Board liability and negligence

When you join a board you are accepting a fiduciary duty - that is, a duty to act in good faith for the benefit of, or in the interests of, the organisation you're overseeing. Any breach of that duty places board members at risk.

The effect of incorporation is to limit liability. However, board members and officers of incorporated associations do have a risk of incurring liability if a personal breach of duty by them causes personal injury or damage to property. They can be liable if they directly caused the loss or damage or if they authorised and directed the actions which caused the event giving rise to liability.

In theory, board members can also be held liable, despite not themselves having done anything objectionable, if they have failed to properly monitor the activities of the CEO and staff. In practice, this possibility is very rare (with only one recorded Australian case in the past 40 years). For this reason (and others), it's important to have in place proper accountability procedures for the CEO.

Where such cases can be proven, the personal assets of board members can be seized to meet any damages. In a case involving the Conservation Council of South Australia, for example, both the council as an organisation and some of its officeholders as individuals were found to have defamed some developers by alleging that the developers were using the threat of libel actions to suppress freedom of speech.

Negligence happens when you allow a person you're supposed to be looking after to get hurt.

In the technical jargon, a cause of action arises when:

  • You have a duty of care to a person
  • You breach it because you didn't take sufficient care to avoid a reasonably foreseeable hazard, and
  • They suffer material harm.

Normally, being incorporated means that the members of the board aren't held liable for the losses of the college. That doesn't apply in cases of negligence. If you as a board member negligently give some wrong advice, ask someone to perform a dangerous task, or dismiss staff without proper authority or process, and where this can be proved, your personal assets can be seized to meet any damages.

The fact that you are a volunteer is not a defense. Nor is it a defense that the person who got hurt wasn't being charged anything, or that they did something stupid, or that they disobeyed your instructions, or even that they weren't invited on to the premises. It can apply to burglars who fall into your swimming pool, for example, if you could reasonably expect that your poolside was going to attract burglars.

You may consider asking the people who use your services to sign waivers. However, waivers don't constitute an excuse or protection for people or organisations that act in a negligent manner. And a waiver doesn't relieve the college from its duty of care to the person signing the waiver. A waiver is valid only if all the possible foreseeable risks have been fully explained and that everything reasonable has been done to either eliminate or minimise or control the risk. This area is a legal minefield, and waivers tend not to hold much credence in courts. However, it may make people think twice about suing if they have signed something saying that they are aware that they are participating in a risky activity and have been made aware of all the possible risks that that activity could possibly entail.

Disclaimers - statements about what your college is accepting responsibility for or not accepting responsibility for - are even less effective at excusing you from your duty of care. Putting up a sign saying that you're not liable for people slipping on the rug is not a protection if you've had complaints, acknowledged that the rug is dangerous (by putting up a sign, say), and still haven't done anything to remove the danger. At worst, it's a criminal offence. In the case of gross negligence or a serious breach of occupational health and safety or environmental laws, a charge of manslaughter may be brought against the college itself, or personally against board members.

This isn't quite as scary as it sounds. It's not often that board members get sued personally for negligence. It's extremely rare, in fact. There are a range of possible defenses, too.

Remember too that it's not at all easy (or cheap) to sue a board member. First you have to jump through all the hoops you would have to jump through to win a case against the organisation, and then you have to go a good deal further to establish a case for a finding of negligence against the board itself.

Most importantly, if you're doing the kind of things we're recommending here, you're unlikely to be found negligent. Negligence might be summed up as 'not acting as a board member ought to.' If you arrange for a proper risk analysis, make sure insurance is in place, and do the things that a reasonable board member would do, you're pretty well in the clear.

If you take reasonable precautions, you have very little to fear.

Become a member of ICDA – it's free!