On 3 August 2016, the Charity Commission (‘the Commission’) provided much welcome guidance for the trustees of charities on bringing or defending legal proceedings (‘the Guidance’).The Guidance seeks to run alongside the core principles expounded by the Commission in their ‘It’s your decision: charity trustees and decision making (CC27)’ paper.
Therefore, it is clear that of fundamental importance that in respect of any litigious proceedings, trustees ensure that they, in accordance with their general duties, act in the best interests of the charity. Of course, this duty involves protecting the charity’s interests.
The Guidance does state however that litigation can present significant risk to a charity’s beneficiaries, assets and reputation. In reality, these risks of litigation are applicable to all legal entities, not exclusively to charities. These are just some of the many matters which have to be weighted up by any party when either contemplating the issue of legal proceedings, or the extent to which any such proceedings should be defended.
Section 2 of the Guidance seeks to provide trustees with a general overview of the types of civil action that may arise in the context of charities, as well as guidance as to the various key issues that those trustees must consider.
In particular, in making their decision, the trustees should:
The Guidance is of general practical use, not least because of a checklist attached to the Guidance that trustees can work through step-by-step. Clearly the risks involved in pursuing and/or defending litigation are recognised by the Guidance, which places great emphasis on parties exhausting alternative means to resolving a dispute in the first instance. Again, such emphasis is not charity-exclusive – alternative dispute resolution options should be explored in any litigious proceedings given the court’s powers to penalise parties who unreasonably refuse to do so, even if they are successful in the litigation.
For further information, the Guidance can be accessed here: