Trustees and Directors of Welfare Organisations Beware!

In Blog, General litigation, News by AAH

There are a huge number of charitable organisations either operating as a company or as a trust and are registered with the Charity Commission. Many of these are run by individuals on a voluntary basis giving up their valuable time for advancements of education, relief from poverty and other charitable objectives.

Whilst there is no doubt that these are noble aims and objectives, people operating such organisations should be careful that in the course of running those organisations they do not find themselves responsible for harm done to outsiders.

The case listed below is about two Directors of the organisation. The Court found them to be personally responsible for compensation to two of its employees. The two directors argued that as they were not acting in the course of their employment they should not be personally liable to these employees. The Court however, disagreed and made them personally responsible for the loss and damage on the grounds that they were acting as agents of the organisation.

The other interesting significant issue highlighted is that whilst only one of the Directors was actually found to be negligent, both Directors were held jointly responsible for the compensation. This means that the two victims can enforce this Judgement against either one or both of the Director’s assets.

If you are a Director or Trustee of a charity, you are probably wondering what you could or should do to make sure you don’t fall into the same trap. The good news is that you can protect yourself by ensuring that you obtain written agreement from the trust or the organisation that it would cover you should you be held personally liable for losses caused to others whilst working for the organisation.

If you have any concerns about this area, or would like any advice regarding a similar matter, we would happily talk this through this with you. If so, you can contact Leeanne Druse or Abdul Hafezi on 0207 377 0600.

For full details of the case in question, see below:

(1) D BUNGAY (2) S PAUL v (1) G SAINI (2) J CHANDEL (3) ALL SAINTS HAQUE CENTRE (IN COMPULSORY LIQUIDATION) (2011)

EAT (Silber J, T Stanworth, P Tatlow) 27/9/2011

The appellants (X), two individuals on the management board of a not-for-profit advice centre, appealed against a decision that they were jointly and severally liable for damages payable to the respondents (C and S) following a finding of unfair dismissal and discrimination on the ground of religious faith. It had been found on the facts that X had operated and encouraged a discriminatory, anti-Hindu policy at the advice centre and that the centre’s mistreatment of C and S, who were Hindus, resulted from that policy. As well as ordering the centre to pay compensation and pay in lieu of notice, the tribunal had found that X were agents of the advice centre within the meaning of the Employment Equality (Religion or Belief) Regulations 2003 reg.22 and reg.23 and ordered them to pay aggravated damages and damages for injury to feelings amounting to some £37,000. The aggravated damages were in respect of the manner in which X had conducted the disciplinary hearings and made unfounded and malicious complaints to the police after C and S had left their employment. X submitted that

(1) There was no jurisdiction to award damages against them personally because they were acting as directors of the centre and the tribunal had erred in making a finding of agency;

(2) The culpability of each appellant, as well as the other directors, ought to have been identified instead of ordering joint and several liability in respect of damages;

(3) Post-employment conduct could not be taken into consideration in assessing aggravated damages.

HELD:

(1) The starting point was the common law rules of agency principles. It was clear that X were managing the centre as part of their authority as its directors and the tribunal had therefore been entitled to conclude that they were acting as its agents. It did not matter that neither of them had acted “in the course of his employment” with the centre, since they were deemed by reg.23(2) to have aided the centre to discriminate and, by virtue of reg.23(1) to have acted unlawfully themselves if liable as agents. Discrimination legislation had to be given a purposive construction and it would be inconsistent with such a construction to interpret the word “agent” within reg.22 and reg.23 in any sense so as to exclude X’s acts.

(2) The correct approach to the measure of compensation was to follow the ordinary principles of the law of tort. Having found that the discriminatory acts concerned were those of X, the tribunal had been correct to impose joint and several liability upon them without apportionment

(3) Post-dismissal behaviour could lead to an aggravated award.

Appeal dismissed