IBB Solicitors advise on what to do to avoid the cost and disruption of litigation, should you find yourselves in a contentious situation.
Written by IBB Solicitors
Charities and not-for-profit organisations can from time to time find themselves in all sorts of contentious situations. Although a charity’s objectives are never commercially orientated, charities do need to consider and manage commercial as well as reputational and regulatory risks.
Getting involved in litigation can be very expensive and take up valuable management time, pulling staff attention and energy away from a charity’s purposes. For this reason, it is often useful to take a step back from any looming dispute and consider how the dispute can be prevented from escalating and how the dispute might have been avoided.
Litigation can also damage a charity’s reputation, regardless of whether the charity’s case is a strong one with a real prospect of delivering the right outcome. The Charity Commission (and indeed the general public) will rarely want to see charitable money used to pursue expensive litigation; there are also some types of dispute (typically where the disagreement relates to the internal workings of the charity) for which the consent of the Commission is required, and a failure to get that consent could have serious consequences for the charity and its trustees.
Here are some pointers as to what charities can do in advance to avoid or minimise the cost and disruption of litigation:
Ensure that there is a contract in place for any commercial deal or relationship. Whilst this may sound obvious enough, its importance is often underestimated. Contracts may sometimes feel like a waste of precious time and money, involving paying for legal advice on drafting that can at times be difficult to understand, but they serve a very useful purpose.
That purpose is protection and certainty. A well-drafted contract can give enormous amounts of commercial security from any number of threats including potential termination, failure to provide the services or goods for which it was created, and failure to provide payment. Before entering into a contract, it is always a good idea to consider what potential there is for dispute to arise on a practical level and make sure the contract provides protection for this.
Visibility throughout the charity is important. In a smaller charity, it may just be the trustees who need to be alert to the risk of litigation. However, in a larger charity, it is important for each department to understand what is happening in other departments, and for the trustees to have sufficient oversight of the whole, so that potential problems can be identified at an early stage.
The charity’s business processes and risks should be regularly reviewed, considering for example health and safety issues, employer/employee issues or regulatory issues/investigations. What might be dismissed in one department as a minor anomaly may be identified by another as a potentially major problem capable of turning into a dispute.
Communication goes hand in hand with visibility. Communication is essential, not just in the context of avoiding disputes, but in understanding the nature of the threat you might be facing. Effective communication in any business relationship can help not only in acknowledging the existence of a problem, but also in managing the situation and preventing it from escalating into a damaging dispute.
Should a dispute arise, try and look at the best ways of resolving it early. There is no ‘one size fits all’ approach here but negotiations are likely to save costs and maintain the relationship between you and your complainant (if there is one to preserve).
Remember, disputes can be a learning exercise on how to improve next time around, so try to treat them as such and take advice at an early stage. This could save you time and costs further down the line.
IBB Solicitors’ specialist charity team can advise you on key matters affecting your charity. Find out more about our work in the charity sector.