Lifeline for Diana charity

The Llanelli charity is supported entirely by the Princess Diana fund

A charity threatened with closure after grants from the Princess Diana Memorial Fund were frozen has received a financial lifeline.

The Life Options project in Llanelli, which supports 14 families with children with special needs had been set close on Friday.

However the Welsh assembly has provided emergency funding for the charity until the end of the financial year, meaning it can withdraw redundancy notices issued to staff.

The memorial fund froze all donations while it fights a legal battle with American souvenir firm Franklin Mint.

Two other Cardiff-based charities which are similarly wholly financed by the memorial fund will also be aided.

They are SOVA Refugees in Wales Mentoring Project, and Displaced People in Action, whose staff had also faced the possibility of redundancy.

The best outcome would be for this legal dispute to be resolved swiftly Edwina Hart

Assembly Social Justice Minister Edwina Hart announced a rescue package of £211,328 on Wednesday to provide short-term funding for the charities until the situation between the mint and the fund is resolved.

Kelly Gammon from Life Options - which helps 14 families who have children with learning difficulties - described this as "very good news".

"We are the only group in the area that really caters for these families' needs," she added.

Mrs Hart said it would have been "intolerable" to see the charities collapse as a result of the legal dispute.

"These projects are providing support to extremely vulnerable people and it is they who would suffer most if this legal dispute forced the charities to close their doors.

"The best outcome would be for this legal dispute to be resolved swiftly so that the charities can be secure in the knowledge that they have the funding they need to continue," she added.

'Malicious prosecution'

The legal battle began when the memorial fund launched a failed attempt to stop Franklin Mint producing souvenirs with the name of the princess who died in a car crash in Paris six years ago.

The firm is now counter-suing the fund for £15m claiming it attempted malicious prosecution.

Andrew Purkis, chief executive of the fund, said in hindsight the legal action it took was a mistake.

"We bitterly regret being in a position where beneficiaries will suffer," he said.