Charity trust disputes

Charity disputes require particularly careful handling due to the combination of trust law, charity law requirements, and regulatory oversight. Their public benefit nature and potential impact on beneficiaries creates additional complexity compared to standard commercial disputes.

Claims and liability in charity disputes

Claims can be brought by various parties :-

• Other trustees - challenging decisions or conduct of fellow trustees.

• The charity itself - against current or former trustees for breach of duty.

• Charity Commission - using regulatory powers to protect charitable assets.

• Members - in membership organisations, challenging trustee decisions.

• Beneficiaries - in limited circumstances where directly affected.

• Attorney General - representing public interest in charity matters.

Types of claims

Trustees may face personal liability for losses. Common claims include :-

• Breach of trustee duties - failure to act in charity's best interests

• Ultra vires actions - decisions beyond trustee or charity powers

• Regulatory breaches - non-compliance with charity law requirements

• Financial management - Disputes about investment policies or inappropriate use of charitable funds, including investment risk levels, use of restricted funds, expense policies, reserves levels, and property transactions.

• Governance breaches - Failure to follow proper procedures or constitutional requirements, such as invalid decision-making, improper appointments, unauthorised actions, or breach of quorum requirements.

• Conflicts of interest - Trustees failing to declare or manage personal interests, including business relationships, family connections, payment for services, or benefit from charity contracts.

• External contracts - Conflicts over significant third-party arrangements or partnerships, including service delivery contracts, funding agreements, collaboration arrangements, and property deals.

The public nature of charitable trusts means that disputes can quickly escalate beyond internal disagreement to involve stakeholders, beneficiaries, or the media. This requires swift and careful handling to protect the charity's reputation and effectiveness.

Charity Commission role

The Commission's powers to intervene are substantial but used selectively. They will typically become involved in cases of serious financial mismanagement, significant risks to charitable assets, or fundamental breakdowns in governance.

When the Commission does intervene, their powers are extensive. They can open statutory inquiries, appoint interim managers to temporarily run charities, freeze bank accounts to protect assets, and suspend or remove trustees in cases of misconduct. They also have authority to direct specific actions to address identified issues and can require detailed accounts and records for investigation purposes.

How to resolve charitable trust disputes

Swift action is crucial to prevent escalation and protect charitable assets. Key steps include :-

• Internal dispute resolution processes - structured approach following constitutional procedures and best practice guidance.

• Independent mediation - professional mediator with charity expertise to facilitate resolution.

• Court applications for directions - seeking judicial guidance on interpretation or powers.

• Charity Commission engagement - early dialogue with regulator about concerns and proposed solutions.

• Constitutional interpretation - clear understanding of governing document requirements and powers.

• Breach of duty proceedings - action against trustees for serious misconduct where necessary.

• Regulatory compliance actions - meeting Commission requirements and directions.

Contact our charity law team for expert assistance with trustee disputes and regulatory matters.