Guidance on how a charity should deal with a legacy dispute
The Charity Commission has issued key guidance on taking or defending legal action. In this article we look at how those guidelines apply to cases involving legacy disputes when a bequest in a will is challenged.
The Commission’s guidelines on legal actions
The Commission’s guidelines apply to a broad range of legal actions. These specifically include, “contesting a charity’s right to property under a will”.
The starting point
It’s essential for trustees to appreciate that legal action can present significant risks to a charity, and the Commission will expect trustees to be able to show they have applied its guidance.
A trustee’s duty to act in the best interests of their charity.
The underlying principle is that trustees have a duty to protect, and where necessary, to recover, assets belonging to the charity.
Balancing benefits and risks
Decisions on whether to initiate or defend a legal action must balance the benefits and the risks:
- What are the prospects of success?
- What are the likely legal costs?
- What is the value of the legal action?
- Are the court proceedings proportionate?
- Is there any reputational risk to the charity?
The need to take professional legal advice
Specialist advice should be obtained from lawyers who are experienced in contentious probate and legacy disputes.
Litigation as a last resort
The Commission expects trustees to explore ways of resolving the issue in dispute that would avoid a contested court hearing.
This means that ADR (Alternative Dispute Resolution) should be considered. Mediation – which involves an independent third party acting as facilitator between the parties – can be particularly effective.
The need for transparency
Trustees must keep clear records of:
- Why they chose to defend or bring the claim.
- The professional advice received.
- Their rationale, including a cost/benefit analysis.
This documentation protects trustees and provides transparency if decisions are questioned later.
The power to settle
Trustees should ensure that they have the power to implement any settlement terms before any settlement is reached.
Breaching the Charity Commission’s guidelines: The risk of personal liability
Trustees who act in breach of their legal duties can be held responsible for the consequences, including any financial loss suffered by the charity.
In some circumstances, the trustees may be liable to pay legal costs personally. For example, where:
- the court considers that the costs have not been properly and reasonably incurred;
- the trustees are unable to demonstrate they have considered all the relevant principles in making their decisions; and
- in the case of an unincorporated charity, the charity has insufficient funds to meet them.
Reducing the risk of personal liability
Trustees should read the Charity Commission’s guidance and work through the Commission’s checklist provided.
A level of protection can be gained by seeking and following independent professional legal advice from specialist legacy dispute solicitors.
Trustees may also avoid the risk of losing the action and facing a significant legal bill by consulting with solicitors who specialise in dealing with legacy disputes on a No Win, No Fee basis. This form of funding can significantly reduce the charity’s exposure to legal costs, making it easier for trustees to balance their duty to protect (and where necessary, to recover) assets belonging to the charity, with their duty to minimise risk.
Trustees may, where appropriate, apply to the commission for an order under section 115 of the Charities Act or applying for a Beddoe order.
How we can help trustees facing legal action
We offer a free consultation service and can deal with contentious probate claims involving charities on a No Win, No Fee basis.
If your charity is in dispute regarding a bequest in a will and you wish to ensure that you are acting in the best interests of the charity, then give us a call on 0333 888 0404 or email us.
