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Could Your Charity Trustees be Open to Personal Liabilities?

In a recent case in the High Court Chandra v Mayor and others [2016] EWHC 2636 (Ch)
the High Court granted permission to enforce a costs order in representative proceedings.
The case of Chandra v Mayor serves as a reminder of the potential liability that trustees of unincorporated associations or trusts may face.
The case was a claim for unfair dismissal and sums due under a minimum wage legislation, the claimant (Dr Chandra) obtained judgment and a costs order.  The Defendant (Dr Mayor) was sued as a representative of the members of an executive committee of an unincorporated Charity who employed the claimant at the time of his dismissal.
The Claimant won his case and was awarded in the region of £65,000 as well as being awarded £20,000 costs. The question for the court was whether or not costs could be awarded against someone acting in a representative capacity. The court ruled that it could.
If your Charity is an unincorporated association or Trust Charity it has no separate legal identity.  This means that if Trustees enter into any contracts, for example employment contracts with their employees they do so in their own names.    If the governing document for the Charity or the terms of the contracts entered into include wording to limit the Trustees liability they may be protected.
Charity Trustees of a charitable unincorporated association are entitled to be indemnified out of the assets of the Charity for any liabilities they incur on its behalf in the every day course of the Charity Activities. If the Charity assets are insufficient to meet the liabilities they or the trustees or members may be personally jointly and severally liable for the shortfall.
The charity in the above case has now incorporated and has a CIO, presumably to prevent such costs falling on trustees again.
The case particularly highlights the need for all, particularly unincorporated Charities and Associations to take expert legal advice to alleviate any future claims against the Trustees or them individually becoming liable. Please contact a member of our Charity Team for further advice.
If you are thinking of becoming a Trustee for any Charity please see the following information available for Trustees on the Charity Commission website.
The Essential Trustee – what you need to know
Charity Trustee – what is involved