Christian Brothers decision marks fundamental shift in liability concerns
By Don Bourgeois
Canadian FundRaiser: August 16, 2000
Our last column reviewed the Supreme Court of Canada's recent
decisions with respect to vicarious liability for the tortious acts
of employees, and promised some ways to minimize risk in these
situations. A new decision from the Ontario Court of Appeal has,
however, been released which puts into question some of the possible
approaches we had in mind. The Court of Appeal in the Christian
Brothers litigation has ruled that all of the assets of a charity are
available to pay for damages.
In the Christian Brothers case, the Court was dealing with a
particularly horrific level of sexual abuse of boys at Mount Cashel
in Newfoundland. The boys, now adults, sued the Christian Brothers
for the damages that they suffered. The number of lawsuits and their
amounts resulted in the insolvency of the Christian Brothers. An
order to wind-up the Christian Brothers was sought to allow for an
orderly and appropriate handling of their debts and obligations.
Should 'in trust' assets be available?
There were, however, two significant assets in British Columbia - two
schools operated by the Christian Brothers. The two schools were
'owned' by separate corporations. Parents of the students made
donations and otherwise supported the operations of the two schools.
They objected to these assets being included in the winding-up of the
Christian Brothers. The argument centred on the position that the two
schools were being held in 'trust' and ought not to be used to pay
for damages suffered by the boys at Mount Cashel.
The Ontario Court of Appeal concluded that all of the assets of the
Christian Brothers are to be available to pay the damages. It found
no basis for the position that the trust assets in British Columbia
should be excluded from the assets to be wound-up to pay for the
damages. This case effectively removes from consideration one of the
methods that could have been used to protect the assets of a charity.
If 'special trusts' are to be dealt with as assets of the charity in
a manner similar to its operational assets, an important tool will be
eliminated.
Variety of potential intervenors
Leave to appeal has been filed with the Supreme Court of Canada. The
Supreme Court will decide whether or not to hear the appeal and if it
does, a date will be scheduled for the appeal. It is understood that
a number of potential intervenors may seek the right to appear on
both the leave to appeal application and, if successful, on the
appeal.
The Charity and Not-for-Profit Law Section of the Canadian Bar
Association-Ontario has recently established a Task Force on
Liability Issues, partly in response to the earlier Supreme Court of
Canada decisions, Bazley v. Curry and Jacobi v. Griffiths, reviewed
in the last column. The Ontario Court of Appeal decision in the
Christian Brothers case has affirmed the need for a thorough review
of liability issues facing charities and nonprofit organizations and
their officers and directors. They also highlight the need for
officers and directors of charities and nonprofit organizations to do
a number of things to protect the organizations and themselves:
-
review insurance coverage to ensure that the organization has the
appropriate types of coverages and levels. Any review should be
undertaken in consultation with the organization's insurer or
insurance broker;
- review the organization's programs to determine if there are any
that ought to be disbanded or modified to minimize risks. This review
is particularly important if the organization provides services to
children, youth, the elderly or others who are considered to be
'vulnerable';
- put into place thorough training and compliance programs for both
staff and volunteers. In addition, training is not sufficient in and
of itself. The organization needs to put into place monitoring
programs to ensure that staff and volunteers are behaving in an
appropriate manner at all times;
- develop a risk management program for the organization's programs.
Some associations have developed programs for specific areas (such as
sports). In addition, some insurance companies may be able to assist
in developing risk management programs;
- take action to address problems as and when they arise. Although
prevention is better, sometimes preventive measures are not enough
and a problem occurs. The organization must deal with the problem and
have mechanisms in place to warn it about the problem;
- consult with the organization's lawyers to determine what
preventive measures ought to be in place. For example, would criminal
records checks be sufficient? There are significant limitations to a
criminal records check. First, the check costs money and may be
prohibitive for large numbers. Second, it provides limited
information on the individual, since criminal records check that is
available to the public, even with the consent of the individual, is
limited and will not include, for example, charges. Third, an
organization will need to deal with human resource issues with
employees if a criminal records check is required. Such checks may
also cause problems in recruiting people as volunteers - people who
do not have records but who object to such intrusions into their
lives;
- obtain releases and indemnifications from persons or organizations
using the services. Again, this method will provide limited
protection but may be better than nothing. Any release or
indemnification should be prepared by the organization's lawyers.
The above are some of the ways to minimize risk. Nonprofits should
focus on prevention - which is best for all concerned.
Don Bourgeois is an Ontario lawyer who has practiced in the
charitable and nonprofit area of law and is an officer and director
of several organizations. He is the author of The Law of Charitable
and Non-Profit Organizations and The Law of Charitable and Casino
Gaming, both published by Butterworths Canada. He can be reached by
e-mail at .
