When can a charity litigate? Key points for trustees

While every case will turn on its facts, UK charity law and best practice provides a clear framework to help trustees decide whether they can, and if so, if they should proceed to the courts.

Litigation and trustees’ duties

Charities can bring or defend legal proceedings, but trustees must approach litigation with particular care. Their overriding fiduciary duties (i.e. the legal obligation to act solely in the charity’s interests) must be met in doing so, including to:

• • Act only in the charity’s best interests;
  • Use charitable funds prudently and proportionately; and
  • Protect the charity’s assets, reputation and ability to deliver its purposes.

Litigation is never risk‑free and will usually be appropriate only where trustees can show a clear overriding benefit to the charity.

When litigation may be justified

Litigation may be in a charity’s best interests where, for example:

• • Significant charitable assets need protection or recovery;
  • The charity must defend itself against serious claims;
  • Reputational harm is materially affecting service delivery or funding; and/or
  • Other options (such as arbitration or mediation) have been exhausted or are unsuitable.

Trustees should carefully consider and record:

• • The merits of their case, having taken and considered legal advice;
  • The likely cost to the charity and how much of that is irrecoverable (even if the charity wins);
  • The potential impact on beneficiaries and charitable activities; and
  • The balance of reputational pros and cons of litigating.

Charity proceedings and authorisation requirement

Not all disputes involving charities are treated the same way in law.  Some will be classed as “charity proceedings” under the Charities Act 2011, which carry specific restrictions and requirements. 

Charity proceedings may only be brought by:

• • The charity itself;
  • Any of its trustees;
  • Any person “interested in the charity” (they must have a material interest and could include, for example, former trustees, members of a membership charity, beneficiaries or donors); or
  • Any two or more inhabitants of the area of the charity, if it is a local charity. 

Charity proceedings involve claims relating to (whether brought by or against the charity):

• • The charity’s internal governance or administration;
  • The exercise of trustees’ powers;
  • The interpretation or application of the charity’s governing document; and
  • Allegations relating to breach of trust or duty by the trustees.

Where proceedings are classed as charity proceedings, Charity Commission or court consent must be secured before a claim can be issued.  Early legal advice is essential to determine whether consent is needed.

Funding litigation

The Sentebale case is notable because the charity has confirmed that the costs of proceedings will be met entirely by a third-party donor.  For most charities, that will not be an option, and charitable funds may be used only where trustees reasonably believe litigation is in the charity’s best interests and the cost is proportionate. 

Where third party funding is available, there will remain a question of whether it is appropriate and necessary to proceed with litigation. There will be risks beyond the purely financial that may still impact on the charity, including in terms of reputation management and engagement with stakeholders.  Trustees must also take care to retain control of the proceedings, ensure that the funder does not influence trustee decisions, and manage conflicts of interest properly. 

In each case, careful documentation by the trustees of the decision‑making process is essential.

Final thought

Litigation can be a legitimate course of action for charities, but it is often high risk.  Trustees should only proceed where they can clearly demonstrate that it advances the charity’s interests, complies with the law, and represents a responsible use of its resources.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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