Avoiding personal liability for legal costs in a legacy dispute
The personal liability of charity trustees is understandably an issue of great concern to those involved in legacy disputes. Here is some helpful guidance on avoiding personal liability for legal costs in a legacy dispute.
The Charity Commission offers guidance on what the trustees of charities can do to manage the risk of being held personally liable for legal costs when bringing or defending a legacy dispute.
If a charity loses the legal action, it is likely that it will be required to contribute to the other party’s legal costs. And even if the charity wins, it may not recover all the costs it has incurred.
A trustee of a charity is at risk of personal liability for legal costs where the decision to take or defend the legal action was not made reasonably.
Before incurring legal costs, trustees should therefore ensure that they have taken all steps to manage the risk of becoming personally liable.
It is good practice to assess what the risks might be and how they should be handled. The Charity Commission has published a useful checklist that trustees can work through to help ensure that their decision is in the interests of the charity.
The commission also encourages trustees to take professional advice and to consider the availability of legal expenses insurance.
Where appropriate, trustees can apply to the commission for an order under section 115 of the Charities Act for authority to engage in legal action. They can also ask the commission for an order under section 105 of the Act to authorise the use of charity funds for litigation.
The commission can be asked to give advice under section 110 of the Charities Act about whether the trustees would be acting in accordance with their duties in taking or defending legal action. However, such advice will only be given where specific requirements are met.
In addition, trustees can apply to the court for what is known as a Beddoe order. However, it is only in exceptional circumstances — when the commission is unable to use its own powers — that it will it permit such an application to be made.
For further guidance on avoiding personal liability for legal costs in a legacy dispute, please feel free to get in touch for a chat: 0333 888 0439 [email protected]
