counterclaim, alleged the contract was unenforceable due to non-compliance with Part 7 of the Charities Act 2011 relating to the disposal of charity land and sought return of the deposit. The Plaintiff amended its claim to seek rectification of the contract.

Legal Issues Presented

1. Whether the Agreement contained the required statement under section 122(2) of the Charities Act 2011 and, if not, whether the Agreement is void, voidable, or otherwise unenforceable.
2. Whether the Plaintiff is entitled to an order for rectification of the Agreement.
3. Whether there was a failure to comply with the requirements of section 119(1) of the Charities Act 2011 and, if so, the effect on the validity of the Agreement.
4. Whether the Plaintiff can rely on section 42 of the Companies Act 2006 to validate the transaction.
5. Whether the case is suitable for summary judgment under CPR 24.2.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff submits that partial failure to comply with section 119(1) does not render the Agreement void or unenforceable in this case.
• The Plaintiff contends that the failure to include the statement required by section 122(2) has no effect on the validity of the Agreement.
• Alternatively, the Plaintiff argues that any omission of the section 122(2) statement can be remedied by rectification of the Agreement.
• The Plaintiff relies on the evidence that the sale price was the best reasonably obtainable price, being significantly above the valuation provided by a qualified surveyor.
• The Plaintiff does not rely on section 42 of the Companies Act 2006 as it is not part of their pleaded case.

Defendant's Arguments

• The Defendant submits that the requirements of section 119 must be strictly complied with in the correct sequence.
• The Defendant argues that the property was marketed before the surveyor's report was obtained and that the report did not provide advice on advertising or marketing as required.
• The Defendant contends the property was not advertised as required, constituting a failure to comply with statutory requirements.
• The Defendant asserts inadequate evidence that the trustees considered the report or were satisfied that the sale terms were the best reasonably obtainable.
• The Defendant relies on these points to argue that the claim is not suitable for summary judgment and should proceed to trial.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by considering the statutory regime under Part 7 of the Charities Act 2011, which restricts the disposal of land by charities unless certain conditions are met, including obtaining a qualified surveyor’s report, advertising the proposed disposition as advised, and trustees deciding the terms are the best reasonably obtainable.

The court noted that the Plaintiff did not obtain an order from the court or the Charity Commission but relied on compliance with the statutory requirements to avoid this necessity. The key statutory provisions considered were sections 117, 119, and 122 of the Charities Act 2011.

Regarding section 122(2), which requires a "statement" in the contract informing the purchaser of the charity status and restrictions, the court held that the Agreement did not contain a fully compliant statement. However, the court concluded that Parliament could not have intended failure to include this statement to render the contract invalid, as the statement is a "flagging procedure" primarily for purchaser awareness rather than a substantive protection warranting invalidity.

On rectification, the court found that the Plaintiff’s evidence was insufficient to meet the high standard required to establish a common mistake or shared intention to include the statement, and thus the Defendant had a real prospect of defending any rectification claim.

For section 119(1), the court analysed the requirement that trustees must obtain and consider a qualified surveyor’s report, advertise the property as advised, and decide the terms are the best reasonably obtainable. The court found that while a report was obtained, it was after marketing had commenced, contained inaccuracies about marketing, and did not advise on advertising or its necessity. The property was not advertised as required.

The court emphasised that the statutory requirements appear to be chronological and mandatory in nature. However, it rejected an absolute rule that any failure to comply renders a contract void or unenforceable. The court reasoned that if the trustees can demonstrate the sale achieved the best price reasonably obtainable, a failure to advertise or obtain advice about advertising should not invalidate the transaction. Nonetheless, cogent evidence is required to support this.

The court found the Plaintiff’s evidence inadequate: there was no evidence concerning the initial decision to market, instructions to agents, reasons for not advertising, or any evidence that absence of advertising made no difference to the sale price. The minutes of the trustees’ meeting were also unsatisfactory, lacking explicit reference to the statutory test.

The court declined to consider reliance on section 42 of the Companies Act 2006 as it was not pleaded.

Applying the test for summary judgment under CPR 24.2, the court found that the Defendant had a real prospect of successfully defending the claim due to factual issues requiring trial, particularly regarding compliance with section 119(1) and the trustees’ decision-making process.

Holding and Implications

The court DISMISSED the Plaintiff’s application for summary judgment under CPR 24.2.

The direct effect is that the claim will proceed to trial for a full investigation of the factual issues concerning compliance with the statutory regime for disposal of charity land, including the marketing and decision-making process of the trustees. No new legal precedent was established beyond the court’s statutory construction and application of established principles regarding statutory interpretation and summary judgment. The decision underscores the necessity of clear and cogent evidence when seeking summary judgment in complex statutory compliance cases involving charitable land disposals.