Charity Litigation – The Importance Of Attempting Alternative Dispute Resolution Options

The work of charities at times may inevitably lead to litigation, whether directly or indirectly, which cannot always be avoided. The types of litigation can vary because of their vast roles and could range from property and probate litigation to commercial litigation.

The trustees will be responsible for overseeing the litigation and making decisions in respect of any proceedings. There will always be different approaches to litigation available and trustees should bear in mind the impact of these when considering what approach to use; for example taking an aggressive approach may lead to obtaining the best result but at the expense of the charity’s reputation and at the risk of prolonged and expensive proceedings should the opponent be equally as aggressive.

Whilst parties in proceedings are free to choose their own approach to litigation, there is a presumption that charities should first attempt to resolve disputes by Alternative Dispute Resolution (ADR). This was considered in the case of Muman and others v Nagasena, which concerned AIM’s, a religious charity, ability to bring proceedings. AIM sought to issue possession proceedings in order to remove an individual from premises they used as a temple.

Case background

During the initial proceedings, the individual was able to dismiss AIM’s proceedings on the grounds AIM was unable to bring proceedings without the involvement of the Official Custodian. AIM appealed on the basis they were able to bring proceedings without the involvement of the Official Custodian. The Court agreed and the appeal was allowed subject to obtaining authorisation from the Charity Commission or the Court. This authorisation is necessary in order to prevent excessive amounts of money being spent on litigation when an early settlement could be obtained and the costs of proceedings could otherwise be avoided. The Court granted authorisation but commented that the parties are first required to attempt resolution by mediation and a stay was ordered for this purpose before proceedings could continue.

This case confirms the importance of ADR, especially in charity proceedings. ADR will often lead to a settlement and in reaching a settlement the costs of seeing a case through to trial will be avoided. It is advisable that any charity considering formal proceedings should first attempt ADR before issuing, as it is likely the first direction may be to attempt mediation. More importantly, reaching an early settlement would allow a charity to economically pursue its purpose.

Our previous blog looks at the ADR options available to charity disputes and a charity may choose to attempt several of these before further engaging with proceedings.