News in focus: Is the cost of legal action too steep a price to pay?

As trustees are personally liable for damages, charities are understandably cautious about litigation, but if their brands, beneficiaries or reputations are risk, something has to be done. Joe Gill investigates.

Charities are not known for being litigious, but as the recent spat between Jewish charity JNF and a Palestinian-rights campaign shows, when reputations are at stake charities do call in the lawyers.

Last week, the Scottish Palestinian Solidarity Campaign accused comedienne Ruby Wax, who spoke at a JNF dinner in Glasgow the previous weekend, of supporting "ethnic-cleansing fundraising" (Third Sector, 31 March).

The campaign's website was disabled for 30 hours after lawyers representing JNF fired off a letter to the host server. When the site reappeared, the offending statements had been removed.

JNF, which says all its projects are within the green lines of Israel's pre-1967 borders and insists it is not the same organisation as JNF Israel, hopes the matter may end there. But the Palestinian group is defiant, and its lawyers are in discussions with the web host over what it calls "censorship" of its site. Bernard Regan, national secretary of the campaign, says: "We've had advice from our lawyers. The Scottish PSC intends to defend its position because we have evidence to substantiate it from UN declarations which are quoted on its website."

JNF chief executive Simon Winters says the organisation did not want to get into a public slanging match. "We have to be careful to be apolitical. We've existed for 102 years, we plant 3 million trees a year, and our projects benefit both Jewish and Arab children. This particular issue is a one-off, and it was such an extreme statement that we could not let it go."

With a TV celebrity and a controversial political issue, the JNF case was always going to make headlines. Most litigation involving charities is far more mundane, says Hempsons charities lawyer Jean Dollimore.

"Most of the litigation is around employment law, as this is quite a complicated sector with lots of part-time and voluntary staff. Commercial litigation is also quite common if something goes wrong with a contract. Charities are also defending themselves a lot of the time against actions taken by others."

But, in general, even the biggest charities won't enter into litigation lightly. Trustees can find themselves at risk for breach of trust and are personally liable for any damages against them. "Trustees have to protect the assets of the charity, so they have to think hard about action. They cannot exceed their authority by taking unjustifiable action," said Dollimore.

Rights violation

The Diana, Princess of Wales, Memorial Fund took US memorabilia firm Franklin Mint to court in 1998 over the sale of a Diana limited edition commemorative plate, saying it violated their "exclusive rights" to the princess' name and image. When it lost, Franklin Mint sued the charity for malicious prosecution to the tune of $25m (£14m).

While that court battle rages on, the fund has had to ask other trusts to pay out millions in grants it had pledged to beneficiaries - including charities working with landmine victims and people with Aids. The fund could not talk about the specifics of the case, as negotiations for a settlement are still under way.

Dollimore says the case "was a good warning to charity trustees that you have to think very hard before you get into litigation. It is a double-edged sword. If you sue someone with lots of money, you may win, but at the same time they are more likely to come up with subsequent litigation."

Anthony Robbins, head of communications at the Charity Commission, says: "We would urge charities to find any possible alternative to resolve difficulties before going to court. If charities have concerns, the best thing they can do is raise them with us at the earliest possible opportunity."

If they do decide to go to court, Robbins adds: "Our advice would be based on a number of criteria, for example protection of reputation, protection of identity, risk to charitable assets and, particularly, risk to vulnerable beneficiaries."

As the Diana case illustrates, a charity's brand is more than its name.

It includes images, logos and slogans, all of which can be used by commercial organisations for profit in cause-related marketing partnerships. And in the age of the internet and global communications, the protection of brand identity is a worldwide issue.

The World Wide Fund for Nature, now WWF, went to court to protect its brand identity from the muscle of the World Wrestling Federation over the use of its initials in federation programmes and merchandising. The federation broke a 1994 agreement not to use the initials outside the US.

"We were around for a lot longer than the World Wrestling Federation, and we took our brand seriously from the outset in 1961," explains the director of communications at WWF International, Thomas Schultz-Jagow.

"We basically had the right to that trademark. That wasn't such a big deal until the internet and satellite TV in the 1990s meant the federation began to profit from programmes and merchandise beyond its US territories. The issue for us was that the federation's brand inhibited a lot of our work in education."

Loss of recognition

WWF had long produced materials about wildlife conservation for schools, but anecdotal evidence and market testing of school children showed that recognition went to the federation.

Schultz-Jagow adds: "We started talking to the World Wrestling Federation, then managed to sign an agreement prohibiting it from using WWF's initials outside the US. We did that to protect our identity, because these initials and logo are crucial to our mission. But we found to our dismay that they didn't give a toss about the agreement and were flouting it."

The WWF International office in Switzerland took on the case on behalf of all the offices in countries where this was an issue. They eventually won at the High Court three years ago. The court ordered the federation to pay all of WWF's legal costs and is now looking at damages.

Size matters when you are fighting a heavyweight like the wrestling federation, but the strength of the case does too. As Schultz-Jagow says: "If you look at the size of our operations, with offices in over 100 countries and a world staff of 4,000, employing a small legal team to look into this was perfectly reasonable. That is a relatively small risk to take if you are convinced you are right on a question of principle."

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