The David Roberts Art Foundation Ltd v Nicole Marlene Riedweg
| Jurisdiction | England & Wales |
| Judge | Chief Master Marsh |
| Judgment Date | 06 June 2019 |
| Neutral Citation | [2019] EWHC 1358 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: PT-2018-000321 |
| Date | 06 June 2019 |
[2019] EWHC 1358 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
PROPERTY TRUSTS AND PROBATE LIST
Rolls Building,
Fetter Lane, London EC4A 1NL
Chief Master Marsh
Case No: PT-2018-000321
Zoe Barton (instructed by Dentons UK and Middle East LLP) for the Claimant
Edward Meuli (instructed by Forsters LLP) for the Defendant
Hearing dates: 20 and 21 March 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The claimant is a charitable company registered with the Charity Commission. It has applied for judgment on its claim pursuant to CPR 24.2 on the basis that the defendant has no real prospect of successfully defending the claim and there is no other compelling reason why the claim should be disposed of at a trial. It is common ground between the parties that when considering the test in CPR rule 24.2 the court may rely on the well-known guidance provided by Lewison J (as he then was) in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch).
The claimant was the freehold owner of 15a and 37 Camden High Street, London NW1 7JE registered with HM Land Registry with title number LN206404 (“the property”). The claimant entered into a contract (“the Agreement”) for the sale of the property to the defendant on 5 May 2017 for £8,010,000 and 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 on 23 November 2017 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 on 15 December 2017 and 5 February 2018. On 23 February 2018, the claimant gave notice of rescission in accordance with Condition 9.5.2 of the Standard Conditions. The notice was accompanied by a letter of claim from the claimant's solicitors to which there was no response. Subsequently, the property was sold by the claimant to a third party for £5,500,000 on 23 February 2018. The difference between the price the defendant agreed to pay and the price paid about a year later by a third party is striking.
This claim was issued on 25 April 2018 and in its unamended form 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. However, the defendant, by her defence, alleged that the contract of sale of the property is unenforceable as a result of being invalid, void or ultra vires because the claimant failed to comply with the provisions of Part 7 the Charities Act 2011 (“the 2011 Act”) concerning the disposal of land by a charity. By her counterclaim the defendant seeks the return of the deposit paid by her. The points taken in the defence and counterclaim had not been raised by the defendant previously and caused the claimant to review its position. By way of amendment the claimant now seeks an order for rectification of the contract.
The core issues that arise for determination concern the provisions of Part 7 of the 2011 Act which provide restrictions on the sale of land by charities. There is no authority that deals with the effect of a failure to comply with its requirements.
The Statutory Regime
The default position is contained in section 117 (1) of the 2011 Act:
“No land held by … a charity is to be conveyed, transferred, leased or otherwise disposed of without an order of —
(a) the court, or
(b) the Commission.
But this is subject to the following provisions of this section, sections 119 to 121 … and section 127…”.
However, section 117(2)(b) enables the sale of charity land to take place without obtaining an order from the court or the Commission if certain ‘requirements’ that are set out in section 119(1) are complied with.
The claimant did not obtain an order from the court or the Commission. However, the restriction in section 117(1) does not prevent a charity entering into a contract to sell land and subsequently seeking an order approving its conveyance or transfer prior to completion albeit there are likely to be practical difficulties in obtaining an order speedily. However, the claimant did not apply for an order before serving notice to complete and, therefore, it is necessary to consider section 119 which sets out the ‘requirements’ that are forecast in section 117(2)(b):
“(1) The requirements mentioned in section 117(2)(b) are that the charity trustees must before entering into an agreement for the sale … of the land
(a) obtain and consider a written report on the proposed disposition from a qualified surveyor instructed by the trustees and acting exclusively for the charity,
(b) advertise the proposed disposition for such period and in such manner as is 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
(c) decide that they are satisfied, having considered the surveyor's report, that the terms on which the disposition is proposed to be made are the best that it can reasonably be obtained for the charity.” [my emphasis]
Section 119(3) provides a definition of who is a “qualified surveyor” and section 119(4) states that any report prepared for the purposes of section 119(1) must contain certain information and deal with such matters as are prescribed in regulations. No regulations have been made under the 2011 Act. However, I was referred to The Charities (Qualified Surveyors' Reports) Regulations 1992 (1992 No. 2980) which were made under the predecessor section which was similar but not identical to section 119. It is, however, unnecessary to refer to the regulations in detail. It suffices to remark that they are highly prescriptive about the contents of the report and require it to include:
(1) details of the property and measurements of the land and buildings;
(2) a statement about whether it benefits from or is subject to any easements, restrictive covenants or rent charges;
(3) information about the state of repair, whether repairs are needed and, if so, the estimated cost;
(4) advice about the benefit to be obtained from alterations to buildings;
(5) advice about the manner of disposal of the property;
(6) advice about VAT (where the surveyor is able to give such advice);
(7) the surveyor's opinion as to value.
Section 122(2) and (3) of the 2011 Act deal with additional requirements that are not part of the requirements arising under section 117. They provide that:
“(2) An instrument to which this subsection applies must state —
(a) that the land is held by or in trust for a charity,
(b) whether the charity is an exempt charity and whether the disposition is one falling within section 117(3)(a), (b), (c) or (d), and
(c) if it is not an exempt charity and the disposition is not one falling within section 117(3)(a), (b), (c) or (d), that the land is land to which the restrictions on disposition imposed by sections 117 to 121 apply.
(3) Where any land held by or in trust for a charity is conveyed, transferred, leased or otherwise disposed of by a disposition to which section 117( 1) or (2) applies, the charity trustees must certify in the instrument by which the disposition is effected —
(a) (where section 117(1) applies) that the disposition has been sanctioned by an order of the court or of the Commission (as the case may be), or
(b) (where section 117(2) applies) that the charity trustees have power under the trusts of the charity to effect the disposition and have complied with sections 117 to 121 so far as applicable to it”
It is convenient to refer to the requirements of section 122(2) as being a “statement” to distinguish it from the requirements of section 122(3) pursuant to which the trustees must certify certain matters in the transfer (“the certificate”). The statement must be included in the contract because section 122(1) specifies that it applies both to a contract of sale and to the transfer. This contrasts with section 122(3) which only applies to the transfer. Thus, the contract must include the statement and the transfer must include both the statement and the certificate.
This claim does not directly concern section 122(3) because the defendant failed to complete the sale and the claimant exercised its right of rescission, or at least on the defendant's case purported to rescind. However, it is important to see the statutory framework in its complete form when considering whether a failure to comply with any of its provisions may affect the validity of the contract of sale.
The statement was described in the White Paper “Charities: A Framework for the Future” which preceded the 1992 Act as “a flagging procedure”. It is designed to draw to the attention of the purchaser that the trustees with whom it is dealing (or the charitable company) are subject to a special procedure. The White Paper goes on to say that the requirements of the statement indicate to purchasers that there is a need to obtain either a certificate in the transfer or approval from the Commission or the court. Clearly, as a safeguard, it is desirable that every purchaser is made aware that the vendor is a charity and is subject to a special regime. But was it intended that a purchaser could take advantage of the charity's failure to include the statement in the contract where the purchaser is aware of the status of the vendor, and the...
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