The sector seems to be seeing a rise in the number of disputes between charity trustees, and between charity trustees and members of their charities.

Charities are increasingly being encouraged to consider mediation as the Charity Commission are avowedly disinterested in such internal problems, unless:

  • There is evidence of misconduct or mismanagement which puts the charity’s assets, beneficiaries, reputation or integrity at risk.
  • All other available methods of resolving the dispute have been exhausted.

Indeed, the latest model constitutions for charities produced by the Commission all contain a provision regarding disputes that requires the parties involved in a dispute about the validity or propriety of anything done by the charity trustees/members under the terms of those constitutions, to try in good faith to settle the dispute by mediation before resorting to litigation.

But what does mediation involve, and what are its advantages?

Is mediation always appropriate?

Nowadays, there will rarely be a case that is not a suitable candidate for mediation or where the parties should decline to mediate.

In many cases, Commission consent is required before any court action is taken in respect of a dispute, and the Commission has made it clear that it will usually expect charities to have tried mediation to resolve a dispute before it will be willing to give its consent.

Indeed, while mediation is not yet a compulsory step in litigation, there can be stringent penalties, particularly in relation to costs, if a party can be shown to have unreasonably refused the offer to mediate.

What does mediation involve?

Mediation involves the parties choosing their own process, which means that although most mediation will follow a similar pattern, it can be infinitely flexible. It is a confidential process and "without prejudice", so it is an opportunity to have your say away from the public forum of a court room and in a way that allows you to explore settlement without being bound irrevocably to that position.

Mediation is generally presided over by a neutral person who assists the parties to work towards a negotiated settlement. That person is not a judge so will not give an opinion on the merits but, done well, a good mediator can really test the parties' positions and assist settlement by highlighting strengths and weaknesses.

However, the decision to settle is made by the parties. They cannot be forced to settle and will only settle if the terms of that settlement have been agreed.

That is why it is always important to have someone empowered to make a final decision on settlement attending the mediation. There is nothing more frustrating than reaching a deal in principle but then having to adjourn because the decision has to be referred back to someone who is not present. Often in such cases, the impetus towards settlement is lost as a result of the delay and the mediation is unsuccessful.

What are the advantages of mediation?

The advantages of mediation are that it can be held at any point – although usually the sooner the better in view of the saving in legal costs that can be achieved by an early settlement.

It is cheaper than a formal process through the court or arbitrator and is very flexible so can allow matters to be brought into a settlement (such as a commercial deal) that could not be achieved by court action. Because mediation is less adversarial it is often a better option if the parties are keen to retain an ongoing commercial or other relationship. Although it is flexible and informal, my experience is that you get the most out of mediation the better prepared you are.

That does not mean pages and pages of material for the mediator, but it does mean:

  • Having a good grip on your case and knowing how it can be proved
  • Having a realistic assessment of the prospects of success at trial
  • Knowing, and sticking to, a top and bottom line
  • Commit to the process: mediation usually only takes a day at most and, while it may seem a big time commitment, it is in fact very little compared to the time of dealing with court proceedings
  • Make sure the key decision makers are either present or readily available