LEGAL AND CONSTITUTIONAL COMMITTEE
A REPORT TO PARLIAMENT
ON THE
PUBLIC LIABILITY OF VOLUNTARY ORGANISATIONS
Ordered to be printed
No. 50
EXTRACTED FROM THE MINUTES OF THE PROCEEDINGS OF THE LEGISLATIVE COUNCIL
TUESDAY 15 NOVEMBER 1988
7 LEGAL AND CONSTITUTIONAL COMMITTEE - The Honourable Evan Walker mov.ed, by leave, That the Honourables Joan Coxsedge, D.M. Evans, W.A. Landeryou, R.J. Long, J. Mclean and G.A. Sgro be members of the Legal and Constitutional Committee.
Question - put and resolved in the affirmative.
EXTRACTED FROM THE VOTES AND PROCEEDINGS OF THE LEGISLATIVE ASSEMBLY
THURSDAY 3 NOVEMBER 1988
11 LEGAL AND CONSTITUTIONAL COMMITTEE - Motion made, by leave, and question proposed - ••• (Mr. Fordham).
Question - That Mr Jasper, Mr Lea, Mr Perton, Mr Thomson, Mrs Toner* and Mr Smith (Glen Waverley) be appointed members of the Legal and Constitutional Committee- put and agreed to.
* Resigned 28 February 1989
********************* iii
LEGAL AND CONSTITUTIONAL COMMITTEE
MEMBERS
The Honourable D.M. Evans, MLC (Chairman)
The Honourable Joan Coxsedge, MLC (Deputy Chair)
Mr. K.S. Jasper, MP
The Honourable W.A. Landeryou, MLC
Mr. D.J. Lea, MP
The Honourable R.J. Long, MLC
The Honourable Jean McLean, MLC
Mr. V.J. Perton, MP
The Honourable G.A. Sgro, MLC
Mr. E.R. Smith, MP
Mr. K.J. Thomson, MP
STAFF
Mr. Spencer Zifcak, Director of Research
Mr. Marcus Bromley, Secretary
Mr. Andreas van Eerten, Assistant Secretary
Ms. Gail Furness, Research Officer
Ms. Pauline Ireland, Research Officer
Ms. Anne Mullins, Research Officer
Miss Sorrel D'Silva, Word Processor Operator
Mrs. Jennifer Hutchinson, Stenographer
*******************
V
INTRODUCTION BY HON. DAVID EVANS, MLC CHAIRMAN LEGAL AND CONSTITUTIONAL COMMITTEE
When the very existence of a valued section of our community is under threat, it is essential that action be taken. In Victoria, it has become clear that voluntary organisations were reassessing their work in light of the fear that they were not adequately protected against potential legal claims arising from their activities.
The significance of this issue for volunteers has been clearly shown in the enormous response by the community to the Legal and Constitutional Committee's inquiry into Public Liability of Voluntary Organisations. The Committee has greatly appreciated this interest and trusts that its Report, which reflects the law as at July 19&&, will alleviate many of the problems currently experienced by voluntary groups.
As Chairman, I would like to extend my thanks to the Subcommittee of the previous Legal and Constitutional Committee chaired by the Hon. L.S. Lieberman, MP, which devoted many hours to the hearing and examining of evidence during this inquiry. The present Committee found this background work to be immensely helpful.
In addition, the Committee wishes to place on record its appreciation of the valuable work performed by the staff of the Committee and, most particularly, by its Research Officer Gail Furness who researched and drafted this Report.
vii
TABLE OF CONTENTS
Page No.
INTRODUCTION vii
SUMMARY OF RECOMMENDATIONS XV
CHAPTER 1 - INTRODUCTION
1.1 Terms of Reference
1.2 Background to the Inquiry 2
1.3 Public Consultation 3
1.4 Conduct and focus of the inquiry 4
1.5 Evidence 6
1.6 Submissions 6
1.7 Acknow 1edgements 6
1.8 For mat of Report 6
CHAPTER 2 - DEFINITIONS 8
2.1 Introduction 8
2.2 "Voluntary Organisations" 8
2.3 Damages Claims 11
2.3.1 Negligence 11 2.3.2 Damages 15 2.4 Public Liability Insurance 15
2.5 Conclusion 16
CHAPTER 3 - UNINCORPORATED ASSOCIATIONS 17
3.1 Introduction 17
3.2 Suing and being sued 17
3.3 Personal Liability 18
ix Page No.
3.4 Right of indemnity 20
3.5 Contracts 21
3.6 Property 21
3.7 Comments 22
RECOMMENDATION I 24
3.8 Conclusion 25
CHAPTER 4 - INCORPORATION 26
4.1 Introduction 26
4.2 Companies (Victoria} Code 28
4.3 Co-operation Act 1981 29
4.4 Hospitals and Charities Act 1958 30
4.5 Associations Incorporation Act 1981 31
4.5.1 Background 31
4.5.2 Eligibility for Incorporation 32
4.5.3 Process of Incorporation 33
4.5.4 Effects of Incorporation 34
4.5.5 Management of the Incorporated Association 35
4.5.6 Statutory Obligations following Incorporation 37
4.5.7 Dissolution 38
4.5.8 Other Matters 39
4.6 Lifting the Corporate Veil 40
4.7 Other methods of conferring the benefits of Incorporation 41
4.7.1 Automatic Incorporation 41
RECOMMENDATION 2 43
4.7.2 Compulsory Incorporation 43
RECOMMENDATION 3 46
X Page No.
CHAPTER 5 -INCORPORATION- SUBMISSIONS AND PROPOSALS 47
5.1 Introductior. 47
5.2 Eligible associations 48
RECOMMENDATION 4 51
5.3 Process of Incorporation 51
5.3.1 Fees 51
RECOMMENDATION 5 52
~12Focms ~
RECOMMENDATION 6 53
5.4 Rules 53
5.4.1 The minimum content of the Rules 55 RECOMMENDATION 7 56 5.4.2 Model Rules 56 RECOMMENDATION 8 56
RECOMMENDATION 9 57
5.5 Statement of Purposes 57
RECOMMENDATION 10 58
5.6 Dispute Resolution Mechanism 58
RECOMMENDATION 11 59
5.7 Short term Incorporation 59
5.7 .1 Period of Operation 61
5.7 .2 Procr~ss of Incorporation 62
5.7 .3 Dissolution 63
RECOMMENDATION 12 63 RECOMMENDATION 13 64
xi Page No.
RECOMMENDATION 14 64
5.8 Branches 65
RECOMMENDATION 15 66
5.9 Management and Finances 66
5. 9.1 Public Officers 66
RECOMMENDATION 16 68
5.9.2 Annual Return 68
5.10 Pre-incorporation contracts 69
RECOMMENDATION 17 70
RECOMMENDATION 18 70
5.11 Dissolution of associations 70
5.11.1 Method of dissolution 70
RECOMMENDATION 19 70
5.11.2 Distribution of surplus assets 71
RECOMMENDATION 20 72 5.12 Victorian associations operating interstate 73
RECOMMENDATION 21 75
5.13 Publicity 75
RECOMMENDATION 22 76
5.14 Review 77
RECOMMENDATION 23 77
RECOMMENDATION 24 78
5.15 Conclusion 78
xii Page No.
CHAPTER 6 - OTHER PROTECTIVE MECHANISMS 79
6.1 IntroductioJ:~ 79
6.2 Immunity 79
RECOMMENDATION 2.5 82
6.3 Disclaimers 82
6.4 Ceilings on Claims 84
RECOMMENDATION 26 87
6 •.5 Other Matters 87
CHAPTER 7 - AVAILABILITY OF PUBLIC LIABILITY INSURANCE 89
7.1 What is a Public Liability Insurance Policy? 89
7.2 The need for Public Liability Insurance 90
7.3 Availability 90
7.3.1 Cost 92
7.3.2 Terms of the Policy 95
7.3.3 How to obtain Public Liability Insurance 99
7.4 Conclusion 107
CHAPTER 8 - INSURANCE PROPOSALS 109
8.1 Introduction 109
8.2 Single Insurance Scheme 109
8.2.1 No fault compensation 109
RECOMMENDATION 27 112
8.2.2 One Policy 113
8.3 Group Plans 114
8.3.1 Role of State Government 115
RECOMMENDATION 28 116
xiii Page No.
RECOMMENDATION 29 118
8.3.2 Role of Local Government 118
RECOMMENDATION 30 119
8.3.3 State associations 119
8.3.4 Conclusion 120
8.4 Compulsory Insurance 120
RECOMMENDATION 31 123
8.5 Publicity 123
RECOMMENDATION 32 124
CHAPTER 9 - CONCLUSION 125
APPENDIX 1 127
APPENDIX 11 130
APPENDIX ID 137
APPENDIX IV 140
APPENDIX V 142
APPENDIX VI 156
APPENDIX VII 161
APPENDIX VID 163
LIST OF REPORTS TABLED 167
xiv SUMMARY OF RECOMMENDATIONS
RECOMMENDATION I (p.24)
The Comm.~ttee recommends that the committee members of unincorporated associations be granted a right of indemnity against the associations' property and funds with respect to any judgement entered against the committee members where the plaintifrs cause of action is such that the association would have been liable as principal if it had been an incorporated bcxty.
The Committee further recommends that the Attorney-General determine the most appropriate form in which this recommendation is to take effect.
RECOMMENDATION 2 (p.4 3)
The Committee recommends that automatic incorporation of voluntary organisations not be introduced.
RECOMMENDATION 3 (p.46)
The Committee recommends that voluntary organisations not be compelled to incorporate.
RECOMMENDATION 4 (p.51)
The Committee recommends that transactions with the public which are intended to provide financial support to the association in a manner which is directly related to its objects shall not be deemed to be trading for the purpose of the Act. Whether these transactions are ancillary or the principal purpose of the group should be irrelevant.
XV RECOMMENDATION 5 (p.52)
The Committee recommends that the present fees remain unchanged save that it recommends that those groups which choose to adopt the model rules pay the reduced incorporation fee of $50. This fee should be indexed on the same basis as the other fees charged.
RECOMMENDATION 6 (p.53)
The Committee recommends that the application for the incorporation of associations and the accompanying declaration be redrafted into one form, and that the requirement that the declaration be sworn be removed. It further recommends that all forms be reviewed by the Office of Incorporated Associations to ensure they are framed in the simplest manner.
RECOMMENDATION 7 (p.56)
The Committee recommends that the Schedule and s.6(a)(i) of the Associations Incorporation Act 1981 be repealed, and further, that s..54(2)(c) be modified accordingly.
RECOMMENDATION 8 (p.56)
The Committee recommends that the model rules be re-drafted in non sexist language and simplified with reference to the matters contained in paragraph 5.4.2.
RECOMMENDATION 9 (p.57)
The Committee recommends that peak organisations in the community be urged to examine the needs of associated groups and draft and circulate appropriate rules for their use.
xvi RECOMMENDATION 10 (p.58)
The Committee recommends that an association's statement of purposes be included in the application form and therefore not be required to be stated on a separate form.
RECOMMENDATION ll (p.59)
The Committee recommends that incorporated associations be granted access to alternative dispute resolution mechanisms. It further recommends that disputes involving questions of law be heard in the Magistrates' Court rather than the Supreme Court.
RECOMMENDATION 12 (p.63)
The Committee recommends that l. Groups which intend to operate for a period of six months or less be able to take advantage of a simpler incorporation process. A discretion should be vested in the Registrar to extend this period for a further maximum period of six months.
2. A simplified set of rules be established for these groups incorporating the matters set out in paragraph 5.7.2.
3. Applications from groups seeking incorporation for this short period be accorded priority by the Office of Incorporated Associations.
RECOMMENDATION 13 (p.64)
The Committee recommends that a procedure, similar to the existing procedure for the reinstatement of defunct companies, be introduced for incorporated associations.
xvii RECOMMENDATION 14 (p.64)
The Committee recommends that the Minister for Local Government in conjunction with community leaders investigate establishing incorporated associations in regions throughout Victoria to provide a corporate structure for groups seeking to operate for a short period only.
RECOMMENDATION 1.5 (p.66)
The Committee recommends that organisations which operate on a branch structure be encouraged to draft and circulate standard rules for the use of the branches, and thereby simplify further the process of incorporation for these branches.
RECOMMENDATION 16 (p.68)
The Committee recommends that there be no maximum age limit for public officers of incorporated associations.
RECOMMENDATION 17 (p.70)
The Committee recommends that sections 17, 20 and 41 of the Associations Incorporation Act 1981 be amended to conform with the equivalent provisions in the Companies (Victoria) Code.
RECOMMENDATION 18 (p.70)
The Committee recommends that section 20 of the Associations Incorporation Act 1981 be redrafted in simpler language.
RECOMMENDATION 19 (p.70)
The Committee recommends that statistics be collected of the ways in which groups terminate their corporate status. In the event of a substantial increase in the numbers of associations being -wound up pursuant to the Companies (Victoria) Code, the Committee recommends that these provisions be reviewed. xviii RECOMMENDATION 20 (p.72)
The Committee recommends that s.3(2)(d) of the Associations Incorporation Act 1981 be repealed. It further recommends that a provision be inserted in the Act requiring associations, on winding up, to distribute their surplus assets to associations with similar objects, and which, in turn, prohibit distribution of their surplus assets to members.
RECOMMENDATION 21 (p.75)
The Committee strongly urges the Victorian Attorney-General to continue to take steps towards ensuring that legislation concerning voluntary organisations is uniform throughout Australia.
RECOMMENDATION 22 (p.76)
The Committee recommends that the Minister for Local Government ensures that a council officer or council sponsored community group be given the task of collecting information about incorporation, regularly liaising with the Office of Incorporated Associations and resourcing and educating the groups within their Shire on the issue of incorporation. The Committee envisages that this officer or group would deal with inquiries in addition to conducting seminars and the like and attending group meetings where appropriate. The Committee recommends that extra funding should be made available to local government if necessary to perform this function.
RECOMMENDATION 23 (p.77)
The Committee recommends that a review be undertaken of the operation of the Associations Incorporation Act 1981 within five years from the tabling of this Report.
xix RECOMMENDATION 24 (p.78)
The Committee recommends that the Office of Incorporated Associations collect detailed statistics of all facets of its operations. In particular, the Committee recommends that the Office examine the annual returns of incorporated associations to determine the extent of their operations and monitor the ways in which the associations are deregistered.
RECOMMENDATION 25 (p.82)
The Committee recommends that voluntary organisations should not be granted immunity from any liability arising out of their activities.
RECOMMENDATION 26 (p.87)
The Committee recommends that Parliament not introduce a statutory limit to the amount which may be claimed against a voluntary organisation.
RECOMMENDATION 27 (p.ll2)
The Committee recommends that an inquiry be established as a matter of urgency to examine the issue of personal InJuries compensation, including the possible introduction of a no fault compensation scheme, for all Victorians.
RECOMMENDATION 28 (p.116)
The Committee recommends that all voluntary groups which receive more than 50Cl6 of their income from government funding be provided with adequate public liability insurance negotiated and paid for by the Department from which their funds derive.
XX RECOMMENDATION 29 (p.ll8)
The Committee recommends that every Government department take immediate steps to implement the model prepared by the Department of Sport and Recreation and contained in Appendix Vm.
RECOMMENDATION 30 (p.ll9)
The Committee recommends that the Government ensures that every local Council take immediate steps to implement the model prepared by the Department of Sport and Recreation and contained in Appendix VIII to assist those groups not covered by the previous recommendations.
RECOMMENDATION 31 {p.l23)
The Committee recommends that the Associations Incorporation Act 1981 be amended to require all incorporated associations to effect and maintain insurance against liability of the incorporated association arising out of an occurrence causing death or bodily injury to a person or damage to property. The cover effected should be not less than $2,000,000 and an appropriate penalty should be prescribed where this requirement is contravened.
RECOMMENDATION 32 {p.l24)
The Committee recommends that the Government ensures that multi-lingual booklets explaining the need for insurance and the avenues through which it may be obtained be produced and widely disseminated to voluntary groups through its Departments, local Councils, community newspapers and community directories.
xxi
REPORT
The Legal and Constitutional Committee has the honour to report as follows:
CHAPTER I - INTRODUCTION
1.1 Terms of Reference
On 17 November 1987, His Excellency the Governor in Council required the Legal and Constitutional Committee -
To inquire into and report to Parliament on: (I) protecting voluntary organisers of events against being personally liable for damages claims arising from those events; (2) conferring the benefits of incorporation on voluntary organisations; (3) the adequacy of existing mechanisms for protecting voluntary organisations, both incorporated and unincorporated, and their members against claims arising from the conduct of their activities; (4) the availability of public liability insurance cover for voluntary organisations and their members; (5) the cost of cover and the consequences of that cost; (6) alternative schemes for providing adequate insurance cover.
In making its investigations, the Committee should note that the Government recognises the important role voluntary organisations play in the life of the community. It values the contribution to public life made by voluntary organisations especially by way of public functions and events. Voluntary organisations should be able to continue to conduct public functions without being unduly burdened by the potential costs of claims arising out of those functions. 1.2 Background to the Inquiry
Voluntary organisations contribute enormously to the welfare of the community and to its cultural, religious, sporting and social life. They provide a wide range of services designed to enhance the quality of life of those who utilise them, such as organising sporting events, advancing the interests of those who suffer some social, economic or legal disadvantage or through preserving the environment.
Voluntary activities have characterised Victorian community life from its colonial days. Since the mid 1800s, Victoria has been home to many organisations managed by voluntary committees including the Salvation Army, the Melbourne Ladies Benevolent Society and the Royal Victorian Institute for the Blind. Religious groups dominated early charity work with the Anglican Mission to the Streets and Lanes founded in 1886, and the St. Vincent de Paul Society in 1854.
Family care was an area of concern to early voluntary organisations and one of the first child care organisations, the Melbourne Family Care Organisation, established in 1851, stilJ operates today. The Victorian Infant Asylum, founded in 1877 also provides aid in 1988, albeit under the modern name of Berry Street - Child and Family Care. The sporting interests of Victorians were similarly catered for early last century with the establishment of the Melbourne Cricket Club in 1838.
By the turn of the century there were hundreds of voluntary welfare groups as welJ as a growing number of recreation and service clubs. For example, the Royal Australasian Ornithologists Union was founded in 1901 by a group of amateurs interested in the scientific study of birds and the Melbourne Rotary Club offered its services from 1921. The aftermath of the first world war also saw the founding of Legacy in 1923, folJowed by Carry On (Vie) in 1932.
The early traditions of benevolence and charity have, however, become more sophisticated in the late twentieth century. The 1970s, in particular, have witnessed the flourishing of many locally managed, district or neighbourhood houses with the 500 or so in Victoria employing several hundred fulJ and part time workers. Hundreds of thousands of Victorians now 2 provide some voluntary help to organisations ranging from small self help groups, through mutual interest groups to the large, more traditional welfare agencies.
The Committee's inquiry arose out of a recognition of the valuable contribution made by voluntary groups in all spheres of community life. In the light of this appreciation of the work of volunteers, there has been some concern as to whether they are adequately protected when conducting their activities and public functions. The government, and indeed the community, became aware that a growing number of volunteers were considering withdrawing their services for fear of losing their personal assets as a result of legal proceedings.
An incident in the north east of the state appears to have been of some influence in this regard. A voluntary committee in that area organised a dance to raise money for a community project. Unfortunately, a person was injured at that event and subsequently initiated legal proceedings to recover compensation from the convenor of that committee. While this action has yet to be resolved, it has nevertheless created uncertainty in the minds of many volunteers about their legal obligations.
The Committee has therefore been given the task of examining the ways in which volunteers are presently protected by the law and recommending reform where appropriate. In addition, the Committee is required to report on the availability and cost of public liability insurance as well as alternative ways in which this insurance may be made more affordable for voluntary groups.
1.3 Public Consultation
A great many people volunteer their services to the community and accordingly are affected by the issues raised in this inquiry. The Committee has consequently made extensive efforts to both inform the public as to the nature of its inquiry and seek its views on the matters contained in its terms of reference.
3 To these ends, in March last year, the Committee prepared and widely disseminated a discussion paper entitled "Public Liability of Voluntary Organisations". The Committee was delighted with the response to this document and distributed 2500 copies both throughout Victoria and to interested people and organisations in other states in Australia. It subsequently received over 220 written submissions.
In addition, representatives of the Committee and its research officer spoke at several public forums designed to educate and inform the community as to the legal and insurance consequences of belonging to a voluntary organisation. The Committee was also pleased for its research officer to be invited to address a conference of Community Leaders involved with service organisations throughout Australia, in Sydney early last year.
Finally, in order to ensure that the fullest range of views were communicated to the Committee, it conducted public hearings both in Melbourne and in rural regions. Evidence was heard in Melbourne from representatives of the legal profession, the insurance industry, Government Departments, local government and most importantly, many voluntary organisations. The Committee also benefited from the views of rural shire councils and voluntary groups operating in the areas of Bendigo and Bright.
1.4 Conduct and focus of the inquiry
Throughout this inquiry, the Committee has seen its essential task as identifying the problems faced by voluntary groups and their members and suggesting practical means by which these difficulties may be remedied or, at least, alleviated. Accordingly, it has sought to produce a report with a practical rather than a theoretical focus.
There has been little research of a statistical nature undertaken in this area. Consequently, detailed information indicating the numbers of voluntary groups, the nature of their activities or their insurance needs is not readily available. Further, the Committee quickly became aware that the time frame allocated to its inquiry would not permit the collection and collation of detailed statistical material on the legal and insurance requirements of these groups. It is clear, however, from a survey conducted by the Australian Bureau of Statistics in 1982, that at least 800,000 Victorians volunteer their services 4 today. Over 50% of their work is directed towards providing assistance to religious institutions or groups and to sporting, hobby and service clubs. A further 15% is devoted to education including services for the disabled, disadvantaged and other special groups, with the remainder divided between many diverse activities.
The Committee's terms of reference, in essence, require it to address the vulnerability of these organisations to the growing trend of legal proceedings being pursued to recover compensation for personal injuries sustained as a result of alleged negligence. To this end, the Committee has examined the legal principles regulating the liability of groups and their members for this type of action. The law in this regard is complex and uncertain, and in keeping with its desire to produce a readable and practical report, the Committee has not prepared an exhaustive statement of this law. Instead, it has endeavoured to set out the relevant legal principles in this area, broadly and simply.
The methods of protection provided by the law, while satisfying some of the needs of voluntary groups, are by no means a complete solution to their vulnerability to legal proceedings. Insurance cover is also necessary to shield these groups and their members from the costs associated with potential claims. The Committee has accordingly considered the availability of public liability insurance and methods of providing adequate cover.
The primary focus of the inquiry has, rightly, centred upon the protection of these groups. The Committee has, however, been mindful to ensure that its proposals do not adversely affect those injured at the hands of voluntary organisations. It is aware that often the injured party is also a member, relative or close supporter of the group. The Committee has therefore attempted, where possible, to balance the rights of both the members of the group and those injured by their activities.
Finally, the Committee has endeavoured to respond to the need for more information about these issues by producing a report which it hopes will educate voluntary groups about their rights and obligations.
5 1.5 Evidence
A list of witnesses who gave evidence before the Committee appears in Appendix I to this Report.
1.6 Submissions
A list of persons and organisations who made written submissions to the Committee appears in Appendix 11 to this Report.
1.7 Acknowledgements
Mr. Alastair Hamilton, for providing valuable information Deputy Registrar, concerning the administration of Office of Incorporated the Associations Incorporation Associations. Act 19&1.
Mr. Robert Wright, for participating in discussions of Solicitor. various legal issues.
Mr. Russell Hopper, ) Executive Director, ) Sports Federation of Victoria. ) ) Mr. Geoff Masel, ) Solicitor. ) ) Mr. Tony Leonard, ) for conferring and advising the H.G.A. Insurance Brokers. ) Committee on issues of public ) liability insurance for voluntary Ms. Judi Kiraly, ) organisations. Victorian Council of Social Service. ) ) Mr. Geoff Park, ) State President of Apex. ) ) Mr. Ron Baxter, and ) Mr. John McCormick, ) Insurance Council of Australia Limited. )
1.8 Format of Report
The Report is divided into nine Chapters. The first, of which this section forms part, deals with introductory mp.tters. The second defines the
6 central terms used in the inquiry. A summary of the major legal difficulties experienced by unincorporated associations is contained in the third Chapter. Chapter Four outlines the ways in which the benefits of incorporation may be conferred on voluntary groups, while Chapter Five proposes areas in which they may be improved. Mechanisms of protection other than incorporation are dealt with in Chapter Six. The following two Chapters address issues concerning public liability insurance and voluntary groups. Chapter Nine comprises the Conclusion to the Report.
7 CHAPTER 2 - DEFINITIONS
2. I Introduction
The Committee's terms of reference contain a number of phrases which require elaboration in order to provide a context for its recommendations. This chapter defines the terms used in the inquiry.
2.2 "Voluntary Organisations"
First, the Committee is required to consider the position of voluntary organisations. It is, therefore, addressing the needs of a wide range of organisations which include community based groups such as neighbourhood houses, self help groups, meals on wheels, senior citizens groups and those operating opportunity shops. In addition, sporting associations, those concerned with cultural and artistic pursuits as well as service clubs, lobby groups and the plethora of voluntary committees which manage property, halls and public resources are being considered by the Committee.
Clearly, extremely diverse activities may be conducted by these organisations. Bushwalking, providing free legal advice, holding fundraising dances, gardening and running rodeos are some of these. These groups may also be geographically dispersed, consist of two or more members or be a transient group formed for a short period to meet a particular demand. Conversely, a voluntary organisation may have many thousands of members, substantial assets and have been in operation for many years.
While many people know of or are involved in these groups, the criteria which distinguishes them from others needs some explanation.
The Committee has sought assistance from various sources in arriving at a workable definition which is sufficiently flexible to accommodate an extremely diverse range of activities while detailed enough to provide an appropriate framework for discussion. The question of what constitutes a voluntary organisation has been addressed by the judiciary, the legislature and legal commentators. Voluntary groups in the past were largely unincorporated, and as such, they were often referred to by the Jaw as unincorporated associations. & Judicial definitions are few and often dependent upon the particular facts or statute under consideration for their meaning. Two of the more instructive definitions are as follows:
Two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings, each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and on what terms and which can be joined or left at will. (Conservative and Unionist Central Office v. Burrell (1982) 2 All E.R. 1, 4.)
And:
A voluntary organisation of persons who agree to maintain for their common personal benefit and not for profit an establishment, the expenses of which are to be defrayed by contributions made by these persons. (Bohemians Club v. Federal Commissioner of Taxation (1918) 24 C.L.R 334, 337.)
Various academics have also attempted to distil some definition of voluntary organisations from decided cases, legislation and other sources. Stoljar, for example, attempted in 1973 to provide a more comprehensive definition of an unincorporated association. He enunciated a number of key factors which distinguish these groups and concluded that a characteristic group would comprise groups of people who voluntarily come together for some purpose whereby every member may leave at any time and the members meet occasionally to deliberate upon their aims. (1973, pp.38-41.)
More recently, Fletcher in Non-Profit Associations, adopted as his working definition, "a group of persons freely associating for any lawful objects or purposes except making pecuniary gain for themselves or their group". (1986, p.34.)
It can be seen from this brief overview that a common thread exists. An organisation is said to be voluntary if its members agree that any profits
9 made by it will not be distributed to the membership. Voluntary organisations may produce a profit from time to time. However, those funds are distributed to advance the organisation's goals rather than used for the financial advancement of individual members. It is thus the economic relationship between a group and its members which determines its status as a voluntary organisation.
Therefore, in its Discussion Paper, the Committee defined a voluntary group as one constituted by people who have joined together for a common purpose and which is not established to, and does not, make a profit for its members.
Several submissions received by the Committee expressed the view that voluntary organisations should be further categorised according to the nature of their activities. It was suggested that voluntary organisations be defined to include those groups which exist primarily for the benefit of their members, the public at large, or for a combination of both these purposes. Examples of the first category were sporting associations; the second, the Salvation Army; and the third category was described as applying to service clubs. Another submission proposed that the ability to raise funds and the charitable nature of an organisation be further distinguishing features.
The Committee is of the view that for the purpose of its Report a broad definition should be adopted. It is conscious both of the need to retain simplicity in an area that is characterised by legal uncertainty and complexity and the need to assist the broadest possible range of groups. To this end it will define groups as voluntary by reference to the manner in which they deal with their assets rather than in relation to the activities they undertake.
Ultimately, therefore, irrespective of membership or nature of activities, a voluntary organisation will be considered as one which does not distribute any profits to its membership and comprises a group of people which come together for a common purpose, which meet occasionally to deliberate upon its aims and whose members are free to choose whether to come or go.
10 2.3 Damages Claims
The Committee is also required to inquire into protecting voluntary organisations against damages claims arising from the conduct of their activities.
Where any person suffers injury or incurs some loss as a result of an involvemer.~t with, participation, or membership of a voluntary organisation she or he may be entitled to claim damages against that group. The right to make such a claim may arise pursuant to contractual obligations, for example, as a result of a breach of an agreement to deliver goods or provide services. More commonly, in relation to voluntary organisations, their rights arise under the law of tort.
There are many wrong-doings which may be classified as torts. Trespass, nuisance and defamation are some of these. The tort which forms the basis of most claims arising from events or activities undertaken by groups, is that of negligence. The evidence received suggests that voluntary organisations consider themselves most vulnerable to claims of negligence, a fear confirmed by the nature of the incidents related to the Committee.
The Committee is concerned to provide a practical solution to the difficulties being faced by voluntary organisations in relation to their liability for damages claims arising from their activities. To this end, it will confine its inquiry to an examination of their liability in relation to damages claims arising pursuant to the tort of negligence. It believes that this interpretation of its terms of reference reflects the concerns of the community as well as being consistent with the other aspects of its inquiry that deal with public liability insurance cover for voluntary organisations and their members.
Therefore, it may be helpful to sketch briefly the main principles of the law of negligence.
2.3.1 Negligence
A person will be regarded as negligent when their actions fall below the standard of care regarded by the community as normal or desirable and an
11 injury results. In order to bring a successful claim in negligence the following elements must be proved:
a) that a duty of care was owed to the injured person; b) that the wrong-doer's conduct was not what a reasonable person of ordinary prudence would have done in the circumstances; c) that an injury has been sustained; d) that there has been a reasonably proximate connection between the conduct and the resulting injury; e) the absence of any conduct of the injured person which would have substantially contributed to the injury. (Fleming, 1987 p. 95.)
For example, a voluntary organisation holds a fair to raise money for a community project. One of the stalls which had been constructed by the group to sell cakes, collapses, with the result that someone receives cuts and abrasions to their face and a broken arm. In these circumstances the group is responsible for ensuring that the fair is safe for people to attend. That is, it may owe the public a duty of care. It is foreseeable that people would visit the stall and therefore a reasonable person would be expected to have erected the stall properly. Finally, it is clear that the injury resulted from the collapse of the stall and not from any action of the injured person. Accordingly, the group has been negligent. The individual member of the group may also be considered negligent if she or he personally erected the stall.
Whether a duty of care is owed is a question of law. This duty is essentially an obligation placed on a person to avoid conduct which embodies an unreasonable risk of danger to others. Accordingly, one must take reasonable care to avoid acts which are likely to injure persons who are closely and directly affected by one's actions.
Particular rules have been developed within the law of negligence to deal with common relationships which may give rise to such a duty of care being owed.
Liability as occupier of premises
Voluntary groups often conduct their activities from a club room,
12 hired halls and the like. Frequently, therefore, they invite others into these places to participate in various functions. In law, some of these groups may be classified as occupiers of the premises. In this event, the legislature places a particular responsibility upon them and provides that they owe a duty to take reasonable care to see that any person on their premises will not be injured or damaged by reason of the state of those premises (s.l4B(3) Wrongs Act 1958).
The relevant principle which determines whether a group is at law an occupier of any premises which it uses, is the extent to which it can be said to have control over those premises. Liability does not fall solely on the legal owner of the property but also on the persons who exercise control over it at the relevant time. For example, a landlord of premises let under a tenancy, who is under an obligation to maintain or repair the premises, is an occupier for the purposes of the Wrongs Act. Groups which hire a room or a hall for limited periods on a casual basis, by contrast, may not be recognised as exerting sufficient control to be responsible in this regard. However, groups which are in control of premises are under an obligation to ensure that they are safe for anyone coming on to the property.
Once it has been ascertained that a group is an occupier, the law prescribes factors to be taken into account in determining whether such a duty of care has been satisfied or breached. They include:
a) the gravity and likelihood of the probable injury; b) the circumstances of the entry on to the premises; c) the nature of the premises; d) the knowledge which the occupier has or ought to have of the likelihood of persons or property being on the premises; e) the age of the person entering the premises; f) the ability of the person entering the premises to appreciate the danger; g) the burden on the occupier of eliminating the danger or protecting the person entering the premises from the danger as compared to the risk of the danger to the person. (s.l4B(4) Wrongs Act 1958)
13 It appears to the Committee that occupiers will have fulfilled their duties in relation to those who come on to the property where they have done what is reasonable to protect entrants from injury.
Negligent advice
Groups which provide information or advice to the community as part of their functions may also be liable for damages if the advice they give is wrong in some way. A person giving either information or advice on a serious matter is under a duty to use reasonable care in giving that information when she or he knows or ought to know that the person receiving it will act upon it, or that it is reasonable for them to so do. In determining whether such a duty of care exists and has been breached, the court will consider all the circumstances of a particular case which have a bearing on the relationship between the parties including whether the injured party relied upon that advice, the formality of the situation in which advice was given and any fee charged for the service. It is quite clear, however, that lay persons as well as professional and skilled people may be liable for making negligent misstatements, notwithstanding that no fee has been charged. (See further, C.C.H. Tort Reporter pp. 35,970- 36,600)
Conclusion
In summary, a group has a legal obligation to take reasonable care to avoid acts which are likely to injure people who are close to them or cause damage to their property. This closeness may arise out of the group inviting people to a dance or fair, or providing a service to the community. If it has not acted reasonably and an injury which is foreseeable has been sustained, .a claim in damages may be made against them.
The Committee received little evidence critical of the principles governing the law of negligence. They were generally accepted as operating to distribute responsibility for accidents in the community fairly.
We believe that the concept of a duty of care being owed by a person to one's neighbour, the definition of the standard of care applicable and the consequences of damages flowing from a breach of the duty of care or
14 breach of the standard of care applicable in all of the circumstances are both a flexible and appropriate. mechanism for determining questions of the rights of persons injured or persons suffering loss and damage as a result of actions of other persons in the community. (Mr. P.H. Lenne, Written Submission, p.l.)
2.3.2 Damages
The amount that will be awarded to compensate an injured person who has suffered as a result of the negligence of a voluntary organisation will generally reflect the degree of damage suffered by her or him. Damages are calculated on the basis of different types of loss. An injured person can be expected to receive compensation for pain and suffering, loss of amenities, loss of expectation of life and disfigurement. He or she may also receive an amount of money to compensate them to satisfy any needs that have been created by the injury. Under this heading of damage, compensation for medical, hospital, attendant care and similar expenses will be payable. Similarly, an injured person may receive compensation for loss of actual earnings as well as loss of their capacity to earn in the future.
The principle of compensation which applies in relation to damage to property is generally to award the amount that will recompense the owner for the reduced value of the property damaged. Most often this will be the cost of the repairs carried out or the reinstatement of the property.
2.4 Public Liability Insurance
The Committee's terms of reference require it to examine public liability insurance for voluntary organisations. This type of insurance seeks to provide protection against losses sustained by the insured as a result of being held legally liable to a third party for loss or damage caused by her or his negligent acts. It is also known as third party, liability or public risk insurance. If a person has been negligent with the result that another is injured or their property damaged, the insurer would stand in the shoes of the negligent person and meet any claims that were made against that person. In order for the policy to provide protection the person who has sought the insurance must be under a legal liability to compensate another person. Mere accident is not sufficient, negligence must be proved. 15 Public liability insurance is to be distinguished from other similar sorts of insurances such as personal accident or professional indemnity. Essentially, personal accident insurance provides cover where a person may have suffered loss or damage and where fault cannot be attributed to another party. Professional indemnity insurance is effected to protect against claims arising out of a breach of duty owed in a professional capacity by the insured. A legal liability must also exist in order for the policy to apply.
The Committee received several submissions and heard evidence from a number of witnesses who expressed their concern that the Committee's terms of reference were not sufficiently broad to encompass an examination of personal accident insurance and professional indemnity insurance. The Committee's terms of reference, however, require it to report to Parliament on only public liability insurance cover for voluntary organisations and their members.
2.5 Conclusion
On the basis of these definitions, the Committee now turns to the legal position of voluntary organisations and their members in relation to any damages claims which may be brought against them.
16 CHAPTER 3 - UNINCORPORATED ASSOCIATIONS
3.1 Introduction
The source of many of the difficulties experienced by voluntary organisations is that they are not accorded recognition by the legal system as a entity separate from their members. Groups are consequently treated as mere collections of individuals and the law is applied accordingly. Therefore, matters such as enforcing the legal rights of a group and allocating responsibility for the actions of the group are dealt with by reference to the individual members. The members are generally seen by the law to be responsible for the group's operations rather than the group itself.
The legislature has chosen to deal with this situation, not by remedying the particular defects which result but instead by creating a process, described as incorporation, by which the organisation can, if it chooses, become a separate entity.
Consequently, there are two bodies of law which apply to voluntary organisations. One is relevant to groups which have undergone this process and become incorporated. This will be discussed in the following chapter. The other concerns those groups which have remained unincorporated and are therefore not legal entities separate from their members. This chapter will outline the major legal principles which apply to voluntary organisations which are in the latter category.
3.2 Suing and being sued
The lack of legal status accorded to unincorporated voluntary organisations affects their ability to initiate or defend legal proceedings. Voluntary organisations, as with other bodies of people in the community, may wish .to enforce their legal rights where they believe these have been infringed. For natural persons or incorporated bodies, to initiate legal proceedings is a relatively simple matter as the action is pursued in the name of the natural person or the incorporated body. An unincorporated association is not, however, recognised as a legal entity and accordingly it cannot generally sue or be sued in its own name. Alternative procedures must therefore be employed to enable these groups to exercise their legal rights.
17 The injured party may join all members of the association as parties to a legal suit, with the result that each member is individually named and liable to incur separate costs. Such an action may, however, be impractical in large associations or impossible where a fluctuating membership exists. A more viable procedure may be for some members of the group to commence or defend actions as representatives of the whole. Some pieces of legislation also allow proceedings to be taken against nominated members of unincorporated associations in order to circumvent these procedural difficulties. (For example Workers Compensation Act 1958).
The procedural complexity of this area of the law has been remedied in two jurisdictions in Australia. Both the South Australian and Tasmanian Supreme Court Rules allow unincorporated assocations to sue and be sued in the name of the association.
Difficulties may also arise in relation to the substantive law. A member of a group may be prevented from suing her or his own group in tort because the member would be both defendant and plaintiff, creating somewhat of a conceptual difficulty for the court. In addition, the fluctuating membership of these organisations creates problems in identifying the members who, at the relevant time committed or authorised the wrongdoing. Consequently suing the correct party may be impossible.
3.3 Personal Liability
Generally the law of tort provides that people are responsible for the consequences of their own actions. Consequently, if a person is negligent with the result that another is injured, the law will look to that person to compensate the injured party. 'This principle applies irrespective of a person's membership of a voluntary group or that group's legal status. In cases where another has directed or authorised the conduct that resulted in the wrongdoing, that other person may also be liable.
For example, if a voluntary group was assisting pensioners to maintain and repair their homes, and a member damaged furniture in the process, that member may be personally liable to compensate the pensioner for the damage that was done to the property.
18 In circumstances where the association itself is responsible for the negligent act or omission, the law is presented with a dilemma. As the association has no legal identity, liability cannot be imposed upon it. The law must therefore loi!Jk to the collection of people who form the association to allocate responsibility for the actions of the group and provide compensation to the injured parties.
Early this century an English court expressed the view which remains the law today:
Clubs are associations of a peculiar nature. They are societies the members of which are perpetually changing. They are not partnerships; they are not associations for gain; and the feature which distinguishes them from other societies is that no member as such becomes liable to pay to the funds of the society or to anyone else any money beyond the subscriptions required by the rules of the club to be paid so long as he remains a member. It is upan this fundamental condition, not usually expressed but understood by everyone that clubs are formed; and this distinguishing feature has been often judicially recognised. (Wise v. Perpetual Trustee Company Ltd. 1903 A.C. 139, 149.)
Accordingly, ordinary members of voluntary groups will not be held responsible, by virtue of their membership, for any liabilities incurred by the association. They will only be required to contribute any amount owing to the group by way of subscriptions.
However, strict application of the law expressed so far, would result in those injured at the hands of unincorporated voluntary organisations having no redress available at law. In order to remedy this defect the courts have developed the concept of "committee liability". It has been consistently held that those who manage an association, usually the committee, will be held responsible by the law for any tortious wrongdoing by the group itself.
19 The liability of the committeemen ..• does not depend wholly upon a logical approach to the law of ••• tort, none the less it is the only method by which justice can be done towards the plaintiff. (Smith v. Yarnold (1969} 2 N.S.W.R. 410, 415}
For example, if a group held a disco and through its negligence in failing to keep the floor clean and dry, a participant slipped and was injured, the law would look to the committee members to compensate the injured person.
Committee members also stand in the shoes of the unincorporated associations in relation to other aspects of the group's affairs. Many associations employ staff to assist in carrying out their purposes. The law imputes liability to an employer for the acts of workers which occur in the course of their employment. In relation to voluntary groups, the employer cannot be the association as it is not a separate legal entity. Consequently the committee members are regarded as fulfilling this position and therefore will be looked to to compensate anyone injured through the negligence of a worker. Similarly, the committee is considered to be the occupier of any premises controlled by the association and therefore would be liable in relation to any action brought because the association had breached its duty with respect to the conditions of those premises.
3.4 Right of indemnity
A crucial issue for committee members of unincorporated organisations is whether they are required to meet any judgment against them out of their own personal assets or whether they are entitled to be indemnified by the association.
This area of the law is by no means clear. However, it may be said with authority that committee members are entitled to be indemnified out of association funds for those contractual liabilities which are incurred in the course of managing association affairs. Thus committee members contracting within the scope of their management authority for the purposes of the association are generally entitled to an indemnity from the funds of the association. In contrast, any contractual arrangement entered into by the
20 committee members outside their authority or beyond the rules of the association would result in them being personally liable for any debts incurred subsequently.
In relation i:o tortious claims the law is unclear on the issue of a right of indemnity. It appears that in the absence of a specific provision in the rules of a group, the committee members will not be entitled to an indemnity when defending an action against an unincorporated organisation following the commission of a tort.
3• .5 Contracts
Many of the routine activities of voluntary organisations involve entering into contractual arrangements. These may take the form of ordering office supplies, arranging accommodation for meetings, or hiring various goods. While most of the agreements which underpin these arrangements are generally fulfilled without conflict, considerable legal problems may arise when an unincorporated association contracts with outsiders.
As such an association is not a legal entity, contracts entered into in the name of the association may be considered by the law to be of no effect. In some circumstances the courts have shown a willingness to treat an unincorporated association as a legal entity for some contractual purposes. (For example, see Bailey v. Victorian Soccer Federation 0976) V.R. 13.) However, the general rule remains that an unincorporated association may be unable to rely on such a contract and therefore may be unable to enforce its terms.
Similarly, any gifts that are bequeathed to an unincorporated voluntary organisation will generally be held to be invalid unless they can be interpreted as a gift to the individual members.
3.6 Property
The lack of a separate entity means that unincorporated associations are incapable of holding property in the name of the association. Consequently, trustees must be appointed who will hold property on behalf of the association. 21 3.7 Comments
The Committee is required to consider whether the existing law adequately protects unincorporated voluntary organisations against damages claims. Clearly, the law described in this chapter does not act as a protective shield but instead creates obstacles for these groups.
Two states in Australia have attempted to alleviate some of these difficulties by bestowing a quasi-legal status on unincorporated associations. Both the South Australian and Tasmanian Rules of the Supreme Court permit these associations to sue and be sued in the name of the group and further, in certain circumstances, grant a right of indemnity to committee members in relation to the groups assets.
Several jurisdictions in the United States of America have adopted similar techniques to accord unincorporated associations, some, but not usually all, of the benefits of incorporation without actually becoming incorporated. In the main these states treat associations as separate legal entities for the purposes of owning property and enabling legal actions to be taken by and against them. It is not common, however, to limit the personal liability of members of these groups.
The Committee received no comment from any groups experiencing difficulties with the current law in Victoria. The issue, instead appears only of academic interest. Queensland academic and author Mr. K.L. Fletcher, submitted that Victoria adopt provisions of a similar nature to South Australia and Tasmania. (Written Submission, p.5.) He also, however, refers in his recent book, Non Profit Associations (1986) to the conflict of opinion among commentators as to the validity of these rules. Monash University lecturer, Ms. A.S. Sievers, by contrast, concluded that it is impossible to design an effective method of limiting the liability of committee members of all unincorporated associations. (Written Submission, p.6.)
The Chief Justice's Law Reform Committee in its final Report, contemplated the introduction of rules similar to those in the South Australian and Tasmanian Supreme Court Rules, as an accompaniment to the Associations
22 Incorporation Act ( 1980, p.6). Its second Interim Report, however, expressed concern about a number of aspects of these rules, particularly their validity and limited scope of operation. It doubted whether these rules were sufficient to cover all cases where tort liability arises. (1979, pp.8-12.)
In addition, it was thought that the availability of a limited legal status without registration would act as a powerful disincentive to associations making use of an Associations Incorporation Act. Consequently, there would be less access to the records and operation of those groups which did not incorporate. The Committee also noted a number of legal technical problems which could arise on the granting of limited legal status, including the difficulty of reconciling the notion that a body has rights and obligations with the notion that it does not legally exist.
It concluded that if change is to be made in the law, the primary reform should not be directed towards procedural matters. (1979, p.l2.) The Committee recommended that the position of unincorporated associations would best be improved with the introduction of a simple incorporation mechanism. (1980, p. 2.)
The Law Reform Commission of New South Wales made a similar finding and recommendation•
.•. such a change in the law would be fundamental. And it would change the rules under which a vast number of associations, nowhere identified and probably impossible to identify, conduct their affairs. Proposals of this kind raise serious technical questions. (Report on Incorporation of Associations, 1982, p.12.)
While the Legal and Constitutional Committee notes the concerns expressed in both reports, it is nevertheless firmly of the view that voluntary organisations should be able to continue their activities without their committee members being unduly burdened by the potential cost of legal claims. To this end it believes that association funds rather than the personal assets of committee members, should be primarily liable for association obligations.
23 For example, where a person is injured when participating in the activities of a voluntary group and claims that the group itself is responsible for the injuries, that person would then sue the committee members of the group. Following this Committee's proposal, the committee members would be entitled to be indemnified by the group for any costs incurred through defending the claim.
Should the funds of the association be insufficient to meet any successful claims, the personal assets of the committee members would then be called upon to make good the shortfall. As a result committee members of associations with few assets may be out of pocket. However, this Committee is concerned to ensure that those injured by the actions of voluntary groups receive adequate compensation. Such a proposal would provide a source for that compensation and also encourage groups to both incorporate and take out adequate insurance cover.
The Committee has considered carefully the form which this change to the law should take. It is hesitant to recommend that an indemnity be incorporated into rules of court given doubt as to the validity of such provisions in other states. An alternative may be to insert a provision giving effect to this proposal in the Associations Incorporation Act. This would allow the major provisions relating to voluntary organisations to be in the one statute. However, in view of the complexity of this issue, the Committee believes it is more appropriate for the Attorney-General to determine the precise placing of this reform.
RECOMMENDATION 1
The Committee recommends that the committee members of unincorporated associations be granted a right of indemnity against the associations' property and funds with respect to any judgement entered against the committee members where the plaintiff's cause of action is such that the association would have been liable as principal if it had been an incorporated body.
The Committee further recommends that the Attorney-General determine the most appropriate form in which this recommendation is to take effect. 24 3.8 Conclusion
As illustrated, those associations which have not become incorporated may face considerable legal difficulties in the management of their affairs. This lack of corporate status may, however, also confer benefits.
Unincorporated organisations are free from the regulation which accompanies the incorporation process. For example, they are not required to make public their affairs, nor are they constrained by the structural requirements imposed by some forms of incorporation. They are under no obligation to keep financial accounts or other records, and may be easily dissolved. There are, however, but few benefits.
This privacy and freedom from intervention must be viewed in conjunction with an unincorporated association's inability to make contracts, to sue and be sued and to hold property. Most significantly, the group which is not a separate legal entity, places its committee members in the invidious position of accepting responsibility for the actions of the association, and, notwithstanding the absence of personal fault, providing compensation from their own assets.
The Chief Justice's Law Reform Committee, concluded:
•.. the law with respect to unincorporated associations is in such a deplorable state, and leads to frustration in the presentation of proper claims by unincorporated associations or against them that it warrants legislative intervention. (Addendum to the Interim Report, 19 October 1976, p.3.)
25 CHAPTER 4 - INCORPORATION
4.1 Introduction
Many of the legal impediments experienced by voluntary organisations arise because the law does not distinguish between the members of a group and the group itself. Consequently, committee members may be liable for activities undertaken by the organisation merely because of their status as committee members.
Incorporation is a technique devised by the legal system to create new legal entities. The need to develop artificial legal bodies arises where it is necessary to distinguish the rights and duties which pertain to a particular person in his or her own right and those which attach to that person in some other capacity, for example, as a member or office bearer of a group. For example when a person is properly carrying out the duties of a secretary of a group and hiring rooms and the like, she does so on behalf of that group which then takes responsibility for her actions. By contrast, if she, for her personal benefit, does the same thing, she will be responsible for any consequences.
Incorporation describes a process whereby, on complying with certain specified administrative requirements, associations are granted a corporate personality, which is separate from the members of the group. On incorporation the new entity enjoys all the rights and is subject to the same duties as individual people. Accordingly, incorporated bodies may enter into contractual arrangements, institute and defend legal proceedings and hold property in their own name. Most significantly, these corporate entities will be liable for any wrongdoings they commit. The responsibility of ordinary members and committee members for the debts or liabilities of the organisation is limited to the amount if any, they owe to the group by way of unpaid subscriptions. Their liability is therefore limited.
Incorporation is the primary existing means of protecting committee members of voluntary groups against being individually and personally liable for damages claims arising out of the activities of the group. Instead of committee members being sued when the group itself commits a wrongdoing, the incorporated association will be sued. Any compensation which it is ordered to pay will, accordingly, be paid out of its assets and not out of the committee members' personal assets.
26 Incorporation is not, however, a panacea which operates to shield groups against all claims and render them immune from liability. The organisation, as a separate legal entity can still be sued where it has committed a wrongdoing. Members of the group may also be the subject of legal proceedings where they personally are responsible for another's injury.
In summary, incorporation allows groups the ease of operating as a separate entity from its members. Its primary consequence for this inquiry is that incorporation protects committee members who, through no fault of their own, would otherwise be held personaJJy liable for the acts of the group.
The effects of incorporation are more far reaching than simply conferring benefits on groups. It also operates to regulate their internal affairs and thereby provides a measure of accountability to members, creditors and the community. Such accountability is regarded as a desirable, even necessary, counterpart to granting the advantages of limited liability.
This chapter wiJl outline the main sources of incorporation, other methods by which the benefits of incorporation, can be conferred and examine a limitation on the doctrine of limited liability.
There are a number of different mechanisms available in Victoria by which associations may incorporate and consequently protect their committee members. Some require that the groups be formed for particular purposes, for example whether they are philanthropic or profit oriented, while others impose conditions as to the size of the organisation. While they alJ grant the members of the association limited liability, both the procedure and the accountability requirements of these mechanisms vary greatly.
The primary sources of incorporation for voluntary groups are the Companies (Victoria) Code, the Co-operation Act 1981 and the Associations Incorporation Act 1981. A table comparing the key elements of these corporate structures is located in Appendix III. The major provisions of these Acts wiU now be discussed.
27 4.2 Companies (Victoria) Code
The Companies (Victoria) Code provides a mechanism whereby any two or more persons can form a company and thereby create an entity separate from themselves. On incorporation the company is classified according to both the nature of the liability imposed on its members, and its public or private status.
The greatest number of companies are those which are limited by shares. A company limited by shares is organised on the principle that the company has a share capital of a stated amount. Each member is allotted one or more shares on the condition that the member will, at some time, pay for the shares. The liability of each member to contribute to the debts and liabilities of the company is limited to the amount (if any) remaining unpaid on each of that member's shares.
Companies limited by guarantee may also be formed with the result that their members are liable only for the amount they undertake to contribute in the event of the company ceasing business. In these companies, members are not required to pay any capital while the company is a going concern. When a company is wound up, the members at the commencement of the winding up are primarily liable to honour their guarantees. If they are unable to meet the company's liabilities, persons who have been members within the year before commencement of winding up are liable to honour their guarantees, although these past members are liable to contribute only towards payment of the companies debts incurred before they ceased to be members. (Ford, 1985, p.28.)
Companies are required to add the word 'limited' after their names. Those groups limited by guarantee who wish to obtain the benefit of limited liability without the taint of commercialism, may apply to be registered pursuant to s.66 with limited liability and without the title 'limited'. This is, however, only available to those groups which are both formed for useful community purposes, like providing recreation or promoting art or charity, and prohibit the payment of any profits to their members.
28 The advantage of such a scheme lies not only in its removal of the suggestion of a profit element, but in its potential to exempt the company from complying with other quite complex and stringent provisions of the Code relating to the lodging of returns. Of the available company structures, s.66 provides the most suitable form for voluntary organisations.
The essential purpose of the Code is to provide both a form of incorporation for profit making enterprises and a system of regulation of their affairs. Consequently, the requirements imposed on companies with respect to the process of incorporation and their subsequent operations are extensive in order to protect those in the community who deal with them.
Companies are required to draft and lodge Memorandum and Articles of Association, a task which is often difficult without the assistance of a lawyer. They must also appoint an auditor, comply with complex meeting procedures and attend to a host of other detailed requirements. While the Code contemplates non profit organisations avai1ing themselves of its procedure through the provisions of s.66, in practice, there are few exemptions granted from compliance with accountability requirements. The initial and on-going expenses of this form of incorporation are also formidable for voluntary groups.
Very few submissions were received by voluntary groups which had incorporated pursuant to the Code. Those which had, invariably chose incorporation as a company limited by guarantee in order to have the same structure as their interstate counterparts. In addition, few other options were available to these groups at the time they sought incorporation.
4.3 Co-operation Act 1981
A voluntary organisation may also gain corporate status by registering as a co-operative pursuant to the Co-operation Act. Registration is generally available to groups primarily concerned with the common needs of their members and established to undertake activities associated with agriculture, trading or the provision of community services or benefits.
29 The process and cost of registration is less onerous for co-operatives than companies, although the Act is quite restrictive as to the nature of the organisation which may incorporate pursuant to its provisions. Most groups which have availed themselves of this process are those which have pooled their money for a common, often commercial purpose, while only a small proportion have as their purpose community benefit and the provision of services to their members.
The Committee received no submissions from co-operatives.
4.4 Hospitals and Charities Act 1958
Some voluntary organisations have also, in the past, chosen or been required to incorporate pursuant to the provisions of the Hospitals and Charities Act 1958. This piece of legislation, repealed by the recently passed Health Services Act 1988, allowed a limited number of organisations, formed with the objects of saving life, promoting health, preventing cruelty or other objects of a philanthropic or human nature, to incorporate.
Transitional provisions contained in the new legislation provides that a group incorporated under the Hospital and Charities Act remains incorporated until 1991 or until it is incorporated under another Act. The Health Services legislation does not provide an alternative method of incorporation. This recent Act followed a review by the Health Department which concluded that the old .Act had outlined its usefulness as a device to enable incorporation. It was of the view that the Associations Incorporation legislation is now the most appropriate mechanism.
The Committee received several submissions revealing some confusion in the minds of voluntary groups as to the steps to take to retain their corporate status. Discussions the Committee has had with Community Services Victoria officers indicate that the Department has, as yet, no policy on the most appropriate form of incorporation for these groups to adopt following the repeal of the Hospital and Charities Act. Its general advice, however, is that the Associations Incorporation Act is the most suitable for community based services.
30 4.5 Associations Incorporation Act 1981
4.5.1 Background
The adequacy of the companies and co-operative structures just described to accommodate the needs of voluntary organisations has previously been the subject of review.
A decade ago the Victorian Council of Social Service published a discussion paper in response to a commonly held view that existing legislation regulating and providing a means of protection for voluntary organisations was inadequate. The paper recognised the need for the not-for-profit sector to be accountable and have available a process of incorporation which was simple, flexible, comprehensive, comprehensible and inexpensive.
The paper reviewed the various mechanisms then available, (such as the Code and Co-operation Acts) and concluded that a model based upon the Associations Incorporation legislation in other States and Territories provided the most appropriate regulation and incorporation mechanisms for not-for profit associations. At that time, legislation similar to the Victorian Associations Incorporation Act had been in force since the turn of the century in Western Australia and following the Second World War in both Territories as well as South Australia and Tasmania. All remaining States now have comparable Acts.
In 1974, the Chief Justice's Law Reform Committee was given the task of examining methods of overcoming the major legal difficulties faced by voluntary organisations and proposing any necessary legislative reform.
In 1976, the first Interim Report of this Committee also identified the inadequacy of existing mechanisms and accordingly recommended that legislation be enacted providing specifically for the incorporation of voluntary organisations which were formed for non-profit making purposes •
... it is well-known that, in Victoria, many voluntary organisations are unwilling or unable to incur the expense, trouble and obligations of incorporation as a company limited by guarantee ••• (and) that the terms of the Co-operation Act are too narrow to be of any appreciable 31 assistance with the problem. (p.4.)
A draft Bill, influenced by similar interstate legislation, was appended to its final Report in 1980. Its contents then formed the basis for the Associations Incorporation Act. The Act was passed by Parliament with the strong support of the Opposition in 1981 (Parliamentary Debates, Legislative Assembly, 17 December, 1981, p.5521) and came into operation on l July, 1983. The Act was seen as providing a simple yet comprehensive method for voluntary groups to protect their committee members from liability.
This Chapter will now outline the main provisions of this piece of legislation.
4• .5.2 Eligibility for Incorporation
Any society, club, institution or body formed or carried on for any lawful purpose which has at least five members may apply for incorporation. The Act does not specifically require members to be natural people as opposed to legally created entities. It does not adopt the New Zealand approach of counting incorporated bodies as three people for the purpose of incorporation. It is, however, administered in such a way as to allow corporate or unincorporated bodies as well as individuals to become members.
The Victorian legislation differs from some of its counterparts in other states in that it does not restrict incorporation to those groups which undertake particular activities. An economic rather than a functional approach has been preferred and accordingly, an association must not trade or secure pecuniary profit for its members in order to receive the benefits of incorporation under the Act.
A somewhat flexible approach to trading activities has been adopted by the legislature, with associations being permitted to make a profit, conditional upon it not being divided among members during the life of the association. Similarly, some trading is allowed where it is ancillary to the main
32 purpose of the group and where any transactions with the public are few or insubstantial in value. Events organised to promote the association, such as displays and sporting fixtures, are excluded for this purpose. The Act also does not consider the payment of wages or competing for prizes relevant to whether an association makes a profit. The prohibition on trading is removed for certain charitable organisations which distribute their surplus assets only for charitable purposes and where their rules authorise trading only in accordance with the Act. An incorporated association may also apply to the Registrar to be exempt from the prohibition on trading. To date, only two associations have applied for an exemption. Both have been granted. The Office has indicated that these applications will be considered on a case by case basis, although it would expect that any trading undertaken by the group would remain ancillary to the primary purpose of that group.
The Associations Incorporation Act, therefore, allows voluntary organisations, irrespective of the purpose for which they are established, to become separate legal entities. The only restriction upon their operations is that they must refrain from extensive trading and from paying dividends to their members. lf.5.3 Process of Incorporation
In order to apply for incorporation, a majority of the members of an eligible association must first authorise a Victorian resident between the ages of 18 and 72 years to make application to the Registrar of the Office of Incorporated Associations, situated within the Corporate Affairs Office. They must then approve a statement setting out the purposes for which the association is established and the rules by which it will operate. A majority of members present at a meeting, of which notice has been given, is sufficient for this purpose.
The rules must deal with various matters including qualifications for membership; the name, constitution, membership and powers of the managing committee; the quorum and procedures at meetings; the sources from which the funds of the association are to be derived and the manner in which they are to be managed; the manner of altering purposes or rules of the association; and the
33 disposition of any surplus assets on the winding up or dissolution of the association.
The regulations made pursuant to the Act set out model rules as a guide for associations. They may either adopt the model rules in their entirety, modify them or draw their own rules, provided they cover all the matters mentioned.
The application to the Registrar should be in the form provided for by the Office and should be accompanied by a copy of the rules, the statement of purposes and a declaration by the person authorised to make application on behalf of the association. Particulars of any trusts relating to the association must also be provided. A fee of $75.50 is payable with the application.
The Registrar will then check the documents lodged to ensure they conform with the requirements of the Act, particularly examining the matters which are required to be contained in the rules. They will be returned to the association if any amendments are necessary, or, alternatively if they are correct, a certificate of incorporation will be issued and forwarded to the group.
An important feature of the Victorian system is that it does not grant the Registrar a discretion as to the granting of a certificate of incorporation. Where an association meets the requirements of the legislation, it must be incorporated. In contrast, a number of other Australian jurisdictions aUow the Minister or administrator power to refuse incorporation where they see fit to do so.
4.5.4 Effects of Incorporation
From the date upon which an association becomes incorporated, it becomes an entity separate from its members. Accordingly, all the rights and obligations which apply to individuals, pertain to the incorporated association.
Any property which the association owns which is held on trust for it by another vests in the association in its own name. Following incorporation the association may buy or lease property in its name without fearing. the legal complications which arise when other people hold land on the group's behalf.
34 Similarly, it may enter into contracts, sue and be sued and, most significantly, all of its members are liable to contribute to the debts and liabilities of the association only to the extent provided in the rules. The association will, in addition, have all of the powers it provides for itself in its rules and, unless stated otherwise, broad powers to deal with the funds of the group.
The Act also provides a dispute resolution mechanism for incorporated groups by granting the Supreme Court wide powers to make orders regarding the rights and obligations of members under the rules. Consequently, members will have standing to sue in this court should they wish to dispute any aspect of their entitlements.
In order for members of the community to be aware that they are dealing with a group which has all the benefits of incorporation including limited liability, the association's name must have the word 'incorporated' or 'inc' as the last word of its name.
4.5.5 Management of the Incorporated Association
The rules are the main source of information as to the procedures to be adopted by and as to the management structure of these groups. Generally, however, the responsibility for the organisation is allocated between the public officer, committee and the members.
(1) The public officer performs the role of contact person and takes primary responsibility for discharging the group's obligations to the Office of Incorporated Associations. This person is not required to be a member of the group, but must be between the ages of 18 and 72 years and a Victorian resident. In most cases the person initially authorised to apply for incorporation will become the public officer.
The Act has recently been amended to allow public officers who reach the age of 72 while in office to continue performing that function until the next annual general meeting. A 72 year old may also be appointed by a resolution of a general meeting to hold office for the same period of time. Other circumstances in which the position of the public officer becomes vacant
35 is detailed in the legislation and includes bankruptcy, unsoundness of mind or when the incumbent ceases to be a resident in Victoria.
The significance of the role undertaken by the public officer is reflected in the range of matters within her or his domain, and the consequent penalties for failure to carry out her or his obligations. Public officers are required to keep the Registrar informed of any changes in the name or address of anyone holding this position; alterations to the group's statement of purposes, rules or name; lodge all documents required by the Act within specified time frames; produce any required information; and act as an address for service. Penalties for failure to attend to some of the duties are imposed.
(2) Power also resides, by virtue of the Act, in the committee of the association. The committee is described as the body having the management of the association, and subject to its rules, those members who constituted the committee prior to incorporation will be the first committee members of the incorporated group. This definition does not, however, preclude an incorporated association being managed upon a collective basis, but merely requires the rules to be appropriately framed to reflect this structure.
The model rules provide for a committee of six members of whom four will be office bearers. The committee is the body which is obliged to oversee the operation of the group and consequently, they must convene annual general meetings at appropriate times and present such gatherings with the prescribed financial information. The committee may also be subject to penalties of up to $5000 and/or imprisonment for one year for failing to comply with the legislative requirements. This maximum penalty will be incurred when false or misleading statements are made in relation to material submitted to the Registrar.
While some states require that the names of the Committee members be lodged with the Registrar, Victoria only prescribes that a register of members be kept by the association.
(3) The third component of incorporated groups is the members themselves. The model rules contain quite detailed provisions dealing with admission to membership, disciplinary procedures, elections and meeting procedures which dictate the role of members in the organisation.
36 Perhaps the most significant aspect of incorporation for aU of the members, including those that form the committee, is the limit which is placed on their liability to contribute towards the payment of the debts and liabilities of the incorporated association when it ceases operations. Subject to the rules of an association, their responsibility as members is only to contribute a subscription fee, set in the model rules as $1.00 entrance fee in addition to an annual payment of $2.00.
The Act does, however, impose personal liability on members in certain circumstances. Where a member is involved with the association trading or dividing profit among its members, it will be personally liable to any creditor for any debts and liabilities subsequently incurred.
Similarly, members may be liable to a fine of $5000 and/or one year's imprisonment where, to their knowledge, false or misleading statements are made to the Registrar. The regulations also allow the committee to fine a member up to $20.
4.j.6 Statutory Obligations foUowing Incorporation
Incorporation pursuant to the Associations Incorporation Act does confer benefits on groups. It also, however, operates to regulate their affairs by imposing reporting requirements and allowing information about the groups to form part of the public record. These ongoing obligations reflect the notion that these associations should be accountable to creditors, the community to which their liability is limited, and their members, while maintaining minimum intervention into their activities.
Associations are required to hold an annual general meeting within 18 months of their incorporation and in each calendar year thereafter. At that meeting, details of the association's assets and liabilities, income and expenditure in addition to particulars of any mortgages or trusts should be provided to members. These details may be contained in a simple statement that, subject to the rules, does not require to be audited. Within one month of this meeting or the time in which this meeting should have been held, the financial statement, a certificate to the effect that the statement has been submitted to members together with any resolutions passed should be lodged with the Registrar. A fee of $24.10 is payable.
37 Associations may apply for an exemption from complying with these requirements, however none, to date, have been granted. It appears the size of a group wilJ not be sufficient to attract an exemption.
The annual general meeting, and the subsequent public access granted to its contents after lodgement, is integral to the group's accountability and in the main, organisations require no professional assistance to comply with the Act in this regard.
4.5.7 Dissolution
The procedures which alJow an association to cease functioning are relatively complex, and in some circumstances mirror those which operate in respect of companies. There are a number of different ways in which a group's corporate status may be ended.
An incorporated association may itself decide to terminate its operations and resolve to be wound up. The provisions of the Companies (Victoria) Code applies in these circumstances, and a protracted process may result. This avenue is only available to those groups which are financially solvent.
Alternatively, the association, a member, a creditor or the Registrar may apply to the Supreme Court for an order that the group be wound up. Such an order wilJ be made only if particular conditions exist, for example, where the group is unable to pay its debts, where it has suspended its operations for a year or where the group has traded or distributed its profits to its members.
A final method of terminating the existence of a group is vested in the Registrar. If she or he has reasonable cause to believe that an incorporated association is not operating; has less than five members; has traded or distributed its profits otherwise than in accordance with the Act; or has failed to provide statements of its annual general meeting for the previous three years, the Registrar may cancel its incorporation. In order to ensure that such a step is not taken lightly, a procedure is in place whereby advertisements of an intention to cancel may be placed and an appeal to the County Court allowed.
38 Any assets that the group may hold at this time are subject to differing rules depending upon the nature of its termination. The association may resolve or provide in its rules that they be disposed of in a certain way, for example, they may be distributed among the existing members or applied to assist a similar group. Where the Registrar intervenes, the surplus assets will vest in him or her who then will direct their distribution as he or she sees fit.
In most cases, however, the group will resolve to be wound up and decide the manner in which their surplus assets will be distributed. It will then contact the Registrar, and its incorporation will be cancelled at no charge. It is requested to dispose of its assets prior to being deregistered. 210 incorporated groups have been deregistered and to date, of these, less than 10% have gone into liquidation or been wound up.
The effect of an association being wound up or its incorporation cancelled is that it reverts to its previous status as an unincorporated association with all its attendant legal difficulties.
4• .5.8 Other Matters
Various other procedural and substantive issues are dealt with by the Act.
The groups which are incorporated under the provisions of other pieces of legislation, such as Companies (Victoria) Code, or the Co-operation Act may "migrate" to the Associations Incorporation Act upon complying with certain conditions. They then become incorporated associations. To date only 70 organisations have done so. Similarly, a procedure is available whereby two or more incorporated groups may amalgamate into one association.
On a more technical note, lengthy and complex provisions regulate the effect of a group entering into a contract prior to its incorporation. Circumstances where the association acts outside its power are also considered as are the consequences of information about the company being available to the public. These provisions provide the detail necessary to construct a separate form of incorporation, however, their direct relevance to most of the groups which fall within the Act's ambit is limited.
39 A register is also kept of all documents lodged by an incorporated association and is available for public inspection on payment of a small fee.
4.6 Lifting the Corporate Veil
As previously discussed, incorporation grants members of an organisation limited liability. (See p. 26) Consequently, when an incorporated body commits some wrongdoing, the courts hold the body rather than Its members liable. Clearly, however, an association has no independent mind and acts according to the wHl and at the direction of its members. In law, therefore, while the role of the members may be disregarded for the purposes of liability, in reality, it is the members who determine the activities of an organisation.
The courts have developed a technique to apply to incorporated bodies when the doctrine of limited liability is being used against the interests of the members or community. This judicial or statutory device known as 'llfting the corporate veil' describes the process by which the fact of Incorporation is disregarded In order to ascertain where the true liability lies.
The circumstances in which the veil will be raised may be contained in statutory provisions or determined by the courts on a case by case basis. For example, personal liability is attached to members or directors of companies where the required number of members falls below the statutory minimum (s.82 Code). The Associations Incorporation Act also prescribes various penalties for which members may be personally liable. For example, if a member is involved with an association which is trading or securing a pecuniary benefit for its members, he or she may be personally liable to pay a penalty of $200 (s.51(2)).
The approach of the courts in this regard is less clear and no one principle can be stated which may assist in predicting when the veil will be lifted In relation to companies or Incorporated associations. However, one example of this principle In practice is where a company which has been used to enable someone to avoid an existing obligation or to carry out a fraud. ( Gilford Motor Co.L td. v. Horne (1933) Ch 935.)
40 In America, the courts will disregard the corporate status when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud or defend crime. (Schlicht, 1982, 134.)
As yet, there is no clear judicial guidance in Australia to indicate whether the courts will be prepared to lift the non-profit corporate veil and, if so, in what circumstances. The Committee includes this section in its report to point out that incorporation may not provide absolute protection. It does, however, support the use of the doctrine to protect the community against fraudulent operators abusing the protection afforded by incorporation.
4.7 Other methods of conferring the benefits of Incorporation
The forms of incorporation previously discussed clearly differ considerably in their requirements. They also share a common element. In all of these mechanisms the new legal status is only bestowed on a group following the lodgement of various specified documents, and retained only on compliance with other established procedures. It is therefore a matter of choice for these groups to seek incorporation, they are not required to do so.
There are several methods other than those described available to the legislature to grant organisations a separate legal identity. First, they may be granted a quasi-legal status of the nature described in Chapter Three. Secondly, they may be deemed to be automatically incorporated without the groups themselves taking any action. Thirdly, they may be required to incorporate. The Committee received many submissions proposing the adoption of one or another of these methods. It will now examine their suitability to assist voluntary organisations.
4.7.1 Automatic Incorporation
Should voluntary organisations be incorporated automatically?
The concept of automatk incorporation is not new to the Victorian legislature. Various pieces of legislation presently confer corporate status upon groups of people exercising particular functions without the need for them to seek incorporation through the normal channels.
41 For example, the Crown Land (Reserves) Act 1978 and its proposed successor the Lands Bill, contemplates that a committee appointed to manage public land may be declared a corporation, on notification published in the government gazette. From that date, the Committee has limited liability and all the other benefits attendant upon incorporation.
In addition, the committee must comply with various procedures regulating membership, meetings and the manner in which the committee informs the Government of its operations. Of the estimated 2000 committees presently managing public land about 100 have requested to be declared a corporation through this mechanism.
Similarly, the recently enacted Health Services Act 1988 deems public and extended care hospitals to be bodies corporate.
The introduction of legislation which itself incorporates voluntary groups was considered in some detail by the Chief Justice's Law Reform Committee in its Second Interim Report. That Committee cited several arguments in opposition to such an Act.
First, they were of the view that there are 'a host' of groups whose activities were such that they did not need the benefits of incorporation. Secondly, it was thought very difficult to develop criteria to distinguish between those groups which do and those which do not require incorporation. For example, should the distinguishing feature be the nature of the activity undertaken, their financial position or the size of the group? As all of these elements may fluctuate considerably, none were thought adequate for the purpose. Finally, the Committee believed that great uncertainty as to whether a legal entity exists would be created by this system. The formation and dissolution of the group would be difficult to pinpoint wlthout a certificate of incorporation providing conclusive proof of its existence.
Most submissions to the Committee believed that the system of incorporation on application should be retained and that deeming legislation
42 should not be introduced. One submission argued against adopting automatic incorporation for voluntary groups on the ground that it would offer these organisations a benefit not available to other groups such as partnerships. Another thought that an additional consequence of deeming corporate status upon voluntary organisations is the lack of accountability by these groups. It would be impractical, it was argued, to force groups to make available information an<:! therefore no register would be available of their existence or dealings. Many organisations may also legally exist long after the association, has in reality, ceased operating.
The few who recommended that the Committee propose automatic incorporation were generally motivated by the perceived complexity of the existing incorporation process. Automatic incorporation was seen as a means of avoiding this procedure.
The Committee does not believe voluntary organisations should be automatically incorporated on the passing of legislation. It is of the view that the benefits of incorporation should be granted subject to some disclosure by groups. In addition, it does not wish to create further uncertainty in an area of the law already well known for its vagaries and anomalies. A major concern is also the difficulty in precisely defining the groups to which the legislation would apply, as in other circumstances where automatic incorporation applies the subject of the legislation can be clearly identified and regulated. The same cannot be said of voluntary organisations.
RECOMMENDATION 2
The Committee recommends that automatic incorporation of voluntary organisations not be introduced.
4.7.2 Compulsory Incorporation
The final means by which voluntary organisations can receive the benefits of incorporation is when the legislature requires them to seek incorporation. Instead of groups choosing whether the nature and scope of their
43 activities are such as to warrant incorporation, Parliament directs that they must incorporate. In view of the advantages of being a separate legal entity, should voluntary groups be required to incorporate?
The legislature presently uses this power, in quite specific circumstances, to require certain bodies to become incorporated. For example, groups of people which number in excess of 20, who associate for the purpose of profit making must incorporate pursuant to the Companies Code. Similarly, the Government has recently tabled guidelines proposing that non-government groups receiving government funds in excess of $5000 per year be required to incorporate. These guidelines are to be implemented over a four year period commencing July 1988. The following rationale was provided for this move:
For Government the main advantage of funding an incorporated organisation is that there is a legal entity against which a legal action can be brought thereby resulting in a greater security of the public funds provided to that organisation. (Guidelines for the funding of non-Government organisations. Statement by the Victorian Government tabled by the Hon. R.A. Jolly, M.P., Treasurer, 6 May, 1988, Appendix 4.)
Incorporation is seen as desirable but not mandatory for those groups which receive less than $5000. The departmental guidelines suggest that the simplest and most widely used method of incorporation is pursuant to the Associations Incorporation Act. Some sections of the community have also resolved that the groups within their auspice must incorporate. For example, Kiwanis International, a service organisation, has inserted a requirement in its constitution that all its clubs be incorporated.
In its Discussion Paper, the Committee posed the question of whether incorporation should be compulsory for all or some voluntary organisations. Nearly all of the replies received to this question declared that incorporation was beneficial and desirable and should be encouraged. The responses were evenly divided on the issue of compulsion. Some thought it over regulatory and inimical to the concept of freedom of association. Others concentrated on the practical difficulties inherent in this proposal and argued it
44 would be impossible to enforce, add an unnecessary administrative burden to smaller groups and, further, that many groups did not require or want incorporation.
By contrast, those in favour of compulsory incorporation, believed it would protect members from financial burden and thus would ensure that volunteering remains attractive to the community. Many expressed a preference that only certain large groups be subject to this requirement while others thought it should apply to all voluntary organisations.
The issue of compulsion was also considered by the Chief Justice's Law Reform Committee. It concluded that it was not desirable to introduce mandatory incorporation for reasons similar to those advanced in the previous section. (See p.42.) In particular, it was of the view that the activities of some associations did not warrant incorporation.
The Legal and Constitutional Committee believes that the law in relation to unincorporated voluntary organisations is, indeed, in a deplorable state. (See p.25.) It is of concern that members of these groups often put their personal assets at risk in order to volunteer their services, and that the simplest transaction may have complicated legal consequences.
Incorporation clearly solves many of these problems and, significantly, has the potential to restore the confidence of volunteers. The Committee is conscious, however, that many voluntary organisations are of a transient nature with activities as innocuous as meeting weekly to play backgammon. Other small groups are of an ad-hoc nature, formed in response to a single issue and disbanded soon after.
In its quest for proposals which are both capable of implementation, and of practical assistance, it has decided against the introduction of compulsory incorporation. It believes it is unneccessary for every voluntary group to incorporate. In addition it is an impossible task to develop criteria, other than those already in existence, to distinguish those which should incorporate. Further, it has real doubts as to whether such a proposal could ever be enforced. On the basis of the extreme difficulty the Committee has
45 experienced in identifying these groups it believes compulsion could not be practically enforced.
It is of the view that the recent guidelines introduced by the government will ensure that many groups receiving public funds are both accountable and their members protected. Those groups not in receipt of government grants should, it believes, be the subject of a sustained educational campaign designed to inform them of the benefits of incorporation and encourage them to apply. The Committee is aware that many peak or parent bodies have undertaken this task and, as a result, many more groups are incorporating. This issue of publicity will be discussed in further detail in the following chapter.
RECOMMENOATION 3
The Committee recommends that voluntary organisations not be compelled to incorporate.
46 CHAPTER 5 - INCORPORATION - SUBMISSIONS AND PROPOSALS
5. I Introduction
The Committee is required by its terms of reference to report on methods of conferring the benefits of incorporation on voluntary organisations and the adequacy of existing protective mechanisms. As the previous chapter demonstrated, several processes of incorporation, of differing complexity and suitability, are available.
At an early stage in its inquiry it became apparent to the Committee that the Associations Incorporation Act is widely accepted as containing the most appropriate method of conferring these benefits on voluntary organisations. Over 16,000 organisations involved in sporting, religious and community activities as well as cultural, ethnic and welfare groups now bear the title "inc." In contrast, less than 1,000 companies have incorporated pursuant to s.66 of the Code and there are only 800 groups registered as community advancement co-operatives. The Committee has, therefore, focussed on investigating and, where appropriate, improving this mechanism for protecting voluntary organisations.
The view was often expressed to the Committee that the provisions of the Associations legislation are relatively straightforward and inexpensive. This opinion was supported by the fact that over 70% of applications are made by groups themselves rather than by legal advisers. The balance sought by the Act between the concept of freedom of association and that of regulation and intervention was also praised.
It provides a simple and efficient incorporation mechanism, requires a minimum of disclosure from incorporated associations and is not intrusive upon or disruptive of their management and activities, while conferring adequate powers upon the Registrar to ensure that their objectives are maintained. (Mr. K.L. Fletcher, Written Submission, p.4.)
The Act is not, however, entirely without its critics. While the framework of the legislation was generally accepted as working effectively,
47 various aspects of the process of incorporation and subsequent requirements were judged to be in need of modification. The common theme in the evidence was the need for simplification of these procedures. This chapter will detail the suggested reforms, compare the approaches of other Australian jurisdictions and propose any necessary amendments.
.5.2 Eligible associations
The Associations Incorporation Act is concerned with non-profit associations. Accordingly, it excludes business or commercial enterprises from incorporating pursuant to its provisions. It achieves this goal by requiring that associations engage in limited trading only and do not secure pecuniary profits for their members. While it is clear that the term securing a pecuniary profit is regarded as being concerned with direct monetary gains and not mere indirect financial advantages, the meaning of "trading" has not been judicially considered.
Most other jurisdictions in Australia contain similar provisions restricting both the amount of trading which may be undertaken by the associations and the manner in which they may distribute their profits. The South Australian legislation takes one step further and allows associations to engage in transactions which are both ancillary to the principal objects of the associations and intended to provide financial support to the association in a manner which is directly related to its objects (s.18(6)(b)(ii)).
The Committee received several submissions querying the meaning of and need for the limited trading provisions. The Victorian Arts Council was particularly concerned that the activities of its local arts councils would be contrary to these provisions. For example, many of these regularly conduct pottery, painting and stained glass workshops in which the community participates on payment of a fee. Similarly, the Australian Multiple Birth Association (Inc) sought clarification on whether regularly hiring out prams to their members would be considered, under the Act, to be ancillary to their principal purpose.
48 Mr. K.L. Fletcher, commented as follows:
I submit that the ... extent of trading should not be relevant to the status of non-profit associations. Incorporated associations are sufficiently distinguished from trading companies by their inability to pay dividends to their members. They should not be precluded from trading with the public as a means of generating funds to further their objectives. (Written Submission, p.4.)
The Committee has deliberated at length on the issue of trading and has concluded that while wholesale trading should not be permitted, the existing provision is unnecessarily limiting. It is aware that many non-profit groups enter into transactions with the public regularly, and often on a large scale, to raise money for the benefit of the community. Indeed many service clubs, for example, are formed for this purpose. The Committee does not wish to exclude these groups from the ambit of the Act, nor to allow commercial ventures to benefit from the limited disclosure requirements of this form of incorporation. It also notes that an exemption from the trading prohibition may be given by the Registrar on application.
Therefore, it prefers the approach adopted in South Australia where organisations may trade in order to raise funds to further their objects. Further, it believes that these transactions do not necessarily have to be ancillary to the principal objects of the association in order to qualify under the legislation. They may, in fact, be a primary purpose. In arriving at this position the Committee has considered a number of factors.
First, it notes the comments made by the Chief Justice's Law Reform Committee in its final report. That Committee admitted that it had some difficulty with framing definitions which permitted associations to trade in what might be regarded as a legitimate way while preventing commercial enterprises from masquerading as dubs. (1980, p.ll.)
Secondly, the material included in Chapter Two dealing with the definition of voluntary organisations (pp.8-10) supports the view that it is the inability to distribute profits to members, rather than their trading activities which distinguishes these groups. Thus, the Committee does not
49 believe that extending permissible trading activities will extend the operation of the Act to those groups which would not ordinarily be considered voluntary. In addition, the Committee will be recommending amendments to the existing winding up provisions in relation to the power of associations to distribute their surplus assets. (See p.73.)
Thirdly, the meaning which may be attributed to this exclusion has not been the subject of judicial scrutiny in Victoria. However, Fletcher in his recently published work, has analysed a series of cases in order to glean some judicial approach to the interpretation of trading. He believes it has been recognised by both the legislature and the judiciary that many non-profit associations indulge in trade activities primarily as a means of providing the funds with which to pursue their objects. (1987, p.233.) As Barwick, C.J. stated in Ex Parte Western Australian National Football League (1979) 143 C.L.R. 190, 199, when interpreting that State's Associations legislation:
It is not the purpose of entering into trading transactions which is intended to disqualify: the disqualification is in the purpose of gaining by trading or otherwise pecuniary profit for the members.
Fourthly, the Committee notes that the Minister has the power to direct that the association become registered as a company if he or she believes it would be inappropriate for them to remain registered with the Associations Incorporation Act. The Minister is to consider the nature of their activities, the value or nature of the property or the extent or nature of the dealings with the public in coming to this decision.(s.31A) Therefore, s. 31 A may apply if it is thought an organisation engages in dealings with the community which warrant the more onerous accountability provisions contained in the Code.
Finally, it notes that any creditors which find that a group is unable to pay its debts as a result of its trading activities may apply for the association to be wound up pursuant to the Code. Further, the provisions in the Associations legislation granting the Registrar power to inspect the books and banking records of groups, would allow sufficient scrutiny of their activities.
50 RECOMMENDATION 4
The Committee recommends that transactions with the public which are intended to provide financial support to the association in a
manner which is directly related to its objects shall not ~ deemed to be trading for the purpose of the Act. Whether these transactions are ancillary or the principal purpose of the group should be irrelevant•
.5.3 Process of Incorporation
The process of incorporation was described by several submissions as inflexible, time-consuming and expensive. The prime concern related to the rules of the group, which will be discussed later in this chapter. The cost of incorporation, however, was also considered excessive, and the forms were often described as being difficult to follow •
.5.3.1 Fees
Some submissions considered that incorporation should be free for all groups or for those with "charitable" purposes or small memberships. Others recommended that a sliding fee scale be introduced to reflect the size and assets of voluntary groups. In contrast, many organisations believed the cost of incorporation was inexpensive and indeed even minimal in relation to the benefits granted. A similar range of views was expressed in relation to the ongoing fees payable.
The Committee notes that in proposing the introduction of this legislation, the Chief Justice's Law Reform Committee saw the Act as a "service to the community (which should be) subsidised by the Government" (1980, p.6). This approach is also reflected in other Australian jurisdictions where charges do not exceed $78 for incorporation or $33 to file an annual return.
The Committee is satisfied that the fees charged reflect the non profit nature of associations and believe they are not excessive given the commensurate benefits. The administrative costs incurred by the Office for incorporating an association and overseeing its ongoing responsibilities under
51 the Act, would clearly exceed the $75.50 it receives in revenue from each group in addition to the $24.10 yearly charge.
The Committee is concerned, however, to ensure that the process of incorporation is simplified in order to both assist voluntary groups and minimise administrative costs. It is aware that the amount of time required to deal with applications for incorporation is greatly lessened for those groups which adopt the model rules. Accordingly, the Committee is of the view that an incentive should be provided to groups to adopt this course.
RECOMMENDATION 5
The Committee recommends that the present fees remain unchanged save that it recommends that those groups which choose to adopt the model rules pay the reduced incorporation fee of $50. This fee should be indexed on the same basis as the other fees charged.
5.3.2 Forms
Some concern was also expressed that the forms prescribed by the Act were overly complicated. In particular, the requirement that the declaration accompanying the application be made before a person authorised by the Evidence Act 1958 was drawn to the Committee's attention. It was told that a common mistake in applications for incorporation is the failure to have the document sworn before an appropriate person. (Mr. R. Wright, Solicitor, Written Transcript of Evidence, p.69.)
The Committee notes that the Act presently contains provisions creating offences and prescribing penalties where false or misleading statements are made in a declaration or in any document submitted to the Registrar (s.49). In the light of this provision, the Committee believes it is unnecessary to oblige a person to swear the declaration relating to the particulars in the application or the contents of the rules and statement of purposes. In the event that this statement is false, a remedy is already provided for by s.49.
52 The removal of this requirement that the declaration be sworn, would also allow the application and declaration to be combined in the one form.
RECOMMENDATION 6
The Committee recommends that the application for the incorporation of associations and the accompanying declaration be redrafted into one form, and that the requirement that the declaration be sworn be removed. It further recommends that all forms be reviewed by the Office of Incorporated Associations to ensure they are framed in the simplest manner•
.5.4 Rules
The aspect of the legislation which causes most confusion, and at times, frustration for voluntary groups are those provisions concerning the rules of an organisation. As mentioned, a group seeking incorporation is required to draft a set of rules setting out the basis upon which it operates. The association may draft its own rules or, alternatively, adopt wholly or in part the model rules provided in the regulations. Where the association writes its own rules, these rules must contain the information set out in the schedule to the Act. (See Appendix IV.)
Other Australian jurisdictions have not demonstrated any uniformity in their approach to providing model rules for the use of groups or regulating the content of rules. Four jurisdictions allow associations freedom to determine their manner of operation and therefore do not prescribe any minimum content for their rules. (The Australian Capital Territory, Northern Territory, South Australia and Tasmania.) Of these jurisdictions, the Territories are the only two which have chosen not to offer model rules.
The remaining States of New South Wales, Queensland and Western Australia have adopted a more regulatory approach to the incorporation and management of these associations. They require that certain matters be dealt with in the rules as well as offering model rules for the guidance of groups. There is, in addition, broad agreement among the states as to the matters which must be contained in the rules.
53 Tasmania and New South Wales also provide, as does Victoria, that the model rules are deemed to be included in the association's rules where the same material is not otherwise covered. This approach has been applauded as both "minimising the amount of paper filed with the registering authority and providing a safety net of protection against unforeseen eventualities or incompetent drafting." (Fletcher 1986, p.268.)
The inclusion of model rules as a guide for groups seeking incorporation was initially hailed in Victoria as "a method both of avoiding unnecessary complexities in the statute and also of remedying the most serious deficiencies commonly found when dealing with voluntary organisations." (Chief Justice's Law Reform Committee Report, (1980), p.7.)
While these goals retain their desirability some eight years later, evidence to the Committee suggests that the current form of the model rules has failed to attain them. Statistics kept by the Office reveal that about half of the groups seeking incorporation opt to draft their own rules. Over half the remaining organisations amend the model rules to suit their own purposes while only the final 20% adopt them in their entirety. The Office has also indicated that about 70 to 80% of the documents lodged with them contain defects. In the majority of cases this has resulted from a failure to include in the rules all the information which is required by the Act to be contained in them.
Many submissions to the Committee believe that the model rules are unnecessarily complex and make the prospect of incorporation daunting, particularly for groups with small memberships. Compliance with the schedule was also described as time consuming and difficult.
Other submissions detailed problems in drafting rules which complied with both the Associations Incorporation Act and other pieces of legislation, such as the Lotteries Gaming and Betting Act. Concern was also expressed that the rules were not couched in non sexist language.
It is clear from the evidence that the Victorian model rules do not simplify or expedite the process of incorporation for many voluntary groups. It is also evident that the sixteen items which the Act requires to be included in any rules drafted by an organisation require review.
54 5.4.1 The minimum content of the Rules
The Committee will deal firstly with the issue of the minimum content of rules provision. In resolving the difficulties experienced by many voluntary organisations when seeking to comply with this provision, the Committee has been concerned to attain a balance. On the one hand it understands that many of the problems which arise concerning voluntary organisations relate to deficiencies in their rules, particularly in the areas of dispute resolution, rights of members, financial matters and the distribution of property on dissolution. (See Chief Justice's Law Reform Committee Report 1980, p.l4.) Therefore it is therefore important that the group turns its mind to its manner of operation when formulating its rules. It also recognises that the rules are a means of alerting outsiders to the internal structure of the association and the authority of its officers.
On the other hand, the Committee does not wish Parliament unduly to restrict the freedom of associations to manage their own affairs. Nor, does it wish to maintain a system, to which adherence proves too difficult.
After consideration of these issues it is of the view that to require groups to deal with certain issues in their rules further complicates the process of incorporation without providing substantial benefits. It is particularly influenced in this regard by the provision in s.21(3) of the Victorian Act which provides the safety net referred to previously and deems the inclusion of model rules where appropriate. The removal of the Schedule will ensure that groups still have the choice of drafting their own rules and establishing their own procedures or adopting the model rules. However, they will not be required to draft a complex set of rules for themselves if they believe this would not be appropriate. Consequently, the Associations Incorporation Office will deal with less paperwork while organisations will still be protected should a dispute arise in relation to any of the matters contained in the model rules, by means of s.21(3). The rules must still comply with the other provisions in the Act relating to the annual general meeting and the like but will not be required to contain the matters presently set out in the Schedule to the Act.
55 RECOMMENDATION 7
The Committee recommends that the Schedule and s.6(a)(i) of the Associations Incorporation Act 1981 be repealed, and further, that s.54(2Xc) be modified accordingly.
5.4.2 Model Rules
The Committee now turns to an examination of the model rules. (See Appendix V.) Evidence has indicated that these rules were drafted hastily and have not been amended since the Act's introduction (Written Transcript of Evidence, p.54). It is clear that review is long overdue. The Committee does not intend to redraft the rules in their entirety. Rather, it proposes that they be substantially simplified with particular reference to the following areas:
the process of nomination and approval of membership. the nominations for officers and committee members. the adjournment procedure where no quorum has been obtained. the procedure for informing members of general meetings. the procedure to be followed at the annual general meeting. resignation of members. the process of expulsion, suspension and fining of members.
In each of these cases the detail contained in the rules is unnecessary for the management of most voluntary organisations.
RECOMMENDATION 8
The Committee recommends that the model rules be re-drafted in non sexist language and simplified with reference to the matters contained in paragraph 5.4.2.
The Committee recognises that the requirements of groups vary greatly and that it is impossible to draft a set of rules which are tailored to the needs of the range of voluntary groups which exist in the community. It notes that some community organisations have remedied the deficiencies in the model rules by drafting rules for special interest groups. For example, the Victorian
56 Council of Social Service in conjunction with the Council of Adult Education has prepared model rules for community groups. These rules have subsequently received the approval of the Office of Incorporated Associations. Some sporting associations have provided similar assistance to bodies within their auspke seeking incorporation.
RECOMMENDATION 9
The Committee recommends that peak organisations in the community be urged to examine the needs of associated groups and draft and circulate appropriate rules for their use.
5.5 Statement of Purposes
A group wishing to incorporate must provide the Registrar with a statement of the purposes for which the group has been formed, in addition to the application, declaration and copy of the rules. While the Committee received no submissions dealing with this particular issue, it did hear many pleas for simplification of the process of incorporation. It has therefore turned its attention to this requirement.
The origins of the statement of purposes appears to lie in the corresponding provisions in the Companies Code.
This additional requirement (of a statement of purposes), which appears to be unique to this State, does not seem to serve any purpose other than to strengthen the analogy to the requirements of the Companies Act for a Memorandum of Association as well as Articles. (Sievers, 1982 p.5.)
Since 1984, however, most companies are no longer required to include in their memorandum a statement as to their objects. (An exception to this rule is a company incorporated under s.66 which must have specified purposes in order to take advantage of the privileges granted by the Code.)
The value of the statement of purposes lles in it being a reference point to determine whether the objects are lawful, thereby making the
57 association eligible for incorporation. It can also indicate whether the association intends to engage in any trading activities which may be contrary to the Act, or has predominantly charitable purposes in order to qualify for an exemption from the trading prohibitions.
The Committee believes that, despite the changes made to the Code, it is important for voluntary groups to consider their objectives and for these purposes to form part of the public record. This is particularly so, in view of the more limited accountability requirements under the Associations Act. However, the Committee is of the view that they do not need to be contained in a separate form. Instead the purposes for which a group is established could be included in the application form. Thus, an application for incorporation may be made on one form only.
RECOMMENDATION 10
The Committee recommends that an association's statement of purposes be included in the application form and therefore not be required to be stated on a separate form •
.5.6 Dispute Resolution Mechanism
The Act invests the Supreme Court with the power both to determine any disputes that may arise between members or between members and the association itself and to give directions regarding observance of the rules of an association. The legislature, perhaps in order to prevent abuse, has also granted the court power to refuse an order or award costs against a party where the issue before it is trivial or where it would be unreasonable to grant the application.
While there are no recent Victorian Supreme Court judgments which would assist in determining the appropriateness of this forum for dispute resolution, a witness to the inquiry provided the following example of the role played by that Court in Tasmania:
An annual general meeting was not held within the time because the rules provided that all the office bearers went out of office at a particular date
58 rather than at the end of a meeting; there was no-one who could call a new meeting, to fix up that matter. A Supreme Court judge overlooked the niceties and fixed it up. (Mr. R. Wright, Written Transcript of Evidence, p.68.)
The witness continued to propose that an alternative dispute resolution process was more appropriate to deal with issues of this minor nature. The court structure with its costs, delays and the need for representation was not, in his view, suitable to deal with disputes which are often "incredibly simple matters (which) escalate to a level with relationships becoming difficult." (Ibid.)
The Office of Incorporated Associations has also indicated that it receives many calls from voluntary groups seeking assistance in resolving internal disputes. In the main these appear to concern matters of a social rather than a legal nature.
The Committee agrees that the Supreme Court is an inappropriate forum for these groups. The issues involved are often of little legal significance, and rarely justify the costs of a Supreme Court application. It believes, instead, they should be granted access to alternative dispute resolution mechanisms, such as the neighbourhood mediation centres, rather than be required to take proceedings in the Supreme Court. Those issues which involve a consideration of legal principles should be heard in the Magistrates' Court rather than the Supreme Court.
RECOMMENDATION 11
The Committee recommends that incorporated associations be granted access to alternative dispute resolution mechanisms. It further recommends that disputes involving questions of law be heard in the Magistrates' Court rather than the Supreme Court.
5.7 Short term Incorporation
According to a great many volunteers and voluntary groups, a major shortcoming in the legislation lies in its inability to deal with associations which
59 operate only for a short period. Groups which form to raise money following a sudden disaster or organise a one-off event such as a fiesta or street party would fall within this category.
The evidence was almost unanimous in disclosing that organisations of this nature found the Act inflexible, expensive and unnecessarily complex for their requirements. The process of incorporation was described as unduly time consuming for a group which required protection immediately and intended to disband within a couple of months. Similarly, the ongoing reporting requirements were seen as irrelevant and the dissolution procedures excessively complex for groups with a short life. The suggestions for reform, however, differed markedly.
Some were of the view that such associations should be granted the benefits of incorporation without the need to engage in the incorporation process. Instead these often small, ad hoc groups should be deemed to be incorporated or have the benefits of incorporation automatically conferred upon them. Others would restrict this deeming process only to charitable groups or those organisations which operate to benefit the community.
Many submissions proposed that the present system of incorporation be retained for short term groups, albeit in a much simplified form. Suggestions as to at what stage the process would be streamlined included transferring administration of their incorporation to local government, substantially redrafting the model rules, particularly in the areas of meeting and financial requirements and dissolution, and permitting the incorporation of umbrella associations to flow on automatically to short term groups. Reducing the cost of incorporation for these groups was also widely supported.
The Shire of Melton proposed a licence system:
This licence would ensure that a voluntary organisation is given incorporation for a short-term period of say 3-6 months with the possibility of further extensions. It would also be simpler and cheaper than full incorporation under the Associations Incorporation Act l98l.
60 The reporting needs of this type of incorporation could require the initial application stating the organisation's aims, activities, and Office bearers and a final report stating where the funds and assets of the organisation have been allocated. (Written Submission, p.4.)
Difficulties which may result from providing for short term incorporation were also raised by witnesses. Mr. Robert Wright, author of A Manual on Incorporated Associations (1986) indicated that, in relation to tortious liability, problems could arise after the cessation of an organisation. (Written Transcript of. Evidence, p.72.) That is, in relation to a wrongdoing committed by the organisation during its life, a claim may not be made until after its dissolution. The injured person may therefore be unable to seek legal redress against the group.
The volume of evidence received by the Committee on this issue clearly supports the introduction of measures to assist groups which operate for a short period only.
5.7.1 Period of Operation
The initial step in devising these measures is to distinguish short term groups from others of a more permanent nature. In the main, submissions did not consider a definition of "short period". Suggestions which were received, however, ranged from groups operating for three months to those which run for up to eighteen months. This latter proposal reflects the period of time in which an incorporated association must hold its first annual general meeting.
The Committee is of the view that those organisations which contemplate operating for longer than six months should be required to comply with the same procedures as other organisations. It does not wish, however, to render any procedures inflexible and accordingly believes a discretion should be vested with the Registrar to extend this period where he or she sees fit for a further period of six months on application by the groups. On expiration of the six months or the extended period, the group, if still operating, must comply with all the requirements of the Act.
61 5.7.2 Process of Incorporation
What measures, therefore, should be introduced to assist groups which operate for six months?
The Committee does not believe that ad hoc groups or indeed the community would be best served by the introduction of a deeming mechanism. In this context it reiterates the arguments set forth in the preceding chapter (see pp.41-43) with respect to automatic incorporation for all voluntary groups. It is of the view that a grant of limited liability should be accompanied by some measure of accountability. The requirements of the Associations Act best provide this accountability.
Therefore, the Committee prefers an approach which would modify the present system to better accommodate the needs of these groups. Clearly, the procedure needs to be simplified to enable quicker incorporation. It appears that drafting the rules or amending the model rules is the most lengthy task in the process of incorporation, as the cancellation of incorporation may be accomplished quite quickly.
Therefore, the Committee proposes that a simplified set of rules, drafted to reflect the situation of these groups, be prepared. These rules should not contain unnecessary detail and the Committee believes the following provisions should provide the basis for the re-drafted rules.
provision for the whole group to manage its affairs and therefore the removal of unnecessary membership and committee requirements
a simpler procedure for convening and conducting meetings
the requirement that a financial statement to be lodged at the office prior to its dissolution containing the same information as is required to be presented to the annual general meeting
It is proposed that these requirements be included in the simplified rules recommended earlier in this Report.
62 Associations wishing to avail themselves of the procedure may adopt the simplified and tailored model rules or amend them to suit their purposes. The short term model rules would be deemed to replace any matter that they omitted to cover in their rules. Such a group would be required to lodge a financial statement in order to disclose its financial position. It would be liable to pay both the incorporation fee and an appropriate fee on lodging the statement. In order to ensure that these groups receive their certificate of incorporation quickly, the Registrar should accord them priority when processing the applications.
The Office of Incorporated Associations has appropriately trained staff to deal with applications and queries concerning this process and accordingly should retain this role in relation to short term incorporation.
5.7.3 Dissolution
The Committee now turns to the concerns expressed as to liabilities incurred by these groups for which a claim is not brought until after its dissolution. The Committee notes that the Companies Code permits an application to the Supreme Court for reinstatement of any defunct company. Any person aggrieved by the cancellation of the registration of a company may apply for an order that the company is deemed to be in existence as if it were not cancelled (s.459). The effect of such an order is that the company may be sued for a liability incurred when it was operating, notwithstanding that it has ceased operating.
The Committee proposes that a similar procedure be available for incorporated associations, particularly those which have operated only for a short term. It would envisage that, given the essentially administrative nature of such an order, it may be made by the Registrar rather than the Court.
RECOMMENDATION 12
The Committee recommends that
1. Groups which intend to operate for a period of six months or less be able to take advantage of a simpler incorporation process. A discretion should be vested in the Registrar to extend this period for a further maximum period of six months. 63 2. A simplified set of rules be established for these groups incorporating the matters set out in paragraph 5.7.2.
3. Applications from groups seeking incorporation for this short period be accorded priority by the Office of Incorporated Associations.
RECOMMENDATION 13
The Committee recommends that a procedure, similar to the existing procedure for the reinstatement of defunct companies, be introduced for incorporated associations.
The Committee is also interested in the concept of the community itself assisting groups intending to operate for a short time only.' It believes that community leaders. in conjunction with local government. should explore the possibility of establishing an incorporated association in their region for this purpose. Groups which wish to form for a one-off event could then apply for membership of the association and thereby secure the protection gained through incorporation, without themselves incorporating. The Committee adds a note of caution that these groups, in order to secure protection, would be required to operate under the direction of the incorporated body rather than autonomously. In addition, their financial affairs would need to be detailed in the association's annual return. (See s.5.8 for a further discussion of the consequences of this arrangement.)
Nevertheless, the Committee is of the view that the community could play a vital role in facilitating voluntary organisations to conduct these types of activities within the protection of a corporate structure.
RECOMMENDATION 14
The Committee recommends that the Minister for Local Government in conjunction with community leaders investigate establishing incorporated associations in regions throughout Victoria to provide a corporate structure for groups seeking to operate for a short period only.
64 .5.8 Branches
Larger organisations are frequently structured with a central body and various branches conducting similar work in different locations. Where ])these branches manage their finances and affairs independently of the central body, they will not be protected by the incorporation of the main group. In order to gain the benefit of limited liability, they must, therefore, seek their own incorporation.
The Committee received a number of submissions claiming that this approach is unsatisfactory. A few believed that branches of incorporated associations should automatically be included in and benefit from their parent's corporate status. Several other voluntary groups qualified this proposal to circumstances where the branches worked under "the same constitution, participated in precisely the same activities and held insurance cover which extended to all locations". A Rotary International District recognised that in such a scheme it was impractical to provide consolidated annual financial returns, while the Department of Sport and Recreation was of the view that branches should be able to demonstrate a strong tie to the central agency in order to benefit in this way.
Most evidence to the Committee, however, proposed that the incorporation process for branches be simplified rather than waived. There was particular concern expressed that any scheme should reflect the autonomy of branches. In addition, some sections of the community believed that it is unwise and unfair to expect a central organisation to assume corporate liability for the activities of small branches.
The problem about providing a blanket cover for branches is that the assets of each branch then become liable for the sins of any other branch. If a local branch has $l,OOO in kitty and a branch on the other side of the State makes a mistake and is sued, the assets of that branch with the kitty could be taken. That is not how it should work. (Mr. R. Wright, Solicitor, Written Transcript of Evidence, p.7l.)
The Committee agrees that it is unreasonable for a group's assets to be put at risk through the negligence of another group which operates
65 independently of the first and over which the former has no control. It therefore rejects the proposition that the incorporation process be waived for branches. The Committee prefers instead to rely upon the simplified procedure already recommended to assist branches.
It notes that both the New Zealand and Queensland Parliaments have enacted provisions specifically dealing with the incorporation of branches. Based on the same formula, the Acts essentially ensure that the branches are formed with the approval of the central body. Neither the effects of incorporation nor the process are altered, save that the branches are required to comply with the rules of the central body. The Victorian legislature could adopt a similar approach by amending its Act. The Committee has, however, taken heed of the concerns of the community that if a branch does operate independently it should be treated accordingly. Therefore, the approach adopted in these other jurisdictions would be of little assistance.
Many larger organisations, such as the service clubs, have established a common set of rules which have received the approval of the Office. Branches could therefore indicate in their application that they had adopted these rules. Accordingly they need only file an application to become incorporated. The independence of these branches would require that they are accountable to the same extent as single groups and subject to the same fees.
RECOMMENDATION 15
The Committee recommends that organisations which operate on a branch structure be encouraged to draft and circulate standard rules for the use of the branches, and thereby simplify further the process of incorporation for these branches.
5.9 Management and Finances
5.9.1 Public Officers
The position of public officer is the most responsible in an incorporated association. She or he must both ensure that the group discloses the requisite information at appropriate times and provide the address at which the public may communicate with the association.
66 These tasks were described to the Committee as complex and "somewhat daunting". The Committee agrees that the role of the public officer is a significant one which should not be assumed lightly. It would also add that while the effect of incorporation is to create a separate entity, in reality, that entity is directed and controlled by people. It is necessary, therefore, for those dealing with an incorporated association, whether members of the community or government departments, to have access to a person with authority to meet the obligations and exercise the rights of the group. The public officer, as the public face of the association, fulfils this function.
The Committee is reluctant to disturb this balance and believes the duties imposed on this officer, while at times onerous for officers of small groups, are necessary for the effective operation of the incorporation mechanism.
In addition, a great many people to whom the Committee spoke expressed dismay that the legislation limited the role the elderly could play in these groups, by restricting the upper age limit for public officers. Many pensioner groups and other organisations catering to the needs of the elderly have difficulty finding a person under age of 72 years to undertake this function.
The anomalies created by the recent amendment were also drawn to the attention of the Committee. While public officers over 72 may be appointed at the annual general meeting, such people are not permitted to be the initial public officer at the time of application. The Act also prescribes that a vacancy in this office must be filled within fourteen days. It would clearly be difficult to hold an annual general meeting in that period in order to appoint a public officer over the age of 72 years.
Most other jurisdictions do not limit the age of public officers and the Committee believes that Victoria's legislation should reflect the enormous contribution of the elderly to voluntary activities. It notes that the Act allows unsoundness of mind as a ground for the office becoming vacant (s.27(2)(e)).
67 RECOMMENDATION 16
The Committee recommends that there be no maximum age limit for public officers of incorporated associations•
.5.9.2 Annual Return
As previously discussed, an annual return is required to be submitted to the members and is to contain particulars of the income, expenditure, assets and liabilities of the association. Details of any mortgages and trusts must also be provided. It must then be lodged with the Registrar.
The Committee received few comments specifically regarding this requirement. A firm of solicitors acting on behalf of a Rotary district questioned the need to lodge these returns, while some other submissions believed that not only were the returns necessary, in addition, they should be audited.
The Committee views the annual return as a lynchpin in the Act's system of accountability which enables both members and the public to have access to financial details of the group. In relation to the need for these returns, the Committee supports the comments of the Chief Justice's Law Reform Committee:
It is clear that some compromise will have to be made between the competing interests of the association in remaining free from excessive government interference, and in not being subjected to unreasonable expenses, and the interests of the members and the community generally in being given a reasonable amount of information about its operations. (1980, p.l6.)
The form in which the financial information is to be provided is not complicated and does not require specialist skills. The Committee is satisfied that the annual returns are, on balance, necessary and not unduly burdensome. Accordingly, they should be retained.
68 Other jurisdictions differ in their approach to financial disclosure requirements. Queensland, Tasmania and the Territories require annual audits, while only South Australian associations with an annual turnovers exceeding $100,000 must have their books audited. The contents of the returns required in other States are broadly similar to that of Victoria.
The Victorian Act empowers the making of regulations providing for an audit (s.54(2)(b)) but, as yet, this power has not been exercised. Notwithstanding this lack of compulsion, the Committee understands that about 40% of organisations do provide the Registrar with an audited statement, often as a result of a requirement in their rules.
The average turnover of incorporated groups has been estimated at $10,000. In view of the cost of having books audited, the Committee believes the present audit provision should remain unchanged.
5.10 Pre-incorporation contracts
As mentioned, the Act contains detailed provisions concerning the effects of entering into contracts made before the incorporation of an association (s. 20).
The Committee received only one submission suggesting that these sections, and those concerning constructive notice (s.41) and ultra vires, (s.l7) all of which are company law doctrines, should be amended to conform with the present provisions of the Code. (Ms. A.S. Sievers, Written Submission, p.9.)
The Committee sees merit in this proposal. However, it does not wish to encourage the insertion of further densely drafted clauses in the Associations Incorporation Act. It notes the concern which was expressed in Parliament when the Act was passed.
These matters are dealt with extensively in the Bill, but there is a problem for laymen. It is all very well for the three lawyers at the table to deal with a Bill such as this, but when it is sent out to club secretaries and club presidents, invariably they say, "What do clauses 17, 19 and 20 mean?" The language is far too complex and difficult for most laymen to
69 comprehend beyond the most basic level. •.•. the language should be far simpler. (Parliamentary Debates, Legislative Assembly, 17 December 1981, pp.5523- 5524.)
RECOMMENDATION 17
The Committee recommends that sections 17, 20 and 41 of the Associations Incorporation Act 1981 be amended to conform with the equivalent provisions in the Companies (Victoria) Code.
RECOMMENDATION 18
The Committee recommends that section 20 of the Associations Incorporation Act 1981 be redrafted in simpler language.
5.ll Dissolution of associations
5.ll.l Method of dissolution
As detailed in the previous chapter, there are several ways in which an association's corporate status may be cancelled. Of these methods, the complex procedures of the Code are rarely followed. Instead, most solvent groups take advantage of the free method of dissolution which simply requires the groups to contact the Registrar. Few associations have sought cancellation and the Committee received no evidence or submissions relating to these matters.
It remains concerned, however, that some groups are still required to wade through the provisions of the Code to secure dissolution.
RECOMMENDATION 19
The Committee recommends that statistics be collected of the ways in which groups terminate their corporate status. In the event of a substantial increase in the numbers of associations being wound up pursuant to the Companies (Victoria) Code, the Committee recommends that these provisions be reviewed.
70 .5.11.2 Distribution of surplus assets
The Victorian legislation permits associations considerable freedom in the manner in which they may dispose of surplus assets on winding up. In the absence of a special resolution directing distribution, they will be divided among the present members in equal shares.
A difference of opinion on this matter was voiced when the Act was debated in the Legislative Assembly in December 1981. One Member referred to other laws which prohibit members of clubs from distributing assets to its members and expressed concern that an "asset stripping operation" could result from allowing members to benefit (Parliamentary Debates, Legislative Assembly, 17 December 1981 p.5524).
Other State Parliaments have been more restrictive in their approach and have deemed it unlawful to distribute any surplus assets to members. New South Wales requires that only non-profit associations with similar objects and which likewise prohibit distribution to members be recipients of surplus assets. South Australia has followed the same broad formula.
The New South Wales Law Reform Commission cited the following examples to support the above provision:
Those who form, say, golf or recreational clubs do not ordinarily ••• contemplate having a proprietary interest in the club's assets that is saleable when they resign. New members may pay a joining fee, but they do not purchase any share in club assets. Members, either foundation ones, or new ones, would probably be surprised to learn that if their golf course or clubhouse were compulsorily acquired in the next generation and the club dissolved, those who then happen to be members would be entitled to divide up the proceeds. It would be more reasonable to expect that the proceeds would be applied to the good of the game or to some other non-profit purpose.
A further possibility is that a voluntary non-profit association which had become rich in assets and low in membership might be "taken over" by
71 commercial interests. There might be member "stacking" and rule changes to allow the new body of members to exercise their right of ownership. (1982, p. 31.)
The Committee received only one submission relating to this issue. This urged the retention of the Victorian provision, on the grounds that to do otherwise would amount to be unnecessary government intervention in the affairs of the association.
Evidence as to whether this provision has been used to benefit members is not available. The Committee notes, however, that some State and Commonwealth government departments require that, in order to be eligible for government assistance, residual assets of non-profit groups must be returned to the funder or go to similar groups on dissolution.
In the light of its recommendation to broaden incorporated associations' power to trade, the Committee is concerned to prevent any consequent abuse of the spirit of the Act. Similarly it believes that the prohibition on members receiving profits of the group during its life could easily be undermined by allowing these members a share in the accumulated assets of the group on dissolution.
It has therefore concluded that the most appropriate protection against such an occurrence is to prohibit organisations from distributing their surplus assets to their members. Instead, groups must, on dissolution, benefit organisations with similar objects and which also prohibit distribution to their members. The Committee does not unduly wish to interfere in an association's right to manage its own affairs, but believes its broader powers to trade must be balanced by further accountability.
RECOMMENDATION 20
The Committee recommends that s.3(2)(d) of the Associations Incorporation Act 1981 be repealed. It further recommends that a provision be inserted in the Act requiring associations, on winding up, to distribute their surplus assets to associations with similar
72 objects, and which, in turn, prohibit distribution of their surplus assets to members•
.5.12 Victorian associations operating interstate
The Committee's attention was also directed towards the difficulties experienced by associations which have incorporated in Victoria pursuant to the Associations Incorporation Act, but which carry on activities in other states. Those groups operating in border areas of Victoria are particularly inconvenienced by the federal system and the lack of uniformity among associations legislation in other states.
The law in relation to associations engaged in activities interstate is relatively clear.
An association which is incorporated in Victoria does retain its corporate status when operating interstate. Accordingly, the benefits of limited liability, the power to enter into contracts and the ability to sue and be sued in the name of the group all apply thr?ughout Australia. However, while still subject to the Act pursuant to which it incorporated, that is, the Victorian Associations Incorporation Act 19&1, the association must also obey the laws of the state in which it operates. Therefore the association will be liable if it commits any offence against the laws of that state while in that state.
While there is a plethora of general laws to be complied with in each state, there is one provision in the Companies Code of particular relevance to incorporated associations operating interstate. The Code applies throughout Australia.
The Code defines associations incorporated in other states as foreign companies and further prohibits a foreign company carrying on a business within a state unless it is registered. (ss.5( l) and .512.) Therefore, incorporated associations must register in the states in which they operate. The Code indicates activities which will not be considered to be carrying on a business. These include holding meetings, maintaining a bank account, conducting isolated transactions, investing funds or holding any property (s.510).
73 It appears that making a profit is not an essential ingredient of carrying on a business. (South West Suburban Water Co. v. St. Marylebone Guardians) (1904) 2 K.B. 174.)
Therefore associations which are incorporated in Victoria and carry on a business interstate as defined above are required to register in that state. Thus, an incorporated sporting association, which for example, leases a football oval located in another state may be carrying on a business and accordingly be required to be registered.
This involves lodging with the Corporate Affairs Commission the following documents: a certified copy of Certificate of Incorporation; a certified copy of its constitutent documents; a list of its members of its committee of management; the powers of those members; appointment of power of attorney in the other state who is authorised to accept on its behalf service of process or any notices required to be served on the company; any existing charges; the address of its registered office in the state of incorporation; its registered office in the state; a statement in writing in the prescribed form made by the agent of the company.
The cost of lodging these documents is $430.
It should be noted that associations which do not comply with requirements of registering as a foreign company do not lose the benefits of their incorporation but are, however, subject to prosecution for their failure to so register.
Clearly these requirements may impose an excessive burden on those groups which operate in border regions. The Committee notes that this issue of interstate control of incorporated associations is currently being examined by the Administrative and Legislative Policy Committee, which consists of representatives of all Corporate Affairs Commissioners in Australia.
74 This Committee received little comment from the community on this issue, other than to indicate that uncertainty existed and that a uniform approach in legislation in all states was desirable. Other law reform reports in this area of the law have similarly called for uniformity. The Chief Justice's Law Reform Committee, attempted in its draft Bill to follow the scheme of existing legislation in other states.
lt concluded, however,
although ••• [uniformity] would be a desirable goal it involves other issues beyond the principal aim of introducing legislation to deal with the problems of unincorporated non-profit associations in Victoria and should not be allowed to obscure that aim. (1980, p.7.)
RECOMMENDATION 21
The Committee strongly urges the Victorian Attorney-General to continue to take steps towards ensuring that legislation concerning voluntary organisations is uniform throughout Australia.
5.13 Publicity
The disadvantages of rema1mng an unincorporated association and the subsequent benefit of incorporation have been clearly documented in the preceding two chapters. The Committee was somewhat alarmed, however, at the extent of the confusion in the community about these issues. Submissions received by the Committee and evidence taken throughout Victoria repeated the call for greater publicity of the operation and benefit of the Associations Incorporation Act.
The Committee is aware that soon after the Act came into operation in 1983, the Office of Incorporated Associations conducted an extensive publicity campaign directed to Shires and sporting bodies in Victoria. It strongly believes, however, as clearly does the community, that further publicity is required.
75 Many proposals were put to the Committee as to the most appropriate methods of conveying this information. A significant number of groups believed that local government were best placed to provide this service. They are regarded as having the most comprehensive listing of local community organisations and therefore more easily able to contact these groups. Several Shires who gave evidence to the Committee endorsed this proposal and believed it was a legitimate function of local government to resource and educate the community in this respect.
The Committee is aware that presently, Councils receive numerous requests for information and advice regarding incorporation from voluntary groups. The Committee agrees that local government is admirably placed to publicise the Associations Incorporation Act as well as provide basic advice on applying for incorporation and meeting the ongoing requirements of the legislation.
RECOMMENDATION 22
The Committee recommends that the Minister for Local Government ensures that a council officer or council sponsored community group be given the task of collecting information about incorporation, regularly liaising with the Office of Incorporated Associations and resourcing and educating the groups within their Shire on the issue of incorporation. The Committee envisages that this officer or group would deal with inquiries in addition to conducting seminars and the like and attending group meetings where appropriate. The Committee recommends that extra funding should be made available to local government if necessary to perform this function.
A number of other submissions suggested that a booklet be produced explaining incorporation and its consequences. Several incorporation kits are presently available which provide this material. For example, a manual for incorporating associations is available at a cost of $37.50; the Sports Federation of Victoria has produced a guide on how to incorporate; the Victorian Council of Social Sec·urities has drafted a similar publication for the use of community groups, available for a fee of $4.00; and a more basic kit is available from
76 Harston Partridge, Legal Stationers for $4.00. Each of these, in varying detail, describes the process of incorporation, ongoing obligations, the benefits of incorporation and provide the necessary forms. The Manual also describes taxation and insurance implications.
The Committee is of the view that additional general information is not required, as these kits adequately and simply explain the process. It would, however, urge peak bodies to obtain copies of the kits most relevant to their purposes, modifying it where necessary to suit their activities and distribute it to member groups. Similarly, local government should ensure it has information available which is relevant and tailored to the range of groups within its area. The preparation of material in languages other than English is, however, necessary.
Finally, the Committee believes the Office of Incorporated Associations should be aware of the material which is available in the community and refer any inquiries to the appropriate sources.
5.14 Review
The Committee has recommended quite a number of amendments to the existing incorporation process, some of which are essentially procedural, and others which deal more with the substantive law. In order to ensure that these recommendations, when implemented, perform the task required and resolve any existing difficulties, their effect must be monitored. The Committee proposes that a review be undertaken of the operation of the Act within five years from the tabling of this Report. It envisages that the review would consider the Act as a whole, with particular attention to the matters raised in this Report.
To enable this review to have access to comprehensive information about the Act, it makes the following recommendation.
RECOMMENDATION 23 The Committee recommends that a review be wtdertaken of the operation of the Associations Incorporation Act 1981 within five years from the tabling of this Report.
77 RECOMMENDATION 24
The Committee recommends that the Office of Incorporated Associations coHect detailed statistics of all facets of its operations. In particular, the Committee recommends that the Office examine the annual returns of incorporated associations to determine the extent of their operations and monitor the ways in which the associations are deregistered.
5.15 Conclusion
It is dear from the evidence received by the Committee that the Associations Incorporation Act provides, in the main, a suitable procedure whereby voluntary organisations can incorporate and thereby protect their committee members. The recommendations made in this Chapter will, the Committee hopes, enable groups to gain this protection more easily while maintaining the group's accountability to its members and the community.
The Committee, however, stresses that incorporation does not operate to totally shield the group or its members from all liability. Instead of the Committee members being personally liable for the actions of the group, the group, as a separate incorporated entity, is responsible. Accordingly, the group may be sued and its assets used to satisfy any judgement made against it. Similarly, ordinary members of an incorporated group may, through their personal negligence, injure another and thereby be liable to compensate that person out of their own pocket.
Clearly, incorporation is only part of the answer. The Committee will now address various other mechanisms which may also assist voluntary organisations in this regard.
78 CHAPTER 6 - OTHER PROTECTIVE MECHANISMS
6. I Introduction
The Committee received much evidence applauding the work carried on by voluntary organisations throughout Victoria. The contribution of these groups was often described as of incalculable benefit to the communities they serve. The provision of recreation facilities, financial assistance, and advice and support to those suffering some social, legal or economic disadvantage received much praise.
Many people were concerned, however, that this valuable and important work was not accorded sufficient recognition by the Parliament, the legal system and, in some cases, the community. The view was often expressed that the legal mechanisms presently in place (see the previous chapters) were not adequate to attract people to volunteering or allow them to continue to volunteer their time with confidence. It was argued that the nature of the work undertaken by these groups therefore warranted special treatment. Several ways in which voluntary groups could be better protected by the law were suggested for the Committee's consideration: immunity from legal liability; disclaimers; imposing ceilings on claims; and alterations to other procedural and substantive aspects of the law. The Committee will deal with these issues in turn.
6.2 Immunity
At present, the law generally holds people responsible for the forseeable consequences of their own actions. Accordingly, if a member of a voluntary group, through his or her negligence, causes injury to another, the law will look to the member to provide appropriate compensation to the injured person. A number of submissions proposed that this rule be abandoned in the case of voluntary organisations. It was argued that both members and the groups should, instead, be immune from any liability arising out of their activities.
Because of the invaluable contribution made by voluntary organisations to the life of the community, including its disadvantaged members, not only
79 in the conduct of public functioru3, but also in such areas as personal care and consultation, it is considered that some form of statutory immunity from liability should be offered to volunteers. (Yinnar South Citizens' Association (Inc), Written Submission, p.3)
The possibility of legal action and costs will drastically reduce their effectiveness and their ability to carry out these activities. It will become increasingly difficult for organisations to find people willing to become involved and the level of professionalism/involvement will be reduced at all levels if not granted some immunity. (Crafts Council of Victoria, Written Submission, p.2)
In contrast, the great majority of submissions received by the Committee felt strongly that immunity was not the solution to the complex problem of volunteer liability. Some believed that this may result in a decline in standards by voluntary groups and, in addition, render them unaccountable to the community. Many focussed on the inevitable lack of compensation for those injured while attending the functions organised by these groups, if immunity was granted.
I submit that the subcommittee should resist the temptation to adopt this cheap solution to the problem. Conferring such a privilege on associatioru3 or their officers would be a signal to associatioru3 that they have no duty to develop and maintain safe and efficient systems of operation. It is a form of discrimination agairu3t those persoru3, whether they be welfare recipients or casual bystanders, who are injured by the property or activities of such organisatioru3. (Mr. K.L. Fletcher, Written Submission, p.3)
In deliberating on whether immunity from liability should be granted to voluntary organisations, the Committee considered the position of these groups in other jurisdictions.
The doctrine that voluntary clubs cannot be held liable for the consequences of their torts does not apply in any jurisdiction in Australia. There have been some circumstances, however, where the legislature has granted limited immunity to people working under difficult conditions. For
80 example, registered or casual emergency workers assisting in times of state disasters will not be Jiable for any injury or loss they infJlct on another person as a result of their emergency work. However, this immunity does not extend to any injury caused by the negJigence or wilful default of the worker. It is therefore an extremely limited immunity. (s.37 Emergency Management Act 1986)
Certain charitable groups in some jurisdictions in America, in contrast to the Australian position, are granted some form of immunity. In that country immunity was part of the common law until the 1940s when it fell into disfavour with the courts. It has now been abolished in many jurisdictions in America and by the beginning of 1986, 33 jurisdictions had abrogated the doctrine for some kinds of charities and 16 had abandoned it all together. However, some 18 or so jurisdictions have retained one or another form of partial immunity. (Harvard Law Review (1987), 1382.) In these states, the groups and members as a whole are not granted absolute immunity from all wrongdoing. Instead, immunity has been granted in relation to only certain aspects of their activities or to specific classes of members. Accordingly, it may be restricted to the non-profit work of a group rather than its commercial activities, or granted only to those groups which do not have insurance.
For example, New Jersey has legislated that non-profit corporations organised exclusively for specified purposes including those which are charitable are not liable for their actions where a "beneficiary" of that group is injured. They do, however, remain responsible where their negligence causes injuries to ordinary members of the public. In addition, the Act does not exempt responsible employees from liability. (Charitable Immunity Act 1984)
A similar approach has been adopted in both Washington and New Hampshire. In the former State, members of the board of directors and officers of non-profit corporations are not liable for negligent acts committed within the scope of their official duties unless such acts are grossly negligent. The New Hampshire Tort Reform Act 1986 grants unpaid office holders immunity in similar circumstances. Volunteers who do not hold these positions are, however, not immune from liability.
81 After considering carefully both the matters raised in submissions and overseas practice, the Committee has concluded that immunity from liability in an absolute or partial form, should not be introduced for voluntary groups.
It agrees that immunity may result in a lower standard of care being adopted by voluntary organisations towards the community. In addition, the Committee believes there is no justification for singling out the victims of volunteer activities from those injured in other circumstances. Personal injury is no less grievous when caused by voluntary organisations. The Committee further believes that modern conceptions of justice demand that the cost of these injuries be spread. The injured should not be required to sustain the total cost alone.
It is concerned that the financial strains of liability may reduce these groups' capacity to provide a valuable public benefit. However, the Committee is convinced that the economic consequences of liability are best dealt with in other ways, in particular by the provision of affordable insurance for these groups. The Committee therefore recommends that immunity not be introduced in any form for voluntary organisations.
RECOMMENDATION 25
The Committee recommends that voluntary organisations should not be granted immunity from any liability arising out of their activities.
6.3 Disclaimers
The use of disclaimers to provide additional protection to voluntary organisations was also considered by the Committee.
A disclaimer is a notice which limits the extent to which a person is prepared to accept responsibility for her or his actions. For example, a voluntary organisation may alJow people to participate in its activities on the condition that the group will not assume any liability for injuries sustained in relation to those activities. Instead, those who attend the event take responsibility for any loss or damage they suffer. Most people would be 82 familiar with the disclaimers which appear on the back of car parking and ski lift tickets, which state the owners are absolved from any responsibility for damage to property or person.
A disclaimer operates on the basis that participants are made aware of the limits placed on an organisation's liability prior to taking part in their events. In order to ensure that this is the case, the law has imposed stringent conditions regarding matters such as these notices' wording, their reasonableness, their location and the nature of their potential audience. The following examples of the operation of these notices were provided to the Committee:
whilst rwming a horse gymkhana all persons participating may be required to sign a Form of Indemnity but in other instances such as the provision of a merry-go-round at a carnival a display of a sign with conditions of operation or use with the printing of such conditions on the rear of the ticket may be sufficient. Where persons under the age of 18 years participate in activities, particularly higher risk activities, it is necessary for an indemnity clause to be executed by the child's parents or guardian. (Mr. P.H. Lenne, Solicitor, Written Submission, p.4)
Unless a disclaimer notice is clear, precise and without ambiguity and has, in law, effectively brought the issue to the attention of the relevant audience, it is unlikely to succeed in protecting the gr-oup. In addition, the courts, mindful that these notices may result in an injured person receiving no compensation, interpret them strictly and against the interests of those who seek to rely upon them. It would be extremely unwise for a voluntary group to rely upon such a notice without first obtaining legal advice.
In the main, submissions to the Committee were of the view that these notices would effectively kill the ability of the organisation to attract visitors or participants. Most people were also critical that an effective disclaimer invariably results in innocent injured parties receiving no compensation.
83 The Committee shares these concerns. It prefers methods of protection which assist both the group and the community and do not leave the victim without legal redress. The Committee believes disclaimers, when properly drafted, can accord some measure of security to a group. It is very wary, however, of commending this course of action to volunteers when it may involve costly legal advice and no compensation for those injured.
6.4 Ceilings on Claims
The introduction of limits to the amount that may be claimed against voluntary organisations was also mooted as a means of relieving them of a potential financial burden. At present these groups are treated no differently than other sectors in the community in relation to claims for damages. Any amount awarded against them reflects the extent to which loss has been suffered by the injured party and is subject to no other legal limits.
Submissions to the Committee were quite evenly divided on this issue. The principal reason cited by those in favour on a limit to claims was its perceived effect on insurance costs.
A maximum limit on claims made against volunteer organisations would be worthwhile, as it would restrain over-zealous insurance claims. More importantly it would serve to keep insurance premiums for volunteer groups to a reasonable level. (Ski Touring Association of Victoria Inc., Written Submission, p.4.)
A significant number of these proponents, however, added a rider. For example:
Provision in the legislation of a ceiling on claims may also have to be matched by some other form of compensation where injuries and/or loss exceeds the ceiling. The operation of a much more demanding claims court, requiring extensive proof of claims above the ceiling, may reduce claims for compensation above the ceiling. (Ibid.)
84 Many submissions believed that the amounts awarded in personal injury cases, regardless of the identity of the defendant, were generally too high. A ceiling was seen as having a deterrent effect on those seeking to benefit from this situation, in addition to reducing the level of awards made. Another concern was that voluntary groups could simply not afford to meet large claims.
Suggestions for the maximum amount which could be able to be claimed against these groups ranged from as low as $25,000 to the extreme of $5 million, the latter figure representing the amount of insurance which should ideally be purchased by these groups. Most of those who proposed a limit believed it should be in the vicinity of $100,000 to $450,000, while the Transport Accident and WorkCare schemes were also mooted as suitable models in this regard.
A large number of submissions were, by contrast, vehemently opposed to the introduction of any limit to claims made against voluntary organisations. The reasons submitted were, in the main, the same as those canvassed in the previous two sections of this Chapter. The community has displayed to the Committee an enormous resistance to moves which prejudice the rights of injured people to adequate compensation.
It also needs to be understood that it is not a privilege but a right to take legal action as a result of sustaining injury through the negligence of others. (Mr. P.H. Lenne, Solicitor, Written Submission, p.2.)
In addition, there is concern that the benefits of imposing a ceiling may be granted to only one sector in the community.
It would be completely alien to all principles of equity and fair justice if a favoured group within our community, were placed in a position of indemnity to the extent that an aggrieved party could not rely on the due processes of the law to gain compensation which they may rightly claim. (Shire of Mildura, Written Submission, p.l.)
85 In considering its position, the Committee first briefly examined existing schemes which operate to limit the amount which may be claimed by injured people at common law, in particular the work and transport accident schemes.
Both of these schemes adopt a two-tiered approach to compensation. The statutes establishing them provide a comprehensive framework for calculating the amounts of compensation to which injured people are entitled. In addition, they allow, in certain circumstances, a further claim for limited compensation to be made by the injured person through the courts. WorkCare, for example, limits this type of claim to those for non-pecuniary damages only. Accordingly, damages for pain and suffering, for example, may be claimed but not loss of earnings. In addition, WorkCare requires that any court settlement made not exceed $140,000 less payments already received. Similarly, the Transport Accident Scheme sets out strict criteria which must be met before a common law action may be mounted.
Whether a similar statutory scheme to provide compensation for those injured through the negligence of voluntary groups is needed will be discussed in a later Chapter. In relation to ceilings on claims made through the court system, however, the Committee is of the view that these schemes do not constitute suitable models for voluntary groups. The distinguishing features of these schemes is that compensation for injuries received while at work or in connection with transport is comprehensively provided for in statute. The common law claim is therefore a form of additional compensation. Accordingly, the common law limits must be considered in the light of the two tiered approach of these schemes and consequently are not of general application.
The Committee has concluded that a ceiling should not be introduced for claims made against voluntary organisations. First, it is of the view that people injured through the negligence of others have a right to full compensation.
Secondly, it is loath to approach the issue of ceilings in an ad-hoc manner. The view of voluntary groups that personal injury awards overall are excessive may be shared by the wider community. In that event the Committee believes this issue should be addressed in that broad context. It should not be introduced only to benefit one section of the community.
86 Finally, the Committee repeats the approach indicated previously in this chapter. The potential financial burden imposed by a vulnerability to legal claims, the high cost of those claims and the needs of those injured are best addressed by the provision of affordable insurance, rather than limiting the claim which may be ma:de.
RECOMMENDATION 26
The Committee recommends that Parliament not introduce a statutory limit to the amount which may be claimed against a voluntary organisation.
6.5 Other Matters
Various other proposals were put to the Committee describing other methods of further relieving voluntary groups of the burden of legal claims.
First, several people were of the view that more stringent measures were required to prevent frivolous claims being made.
Secondly, the payment of Jump sums to injured people was described as undesirable and financially burdensome for the defendant.
Thirdly, the insurance industry expressed concern that the length of period in which potential claimants had to bring legal proceedings was excessive.
Finally, it was argued that the different categories under which compensation is payable require review.
All of these issues raise important questions regarding both procedural and substantive aspects of the law regulating the conduct of personal injury claims. None of these matters are exclusive to actions against voluntary organisations, instead they apply to all claims.
87 The Committee is reluctant to substantially alter the law in these regards in relation only to voluntary groups. It believes that the present level of claims does not warrant this action. In addition, it is of the view that issues such as these are fundamental to this area of the law. As such, they deserve greater attention than can be accorded to them in the context of this Committee's inquiry. In the event that these aspects of the law are not operating effectively, amendments should be made to the law on a uniform basis for the benefit of all potential parties to proceedings.
The Committee does, however, take this opportunity to inform the Parliament that dissatisfaction exists in a section of the community as to these issues. (see p. 113.)
88 CHAPTER 7 - A VAIL ABILITY OF PUBLIC LIABILITY INSURANCE
The Committee's terms of reference require it to examine the availability of public liability insurance and report on any alternative schemes for providing adequate insurance cover to voluntary organisations.
The issue of public liability insurance has proved to be a vexed one for many voluntary groups. There appears to be considerable confusion in the community as to the nature of insurance, the circumstances in which it is needed, and how to best obtain it. In particular, the high cost of public liability insurance was cited as a major obstacle to many voluntary groups obtaining adequate insurance cover. In this chapter, the Committee will briefly canvass the meaning of and need for public liability insurance. It wi11 then address the issue of its availability to voluntary organisations.
7.1 What is a Public Liability Insurance Policy?
Most people are familiar with the concept of protecting oneself and one's property against possible risk or loss through buying insurance. The type of insurance required is determined by the nature of the risk or the nature of the property to be protected. For example, some voluntary groups may own a meeting place and several cars and therefore need burglary, fire and motor vehicle policies. Other groups' activities may be effectively protected only if they hold personal accident, professional indemnity and marine insurance.
However, the Committee is directed to consider only public liability insurance (see p.J6). A group which has taken out a public liability policy will be covered for any legal liability it incurs for damage or injury to a third party. The holder of this policy will therefore be protected against a claim for compensation for personal injuries arising from its negligence.
An insurance policy is, in essence, a contract between the insurance company and the person seeking insurance. It contains details of those people and groups covered by the policy, the circumstances in which the insurer will honour the policy and those in which it stat~s it will not assume any risk. It also covers matters such as the procedure to be followed when an accident
89 occurs and the maximum amount the insurer wiH pay on a successful claim. A policy is issued on payment of the required premium.
7.2 The need for Public Liability Insurance
In conducting its inquiry, the Committee became aware of a range of attitudes among voluntary organisations towards holding public liability insurance. Some groups were unaware that they may be held responsible for an accident and consequently had not sought insurance. Many of these relied upon what they perceived to be a moral obligation on those taking part in their activities to refrain from taking such action. Others were of the erroneous belief that their incorporated status prevented any claims being made against them. However, most of the groups with whom the Committee came in contact were aware of the need for some kind of insurance.
Public liability insurance is a desirable and in many cases a necessary protection for voluntary organisations. The previous chapters have examined the legal methods by which voluntary organisations may be shielded from liability for claims arising out of their negligence. It is dear from that discussion that, even after applying these methods, committee members of unincorporated bodies, those groups which have a separate legal identity, and negligent individual members may still remain subject to claims for damages. Therefore, further measures are needed to protect these members and groups and the valuable work they perform for the community. Public liability insurance can provide that protection.
Equally importantly, those people participating in the activities of voluntary groups deserve some compensation if injured by the group's negligence. In many cases the assets of the organisation or the responsible member will be insufficient to compensate an injured person adequately. Insurance, in these circumstances, provides that compensation.
7.3 Availability
There are many factors which govern the availability of public liability insurance for voluntary organisations. A significant consideration,
90 often ignored by groups, is that the provision of insurance is a commercial enterprise. Accordingly, it will be made available to the community, including voluntary organisations, only where it is profitable to do so. In addition, insurance is based upon the accurate prediction of risk. Premiums set today must therefore create a sufficient pool of funds to provide compensation having regard to both the wages and economic situation prevailing in the future. They must also take into account the likelihood of occurence of the event insured against.
The Insurance Council of Australia described the industry's general approach to making available public liability insurance for voluntary organisations:
With few exceptions [the 100 insurers authorised to offer cover] write some form of legal liability cover but their perceptions as to risk evaluation, risk acceptance and premium rating vary widely. ...
Many insurers write liability covers only in conjunction with property business, some will not write liability covers on 'one day' events. A proportion of insurers only have facilities to write say $2 million dollars cover or will not write 'member to member' liability for social or sporting clubs. However, it can be safely and in truth be said that there are few if any risks which involve [voluntary] associations .... that could not find satisfactory cover in the Australian market ... Service clubs, baby sitting and child care groups, sporting bodies, motor racing clubs are all insurable and presently catered for by the market. •..
It is logical that many underwriters refuse the more hazardous risks but there is today (and has been constantly for the last 20 years) a market for such risks and the funding of such markets is the expertise of the professional broker. There are just under 1000 brokers registered ••. and any club or association using their services would find that the problem of insurance availability resolved itself automatically. (Written Submission, p.3.)
The Council then concluded in oral evidence before the Committee:
91 Generally if a voluntary organisation does not have a particular claims history and is not involved in extremely high-risk activities and is prepared to meet relevant safety criteria, it can buy insurance at a price. (Written Transcript of Evidence, p.3.)
Consequently, the evidence reveals that risk, profit and future costs increase the present cost of insurance. In addition, the terms of the policy and the avenues through which it is obtained will also influence .its ava.ilabil.ity to voluntary organisations. The Committee will now deal with each of these matters in turn.
7.3.1 Cost
The Committee received overwhelming evidence that the cost of public JiablJity .insurance for small voluntary organisations is prohibitive. It was generaJJy accepted that the larger groups with many branches and interstate counterparts were able to accommodate .insurance costs. However, many dubs with smaJJ memberships and with no parent or sister bodies to provide support, appear to be unable to meet the cost of .insurance premiums.
The Committee was told of scores of cases where these groups have been forced to abandon their activities because of their .inability to either obtain insurance at all or to obtain it at an affordable cost. For example, the Yinnar South Country Fair Committee reports an .increase in the premium for public liability insurance from $30 in 1983 to $590 for the current year. Similarly, the Victorian Association of Day Nurseries were advised that their existing public J.iab.iJ.ity poJ.icy would increase from $856 last year to $4000 this year. A swimming pool committee in a small rural town with a population of 200 paid $197 for $2 million cover .in 1987. The cheapest quote for a premium received last year was $1000.
Other organisations with little insurance needs other than public liability similarly experienced difficulty obtaining reasonable quotes. The Victorian Woodworkers Association received quotes varying between $1300 and $2500, with the company quoting the latter price only interested if the association placed all of its insurance requirements with them. The Rotary Club in Bright was made aware of the value in placing all of its insurance with
92 the same company when it attempted to obtain insurance for a community water slide. It was quoted $13,600 for its premium. The local council subsequently added the slide to its policy for an additional cost of some $300.
The Committee was also advised that, in numerous instances, insurers have declined to renew public liability policies held by voluntary groups. The Department of Sport and Recreation reports:
We had a history of people saying, 'The policy we have had for ten years is no longer available, the underwriters are withdrawing it'. ( Written Transcript of Evidence, p. 99.)
It is reasonable to expect that premiums will continue to rise, further exacerbating the present position.
Insurance premiums can represent a large component of a group's income. Figures provided to the Committee reveal that up to one-half of some funded groups' income is spent on insurance (Ms. M. Portelli, Victorian Association of Citizens' Advice Bureaux, Written Transcript of Evidence, p.49). There are two primary consequences of the rapidly increasing cost of insurance. First, many groups cannot afford to purchase it and consequently operate without the protection afforded by insurance. Both the groups and their members' assets are accordingly at risk. Equally importantly, a person injured by the negligence of the group may be unable to obtain adequate compensation if the group has insufficient funds. Secondly, the events staged by the voluntary groups and the services they provide may be abandoned as a result of being unable to afford insurance cover. The Committee is aware of several instances where this has occurred. including the closure of a community swimming pool and the cancellation of a loc~l mardi gras. Clearly, the community itself must also suffer from reduced services provided by these groups in addition to placing themselves at risk when' participating in their activities.
In the light of the substantial evidence received of escalating premiums, the Committee obtained information from the insurance industry regarding the factors it considered when setting premiums for voluntary organisations. They are as follows:
93 the nature of the activities undertaken. numbers, age, range and physical fitness of persons involved. the frequency of accidents and the group's history of claims. the use of alcohol. whether the group is incorporated or unincorporated. ownership or tenancy of buildings or land. risk management procedures. economic considerations such as inflation and interest rates. continuity of business between the insurer and the insured. court awards and the attitude of the courts towards injury claims. administration costs.
The potential of many of these items to reduce or increase any possible risk to the insurer is self-explanatory. The range of activities conducted by groups vary greatly between sedentary pastimes such as card playing to the outdoor adventure provided by white water rafting. Similarly, an elderly group or one comprised of small children may pose greater risks to insurers than a club with membership restricted to the 20-35 year age group. The risk involved and therefore the cost of policies offered to voluntary groups must consequently vary accordingly.
The Committee has experienced considerable difficulty in obtaining details of the number and type of claims made against voluntary groups. Apparently statistics held by insurance companies are unable to identify these -groups as a separate class of business (Insurance Council of Australia, Written Transcript of Evidence, p.&). Anecdotal evidence has revealed two or three well-publicised claims, but, in the main, there appears to be an extremely low incidence of claims among voluntary groups. Recent surveys undertaken by the Department of Sport and Recreation and government agencies in other states support this view.
Incorporated organisations are required to keep records of their membership and financial dealings. Accordingly, insurers can determine these groups' insurance requirements and set premiums more accurately than in the case of those unincorporated groups which do not have such information readily available. Similarly, a group which has consciously evaluated its own operation
94 and activities and set up procedures to minimise the possibility of any accident, may constitute a better risk from an insurance perspective. In addition, the Committee has been informed that for most low risk groups administration costs are quite high. Therefore many groups are paying almost one half of their premiums towards these charges. (Insurance Council of Australia, Written Submission, p.4.)
Finally, the attitude of the courts towards personal injury claims was particularly stressed in the evidence of the insurance industry as an important factor in determining premiums. Awards made by the courts in personal injury cases have risen sharply over the last few years. A Report to the Local Government Ministers of Australia and New Zealand on the Liability of Local Authorities: Options for Reform, released in 1988, (referred to as the Local Government Report) has indicated that "New South Wales is second only to the U.S.A. in the level of damages awarded in personal injury cases, with Victoria closely behind in third place". (p.236.) The Insurance Council of Australia has also provided the Committee with figures revealing that awards for serious injuries have risen ten fold over the last decade. Insurance premiums set today must therefore take into account and anticipate these trends.
This examination indicates that there are some steps that groups can take to reduce their premiums. Incorporation and the implementation of measures to lessen the likelihood of accidents may be crucial in this regard. However, notwithstanding the adoption of these measures, public liability insurance may remain out of the reach of many voluntary organisations, particularly those with small memberships.
7.3.2 Terms of the Policy
There are Volkswagens' and Rolls Royces' [public liability policies]. You can have public liability that covers you only if you were to be fallen on by a Portugese fisherman at midnight and that is about alL It is the quality of the cover that counts, to a great extent. (Mr. G. Clinnick, Insurance Broker, Written Transcript of Evidence, p.UO.)
95 The second major factor influencing the availability of public liability insurance is the nature of the cover required by groups. While there exists 'off the shelf' public liability policies which contain basic cover, groups should seek to obtain a policy which is tailored to their requirements. Voluntary organisations conduct an enormous range of activities. High risk ventures such as rodeos, hang-gliding and water sports are common to some groups while others provide only telephone advice and rarely leave the confines of an office. A public liability insurance policy would therefore need to be worded appropriately to reflect these operations and provide suitable cover. For example, the latter group may not need cover for the transport of goods but may require an indemnity in the event that a defamatory comment is made. Others may only be effectively covered if they hold a policy which covers incidents occurring on water. For this reason, a standard public liability policy which could be adopted by all voluntary groups cannot be developed. While any given policy may suit the needs of some groups perfectly, it would be entirely inappropriate for others.
Policies generally list the circumstances in which cover will be provided as well as specifying when the insurer will not take responsibility. Each voluntary group should examine all of its activities to determine the circumstances for which it requires insurance. This scrutiny should take place both before the policy is obtained and at regular intervals thereafter to ensure that the policy continues to reflect their needs.
The activities of each group will determine the content of its policy. However, there are circumstances and activities which are common to many voluntary groups and which may be protected in a public liability policy. The Committee has sought the assistance of several people with special knowledge of the field of insurance and the needs of voluntary groups to provide examples of the type of cover generally required by voluntary organisations. These are generally known as extensions to the basic public liability policy.
1. Legal expenses When defending a legal action, the club itself may ultimately not be held liable but nevertheless can incur legal costs. For example, If a group was sued for negligence and at the ensuing trial, regligence was not proven, legal costs may still have been incurr 96 2. Goods sold This extension will provide an indemnity against any liability which arises from the sale or provision of food and drink. For example, groups which hold social functions or fund raising activities where meals are provided may need this extension. 3. Unregistered vehicles Some organisations use vehicles or motorised equipment such as ride-on mowers and tractors which do not require registration. This clause will provide indemnity for any liability arising out of the use of these vehicles. For example, the driver of the tractor may lose control of the vehicle and a passer-by may subsequently be injured. 4. Tenants' liability Groups which rent or use premises owned by other people will be protected against any liability arising out of the use of such premises on insertion of this clause in the policy. The group may not have ensured that the floor was dean and dry and a participant in their activities may slip and injure himself or herself. 5. First Aid Treatment This provides coverage in relation to any liability incurred through providing this treatment. For example, an unqualified member may apply a torniquet incorrectly with a serious injury resulting. 6. Care, custody and control Some organisations look after equipment or property belonging to others, us<.~ally members of the group. In circumstances where the club is liable for any loss or damage caused to these goods, for example, in the event of theft, this extension will provide an indemnity. 7. Car parking Those groups which provide car parking facilities will be protected for any liability arising therefrom under this extension. For example, the directions in which traffic is to flow may be inadequately marked and an accident ensues. 97 8. Member to member liability The object of this clause is to protect members of an organisation against claims made by the public. Individual members who are themselves personally responsible for a member of the public's loss or injury will generally not be protected unless this clause is inserted. 9. Cr05S liability Cross liability provides similar but not the same protection to that of member to member liability. The inclusion of this clause would allow members of groups to sue other members if they have been injured by the other members' negligence. 10. Sponsors' liability Many groups enter into arrangements with sponsors who provide finance, goods or services in exchange for advertising rights or good will. That sponsor may require the organisation to indemnify it against any legal action which arises from the conduct of that event. Such an indemnity may be protected by the insertion of this clause. 11. Family members A clause may also be required protecting family members against liability arising during the conduct of a voluntary organisation's activity. For example, a group event may be held at a member's house. The group provides food which causes a member of the family to become ill. This clause would assist that family member. 12. Location Organisations should ensure that their policy covers them for their activities throughout Australia or throughout the world, if necessary. 13. Description of the insured The insured described in the policy should be the association, its officers, directors, committee of management, members and employees when engaged in the activities of the association. 98 Each group should examine their own activities to determine which of these clauses are necessary to afford them adequate protection. However, it should be stressed that the extent of the cover sought will be reflected in the premium charged for the policy on the basis of the additional risk involved. Thus, a group requiring protection against all of these events will pay a greater premium than one which, for example, owns no vehicles and does not use premises owned by others. Insurance policies also exclude certain specific risks. The Insurance Council of Australia has provided the Committee with an explanation of the policy's operative clause and the more common exclusions found in public liability policies, which are located in Appendix VI to this Report. The final matter to be addressed in relation to the terms of the policy is the amount of cover required by voluntary groups. The submissions received on this point almost uniformly proposed that a minimum cover of $2 million be sought. The Victorian branch of the Australian Insurance Law Association stated: The experience of the courts is that this limit in any one occurrence and in the aggregate is adequate in all but the worst of the cases. (Written Transcript of Evidence, p.26.) The branch, as did several other submissions, also considered that the sum insured of $5 million has the advantage of providing greater cover for a not disproportionate premium (Written Submission, p.6). It may be concluded therefore that a minimum cover of $2 million is required by voluntary groups. 7 •.3.3 How to obtain Public Liability Insurance The final primary factor which governs the availability of this form of insurance, and, in particular its cost, is the manner in which the policy is procured. The most common way for groups, especially those with a small membership, to insure is for each to obtain their own insurance cover. Other organisations may participate in group plans organised within the community while some groups benefit from government initiated group plans. 99 (1) Individual Policies The general perception of many smaller organisations appears to be that the insurance industry is, in the main, unable or unwilling to provide adequate insurance cover to individual groups. Those dubs and societies which approach an insurer direct or through an insurance broker to obtain cover for a single event or to protect a small membership face the most difficulty in securing affordable cover. The insurance industry, for its part, argues that a combination of the high administrative costs of writing a policy for one group and the fact that many insurers have little or no claims experience of many of these clubs, operate to significantly increase the cost and hence, the availability of these policies. We would be loathe to underwrite [public liability policies for voluntary organisations] in isolation because the premiums we would require on an individual basis would probably be prohibitive. (Mr. R. Waites, Manager, Liability Department, C.E. Heath Underwriting and Insurance (Australia) Pty. Ltd., Written Transcript of Evidence, p.95.) Similarly, Mr. Tony Leonard, the Government Insurance Broker stated: If individual organisations contact an insurance company, the company will charge them so many dollars for doing the necessary paper work. The insurance company may not be well versed in that area of insurance, and, therefore, would rate it accordingly. (Written Transcript of Evidence, p.l5.) A group plan approach has been preferred by other groups to overcome these obstacles. lOO (2) Group Plans A. Group Plans Funded by Organisations To operate such a plan, a number of organisations form themselves into a larger body for the purposes of obtaining insurance. The common thread between these groups may be the activities they engage in, their geographical location or common funding arrangements. The umbrella organisation then negotiates with a broker or insurance company and obtains an insurance policy on behalf of the smal1er groups. The larger premium base then has the effect of reducing the individual premiums paid by each participant. There are many such schemes presently operating. Some are organised by the participants themselves and others by insurance brokers. In addition, the Government facilitates the entry of certain groups into these plans. The service clubs provide good examples of schemes which are primarily organised by participants. Apex Clubs, for example, have negotiated a public liability policy which covers all of its clubs in aiJ the states. Similarly, Zonta International has obtained cover of $5 million for its member groups throughout Australia. As the cost of insurance in this form is relatively cheap, these groups are satisfied that a group approach is the most economical. The Committee was also provided with many examples of group insurance plans negotiated by voluntary organisations operating solely within Victoria. The Victorian Playgroup Association, for example, has arranged a policy which covers its 30,000 member families at a cost of $5 per family. Similarly, the State Electricity Commission's Social Club holds insurance which provides cover for its 22,000 members in return for each member paying 95 cents. All of these organisations clearly benefit from both a large membership and the existence of a parent group. However, group plans are also available for those groups with fewer members or with no connections with other organisations. A group insurance scheme was established in 1982 by a Melbourne firm of insurance brokers to assist community based organisations obtain affordable insurance cover. The "Clinnick and Stirton Plan" has developed a policy which over 1,000 groups with over 200,000 members have taken out. 101 These groups have no common nexus, indeed according to the initiator of the scheme they range in scope of activities from "the most innocuous, to those that would leave the vast majority of liability underwriters quaking at their mere mention". (Mr. G. Clinnick, Written Submission, p.l.) The Government also plays a role in facilitating the provision of public liability insurance to voluntary groups. The main age"ncies performing this function are local government and the Department of Sport and Recreation. Through a local government insurance broker, councils are able to offer public liability insurance to groups which hire council owned facilities - the primary source of accommodation for many groups. The premiums set by the policy are extremely small. For example, a group organising a meeting where less than 20 people were attending and no refreshments were served would be charged $20 for a policy with a limit of $2,000,000. A group seeking insurance for this purpose would merely purchase the policy from their local council and be immediately issued with a certificate of insurance. The Department of Sport and Recreation, in contrast, directs sporting and recreation bodies to the most appropriate source from which they may obtain reasonably priced insurance. Often this may be a parent group with similar interests to the organisation seeking insurance or to a group scheme which already exists and into which the organisation can "plug". The Department also operates as a facilitator to inform the insurance industry of the needs of voluntary groups operating in its area. While the Department's scheme is still in its infancy, early results have been promising: The initial informal feedback from various sport and recreation associations and the insurance broker is that appropriate and affordable public liability insurance is now available. A number of groups who have had difficulty gaining public liability insurance in the past are now engaged in the process of negotiating policies or have established a satisfactory policy to meet their needs. (Department of Sport and Recreation, Written Submission, p.4.) 102 Group plans were highly commended to the Committee as providing cover at a reduced cost and allowing small groups access to a better cover than they could negotiate or afford themselves. The Victorian branch of the Australian Insurance Law Association detailed the following advantages of this approach: Clearly, in any group arrangement, there must be lower unit overheads as the contract is established on a group basis for all participating incorporated Associations. It further lends itself to claims experience rebates and/or premium reductions in the future as a result of bulk management and controlled claims management. Such a group contract could readily provide for: (i) Different categories of risk profile to accommodate the widely varying roles of incorporated Associations, which, .combined with the experience which will be accrued by the Manager of that contract, will ensure a more equitable and fairer rating s)\Stem across the different risk profiles of the Associations, and (ii) Extensions of cover to remove one or more of the standard exclusions for this class of insurance. The management of such a group arrangement ensures the highest possible expertise being available in the management of the group plan, which in turn provides advice to the porticipoting incorporated Associations, particularly in the event of a claim being lodged against them. The premiums for this class of insurance are generally quite low, and as a result the proportion of the premium which has to be allocated to meet management and administrative overheads is therefore very high. Thus, the group plan approach provides significant advantages of (a) spreading the base administrative charges over a larger number of participating incorporated Associations, and (b) ensuring that the major cost to those Associations is that of the risk itself. (Written Submission. pp. 4, 5.) 103 However, some disadvantages of this model have also been identified. The major drawback is that those groups with a satisfactory claims history may subsidise those organisations which do attract claims. In addition, some bodies may require cover which is not included in the group policy. In summary, the group plan model has the potential to provide all voluntary organisations, regardless of the nature of their activities, access to suitable, affordable public liability cover. There is, however, a means by which some groups may be accorded such protection at no cost. B. Group Plans Funded by the Government The second method by which voluntary groups can secure public liability insurance cover is through an association or involvement with a government agency. At both the state and local levels of government, insurance cover is available to some groups which receive state funding and others which are involved with council related activities or land. Local Government There are two primary avenues through which some voluntary groups may gain access to insurance held by their local shire or city. First, councils may delegate management of property, buildings and the like to voluntary committees in the community. (s.241 A, Local Government Act.) These committees are then covered for public liability insurance, while carrying out their delegated duties, under a policy held by the Council. Thus, groups appointed under this scheme to manage areas such as reserves, public halls and child care centres will be protected by insurance cover without themselves incurring any cost. In addition, those Committees appointed to manage land reserved under the Crown Land (Reserves) Act 1978 (s.14), for example, public parks or gardens, will be covered under a policy held by Department of Conservation, Forests and Lands. Secondly, voluntary committees which are not appointed under this piece of legislation, but instead have some other connection with local government may be entitled to insurance cover. An insurance consultant to local government explained the circumstances in which this may apply. 104 Committees ••• [which] are not appointed under the Local Government Act ... [but which] have been elected at a public meeting or they may have been appointed by council on an ad hoc basis, undertaking the organisation of a festival or the like ••• These committees also can be covered under ... fan MAV insurance] policy. ... Under [this] policy ••• we can arrange to extend that policy to include indemnity of those committees based on a request from the council. (Mr. R. Falzon, Municipal Association of Victoria Insurance Broking Services, Written Transcript of Evidence, pp.83-84.) It would be necessary for voluntary groups to negotiate with their respective councils to determine their status in this regard. State Government Voluntary groups which receive funding from the State Government may be in a more favourable position in relation to public liability insurance. Several state government departments have negotiated insurance to cover selected funded voluntary groups. In effect, they have created group plans for the benefit of those that they fund. The most comprehensive cover has been obtained by Community Services Victoria. This Department negotiated with the Government insurance broker to write insurance for many of the volunteers working in programs it funds. As a result, diverse groups such as foster parents, the officers, members and volunteers at day care centres, voluntary care-givers in home-based schemes and workers in Neighbourhood Houses are all covered by public liability insurance without any cost to themselves. In addition, disaster volunteers, honorary probation officers, youth attendance order sessional supervisors and workers in the out of school hours programs receive similar protection under this policy. The policy was initially effected in 1987 to cover only a proportion of those now protected. Since that time numerous programs have been added to the policy with little extra premium costs being incurred. Consequently, this policy protects almost one hundred thousand volunteers in Victoria. 105 The Ministries of Housing and Health have developed less ambitious insurance schemes to protect their volunteers. The former department, for example, funds over 500 voluntary groups, of which about 400 are covered under a public liability policy negotiated and paid for by the Ministry of Housing. Similarly the Health Department has effected insurance cover for just less than one half of the voluntary groups which it funds. Other government agencies, in the main, do not provide insurance for most of their funded voluntary organisations. (3) Householder's Policy The final, albeit limited, way in which voluntary groups can be covered by public liability insurance is through a householder's policy. Mr. Geoff Masel of the Victorian branch of the Australian Insurance Law Association explained its application. Home contents policies, although they have a public liability section, limit the cover given if it is a home liability policy, to the owner of the home to his or her public liability as the owner of that home. If it is a contents policy based on liability as an occupier, the public liability section is limited to the legal liability as an occupier of the premises. If the local bridge club meets at the home then the home policy is a very useful protection. If the voluntary association is carrying on activity that may well be outside the home, then a difficulty will arise. As an example of a claim against a voluntary organisation, some years ago a voluntary organisation organised a barbeque at a private home. There were a number of volunteers helping with the preparation of the food. One of the volunteers picked up a can, and thinking it had a low flashpoint substance in it and it might help a little to get the fire going, unfortunately the can had a much higher flashpoint and there was an explosion and, consequently, serious burning. Action was taken against the voluntary organisation, the owner of the house who had not had the can marked and the person who threw the can on the fire. The owner of the house would have been covered under his 106 home policy but the volunteer who picked up the can and threw it on the fire was not covered because he was not the occupier of the home. (Written Transcript of Evidence, pp.33, 34.) Mr. Peter Lenne, a Myrtleford solicitor discussed how this policy may be extended. It is possible for a householder to obtain an endorsement on a householder's policy which is designed to cover both liability for negligence acts arising around or connected with the home of the person and also the persons individual activities within the community. For example the individual householder may be involved in a voluntary activity e.g. organising children's bike races, and ceases to supervise the activities properly with the result that a child is injured. The extension on the householder's public liability insurance policy would mean that the householder would be protected in a negligence action commenced against the person by or on behalf of the injured child. The endorsement would extend to all non-business or non-profit activities conducted by the individual outside his home. Such a policy endorsement is not normally expensive (we have seen quotations in the $60-$80 range for such an endorsement for annual cover) and would protect a householder or a person who had a contents policy with such an endorsement. (Written Submission, p.3.) 7.4 Conclusion It is clear from the evidence received by the Committee that obtaining affordable and suitable public liability insurance cover is both a confusing and often arduous process for many voluntary organisations. Some groups are unaware of the need for such cover, others fail to ensure that their policy protects all of the activities in which they are engaged. In addition, many groups do not have access to cheaper premiums obtainable through group plans. Instead they seek individual policies and as a consequence are unable to afford protection. The Committee is of the view that a public liability insurance policy is an integral component of the successful management of most voluntary 107 organisations. It protects the assets of the group and its members and provides a source of compensation for those injured while participating in the group's functions. Without the security provided by this cover, some groups have, as the evidence has indicated, ceased operating. In addition, the cost of meeting any claim out of the funds of the group may result in its closing its doors. Clearly, the community as a whole would suffer without the myriad of services provided by these groups. In the light of this evidence, the Committee will now turn to an examination of the ways in which public liability insurance may be made more accessible to voluntary groups. 108 CHAPTER 8 - INSURANCE PROPOSALS 8.1 Introduction The previous chapter has revealed that while public liability insurance is available to voluntary organisations, the extent of this availability is dependent upon several factors. These include the nature of the cover required, the cost of the premium and the source from which it is obtained. The evidence clearly indicates that many voluntary groups are experiencing difficulty in obtaining affordable appropriate cover under the existing system. Accordingly, various proposals were put to the Committee detailing alternative schemes through which public liability insurance may be provided. In essence, two different models were proposed. First, a single insurance scheme to cover all voluntary groups in Victoria and secondly, a series of group plans initiated either by the Government or the community in which aB organisations may participate. In addition, the issue of compulsory insurance was addressed. 8.2 Single Insurance Scheme Numerous submissions advocated the establishment of one insurance scheme to provide cover for all voluntary groups. Some were of the view that this scheme should take the form of no-fault accident compensation for volunteers. Others believed the present allocation of responsibility should remain. However, they thought that the provision of insurance should be simplified to the one policy providing protection for all volunteers. A range of views was also expressed on the methods of financing these schemes. It was claimed that the Government should shoulder the full burden, while a subsidy arrangement also received approval. Few believed the groups should themselves pay for the full cost of a single insurance scheme. The Committee now addresses the suitability of a no fault scheme and a single policy. 8.2.1 No fault compensation The solution to the problem of personal injury which I have long advocated is the adoption of a comprehensive accident insurance 109 scheme, preferably at a national level, which would provide adequate compensation for all persons sustaining serious injuries, from whatever cause, efficiently and at reasonable cost. At the same time, such a scheme would provide immunity from liability to any person who presently is responsible for causing such injury owing to negligence. (Prof. H. Luntz, Dean, Law School, University of Melbourne, Written Submissions, p.2.) Most supporters of this proposal cited the New Zealand Accident Compensation Scheme as a suitable model for introducing no fault compensation into Victoria. Legislation passed in 1972 by the New Zealand Parliament entitles any person injured by an accident in New Zealand to compensation, regardless of where responsibility for the injury lies. Injuries caused by medical treatment, someone else's criminal act, playing sport, or diseases resulting from the nature of employment are aB eligible for compensation. An injured person may be entitled to receive compensation for loss of earnings, medical and related treatment, transport expenses, payment for damage to clothing and artificial aids worn or used at the time of the accident, home help and attendant care. In addition a lump sum award for permanent damage and injury to a person's way of life is also payable. The scheme is funded from three different sources. First, a levy based on wages paid by employers and the earnings of self-employed is exacted from these people. Secondly, motor vehicle owners contribute on a per vehicle registered basis and thirdly, money from general taxation is contributed. In addition to its role of compensating those injured by accidents, the scheme's function is to prevent accidents and to reduce the severity of accidents that do occur. To this end rehabilitative and preventative programmes are emphasised as well as the payment of compensation. Other submissions considered that the estabJishment of a no-fault scheme on similar lines to that of WorkCare and the Transport Accident Scheme would be more appropriate for Victorians. 110 In contrast, a number of groups were of the view that a no-fault system was impractical. Some argued that the cost would be prohibitive. Others disapproved of the effects of such a scheme. We consider [a no-fault compensation scheme] undesirable as such scheme would necessitate in taking away common law rights of individual members of the public. (Mr. D. Moore, Written Submission, p.6) The Committee is mindful of the intention expressed in the terms of reference, that "voluntary organisations should be able to conduct public functions without being unduly burdened by the potential costs of claims arising out of those functions". It also notes the Government's recognition of the valuable contribution made by voluntary organisations to public life and the important role they play in the community. This report has identified a number of steps which can be taken by voluntary organisations to shield their members from the effects of claims brought against them, while maintaining protection for the public. It has further suggested means by which public liability insurance c~ts may be kept at a lower level. Clearly, however, those who are injured as the result of the actions of voluntary organisations and require compensation will have little option but to seek compensation through a suit for negligence. Voluntary organisations will thus continue to be faced with the possibility of costly court expenses and substantial damages. As with many other members of the community who are injured or sued in circumstances not covered by statutory schemes such as WorkCare, voluntary groups have no access to a compensation scheme which provides necessary financial comforts without the need for expensive and often protracted court battles. The Committee's terms of reference are not wide enough to inquire into or make recommendations on a general no fault compensation scheme which would provide all victims of accidents with adequate compensation regardless of the nature of the accident or the identity of the wrongdoer: a scheme which would considerably lessen the anxiety of volunteers by removing the financial burden from those responsible for the injury. Ill However, the Committee believes that it is imperative that this important issue be immediately considered by the Government. To this end the Committee makes the following recommendation: RECOMMENDATION 27 The Committee recommends that an inquiry be established as a matter of urgency to examine the issue of personal injuries compensation, including the possible introduction of a no fault compensation scheme, for all Victorians. The Committee has, however, considered the merits of a no fault scheme specifically for voluntary organisations alone. After much deliberation and careful scrutiny of the evidence the Committee has come to the conclusion that such a scheme is not justified for voluntary organisations. First, it believes the extremely low incidence of claims does not warrant the establishment of the elaborate administrative machinery which would be required to develop this scheme. Secondly, the Committee is of the view that the existing insurance market is capable of providing groups with suitable cover, although modification may be required to the manner in which insurance is presently obtained. The Committee is hesitant to recommend the costly process of establishing a new bureaucracy while the present system of providing insurance is, subject to some alterations, adequate. Thirdly, it shares the concerns expressed to the Committee by some in the community. [I] believe that a separate scheme for victims of voluntary organisations would be socially unjust. Guaranteeing relief for a special class of victims is unfair to other accident victims who are unable to obtain compensation from their impecunious assailants. At the same time a special scheme would attract adverse comment if the benefits paid were significantly less than those ordinarily available by recourse to the courts. (Mr. K.L. Fletcher, Written Submission, p.2) In the event a scheme was to be developed, its associated benefits should be available to all Victorians involved in accidents. However, it is of the view that its establishment for voluntary groups alone is unnecessary. 112 8.2.2 One Policy The approach most favoured by those proposing a single insurance scheme is the development of a master policy administered and funded, in full or in part, by the Government. Various scenarios were advanced as to the method by which voluntary groups would obtain this cover. Some proposed that volunteers, by virtue of their status, as volunteers would be automatically covered at no personal cost. Many preferred a process whereby groups were provided with cover under the policy upon application and upon payment of a premium which reflected their activities, membership and financial position. Council would suggest that Government through its insurance agency take out a blanket cover of public liability for registered voluntary organisations. Under this scheme Council would envisage that all voluntary organisations would have to register with the Government in order to be covered by the particular policy. Council also believes that an appropriate level of fee would be able to be established in order to meet premiums on the policies. (City of Hors ham, Written Submission, p.2.) The Australian Association of Live Steamers similarly preferred: A government sponsored/funded scheme which covers liability insurance. The cost should be levied on each participating Voluntary Organisation and be a minimal percentage of the gross income of the Voluntary Organisation. We recommend a figure of 2%. (Written Submission, p.4.) However, this proposal was not without its critics. The Rotary International District 980 stated : We do not favour a government-arranged insurance scheme ... Voluntary organisations are involved in an extremely wide variety of activities and sporting and fundraising groups may include some functions of very high risk. Some of these, such as air displays, power boat racing and rifle shooting, would be more economically covered under a separate policy arranged for the particular day, rather than in the annual policy. On the 113 other hand, the many groups involved in indoor recreational and other passive activities would not need to cover special risks and the standard form of policy would suffice. A single policy designed to fully insure the liability of every activity of every voluntary organisation in Victoria could be a very expensive and wasteful method of insuring. (Written Submission, p.3.) The Ski Touring Association of Victoria Inc. was also of the view that it would be inappropriate for Government to assume this role. This would prove far too expensive and could lessen the appreciation for the need for safety and responsibility. (Written Submission, p.3) The Committee agrees with the arguments put forward by the Rotary District. The sheer diversity of activities undertaken by voluntary organisations dictates that their insurance needs be dealt with according to more specific factors than merely their voluntary nature. It is more appropriate to arrange insurance for collections of voluntary groups on the basis of their common needs. Suitable premiums can then be accurately set and terms tailored more specifically to meet the groups' requirements. In addition, a single policy would considerably diminish the control the groups could exercise over the management of their service. Accordingly, it is not in favour of a single insurance scheme for voluntary groups. 8.3 Group Plans The concept of a group plan received overwhelming support as the preferred model for providing insurance to voluntary groups. It was envisaged by many in the community that a series of these plans could be established based on common elements shared by various voluntary groups. The existing plans arranged by some Government departments were, subject to minor amendments, considered as an appropriate model in this regard. Views differed as to those most suitable to administer these plans. Some believed that the State and local tiers of government were most aptly placed. Others were of the view that existing umbrella organisations, such as State associations should perform this role. The Committee will now examine proposals for the development of group plans to assist these groups to obtain suitable, affordable insurance. 114 8.3.1 Role of State Government As illustrated earlier, the State Government presently helps voluntary groups to obtain insurance in two principal ways. First, some departments negotiati~ and pay for a policy which covers selected funded groups. Secondly, through the Department of Sport and Recreation, the Government collects information as to schemes presently operating, liaises with the insurance industry and advises sporting and recreational bodies accordingly. It also establishes umbrella bodies where necessary through which otherwise unconnected groups may obtain insurance. Various proposals were received in relation to both of these functions. (i) Government funded group plans The cover made available through departments such as Community Services Victoria is widely perceived as a most effective means of covering voluntary groups with public liability insurance. However, some concern was expressed that the policy effected by Community Services Victoria was not adequate to properly cover some funded groups. (Mr. A.J. Kilgour, Executive Secretary, Resources Commission, Uniting Church in Australia, Written Transcript of Evidence, pp.292-293.) In the main, the initiative of these departments was applauded. The Committee also commends this work. It is concerned, however, that those groups which obtain their funding from other Government agencies receive disparate treatment. Differences exist in this regard not only between departments but also between sections of those departments. For example, the Ministry of Transport itself does not provide cover or require recipients of its funds to seek insurance. In contrast, V Line requires voluntary bodies operating on its land or with its equipment to take out public liability cover. The Road Construction Authority, again connected with this Ministry, holds insurance which covers the fourteen voluntary organisations which it funds. Similarly, those groups funded by programs not included within the policies negotiated by departments are left to their own devices. 115 Thus, while the Committee approves in principle these steps taken by sections of the Government, further measures are clearly needed to ensure that a wider number of groups are adequately and, where possible, uniformly covered. To this end, the Committee believes that all voluntary groups which receive more than .50% of their income from Government funding, should be provided with adequate insurance negotiated and paid for by the Department from which their funds derive. Appendix VII indicates the numbers of voluntary organisations funded in the last financial year by each Department and the steps taken by those Departments to provide them with insurance. The Committee is clearly unable to cost such a proposal. These groups conduct a great range of activities, have varying memberships and different legal structures. However, it firmly believes that the valuable services provided by these groups may be continued only if they are adequately protected by insurance. Accordingly, the community and the Government, as beneficiaries of this work, should provide financial support and security in the form of an insurance policy for funded voluntary groups. RECOMMENDATION 28 The Committee recommends that all voluntary groups which receive more than 5096 of their income from government funding be provided with adequate public liability insurance negotiated and paid for by the Department from which their funds derive. However, many thousands of voluntary groups do not receive Government support. The Committee will now consider the role of the Government in relation to other group plans which may assist these organisations. (ii) Department of Sport and Recreation Scheme This scheme was much praised as a model for the development of additional group schemes. 116 In order to reduce the cost of premiums, the scheme now being developed by the Victorian Department of Sport and Recreation seems worthy, and thus could be extended to cover all voluntary organisations . .. - administered through whichever government department has the closest historical links with the activities of a particular organisation, be they sporting, recreation, health or general community support etc. In the event that this group plan could mean a cost to the government, if only in the area of administration, the argument could be given that if voluntary organisations cease to operate on their present level it would mean that in many areas the government would have to provide direct funding, which would be far more costly. (Yooralla Society of Victoria, Written Submission, p.l.) The model for a group insurance plan developed by the Department of Sport and Recreation to cover all sporting and recreation organisations is considered a desirable step and is supported by Council. (City of Heidelberg, Written Submission, p.2.) The Council also recognised the present limited application of the Department's scheme and proposed that: ..• similar parallel models be developed by other Government Departments to ensure that there will be low cost schemes to cover all voluntary organisations .•• [and] that provision be made within the above model(s) for "one off" or impromptu organisations formed to organise single events. (Ibid, p.3.) In its submission to the Committee, the Department also stated that its model could be utilised by other Government departments. (Written Submission, p.l.) In addition it provided a five step model directed at other Government agencies, for the development of similar schemes. The Committee includes this model in Appendix VIII. The Committee is of the view that the extension of this model to other Government departments will greatly assist voluntary groups. It has been informed that the role performed by the Department does not require extensive additional resources. On the contrary, one departmental officer could l l 7 undertake the task in addition to other duties. (Mr. J. Webb, Co-ordinator, Community Recreation and Development, Department of Sport and Recreation, Written Transcript of Evidence, p.l04.) RECOMMENDATION 29 The Committee recommends that every Government department take immediate steps to implement the model prepared by the Department of Sport and Recreation and contained in Appendix VID. 8.3.2 Role of Local Government The recommendations made in this Chapter will have the effect of providing suitable affordable insurance to all funded voluntary groups, in addition to providing an avenue through which other organisations may procure insurance. Inevitably, ho.wever, some groups may still be without access to adequate insurance. For example, groups which operate in rural areas and those with a distrust of dealing with a centralised bureaucracy may be reluctant or unable to make use of these plans. Evidence has shown that these groups may be amenable to seeking assistance through their local councils. My inevitable ••• conclusion is that local government is a logical vehicle to organise and administer such geographic group insurances because they are closest to the groups involved, particularly in the country. ( I am wary of any centrally - administered scheme(s) because voluntary groups are fairly fragile and easy to lose touch with - the further the administration is from the action, the more out of touch it becomes). (Shires of Colac, Otway and Winchelsea, Written Submission, p.6) The Committee accepts that the cost of including all voluntary organisations which operate in each council region, within the existing council policy would be prohibitive. It notes the City of Heidelberg investigated this option and concluded it was not viable as the additional cost was likely to be "astronomical". (Written Submission, p.3.) Instead, the Committee believes that local government could play a role similar to that presently undertaken by the Department of Sport and Recreation. 118 RECOMMENDATION 30 The Committee recommends that the Government ensures that every local Council take immediate steps to implement the model prepared by the Department of Sport and Recreation and contained in Appendix Vlll to assist those groups not covered by the previous recommendations. The Committee also received evidence concerning the insurance cover provided for groups which manage property reserved under the Crown Land (Reserves) Act 1978 (see p.l 05.) A number of small community groups working in country areas have requested that this insurance be available to protect a wider class of organisations than is presently covered. Similarly, several councils thoughout Victoria were of the view this policy should be extended. Some have entered into negotiations with the Department of Conservation, Forests and Lands in this regard. For example, the Shire of Bannockburn recently sought to have the policy expanded to include users and hirers of Council reserves. It presently excludes such groups. The Department, in turn, replied that the task of determining to whom the extension should apply and then obtaining the appropriate insurance cover was formidable. (Written Submission, Shire of Bannockburn) The Committee notes that insurance has been recently made available at very reasonable rates to voluntary groups which use council facilities. (see p.l03.) This policy has been offered for a short time only and the Committee believes that the scheme should be monitored to ensure it continues to offer affordable insurance. In the event that voluntary groups in the future are not able to take advantage of this scheme, the Committee believes the Department of Conservation, Forest and Lands' policy should be extended to cover the users of council facilities. 8.3.3 State associations Many voluntary organisations operate within a state-wide network. Clubs are situated in various parts of the community with an executive appointed from their ranks to oversee and administer their operations. In many 119 of these cases, the state, or the Australian association organises a group plan insurance scheme to cover all the clubs. Under these schemes premium costs are generally greatly reduced. (see p.102). The Committee urges these associations who have not yet explored a group plan scheme to do so in order to protect their members at a reasonable cost. 8.3.4 Conclusion The Committee is convinced from submissions made and evidence given that group plans are the most effective model for providing suitable affordable insurance to voluntary groups. It believes the combination of the provision of insurance for funded groups, the establishment of schemes in all government departments including local government and the influence of state associations will operate to protect groups and restore the confidence of volunteers in Victoria. 8.4 Compulsory Insurance A public liability policy is clearly capable of providing adequate protection to voluntary groups and their members while, at the same time, ensuring that injured parties receive adequate compensation. In the light of these benefits, many submissions were of the view that voluntary organisations should be required to hold public liability insurance. It is in the public interest to encourage the work done by voluntary associations within the community. However, the activities of these associations do expose their own members to potential claims and members of the public to risks of damage or injury. Indeed, it seems incongruous that a voluntary organisation established to benefit the community, can in fact jeopardise the same community by it being allowed to come into operation without adequate safeguards, as is presently the case. (Victorian Branch of the Australian Insurance Law Association, Written Submission, p.2) 120 The Victorian members of the Association of Apex Clubs, Australia agreed: People must retain the right to compensation and voluntary organisations must provide protection to their membership from personal liability. For this reason, voluntary organisations like Apex must have Public Liability Insurance. (Written Submission p.7) Others took the view that compelling groups to obtain insurance could have detrimental results. It was argued that compulsion may increase claims and reduce competition between insurers. Many thought it would be impractical on the basis that insurance premiums are too expensive. Compulsory insurance ••• might be a double-edged sword, even a treble edged sword if appropriate affordable policies are not readily available. If insurance is to be made compulsory, appropriate policies must also be available. (Mr. J. Webb, Written Transcript of Evidence, p.lOl) A more common criticism of compulsion concerned enforcement. Several organisations pointed out that the present difficulty in identifying these groups would mitigate the effective enforcement of such a requirement. Some advocated that the better approach is to limit compulsory insurance to those groups which have incorporated pursuant to the Associations Incorporation Act 1981. Most submissions which turned their attention to the issue preferred this approach, although some were of the view that it would ultimately act as a deterrent to incorporation. The Committee agrees that it would be a futile exercise to require all voluntary groups to hold insurance. Such a requirement would be extremely difficult to enforce, particularly in the case of smaller groups operating only for a short period. However, the proposal that compulsory insurance be restricted to incorporated associations deserves careful consideration. Two other State Parliaments have introduced this measure, New South Wales in 1984 and 121 Queensland in 1981. The Queensland Associations Incorporation Act requires all incorporated associations possessed of property to insure for $100,000 against the risk of damage to property, death or bodily injury occurring on the property of the incorporated association. (s.38.) The New South Wales legislation provides that all incorporated groups take out a public liability policy of not less than $2,000,000. (s.44.) Both Acts prescribe a penalty of $500 if insurance is not held. The New South Wales Law Reform Commission in their report on Incorporation of Associations described compulsory insurance as: a proper counterpart to the power allowed to an incorporated association to limit or exclude the liability of members to contribute for the payment of claims against the incorporated association. (p.24.) The New South Wales legislation based on that report requires that groups take out public liability insurance from an "approved insurer" as a prerequisite to incorporation. The New South Wales Corporate Affairs Commission which administers the legislation initially reported being advised of considerable difficulty by associations seeking insurance. Such difficulty has lessened considerably and no penalties for failure to comply with this provision have been incurred. A recent survey undertaken by the Commission indicated that over 75% of respondents experienced no difficulty in obtaining the insurance required under the Act. However, a lower than anticipated number of groups have chosen to incorporate. The Committee sought clarification from the insurance industry as to the effect of the introduction of compulsory insurance in these States. The Insurance Council of Australia made the following reply: We have been unable to ascertain any indication of an increase in litigation in either State which could be attributed to making insurance for voluntary organisations compulsory. However, we would add the proviso that it is possibly too early, as yet, to ascertain any definite trend; there tends to be a delay between occurrence and claim, whilst wide public recognition of such a situation does not necessarily take place until a substantial number of awards have been made and publicised in the media. 122 The Committee has come to the conclusion that public liability insurance is necessary to protect voluntary organisations and to ensure adequate compensation is available to those injured by the actions of these groups. In addition it agrees with the approach adopted by New South Wales and believes that compulsory insurance is a proper counterpart to the limited liability bestowed upon groups by incorporation. As the implementation of the recommendations contained in this report should result in public liability insurance being more readily affordable and available to all voluntary groups, it is of the view that those groups incorporated in Victoria pursuant to the Associations Incorporation Act should be required to hold public liability insurance. RECOMMENDATION .31 Tile Committee recommends that the Associations Incorporation Act 1981 be amended to require all incorporated associations to effect and maintain insurance against liability of the incorporated association arising out of an occurrence causing death or bodily injury to a person or damage to property. The cover effected should be not less than $2,0001000 and an appropriate penalty should be prescribed where this requirement is contravened. 8..5 Publicity In conducting this inquiry, the Committee was quickly made aware that ll)any voluntary organisations have no access to information about public liability insurance. Some agencies have remedied this. For example, the Victorian Council of Social Service regularly produces insurance handbooks for community based organisations and several Government Departments provide similar information to their funded groups. A large number of groups, however, remain ignorant of the need to insure or how best to procure insurance. The Committee therefore recommends that multi-lingual booklets be produced, explaining in simple terms the need for insurance. In addition, Departments and Local Councils should publicise their service of facilitating group plans. Community newspapers and community directories may be appropriate vehicles in this regard. 123 RECOMMENDATION 32 The Committee recommends that the Government ensures that multi-lingual booklets explaining the need for insurance and the avenues through which it may be obtained be produced and widely disseminated to voluntary groups through its Departments, local Councils, community newspapers and community directories. 124 CHAPTER 9 - CONCLUSION This Report has canvassed the difficulties which beset voluntary organisations in relation to their legal status and to their capacity to obtain adequate and affordable insurance. A primary concern for volunteers, in particular those involved with small groups, has been the complexity of the incorporation process. The precarious position of groups which remain unincorporated was also raised. In dealing with these issues, the Committee has endeavoured to provide practical solutions. It has proposed a simplified process of incorporation which retains a measure of accountability by voluntary organisations to the community. It has sought to provide protection for the office bearers of unincorporated associations whose personal assets may be at risk as a result of the group's activities. In addition, it has drawn to the attention of Parliament issues raised in the inquiry regarding general aspects of the law regulating the conduct of pefsonal injury claims which are not exclusive to those made against voluntary organisations. The Committee has also recommended that an inquiry be established as a matter of urgency to examine the issue of personal injuries compensation, including the possible introduction of a no-fault compensation scheme for all Victorians. Finally, the Committee has examined the cost and availability of public liability insurance for voluntary organisations. Insurance was generally reported to be expensive and in many cases out of the reach of small groups. Further, there appeared to be little understanding of the nature of the cover which should be sought by voluntary groups. In response, the Committee has proposed a multi-layered scheme which places responsibility upon Government departments to insure those groups which it funds and, as well, assist those organisations with links to the departments to obtain insurance. In addition, the scheme recognises the relationship between many groups and their local councils and it seeks to involve councils in facilitating access to insurance. On this basis, the Committee has also recommended that all incorporated associations be required to hold public liability insurance. 12.5 Solutions to the problems experienced by voluntary organisations cannot be simple due to the diverse nature and location of these groups. The Committee believes its practical approach to these issues wiU, when implemented, provide long awaited security for volunteers in Victoria. COMMITTEE ROOM 22 February 1989 126 APPENDIX I LIST OF WITNESSES MELBOURNE 16 June 1988 Mr. P. Maguire, Manager, Market Services, Insurance Council of Australia. Mr. R. Bancroft, Senior Liability Underwriter, Royal Insurance. Mr. A.J. Leonard, Managing Director, H.G.A. Insurance Brokers. Mr. G. Masel, Member, Victorian Branch, Australian Insurance. Law Association. Mr. R.J. Hopper, Executive Director, Sports Federation of Victoria Incorporated. Ms. J. Kiraly; and Mr. R. Bishop, Victorian Council of Social Service. Ms. M. Portelli, Victorian Association of Citizens' Advice Bureaux. Mr. J. Park, State President-Victoria, Apex Clubs of Australia. 22 June 1988 Mr. R. P.D. Wright, Solicitor. Ms. H. Proctor, Senior Legal Adviser; and Mr. K. Dwyer, Legal Officer, Municipal Association of Victoria. Mr. R. Falzon, Manager, MAY Insurance Broking Services. Mr. R.J. Waites, Manager for Australia, Liability Department, C.E. Heath Underwriting and Insurance (Australia) Pty. Ltd. Mr. J. Webb, Coordinator, Community Recreation and Development, Department of Sport and Recreation, Victoria. Mr. G. Clinnick, Clinnick and Stirton Insurance Brokers Pty. Ltd. BENDIGO 13 July 1988 Mr. G. Elvey, Chief Executive Officer, Shire of Marong. Mr. J. J. Boyd, Mitiamo. Mr. W. J. Nabbs, Vice-President; and Mr. C.W. Holl, Treasurer, Castlemaine-Maldon Railway Preservation Society. 127 Mr. M. Gee, President, Goornong Swimming Pool Committee Inc. Mrs. M. Crouch, Administrative Officer, Loddon Campaspe Sports Assembly Incorporated. Mrs. D. Kennedy, Program and Services Coordinator, Central and Northern Association for the Accommodation of the Intellectually Disabled. Mrs. S. Murray, Volunteer Coordinator, Golden Square/Kangaroo Flat Community Health Centre. BRIGHT llf July 1988 Mr. P. H. Lenne, Barrister and Solicitor, Myrtleford. Mr. G. J. Nevin, Barrister and Solicitor, Myrtleford. Mr. M. Sharpe, President, Rotary Club of Bright. Mr. N. Serritelli, Secretary/Treasurer, North Eastern Branch, State Electricity Commission Social Club. Mr. R. Emptage, President; and Mr. G. Gifford, Vice-President, Apex Club of Albury. Mr. R. Addinsall ) Mr. J. Bates ) Concerned Citizens of Mount Beauty Mr. P. Mal ) and also representing the Mount Beauty Rotary Club, the Upper Kiewa Valley Lions Club and the Mount Beauty Chamber of Commerce, respectively. Mr. G. S.Meakin, Wodonga. Mr. A. Roadknight, Upper Kiewa Valley Historical Society. Mrs. C. Hedley, Secretary; and Mr. J. Bakkum, Member, Harrietville Historical Society. Cr. P. Cox, Shire President; and Mr. W. Warne, Shire Secretary, Shire of Bright. 128 MELBOURNE 28 July 1988 Mr. C. Alsop, Secretary, Mornington Bay Rescue Service. Mr. A. Balmer, Secretary, Moorabbin Branch, Combined Pensioners' Association. Mr. W. Cutter, Vice-President, The Victorian Woodworkers Association. Mr. A.J. Kilgour, Executive Secretary, Resources Commission, Uniting Church in Australia, Synod of Victoria. Ms. N. Jarvis, Doveton Arthritis Support Group Inc. Mrs. M. Peachey, President/Public Officer, Mulgrave Self-Help Group Inc. Mrs. B. Stone, General Secretary, Al-Anon Family Groups (Australia) Pty. Ltd. Mr. R. E. Jack, Seaford. Mr. L. W. Carver, Councillor, Royal Historical Society of Victoria Inc. Mr. R. Turner, Risk Manager, City of Ringwood. Mrs. F. Woppenkamp, Clayton. Mr. J. Cunningham, Ringwood East. Mr. D. McKay, Executive Director, Victorian Arts Council. Mr. D. Ward, Tawonga. Mr. M. Hollow, Frankston. 129 APPENDIX 11 LIST OF SUBMISSIONS ACHPER, Victorian Branch Inc Aged Needs Group of Sherbrooke Al-Anon Family Groups (Australia) Pty Ltd Albury &: District Softball Association lnc Mr. N. Almeida, Dandenong ALPS lnc, Mount Beauty Mr. J. Anselmi, Stawell Apex Club of Mortlake Apex Club of Rutherglen Apex Club of Tatura Association of Apex Clubs of Australia, Victoria- Zone 1 Association of Apex Clubs- Zone 12 Mr. D.S.F. Atkinson, Canterbury Australia-China Friendship Society (Victorian Branch) Australian Association of Live Steamers Australian Federation of Business and Professional Women Inc Australian Insurance Law Association (AILA), Victorian Branch Australian Multiple Birth Association Inc, Victorian State Committee Australian Volunteer Coast Guard Association, Victorian Squadron Bairnsdale Women's Softball Association Berry Street - Child &: Family Care, East Melbourne Beta Sigma Phi, Sigma Chapter, Bright Birthright, (Victoria), Warrnambool Branch Borough of Port Fairy Borough Council of Sebastopol Bright Community Youth Club Business and Professional Women's Club of Wangaratta Cemeteries &: Crematoria Association of Victoria Incorporated Ms. S. Charlesworth, Department of Social Work, University of Melbourne Citizen Advocacy Barwon Region Inc, Geelong West City of Altona City of Bendigo City of Berwick City of Box Hill City of Camberwell 130 City of Coburg City of Croydon City of Dandenong City of Footscray City of Frankston City of Hamilton City of Heidelberg City of Horsham City of Maryborough City of Moe City of Mordialloc City of Ringwood City of Sale City of Shepparton City of South Barwon City of Wangaratta City of Warrnambool City of Werribee City of Whittlesea Rural City of Wodonga Mr. G. Clinnick, Clinnick and Stirton Insurance Brokers Pty Ltd Cohuna Historical Society Co-operative Limited Combined Pensioners' Association, Moorabbin Branch Connection, East Brunswick Council of Tramway Museums of Australasia Crafts Council of Victoria Mr. J. Cunningham, Ringwood East Department of Property and Services, Victoria Department of Sport and Recreation, Victoria Doveton Arthritis Self Help Group lnc Early Planning for Retirement Group (Waverley) Inc Early Planning for Retirement Group Nunawading Incorporated Emerald Tourist Railway Board Eva Tilley Memorial Home, North Balwyn Hon. D.M. Evans, MLC Family Action, Oakleigh Federation of Victorian Walking Clubs Inc 131 Ferny Creek Horticultural Society Inc Mr. K.L. Fletcher, Law School, University of Queensland Friends of National Parks Committee Mr. B. Fuller, Glen Waverley Gisborne District Steam &: Engine Society Limited Goornong Swimming Pool Committee Incorporated Mr. J. Gulliver, Melton South Mrs. S. Head, Endeavour Hills C.E. Heath Underwriting&: Insurance (Australia) Pty Limited Heidelberg Mutual Child Minding Group Inc HGA Insurance Brokers, Port Melbourne Horsham Field Naturalists' Club lnc Insurance Council of Australia Limited Mr. R. Jack, Seaford Kangaroo Ground Tennis Club Knox Community Volunteers lnc Mrs. M. Laity, Box Hill North Latrobe Valley Village Inc Law Institute of Victoria Mr. P.H. Lenne, Nevin, Lenne, Gross and Bennett, Myrtleford Lions Club of Anglesea Lions Club of Deer Park Incorporated Lions Club of Hamilton Lions Club International - District 201 V6 Lions Club of Leongatha Lions Club of Phillip Island Incorporated Lions Club of the Upper Kiewa Valley Loddon Campaspe Sports Assembly Incorporated, Bendigo Lord Somers' Camp and Power House Professor H. Luntz, Law School, University of Melbourne· Macpherson &: Kelley, Dandenong Malvern News Sheet Co-operative Society L td Mr. G.S. Meakin, Wodonga Mid Murray Vintage Car Club, Swan Hill Mr. K. Mohr, Moe Allan Moore &: Co, Melbourne Mount Beauty Concerned Citizens Group 132 Mt Pleasant Kindergarten (Forest Hill) Incorporated Municipal Association of Victoria Neerim South High School Council Cr. L. Nette, Beechworth Mr. G.J. Nevin, Nevin, Lenne, Gross & Bennett, Myrtleford Options for Community Living Inc, Croydon Rotary Club of Bright Rotary Club of Mount Beauty Rotary Club of Shepparton South Inc Rotary Club of Tallangatta Rotary International District 980 Rotary International District 982 Royal Guide Dogs Associations of Australia, Kew Royal Historical Society of Victoria Inc Royal Victorian Bowls Association Inc Sale Softball Association Mr. K. Schilling, Carnegie Shire of Alberton Shire of Ararat Shire of A voca Shire of Avon Shire of Bairnsdale Shire of Ballarat Shire of Bannockburn United Shire of Beechworth Shire of Bellarine Shire of Benalla Shire of Bet Bet Shire of Birchip Shire of Bright Shire of Buln Buln Shire of Cohuna Shire of Colac Shire of Daylesford and Glerilyon Shire of Dimboola Shire of Dunmunkle Shire of East Loddon 133 Shire of Eltham Shire of Euroa Shire of Cordon Shire of Grenville Shire of Hampden Shire of Heytesbury Shire of Kerang Shire of Kowree Shire of Lillydale Shire of Lowan Shire of Maffra Shire of Marong Shire of Melton Shire of Mildura Shire of Mortlake Shire of Morwell Shire of Mount Rouse Shire of Narracan Shire of Pakenham Shire of Portland Shire of Pyalong Shire of Rochester Shire of Ripon Shire of South Gippsland Shire of Stawell Shire of Strathfieldsaye Shire of Swan Hill Shire of Tungamah Shire of Tullaroop Shire of Wangaratta Shire of Warrnambool Shire of Wimmera Shire of Woorayl Shire of Wycheproof Shire of Yackandandah Shire of Yarrawonga Mrs. A.S. Sievers, Faculty of Law, Monash University 134 Ski Touring Association of Victoria Inc Mr. W.A. Smith, Bacchus Marsh Sorrento-Portsea-Blairgowrie Conservation Group Southern Regional Consultative Council Ms. M.C. Spark, Cohuna Mr. R.L. Splatt, Wandiligong Sports Federation of Victoria Incorporated Stanley New Year's Day Sports Committee State Insurance Office, Victoria St. John Ambulance Australia, Victoria Stawell Amateur Athletic Club Stawell Soaring Club Inc Sunshine Softball Association Swimming Victoria Incorporated The Andoom Club Inc The Country Women's Association of Victoria lnc, Toorak The Institute of Recreation (Vie) Inc The Melbourne Junior Chamber of Commerce (Melbourne Jaycees) The Plenty Valley Quarter Horse Association The Pony Club Association of Victoria Inc The Scout Association of Australia, Victorian Branch The Surf Life Saving Association of Australia, Victorian State Centre The Uniting Church in Australia, Synod of Victoria The Victorian Woodworkers Association Town of Bairnsdale Town of Stawell Upper Kiewa Valley Historical Society Upper Kiewa Valley Nursing Home Society Victorian Agricultural Societies Association Incorporated Victorian Arts Council Victorian Association of Day Nurseries Victorian Association of Youth in Communities Victorian Council of Social Service Victorian Court Information and Welfare Network Inc Victorian Cricket Association (Incorporated) Victorian Farmers Federation, Nandaly Branch 135 Victorian National Parks Association Inc, Mr. G.A. Durham Victorian National Parks Association lnc, Mr. S. Manders Victorian Playgroup Association lnc Victorian Soaring Association Miss V.J. Walton, Deepdene Mr. D. Ward, Tawonga Warrandyte Environment League Inc Mrs. F. Woppenkamp, Clayton Yinnar South Citizens' Association Inc Yooralla Society of Victoria YWCA, Melbourne 136 APPENDIX Ill INCORPORATED PROPRIETARY CO-OPERATIVE S.66 ASSOCIA TlON COMPANY SOCIETY COMPANY Basic cost of $75.50 $430 $53 $240 incorporation Number of Directors/ None prescribed Minimum of 2 Between 3- 7 Minimum of 3 Committee Members although I public required officer Members Minimum of 5 Between 2 - 50 Minimum of 7 Minimum of 5 ""'""" Natural persons only Need not be a Co-operatives may Need not be a natural person be members natural person Age Restrictions Public officers must be Directors must be Over 15 yrs for Directors must be between I 8 and 72 years over I 8 years membership and over between 18 and 72 years with limited exceptions 18 years if applying with limited exceptions for incorporation Registered Office Not required Notice of current Required Notice of current address must be address must be filed and the office filed and the office must be open to the must be open to the public at least 3 hours public at least 3 hours per day. Penalty $500. per day. Penalty $500. INCORPORATED PROPRIETARY CO-OPERATIVE 5.66 ASSOCIATION COMPANY SOCIETY COMPANY Registers Required to Register of Members Members, Directors, Members and shares, Members, Directors, be kept Secretaries and share transfers, directors, Secretaries and Managers secretaries, loans and Managers securities, withdrawals and forfei tu res Annual Financial Report Submit to AGM & lodge Submit to AGM & lodge Submit to AGM & lodge Submit to AGM & lodge in I mth. in I mth. in 3 mths. in l mth. Fee: $24.10 Fee: $170 Fee: nil Fee: $20 Extension of time: $11.50 Late lodgement: $14- $70 Late lodgement: Exemption may be 1...1 Penalty: $200 Penalty: $500 & $50 $5.30- $16.00 available in exceptional 00 per day circumstances Insurance No compulsory insurance No compulsory insurance The governing body No compulsory insurance determines the insurance cover which must be effected. Auditor Not required Required Required May be exempted from this requirement in exceptional circumstances Reservation of name Not required Required Not required Required Fee: $22 Fee: $1& INCORPORATED PROPRIETARY CO-OPERATIVE 5.66 ASSOCIATION COMPANY SOCIETY COMPANY Administrative No No Yes Yes Discretion as to incorporation Process of Incorporation Lodge: Reserve name then Lodge: For approval Lodge: - Rules Lodge: - Formation statement - Draft Memo of Assoc. - Statement of Purposes - Memorandum of Assoc. - Application - Draft Articles of Assoc. -Application - Articles of Assoc. - Statutory Declaration -Statement of activites -Statutory Declaration - notice of registered - Details of Directors - list of promoters office - list of members - financial details list of Directors - registered office -statement """\.£:) On approval lodge - executed Memo of Assoc. - executed Articles of Assoc. - list of consenting Directors - registered office Eligibility for An association formed or Any 2 persons can A community advancement A public company limited by Incorporation carried on for any lawful form a company for society formed for the guarantee which is formed for purpose, which does not any lawful purpose object of providing purposes beneficial to the trade or secure pecuniary community services or community and prohibits gain for its members benefits payment of dividends to its members. APPENDIX IV EXTRACT FROM ASSOCIATIONS INCORPORATION ACT 1981 SCHEDULE MATTERS TO BE PROVIDED FOR IN THE RULES OF AN INCORPORATED ASSOCIATION 1. The qualifications (if any} for membership of the incorporated association. 2. The register of members of the incorporated association. 3. The entrance fees, subscriptions and other amounts (if any} to be paid by members of the incorporated association. 4. The name, constitution, membership and powers of the committee or other body having the management of the incorporated association (in this paragraph referred to as "the committee"} and - (a} the election or appointment of members of the committee; (b) the terms of office of members of the committee; (c) the grounds on which, or reasons for which, the office of a member of the committee shall become vacant; (d) the filling of casual vacancies occurring on the committee; (e) the quorum and procedure at meetings of the committee. 5. The quorum and procedure at general meetings of members of the incorporated association and whether members are entitled to vote by proxy at general meetings. 6. The time within which, and manner in which, notices of general meetings and notices of motion are to be given, published or circulated. 7. The sources from which the funds of the incorporated associati.on are to be or may be derived. 8. The manner in which the funds of the association are to be managed and, in particular, the mode of drawing and signing cheques on behalf of the incorporated association. 9. The intervals between general meetings of members of the incorporated association and the manner of calling general meetings. 10. The manner of altering the statement of purposes of the incorporated association. 11. The manner of altering and rescinding the rules and of making additional rules of the incorporated association. 140 12. Provisions for the custody and use of the common seal of the incorporated association. 13. The custody of books, documents and securities of the incorporated association. 14. The inspection by members of the incorporated association of books and documents of the incorporated association. 15. The disposition of any surplus assets on the winding up or dissolution of the incorproated association. 16. The procedure (if any) for the disciplining of members and the mechanism (if any) for appearances by members in respect of disciplinary action taken against them. 141 APPENDIX V EXTRACT FROM ASSOCIATIONS INCORPORATION REGULATIONS 1983 (S.R. 122/1983) SCHEDULE 3 MODEL RULES FOR AN INCORPORATED ASSOCIATION 1. The name of the incorporated association is (in these rules called 'the Association'). 2. ( 1) In these rules, unless the contrary intention appears - 'Committee' means the Committee of Management of the Association. 'Financial year' means the year ending on 30 June. 'General Meeting' means a general meeting of members convened in accordance with Rule 11. 'Member' means a member of the Association. 'Ordinary Member of the Committee' means a member of the Committee who is not an officer of the Association under Rule 21. 'The Act' means the Associations Incorporation Act 1981. 'The Regulations' means Regulations under the Act. (2) In these Rules, a reference to the secretary of an Association is a reference- (a) where a person holds office under these Rules as secretary of the Association - to that person; and (b) in any other case, to the public officer of the Association. (3) Words or expressions contained in these rules shall be interpreted in accordance with the provisions of the Acts Interpretation Act 1958 and the Act as in force from time to time. 3. (I) A natural person who is nominated and approved for membership as provided in these rules is eligible to be a member of the Association on payment of the entrance fee and annual subscription payable under these rules. 142 (2) A person who is not a member of the Association at the time of the incorporation of the Association (or who was such a member at that time but has ceased to be a member) shall not be admitted to membership- (a) unless he is nominated as provided in sub-clause (3); and (b) his admission as a member is approved by the Committee. (3) A nomination of a person for membership of the Association - la) shall be made in writing in the form set out in Appendix I; and (b) shall be lodged with the secretary of the Association. (4) As soon as is practicable after the receipt of a nomination, the secretary shall refer the nomination to the Committee. (5) Upon a nomination being referred to the Committee, the Committee shall determine whether to approve or to reject the nomination. (6) Upon a nomination being approved by the Committee, the secretary shall, with as little delay as possible, notify the nominee in writing that he is approved for membership of the association and request payment within the period of 28 days after receipt of the notification of the sum payable under these rules as the entrance fee and the first year's annual subscription. (7) The secretary shall, upon payment of the amounts referred to in sub-clause (6) within the period referred to in that sub-clause, enter the nominee's name in the register of members kept by him and, upon the name being so entered, the nominee becomes a member of the association. (8) A right, privilege, or obligation of a person by reason of his membership of the association - (a) is not capable of being transferred or transmitted to another person; and (b) terminates upon the cessation of his membership whether by death or resignation or otherwise. 4. (1) The entrance fee is $1. 143 (2) The annual subscription is $2 and is payable in advance on or before 1 July in each year. 5. The secretary shall keep and maintain a register of members in which shall be entered the full name, address and date of entry of the name of each member and the register shall be available for inspection by members at the address of the Public Officer. 6. (1) A member of the Association who has paid all moneys due and payable by him to the Association may resign from the Association by first giving one months notice in writing to the secretary of his intention to resign and upon the expiration of that period of notice, the member shall cease to be a member. (2) Upon the expiration of a notice given under sub-clause (1), the secretary shall make in the register of members an entry recording the date on which the member by whom the notice was given, ceased to be a member. 7. (I) Subject to these rules, the Committee may be resolution- (a) expel a member from the Association; (b) suspend a member from membership of the Association for a specified period; or (c) fine a member in accordance with the Regulations if the Committee is of the opinion that the member - (d) has refused or neglected to comply with these rules; or (e) has been guilty of conduct unbecoming a member or prejudicial to the interests of the Association. (2) A resolution of the Committee under sub-clause (1) - (a) does not take effect unless the Committee, at a meeting held not earlier than 14 and not later than 28 days after the service on the member of a notice under sub-clause (3) confirms the resolution in accordance with this clause; and (b) where the member exercises a right of appeal to the Association under this clause does not take effect unless the Association confirms the resolution in accordance with this clause. 144 (3) Where the Committee passes a resolution under sub-clause (1), the secretary shall, as soon as practicable, cause to be served on the member a notice in writing- (a) setting out the resolution of the Committee and the grounds on which it is based; (b) stating that the member may address the Committee at a meeting to be held not earlier than 14 and not later than 28 days after service of the notice; (c) stating the date, place and time of that meeting; (d) informing the member that he may do one or more of the following: (i) Attend that meeting; (ii) Give to the Committee before the date of that meeting a written statement seeking the revocation of the resolution; and (iii) Not later than 24 hours before the date of the meeting, lodge with the secretary a notice to the effect that he wishes to appeal to the Association in general meeting against the Resolution. (4) At a meeting of the Committee held in accordance with sub clause (2), the Committee - (a) shall give to the member an opportunity to be heard; (b) shall give due consideration to any written statement submitted by the member; and (c) shall by resolution determine whether to confirm or to revoke the resolution. (5) Where the secretary receives a notice under sub-clause (3), he shall notify the Committee and the Committee shall convene a general meeting of the Association to be held within twenty-one days after the date on which the secretary received the notice. (6) At a general meeting of the Association convened under sub clause (5)- (a) no business other than the question of the appeal shall be transacted; 145 (b) the Committee may place before the meeting details of the grounds for the resolution and the reasons for the passing of the resolution; (c) the member shall be given an opportunity to be heard; and (d) the members present shall vote by secret ballot on the question whether the resolution should be confirmed or revoked. (7) If at the general meeting - (a) two-thirds of the members vote in person or by proxy in favour of the confirmation of the resolution, the resolution is confirmed; and (b) in any other case, the resolution is revoked. 8. ( 1) The Association shall in each calendar year convene an annual general meeting of its members. (2) The annual general meeting shall be held on such day as the Committee determines. (3) The annual general meeting shall be specified as such in the notice convening it. (4) The ordinary business of the annual general meeting shall be - (a) to confirm the minutes of the last preceding annual general meeting and of any general meeting held since that meeting; (b) to receive from the Committee reports upon the transactions of the Association during the last preceding financial year; (c) to elect officers of the Association and the ordinary members of the Committee; and (d) to receive and consider the statement submitted by the Association in accordance with section 30 (3) of the Act. (5) The annual general meeting may transact special business of which notice is given in accordance with these rules. 146 (6) The annual general meeting shall be in addition to any other general meetings that may be held in the same year. 9. All general meetings other than the annual general meeting shall be called special general meetings. 10. (1) The Committee may, whenever it thinks fit, convene a special general meeting of the Association and, where, but for this sub-clause, more than fifteen months would lapse between annual general meetings, shall convene a special general meeting before the expiration of that period. (2) The Committee shall, on the requisition in writing of members representing not less than 5 per cent of the total number of members, convene a special general meeting of the Association. (3) The requisition for a special general meeting shall state the objects of the meeting and shall be signed by the members making the requisition and be sent to the address of the Secretary and may consist of several documents in a like form, each signed by one or more of the members making the requisition. (4) If the Committee does not cause a special general meeting to be held within one month after the date on which the requisition is sent to the address of the Secretary, the members making the requisition, or any of them, may convene a special general meeting to be held not later than three months after that date. (5) A special general meeting convened by members in pursuance of these rules shall be convened in the same manner as nearly as possible as that in which those meetings are convened by the Committee and all reasonable expenses incurred in convening the meeting shall be refunded by the Association to the persons incurring the expenses. ll. (l) The Secretary of the Association shall, at lease 14 days before the date fixed for holding a general meeting of the Association, cause to be 147 sent to each member of the Association at his address appearing in the register of members, a notice by pre-paid post stating the place, date and time of the meeting and the nature of the business to be transacted at the meeting. (2) No business other than that set out in the notice convening the meeting shall be transacted at the meeting. (3) A member desiring to bring any business before a meeting may give notice of that business in writing to the secretary, who shall include that business in the notice calling the next general meeting after the receipt of the notice. 12. (1) All business that is transacted at a special general meeting and all business that is transacted at the annual general meeting with the exception of that specially referred to in these rules as being the ordinary business of the annual general meeting shall be deemed to be special business. (2) No item of business shall be transacted at a general meeting unless a quorum of members entitled under these rules to vote is present during the time when the meeting is considering that item. (3) Five members personally present (being members entitled under these rules to vote at a general meeting) constitute a quorum for the transaction of the business of a general meeting. (4) If within half an hour after the appointed time for the commencement of a general meeting, a quorum is not present, the meeting if convened upon the requisition of members shall be dissolved and in any other case shall stand adjourned to the same day in the next week at the same time and (unless another place is specified by the Chairman at the time of the adjournment or by written notice to members given before the day to which the meeting is adjourned) at the same place and if at the adjourned meeting the quorum is not present within half an hour after the time appointed for the commencement of the meeting, the members present (being not less than 3) shall be a quorum. 148 13. (l) The President, or in his absence, the Vice-President, shall preside as Chairman at each general meeting of the Association. (2) If the President and the Vice-President are absent from a general meeting, the members present shall elect one of their number to preside as Chairman at the Meeting. 14. (l) The Chairman of a general meeting at which a quorum is present may, with the consent of the meeting, adjourn the meeting from time to time and place to place, but no business shall be transacted at an adjourned meeting other than the business left unfinished at the meeting at which the adjournment took place. (2) Where a meeting is adjourned for fourteen days or more, a like notice of the adjourned meeting shall be given as in the case of the general meeting. (3) Except as provided in sub-clauses (1) and (2), it is not necessary to give notice of an adjournment or of the business to be transacted at an adjourned meeting. 15. A question arising at a general meeting of the Association shall be determined on a show of hands and unless before or on the declaration of the show of hands a poll is demanded, a declaration by the Chairman that a resolution has, on a show of hands, been carried or carried unanimously or carried by a particular majority or lost, and an entry to that effect in the Minute Book of the Association is evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution. 16. (l) Upon any question arising at a general meeting of the Association, a member has one vote only. (2) All votes shall be given personally or by proxy. (3) In the case of an equality of voting on a question, the Chairman of the meeting is entitled to exercise a second or casting vote. 149 17. (1) If at a meeting a poll on any question is demanded by not less than three members, it shall be taken at that meeting in such manner as the Chairman may direct and the resolution of the poll shall be deemed to be a resolution of the meeting on that question. (2) A poll that is demanded on the election of a Chairman or on a question of an adjournment shall be taken forthwith and a poll that is demanded on any other question shall be taken at such time before the dose of the meeting as the Chairman may direct. 1&. A member is not entitled to vote at any general meeting unless all moneys due and payable by him to the Association have been paid, other than the amount of the annual subscription payable in respect of the current financial year. 19. (1) Each member shall be enti tied to appoint another member as his proxy by notice given to the secretary no later than 24 hours before the time of the meeting in respect of which the proxy is appointed. (2) The notice appointing the proxy shall be in the form set out in Appendix 2. 20. (1) The Affairs of the Association shall be managed by a Committee of Management constituted as provided in Rule 21. (2) The Committee- (a) shall control and manage the business and affairs of the Association; (b) may, subject to these rules, the regulations and the Act, exercise all such powers and functions as may be exercised by the Association other than those powers and functions that are required by these rules to be exercised by general meetings of the members of the Association; and (c) subject to these rules, the regulations and the Act, has power to perform all such acts and things as appear to the Committee to be essential for the proper management of the business and affairs of the Association. 150 21. (l) The officers of the Association shall be (a) a President; (b) a Vice-President; (c) a Treasurer; and (d) a secretary. (2) The provisions of Rule 23 so far as they are applicable and with the necessary modifications, apply to and in relation to the election of persons to any of the offices mentioned in sub-clause (l). (3) Each officer of the Association shall hold office until the annual general meeting next after the date of his election but is eligible for re election. (4) In the event of a casual vacancy in any office referred to in sub clause (l) the Committee may appoint one of its members to the vacant office and the member so appointed may continue in office up to and including the conclusion of the annual general meeting next following the date of his appointment. 22. (I) Subject to section 23 of the Act, the Committee shall consist of - (a) the officers of the Association; and (b) two ordinary members - each of whom shall be elected at the annual general meeting of the Association in each year. (2) Each ordinary member of the Committee shall, subject to these rules, hold office until the annual general meeting next after the date of his election but is eligible for re-election. (3) In the event of a casual vacancy occurring in the office of an ordinary member of the Committee, the Committee may appoint a member of the Association to fill the vacancy and the member so appointed shall hold office, subject to these rules, until the conclusion of the annual general meeting next following the date of his appointment. 151 23. (l) Nominations of candidates for election as officers of the Association or as ordinary members of the Committee - (a) shall be made in writing, signed by two members of the Association and accompanied by the written consent of the candidate (which may be endorsed on the form of nomination); and (b) shall be delivered to the secretary of the Association not less than seven days before the date fixed for the holding of the annual general meeting. (2) If insufficient nominations are received to fill all vacancies on the Committee, the candidates nominated shall be deemed to be elected and further nominations shall be received at the annual general meeting. (3) Jf the number of nominations received is equal to the number of vacancies to be filled, the persons nominated shall be deemed to be elected. (4) If the number of nominations exceeds the number of vacancies to be filled, a ballot shall be held. (5) The ballot for the election of officers and ordinary members of the Committee shall be conducted at the annual general meeting in such usual and proper manner as the Committee may direct. (6) A nomination of a candidate for election under this clause is not valid if that candidate has been nominated for another office for election at the same election. 24. For the purposes of these rules, the office of an officer of the Association or of an ordinary member of the Committee becomes vacant if the officer or member- (a) ceases to be a member of the Association; (b) becomes an insolvent under administration within the meaning of the Companies (Victoria) Code; or (c) resigns his office by notice in writing given to the secretary. 152 25. ( l) The Committee shall meet at least 3 times in each year at such place and such times as the Committee may determine. (2) Special meetings of the Committee may be convened by the President or by any four of the members of the Committee. (3) Notice shall be given to members of the Committee of any special meeting specifying the general nature of the business to be transacted and no other business shall be transacted at such a meeting. (4) Any four members of the Committee constitute a quorum for the transaction of the business of a meeting of the Committee. (5) No business shall be transacted unless a quorum is present and if within half an hour of the time appointed for the meeting a quorum is not present the meeting shall stand adjourned to the same place and at the same hour of the same day in the following week unless the meeting was a special meeting in which case it lapses. (6) At meetings of the Committee- (a) the President or in his absence the Vice-President shall preside; or (b) if the President and the Vice-President are absent, such one of the remaining members of the Committee as may be chosen by the members present shall preside. (7) Questions arising at a meeting of the Committee or of any sub committee appointed by the Committee shall be determined on a show of hands or, if demanded by a member, by a poll taken in such manner as the person presiding at the meeting may determine. (8) Each member present at a meeting of the Committee or of any sub committee appointed by the Committee (including the person presiding at the meeting) is entitled to one vote and, in the event of an equality of votes on any question, the person presiding may exercise a second or casting vote. 153 (9) Written notice of each committee meeting shall be served on each member of the Committee by delivering it to him at a reasonable time before the meeting or by sending it by pre-paid post addressed to him at his usual or last known place of abode at least two business days before the date of the meeting. (10) Subject to sub-clause (4) the Committee may act notwithstanding any vacancy on the Committee. 26. The secretary of the Association shall keep minutes of the resolutions and proeedings of each general meeting and each committee meeting in books provided for that purpose together with a record of the names of persons present at committee meetings. 27. (1) The Treasurer of the Association - (a) shall collect and receive all moneys due to the Association and make all payments authorized by the Association; and (b) shall keep correct accounts and books showing the financial affairs of the Association with full details of all receipts and expenditure connected with the activities of the Association. (2) The accounts and books referred to in sub-clause ( 1) shall be available for inspection by members. 28. (1) The Association in general meeting may by resolution remove any member of the Committee before the expiration of his term of office and appoint another member in his stead to hold office until the expiration of the term of the first-mentioned member. (2) Where the member to whom a proposed resolution referred to in sub-clause (1) makes representations in writing to the secretary or President of the Association (not exceeding a reasonable length) and requests that they be notified to the members of the Association, the secretary or the President may send a copy of the representations to each member of the Association or, if they are not so sent, the member may require that they be read out at the meeting. 154 29. All cheques, drafts, bills of exchange, promissory notes and other negotiable instruments shall be signed by two members of the Committee. 30. (1) The Common seal of the Association shall be kept in the custody of the secretary. (2) The common seal shall not be affixed to any instrument except by the authority of the Committee and the affixing of the common seal shall be attested by the signatures either of two members of the Committee or of one member of the Committee and of the Public Officer of the Association. 31. These rules and the statement of purposes of the Association shall not be altered except in accordance with the Act. 32. ( 1) A notice may be served by or on behalf of the Association upon any member either personally or by sending it by post to the member at his address shown in the Register of Members. (2) Where a document is properly addressed prepaid and posted to a person as a letter, the document shall, unless the contrary is proved, be deemed to have been given to the person at the time at which the letter would have been delivered in the ordinary course of post. 33. In the event of the winding up or the cancellation of the incorporation of the Association, the assets of the Association shall be disposed of in accordance with the provisions of the Act. 34. Except as otherwise provided in these Rules, the secretary shall keep in his custody or under his control all books, documents and securities of the Association. 35. The funds of the Association shall be derived from entrance fees, annual subscriptions, donations and such other sources as the Committee determines. 155 APPENDIX VI INSURANCE COUNCIL OF AUSTRALIA 1. Operative Clause In essence the Operative Clause of an insurance policy constitutes a statement of the basic cover which is being provided. In this instance we would envisage the Operative Clause as providing compensation in respect of third party bodily injury and damage to tangible property arising out of an occurrence during the period of insurance for which the insured is legally liable. The Operative Clause will also include a definition of the insured which, because of the nature of voluntary organisations, must be wide enough to avoid any omission of parties involved directly in the organisation's activities. In the case of an incorporated body it will be necessary to examine the articles of association to ensure that an adequate legal definition is established. With an unincorporated body, the body itself, office bearers, committee members, voluntary helpers and other persons, including voluntary workers, will all have to be considered for inclusion. A greater onus falls on the unincorporated body to ensure that everyone involved is covered as there is no legal definition on which one can depend. Whatever the precise definition employed, the policy will, of course, be restricted to providing cover whilst the persons referred to are performing any function in connection with the insured's business. The word business may, perhaps, seem a trifle out of place when referred to a voluntary organisation, but it has a recognised meaning within an insurance context that other seemingly more appropriate words, such as activities, might not enjoy. The underwriter will require a full description of the insured's business in order that he (or she) may adequately assess the risk and this may be defined in the Operative Clause. 156 2. Exclusions Whilst the Operative Clause provides a broad statement of basic covert it has of necessity to be refined by excluding certain specific risks. This may be due to a particular risk being precluded by statute, or being of a nature which no underwriter would readily accept. Other risks would be inappropriate to some organisations and, rather than increase the overall premium by absorbing them into the basic cover, the insurer makes them an optional extra which may be purchased by such organisations as require them. Yet others are more appropriately dealt with by a separate policy of insurance which has been tailored to meet a rather different need. In outlining the exclusions we would expect to find in a policy such as this, explanatory notes have been provided to clarify what is entailed and to indicate which exclusions might be removed so that such cover could be included in the policy as an optional extra. Exclusion Explanatory Note a) Paid workers In Victoria work related injuries are covered by the statutory "WorkCare" scheme rendering this cover unnecessary. b) Demolition and/or This type of work should only be carried out by Works, etc. qualified professionals who, of course, should maintain their own insurance for that purpose. For amateurs it is an unacceptably dangerous undertaking. c) Motor Vehicles As regards bodily injury, this is provided for by the statutory Compulsory Third Party (CTP) scheme for which premiums are paid at the time registration is renewed. In the case of property damage, this cover is very readily available under policies specifically geared to that risk. e.g. Third Party Property Damage 157 Exclusion Explanatory Note Insurance or "Comprehensive" motor vehicle cover. It is, therefore, excluded from liability policies in general. However, one area remains, that of unregistered vehicles used in off-road situations. These may be included in the policy at the insureds' request. d) Injuries to members This type of risk is more appropriately covered by or voluntary helpers a specialised Personal Accident insurance policy. Such insurance is, again, readily available. (This refers to injuries caused by accidents and not through the negligence of another - the latter would be covered by a public liability policy.) e) Watercraft, aircraft, This sort of equipment, being of a specialised locomotives, etc. nature, is best handled by a separate policy which is specifically designed to accommodate such risks. An organisation would be advised to seek professional advice where such equipment is employed in any of its activities, irrespective of whether it is owned or not. f) Goods sold Cover for this risk may be obtain~d as an optional extra. Organisations selling goods which they have manufactured themselves (e.g. Crafts, toys, etc.) should not mistake this cover for Product's Liability (see Extensions, below*) as it is intended purely for a retail situation. * - Extensions not reproduced 158 Exclusion Explanatory Note g) Fines, penalties, These are not considered matters to which etc., imposed by insurance should respond. law or regulation h) Errors and Omissions Where appropriate this cover may be obtained as an optional extra. i) Libel and Slander This cover is not normally recognised as falling within the definition of bodily injury and damage to property, but may be obtained as an optional extra. j) Pollution Policies such as we envisage here will generally cover pollution of a sudden or accidental nature. The intention of this exclusion is to avoid pollution of the gradual or progressive variety. k) Contractual Liability This exclusion is intended to cover a situation (including Tenant's where, by entering into a contract, the insured Liability) assumes a liability which would not normally attach to him, but for the existence of that contract. (e.g. A lease.) Such cover may be available as an optional extra. J) Nuclear, war, This is a standard exclusion under virtually all asbestos, etc. liability policies. m) Property in care, This type of risk should be covered by a policy of custody and control insurance taken out in the name of the owner of of the insured the property. (e.g. Fire, Motor Vehicle, Personal Effects, etc.) Such insurance is, of course, readily available. However, it may be possible to include certain items as an optional extra, but a separate sub-limit of indemnity (sum insured) wlll generally apply. 159 n) Riots Liability policies do not cover bodlly injury or damage to property resulting from riots or civil commotion. o) Defective design Defective design or formulae error are more appropriate to Professional Indemnity or Product Liability policies of insurance. Where Product Liability cover is provided as an extension of a policy of this type, then defective design and formulae error (insofar as they effect the products involved in the risk) will be included. It is possible that in certain circumstances Defective Design cover might be included in an Errors and Omissions Extension. 160 APPENDIX VII DEPARTMENT NO. OF GROUPS INSURANCE PROVIDED FUNDED IN 1987-1988 Agriculture and Rural Affairs 25 Nil Arts 250 Nil Attorney-General 2 Nil Community Services Victoria 2662 (e) groups 1519 (e) groups 2170 volunteers 1370 volunteers 50 families 50 families covered by Department policy. Remainder not covered. Conservation, 118 (e) 12 (e) covered by Forests and Lands Department policy. Remainder not covered. Consumer Affairs 76 Nil Education 676 Details not provided by Department. Ethnic Affairs 328 Nil Health 1000 (e) 350(e) covered by Department policy. Remainder not covered. Housing and 520 (e) 400 covered by Department Construction policy. Remainder not covered. Industry, Technology and Resources 44 Nil 161 DEPARTMENT NO. OF GROUPS INSURANCE PROVIDED FUNDED IN 1987-1988 Labour 188 Nil Local Government Nil Nil Management and 22 Nil Budget Office of Corrections 8 Nil Planning and 19 Nil Environment Police and Emergency Services 6 Nil Premier and Cabinet Some volunteers covered by group's insurance. Others by Government insurance policy. Property and Services 7 Nil Sport and Recreation 1025 72 groups are required to hold insurance as a condition of funding. Tourism Details not Details not provided by provided by Commission. Commission. Transport 22 14 covered by Department's policy. Some required to hold insurance as condition of funding or using land or equipment. 162 APPENDIX VID FIVE STEP MODEL FOR THE DEVELOPMENT OF GROUP PUBLIC LIABILITY INSURANCE SCHEME FIVE STEP MODEL DEPARTMENT OF SPORT AND RECREATION IMPLEMENTATION OF THE MODEL l. NEEDS IDENTIFICATION I. DSR identified the potential to develop a Group Public Government Department identified Liability Plan for statewide recreation and sport clients and issues. associations. Issues included: -0'\ "" confusion about appropriate level and type of cover; lack of acknowledgement of need for Public Liability cover; and failure of insurance companies to respond to small or "perceived high risk acitivity" groups' needs. 2. NETWORK IDENTIFICATION 2. An established network of statewide sport and recreation Like activities or agencies are associations already exists. (Similar networks probably combined/grouped into "Peak Agencies" exist in the health, welfare, arts, education, etc.areas.) FIVE STEP MODEL DEPARTMENT OF SPORT AND RECREATION IMPLEMENTATION OF THE MODEL 3. RESEARCH I DOCUMENTATION 3. An "empathetic" broker was appointed to do the required Investigate community groups via the research. The broker's report provided: "Peak Agencies". (Documentation Statistical information from a survey; should include participant numbers, A guide/checklist to assist agencies in their description of activities, purchase of Public Liability insurance; organisation structures, history An outline of the important elements for of claims, etc.) consideration of a Public Liability policy; and -13'\ -4:> A list of factors for evaluating risk and negotiating premiums. (This step could be done by an internal investigation within a Government department.) 4. INFORMATION I EDUCATION 4. Reports will be distributed to interested insurance Inform the relevant insurance brokers and underwriters. A guide on how to select brokers of the community groups' Public Liability insurance will be circulated to needs, and inform the "Peak Agencies" statewide associations. Seminars and workshops will be of the pertinent issues which they held to inform both statewide associations and need to consider. community groups. FIVE STEP MODEL DEPARTMENT OF SPORt AND RECREATION IMPLEMENTATION OF THE MODEL 5. NEGOTIATION 5. Informed state associations and empathetic insurance "Peak Agencies" negotiate with brokers are currently at this stage. Preliminary insurance brokers to determine indications are that the needs of the small agencies appropriate cover and affordable and the "perceived high risk activity" groups are being rate. met. Appropriate cover is being provided at an ,_ affordable rate. """' LEGAL AND CONSTITUTIONAL COMMITTEE LIST OF REPORTS TABLED LCC 1 Report on the Statute Law Revision (Repeals) Bill 1982 1982 LCC 2 Report on the Statute Law Revision Bill 1982 1983 LCC 3 Report on the Interpretation Bill 1982 1983 LCC 4 Preliminary Report on Delays in Courts 1984 LCC 5 Report on the Statute Law Revision Bill 1984 1984 LCC 6 Report on the Subordinate Legislation (Deregulation) Bill 1983 1984 LCC 7 Report on Overseas Court Delays and Remedies 1984 LCC 8 First Report on the Australian Constitutional Convention 1985 LCC 9 Report upon a Proposal for a Statute Law (Miscellaneous Provisions) Bill 1985 LCC 10 Report on the Burden of Proof in Criminal Cases 1985 LCC 11 Second Report on the Australian Constitutional Convention 1986 LCC 12 First Report on Subordinate Legislation 1986 LCC 13 Second Report on Subordinate Legislation 1986 LCC14 First Report on the Operation of Section 32 of the Interpretation of Legislation Act 1984 1986 LCC 15 Third Report on Subordinate Legislation 1986 LCC 16 Fourth Report on Subordinate Legislation 1986 LCC 17 Fifth Report on Subordinate Legislation 1986 LCC 18 Second Report on the Operation of Section 32 of the Interpretation of Legislation Act 1984 1986 LCC 19 Sixth Report on Subordinate Legislation 1986 LCC 20 Seventh Report on Subordinate Legislation 1986 LCC 21 A Review of the Operation of Section 32 of the Interpretation of Legislation Act 1984 1986 LCC 22 Eighth Report on Subordinate Legislation 1987 LCC 23 Report on the Desirability or Otherwise of Legislation Defining and Protecting Human Rights 1987 LCC 24 Third Report on the Operation of Section 32 of the Interpretation of Legislation Act 1984 1987 LCC 25 Ninth Report on Subordinate Legislation 1987 LCC 26 Report upon Support Services for Victims of Crime 1987 LCC 27 Tenth Report on Subordinate Legislation (The Issue of Premier's Certificates) 1987 LCC 28 Eleventh Report on Subordinate Legislation 1988 LCC 29 Twelfth Report on Subordinate Legislation 1988 LCC 30 Thirteenth Report on Subordinate Legislation 1988 LCC 31 Fourth Report on the Operation of Section 32 of the Interpretation of Legislation Act 1984 1988 LCC 32 Fourteenth Report on Subordinate Legislation 1988 DISCUSSION PAPERS DP 1 A Bill of Rights for Victoria? Some Issues 1986 DP 2 Are Human Rights Adequately Protected in Victoria? Some Preliminary Examples 1986 DP 3 Freedom of Expression in Victoria 1986 DP 4 Charitable Trusts: Review of Principles and Practice 1988 DP 5 Public Liability of Voluntary Organisations 1988 DP 6 Freedom of Information 1988 167 Jean Gordon Government Printer Melbourne