Are trustees to be discouraged from doing anything?

The Charity Commission has just published new guidance for trustees on litigation.

It may come as quite a surprise to many that the guidance was being reviewed, unless you spotted a mention of this in the commission’s July news update.

Why is the commission issuing new guidance?

It is not clear why brand new guidance was necessary, since as far as I am aware the previous version hadn’t caused any problems. Furthermore, the legal principles underpinning charities and litigation remain unchanged.

And this latest intervention by the commission is likely to raise concerns since it follows a number of other attempts by government to restrict charities’ right to initiate legal proceedings – over the past couple of years we have seen judicial review slowly but relentlessly curtailed by a number of changes.

Changes include: introducing a rule whereby a third party intervening in a judicial review proceeding might have to pay the costs of the other parties incurred as a result of their intervention if certain conditions are met; changing the way in which cost-capping orders are awarded; and shortening the time limit for bringing judicial review of certain planning and procurement decisions.

In recent previous revisions of its guidance, the commission has tended to re-set the tone to a much more restrictive one, often strengthening the emphasis on the risks of trustees doing something and on their liabilities should they fail to meet their legal duties (see for example the updated CC3 guidance on the ‘Essential Trustee’).

What does the guidance say?

The same approach seems to have been taken with regards to the guidance on litigation. Statements such as the following send a rather negative and discouraging message to trustees considering whether to undertake legal action:

• ‘Legal action can present significant risk to a charity’s beneficiaries, assets and reputation.’
• ‘The commission expects trustees to consider legal action only after they have explored and, where appropriate, ruled out any other ways of resolving the issue in dispute.’
• ‘The commission can use its powers to provide advice, guidance or an action plan, and where there are serious concerns of abuse in a charity, the commission may open a statutory inquiry under section 46 of the Charities Act.’

These are at no point balanced out by the commission’s acknowledgement that legal proceedings can be a necessary step, and the only way in which trustees can act in the interests of their beneficiaries.

Think about organisations such as Compassion in Dying, whose various legal challenges have been key in enabling terminally ill adults to take more control over the manner and timing of their deaths when they feel their suffering has become unbearable.

Not to mention the use of judicial review as a vital way for individuals and groups to hold powerful public authorities to account for important decisions such as which public services they provide, how they provide them and who can access them – by organisations such as AGE UK, Justice, Child Poverty Action Group and many others.

Just last week, the National Aids Trust succeeded in its legal action against the health service, ensuring the funding by NHS England for a ‘game changing’ HIV drug, after health bosses had argued that it was not their responsibility to do so.

What does this mean for trustees?

Of course trustees, where confronted with the decision whether or not to initiate proceedings, must take and consider appropriate legal advice about the merits of their case and its prospects of success.

Equally, no sensible trustee would fail to consider the impact on the charity and its beneficiaries of spending funds on legal proceedings which will therefore not be available for other work carried out by the charity.

But it is also crucial for trustees to consider the consequences of not taking legal action. The commission’s checklist fails to recognise this.

Ultimately the decision about whether or not to initiate proceedings on behalf of a charity is a matter for the trustees, acting exclusively in the best interests of the charity: this key legal principle remains unchanged – however it fails to be properly reflected in the new version of the guidance.

Should you worry?

Of course, there are risks to litigation. But there are risks inherent in any and all activities that charities undertake. Your fundraising appeal may not generate a return. The new employee you’ve just taken on may turn out to not be a good appointment. The bid application you spent two weeks writing may be rejected.

If you took the Charity Commission’s approach here to your work, only considering the risks of doing anything and never the opportunities, you wouldn’t even open your office in the morning. The commission should provide prudent guidance, but it must also be constructive and reasonable. This guidance falls short of that mark.

We will be raising our concerns with the commission. In the meantime, it is important for trustees to remember that their duties and legal responsibilities when considering litigation are the same as before.