Mediation in charity litigation: what is mediation, and when is it appropriate?

As the Charity Commission’s guidance “Charities and litigation: a guide for trustees” makes clear, trustees have a variety of factors to consider when deciding whether or not to bring or defend legal actions against third parties. Overarching all of these factors is the trustees’ duty to ensure that any such legal action is in the charity’s interests.

The factors which trustees are obliged to consider are very much the sorts of factors which any sensible potential litigant, charitable or otherwise, should consider before embarking upon court action, and the Commission’s guidance is clearly sensible.

However, prior to commencing litigation, trustees must also consider whether any other course of action is available, and in particular the Commission expects trustees “to explore and, if appropriate, rule out all other reasonable options open to them to resolve the issue, such as alternative dispute resolution or agreeing a legal compromise”. This post explores the concept of mediation in resolving disputes, and its suitability for charities.

Mediation, in this formal litigation context, is a process in which a third party mediator helps parties to a dispute try to reach an agreement. He or she does not adjudicate on the rights or wrongs of the claims, but facilitates constructive discussions between the parties.

There are few litigation disputes in any field which are unsuitable for mediation, and disputes involving charities are no different. In particular, although this post envisages mediation primarily in commercial/third party disputes, it is not inherently unsuitable even for “charity proceedings” authorised by the Charity Commission, although such proceedings will only be authorised where “matters are contentious, intractable, and difficult and cannot be resolved in any other way whether by the Commission or anybody else”. In fact, if such disputes are suitable for mediation, it is likely the Commission will order mediation as a first step before authorising legal proceedings.

Save for the rare cases where a point of particular importance needs to be ruled on by a court, and where anything less than a definitive ruling will not solve the problem, most disputes can and should be capable of settlement. Charities may be involved in a wide variety of disputes, from Inheritance (Provision for Family and Dependants) Act 1975 claims or disputed probate where a charity is a beneficiary, to defended employment tribunal proceedings, from disputes with commercial partners to contested claims involving property. All of these are eminently suitable for mediation.

So, what are the advantages of mediation? And what should the charity trustees consider before mediating, and before agreeing to any settlement, assuming mediation is successful?

These points will be considered in the next two posts of this series, the first of which will be published next Tuesday.

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