Contract for sale of land — Charity Charity failing to obtain order of court or Charity Commissioners before exchanging contracts — Charity refusing to complete — Whether contract void for failure to comply with section 36(1) and (3) of Charities Act 1993 — Whether purchaser able to rely upon section 37(4) — Appeal allowed
The respondent charity agreed to sell a freehold property in London W2 to the appellant for £3.2m. The contract stipulated that the restrictions on disposition imposed by section 36 of the Charities Act 1993 applied to the sale. After contracts were exchanged, P assigned the benefit of the contract to B for a consideration of £450,000. However, when B called upon the charity to complete, it refused to do so.
In defence to an action brought by B, the charity argued that the contract of sale was void for failure to comply with the requirements of section 36(1) of the 1993 Act. Section 36(1) provided that “no land held by or in trust for a charity shall be sold, leased or otherwise disposed of without an order of the court or of the Commissioners” unless the requirements of section 36(3) had been fulfilled. B and the appellant contended, relying upon section 37(4), that such non-compliance had not invalidated the contract because the appellant had acquired, in good faith, an interest in the property for money or money’s worth. However, the charity submitted that section 37(4) did not apply to contracts, but only to completed transactions, by virtue of its opening words referring to instances where charity land was “sold, leased or otherwise disposed of by a disposition to which subsection (1) or (2) of section 36 above applies”.
The master gave summary judgment for the charity, holding that the provisions of section 37(4) had not been enacted for the benefit of a prospective purchaser who had not completed his purchase. That decision was upheld by a deputy judge, who found the contract to be void and of no effect. The appellant appealed.
Held: The appeal was allowed.
Although section 36(1) did not, in itself, render void an agreement for the sale of charity land, which had been entered into without compliance with the requirements of section 36(3), any transfer made in purported performance of such an agreement would be void (absent an order of the court or of the Commissioners), unless saved by section 37(4). It followed that where, as here, the purchaser became aware of the failure to comply with section 36(3) before completion of the contract by transfer or conveyance, he could not compel performance of the contract. Section 37(4) did not assist in such a case; an uncompleted contract for the sale of charity land was not, itself, a “disposition” of that land for the purposes of section 36(1) or (2).
The appeal would be allowed to the extent of setting aside the judge’s declaration that the contract was void, but a declaration would be substituted to the effect that section 37(4) had no application in relation to that agreement.
Andrew Simmonds QC and Tracy Angus (instructed by Howard Kennedy) appeared for the appellant; Michael Furness QC and Jonathan Evans (instructed by Winward Fearon) appeared for the respondent; B was not a party to this appeal.
Sally Dobson, barrister
