Sale of land – Charity – Breach of trust – Power of sale – Defendant council selling cottage on land held on charitable trust – Claimant seeking declarations regarding defendant’s power to sell part of land governed by Charity Commission scheme – Whether sale by defendant in breach of trust – Whether defendant having power to sell charity’s land without scheme – Claim dismissed
Graves Park in Sheffield was held by the defendant council on a charitable trust governed by a charity commission scheme. Clause 4(2) of the scheme provided that the parkland had to be retained for use for the object of the charity. Clause10 empowered the commission to decide any question put to it concerning the interpretation of the scheme or the validity of anything done, or intended to be done, under it.
Cobnar Cottage was part of Graves Park and was held under the terms of the scheme. Until 2006, the cottage had been let to council tenants, after which its upkeep became uneconomic and it was vacant. In 2013, the defendant resolved to sell the cottage. The Charity Commission confirmed that its operational guidance applied so as to enable the defendant to sell under the power of sale conferred by section 6 of the Trusts of Land and Appointment of Trustees Act 1996 without a further scheme being made by the court or the commission. When asked about clause 4(2) specifically, the commission indicated that it simply confirmed that the land was “designated land”, as defined in operational guidance document OG 548. The commission subsequently changed its view and concluded that clause 4(2) expressly prohibited any disposal of the cottage without a scheme but later reverted to its original view that the defendant could rely on its power of sale under section 6 of the 1996 Act. In January 2016, the defendant sold the cottage for £152,000.
The claimant was one of the trustees of the Friends of Graves Park, a charity whose purpose was to maintain and enhance the park, working with other trusts. She brought proceedings seeking declarations that: (i) the sale by the defendant of the cottage was a breach of trust; and (ii) the defendant had no power to sell the charity’s land or any part of it without a scheme made by the court or the charity commission.
Held: The claim was dismissed.
(1) When the defendant asked the commission about the propriety of selling the cottage, it had not asked about clause 4(2). The commission’s decision that the proposed sale came within the guidance set out in guidance document OG 548 determined the question asked by the defendant and the commission never changed its mind on that issue. The commission’s unequivocal statement, that clause 4(2) meant only that the land was designated land as defined in the commission’s published guidance, was to be read as part of a series of communications in which questions were put and decided within the meaning of clause 10 of the scheme. Under clause 10, a decision of the commission that a proposed transaction would not be in breach of trust was final on that issue. Otherwise there would be no point in the clause. Moreover, there was no reason to deny effect to clause 10 as so interpreted. Accordingly, the court would decline to grant a declaration that the defendant acted in breach of trust in selling the cottage. It did not act in breach of trust, since the Charity Commission decided before the sale proceeded that it would not be a breach of trust.
(2) Taken alone, the natural and ordinary meaning of the words “the land … must be retained by the trustee” in clause 4(2) was that the trustee was prevented from selling any of the land. But those mandatory words had to be read with the words which followed them, “for use for the object of the charity”. Those words gave rise to ambiguity about the nature and extent of the trustee’s obligation as regards parts of the land for which it could find no affordable use which furthered the objects of the charity; and as regards parts of the land, the retention of which might actually impede the charity’s objects by draining its resources. In addressing that ambiguity regard had to be had to the factual matrix which included that the cottage had been unoccupied since 2006 and had not been used for the purposes of the charity for several decades. Clause 4(2) demanded that land be retained for use for the object of the charity, but part of the land had not been so used for decades.
(3) The court rejected the argument that the case of Oldham Metropolitan Council v Attorney-General [1993] Ch 210 was authority for the proposition that land might not be sold by charity trustees without replacement land being provided. In that case, the land to be sold was to be replaced with other land upon which the charitable purpose could be achieved. The Court of Appeal therefore did not have to decide whether replacement land was always necessary. Further, the argument was rejected that replacement land was always necessary if part of a park was disposed of, because the park thereby became smaller and the charitable purpose could only be achieved to a diminished extent on the land which remained; it overlooked that selling one part of a park might result in enhanced achievement of the charitable purpose on the diminished remainder. Any requirement that a tiny strip of land had to be found to replace the ransom strip before such a beneficial sale could occur would expose the charity itself to ransom demands from those able to provide the replacement strip. The fundamental principle was that the power of sale conferred by section 6 of the 1996 Act might not be exercised unless a sale was in the best interests of the charity and conducive to achievement of its purposes. That was the protection that a charity needed and the law did not impose a further requirement that a charity’s holding of designated or functional land had never to be diminished.
Joshua Winfield (instructed by Bell & Buxton, of Sheffield) appeared for the claimant; Edward Francis (instructed by Sheffield City Council) appeared for the first defendant; the second defendant did not appear and was not represented.
Eileen O’Grady, barrister
