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.