VICARIOUS LIABILITY OF CHARITY TRUSTEES

Added 21/6/02. This information adds to s.19.5.3 in The Voluntary Sector Legal Handbook 2nd edition.
"Vicarious liability" means that an employer--including charities and other voluntary organisations, and their governing body members (management committee/trustees)--can be liable for the actions of employees and volunteers. In May 2002 the Charity Commission issued guidance on vicarious liability, which is at www.charitycommission.gov.uk/supportingcharities/vicarious.asp.

VICARIOUS LIABILITY FOR TEMPORARY DEEMED EMPLOYEE

Added 6/8/06. This information updates s.19.5.3 in The Voluntary Sector Legal Handbook 2nd edition.
Employers have vicarious liability for acts of their employees, even if the employer did not authorise or order the employee's act and even if the employer did not know about it. All that must be proved is that the person committing the act is an employee of the employer, the act occurred during the course of the employee's employment, and the act committed by the employee is one which entitles the person who has been injured to bring court proceedings.

Until a court of appeal decision on 24 January 2006, it was unclear whether an employer could be liable for the actions of an agency worker contracted to them for a specific task or defined period, or a seconded employee. The January case, Hawley v Luminar Leisure Ltd & others, involved a nightclub doorman who was employed by a security agency but had been supplied to the club for two years. The doorman punched a customer in the face, causing severe brain damage. The court of appeal confirmed that Luminar had sufficient practical control over the doorman to make him a "temporary deemed employee", and the nightclub was therefore liable for his actions.

The court looked in particular at the level of control exercised by the nightclub. The doorman wore a Luminar uniform, was subject to the Luminar code of conduct, stood where the Luminar manager told him to stand, and in case of a violent incident could not take action until the manager told him to.

Although the implications of this decision are unclear, any organisation that uses agency staff or employees seconded from another employer, especially on a long-term basis, should discuss the potential implications with their insurers.

For a clear explanation of the case, provided by TLT Solicitors, click here (the address is too long to show on screen).
The case is at www.bailii.org/ew/cases/EWCA/Civ/2006/18.html.

CHECKING THAT CONTRACTORS HAVE INSURANCE

Added 5/1/03; links updated 22/12/05. This information adds to ss.19.5.3.4 and 20.5.1.4 in The Voluntary Sector Legal Handbook 2nd edition.
In a recent case, a hospital hired in a "splat wall" for a fundraising event. (For those of you who like me are not into such things, a splat wall is where a person dressed in a velcro suit bounces on a trampoline and sticks to a specially coated wall.) A woman who was injured sued both the contractor and the hospital. It was clear that the contractor had a duty of care and had been negligent (in breach of its duty of care) in setting up the equipment. But the Court of Appeal was asked to rule whether the hospital also had a duty of care to the woman, and if so, whether it had been in breach of that duty.

The court ruled that as occupier of the premises the hospital did have a duty of care and as part of this duty, should have checked that the contractor had public liability insurance. The hospital had done this. However it had not asked to see the policy, and it turned out the policy had expired four days before the event. The appeal court held that it would not have been reasonable to expect the hospital to ask to see the policy, so by not having done so the hospital was not in breach of its duty of care.

Like all negligence cases the decision is specific to the facts in each case. But it emphasises the importance of taking reasonable steps to ensure you are hiring proper contractors, especially when they are operating on your premises. You should satisfy yourself that they are competent to do whatever you are hiring them to do, and check that they have appropriate insurances (generally public liability and/or professional indemnity).

To further protect the organisation, you may want to require a contractor to have insurance indemnifying your organisation if any claims are brought against you arising from the contractor's negligence.

The splat wall decision in Gwilliam v West Hertfordshire Hospitals NHS Trust and others is at www.bailii.org/ew/cases/EWCA/Civ/2002/1041.html.

LIABILITY OF COMPANY DIRECTORS AND SECRETARIES

Updated 30/4/06. This information updates s.19.6.7.2 in The Voluntary Sector Legal Handbook 2nd edition.
Under changes introduced on 6 April 2005, rules relating to a company indemnifying its directors and officers have been relaxed. Companies which may wish to use these new provisions should take advice from their legal advisors and insurers, and should ensure their articles of association allow such indemnity.

Normally proceedings by third parties are brought against the company, rather than directors. But in some situations proceedings could be brought against the directors. Under the new rules companies are allowed (but not required) to indemnify directors in respect of proceedings brought by third parties and applications for relief from liability. The indemnity can cover legal costs of a successful defence and will also be able to cover legal costs and the financial costs of an adverse judgment, but cannot cover the legal costs of an unsuccessful criminal defence, criminal penalties, penalties imposed by regulatory bodies, or the legal costs of an unsuccessful application for relief from liability.

Previously, directors and other officers (such as the company secretary) who successfully defended a claim of negligence, default, breach of duty or breach of trust in relation to the company could be indemnified by the company--but only after they had won their case. Under the new rules the company is allowed (but not required) to indemnify directors as costs are incurred, rather than waiting until the end of the case. If the director's defence is unsuccessful, the director has to repay the defence costs to the company.

A director or other officer could not be indemnified by the company for legal costs or damages in relation to negligence, default, breach of duty or breach of trust in relation to the company. Under the new rules this prohibition applies only to directors. Company secretaries can be indemnified by the company.

Companies remain able to purchase insurance to cover their liabilities to directors and officers.

The new rules are in ss.19-20 of the Companies (Audit, Investigations and Community Enterprise) Act at www.opsi.gov.uk/acts/acts2004/20040027.htm. Explanatory notes are at www.opsi.gov.uk/acts/en2004/2004en27.htm.