Sale of charity land - failure to comply with statutory requirements - uneffected contract not 'disposition' of land

Bayoumi v Women's Total Abstinence Educational Union Ltd and another [2003]: CA (Lords Justice Chadwick, Buxton and Rix): 5 November 2003

The first defendant charity contracted to sell a freehold property to the second defendant, who assigned the benefit of the contract to the claimant.

The charity failed to complete after receiving advice that the contract was void for non-compliance with section 36(3) of the Charities Act 1993, which required the charity's trustees first to obtain and consider a surveyor's report and to satisfy themselves that the terms of the proposed disposition were the best that could reasonably be obtained.

The claimant sought an order for specific performance, contending that the transaction was saved by section 37(4), which provided that where land held by a charity was 'sold, leased or otherwise disposed of by a disposition' then in favour of a purchaser in good faith for money or money's worth the disposition would be valid.

The deputy judge [2003] EWHC 212 (Ch); [2003] Ch 283; [2003] Gazette, 13 March, 27; held that the uncompleted contract was a sale or other disposition to which section 36(1)(2) applied but that section 37(4) did not apply to an uncompleted contract and he granted a declaration that the contract was void for non-compliance with section 36(3).

The second defendant appealed.

Andrew Simmonds QC and Tracey Angus (instructed by Howard Kennedy) for the second defendant; Michael Furness QC and Jonathan Evans (instructed by Winward Fearon) for the charity; the claimant did not appear and was not represented.

Held, allowing the appeal in part, that an uncompleted contract for the sale of charity land was not a 'disposition' for the purposes of section 36(1)(2); that no 'disposition' was capable of being validated by section 37(4) unless it was one to which section 36(1)(2) applied; that, therefore, where a purchaser became aware, before completion of a contract, of the failure by charity trustees to comply with section 36(3), he could not compel performance; that a contract into which, by virtue of section 36(3), it was unlawful for charity trustees to enter would, prima facie at least, be void for that reason; that, on the facts, it was impossible to hold that the contract was saved by the operation of sections 35 and 35A of the Companies Act 1985 and section 65 of the 1993 Act but, equally, it was not possible to say that the contract was void; and that, accordingly, a declaration to the effect that section 37(4) had no application in relation to the contract would be substituted for that granted by the deputy judge (WLR).