Liability of management committee members
One of the benefits of incorporation is that members (including the management committee) and office bearers of the association are generally not liable for debts or liabilities of the association. However, this does not apply to liabilities incurred by or on behalf of the association before incorporation.
The most common form of liability an association incurs is liability under the contracts it enters into. An association may also incur liability under tort law, such as for negligent acts done by the management committee, employees or volunteers. An association can also be liable under criminal law, such as for fraud.
Management committee members are not immune from personal liability. There is a duty to fulfil the functions of their office to the best of their ability. If a committee member or officer acts in bad faith or contrary to the rules of association, he or she may personally be criminally prosecuted or be the subject of civil proceedings. An example is where an officer enters into a contract against the instructions of the management committee.
Likewise, if a management committee member acts negligently in the performance of his or her office, he or she may be held personally liable for any resulting loss or damage (See Insurance and Risk Management for information on insurance for office bearers/committee members).
It is possible for incorporated associations to adopt rules which indemnify committee members against breaches of their duties to the association and/or against liability to third parties. Before an indemnity is granted, the association should consider their objects and make an assessment of the risks the organisation may face.
Duty of care and risk management
Incorporated associations have a duty of care to ensure the activities of the association do not cause harm, damage or injury to any participant or recipient of its services, or any other person who is reasonably likely to be affected. If an injury is a foreseeable result of the association failing to exercise reasonable care in providing these services, then the association will be liable for any loss or damage suffered. For example:
- while participating in a sporting event or school holiday program provided by the association; or
- while attending a childcare facility provided by the association.
Management committees need to ensure the standard of care provided by their association is reasonable in order to minimise the risk of liability. The committee should identify and evaluate the risks for all activities. In situations where there is a likelihood of harm or a greater risk of harm, a higher degree of care is required. For example a higher degree of care and supervision is required for young children taking part in physical games than for children sitting listening to stories being read.
An example of duty of care:
An association arranges a day of activities to celebrate Youth Day. Activities include:
- Crazy sports.
- Competitions that involve activities with some risk (eg darts).
- Go-kart racing.
- Animal rides.
- Amusement park rides.
These activities all involve some foreseeable risk. The association has a duty to take reasonable steps to ensure all activities and rides are safe, appropriate for the age levels and properly supervised. Attendees and participants must be warned of any dangers.
It is important the association’s insurance policy covers such an event and if not, to take out additional insurance for the day (see also Public liability insurance in Insurance and Risk Management).
Codes of conduct
Increasingly, management committees are developing codes of conduct for management, staff and volunteers. A code of conduct defines the expectations about the behaviour of people involved in the association’s activities. While a code of conduct can theoretically cover a range of behaviours, it cannot be discriminatory, unreasonable or advocate unlawful activities.
A code of conduct for committee members might include:
- complying with all policies, procedures and rules of the association;
- attendance and participation in management committee meetings and the work of the management committee;
- clarifying who has authority to speak on behalf of the association;
- maintaining confidentiality;
- behaving in a manner that does not obstruct the association's pursuit and fulfilment of its objectives;
- behaviour that is respectful of diversity, is non-discriminatory and upholds the association's values (if defined); and
- behaviour that does not abuse, physically, sexually or verbally any member of the association, staff, volunteers or members of the public.