Most of us are now at least familiar with the concept of Alternative Dispute Resolution (ADR) but a number of studies suggest that charities have some reservations about using it. This approach has great benefits for charities when faced with a wide range of disputes, from disputed wills to contractual disputes charities may have with other companies or not for profit organisations.
In Muman v Nagasena, a charity dispute that went to the Court of Appeal, Mummery LJ, complained about the substantial sums of money that had been spent on litigation. His observation was that the parties had spent far too much money on the dispute. He directed that no more money was to be spent from the assets of the charity until all efforts had been made to secure a mediation of the dispute in question.
Despite such strong direction from a Court of Appeal judge, in general, the charitable sector is relatively cautious in its uptake of mediation. This may be because charities see ‘cost’ in paying for a mediation, as opposed to ‘no cost’ to struggling on with internal attempts at resolution. The painful reality is that there is always a cost; the real issue is managing the costs appropriately.
On the rare occasions where there has been publicity about a charity using ADR, the experience reported seems to be positive. For example, the Joseph Rowntree Foundation, in its report of its experiences of using arbitration to resolve a libel dispute with The Sunday Times newspaper, stated that advantages of using the arbitration procedure included much reduced financial risk and greater speed with which the process was conducted when compared to using the courts. Resolving disputes in private may also mean that the charities’ funders do not get involved and might not even aware of the problems.
The Charity Commission itself is supportive of ADR for charities. It considers that one of the hallmarks of a well-run charity is that it conducts its external relations in a way that enhances its own reputation. A charity’s reputation is a valuable asset, and a well-run charity is sensitive to external opinion and should seek to enhance its standing in its dealings with commercial and public sector bodies. This approach also extends into managing its methods of raising funds, and its advertising and publicity.
The Charity Commission recommends that all contracts entered into by charities should include a provision for resolving contractual disputes and recommends adopting a form of ADR, adding that a charity would be justified in paying the reasonable fees of a dispute resolution service if there is a fair chance that it will mean avoiding the greater expense and disruptive effect of litigation later on.
The National Council for Voluntary Organisations (NCVO) has offered a mediation service since 1995 and has had a panel of experienced and skilled mediators who have worked since then on resolving conflict in the voluntary sector.
Mediation will only be an option for charities if they have the power to enter into the compromise arrangements that will hopefully emerge. Charity trustees are under a duty to apply their assets as far as is possible for the purposes of the charity, so trustees may be concerned that only a court order or a legally binding decision of an arbitrator will enable them to part with some of their resources in favour of the other disputing party.
However, in most cases, trustees will either have the power in their governing documents or be able to seek the power to enter into a compromise arrangement. This may be via section 15 of the Trustee Act 1925. Alternatively, section 26 of the Charities Act 1993 gives the Charity Commission the power to authorise entry into a compromise arrangement.
We always recommend our Charity clients seriously consider ADR when faced with a meaningful dispute. We have built up strong ties with accomplished Mediators who can offer the very best chance to both parties of finding a solution to a difficult, sometimes intractable problem. Spending some money to save a substantial amount of money may not only resolve a dispute but may also ensure that the Charities activities and interests are protected.