29 03 2023 Insights Corporate & Commercial

Time to Tackle Legal Liabilities of Unincorporated Sporting Associations

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Rugby ball

Unincorporated associations have been common in Ireland for many years, particularly in the sports sector and the chances are that you or one of your family or friends are a present member of one. However, the legal status of these associations has long been a source of uncertainty. Unincorporated associations are voluntary and non-profit groups or clubs formed by individuals with a shared non-commercial and lawful objective such as the pursuit of sport, community interest or volunteering. The Law Reform Commission (LRC) is currently conducting a consultation process into the liability of unincorporated associations under the law. The LRC consultation paper was published in December 2022 and invites submissions from interested parties until May 2023 (extended from March 15th due to public interest ). The LRC consultation paper outlines a number of the legal issues relating to unincorporated associations in Ireland and invites submissions from interested parties regarding possible changes to the law. The LRC is expected to publish its final report next year which will include recommendations for changes to the law for the consideration of the Oireachtas.

Current position – Hitting the Post

Contract Law

In Ireland, unincorporated associations are not legal entities and as such, do not have separate legal personality. This means that they cannot sue or be sued, enter into contracts or own property. Often the assets of an unincorporated association are owned by trustees, being persons appointed by the members to hold property on trust for the association.

The lack of separate legal personality can present many difficulties given that unincorporated associations still need to buy things, employ people and obtain financing, all of which require the entry into of a contract. Given that an unincorporated association cannot enter into a contract in its own right, a member or members of the association (or sometimes the trustees) will often enter into a contract on behalf of the association. Often, it may appear on the face of a contract that it has been entered into by the association itself when it is in fact a contract entered into between the relevant party and one member or all members of the association. This is unsatisfactory for both the member(s) entering into the contract and the parties who want to contract with the association as it creates uncertainty as to who is liable if the contract is breached.

Given that an unincorporated association cannot sue or be sued, a litigant will need to decide the relevant parties to take a case against. Depending on the circumstances, this may be the members of the management committee of the unincorporated association, the trustees, the members responsible for the harm or all members of the unincorporated association. It can be very difficult in practice for a litigant to ascertain who the members of an association actually are. As an association is simply a collection of its individual members, if an action is taken against those members for breach of a contractual obligation, the members could be personally liable for any debts or obligations incurred by the association.

Even if a litigant was successful in an action against the members, the fact that associations cannot hold property directly and employ the use of trusts (as mentioned above) could mean that any funds and assets held by such trustees may be beyond the reach of litigants.

Tort Law

A tort is a civil wrong (such as negligence, nuisance or defamation) that causes a claimant to suffer loss or harm resulting in legal liability for the person that committed the wrong. As with a contractual claim, a person who wants to make a tort claim against an association, cannot take the case against the association itself and would need to take a case against one of the groupings outlined above and even if successful could find it very difficult to recover damages.

Given that an unincorporated association has no separate legal personality distinct from its members, the courts in Ireland have established the position that a member of an unincorporated association cannot sue their own incorporated association because the member would in effect be suing themselves.

The case of Brady v Moore and Scanlon [2022] IEHC 420 involved a claim for damages for personal injury where the plaintiff was removing slates from the clubhouse of his local GAA club and fell from the roof sustaining serious injuries. The plaintiff argued that the club owed him a duty of care under the provisions of the Occupier's Liability Act, 1995 (the “1995 Act”) as he was on the premises as a visitor. In dismissing the claim, the Court held that the plaintiff was exercising his own free will in agreeing to assist the club and held no liability arose given that the plaintiff was acting in his capacity as member, was the occupier for the purposes of the 1995 Act and could not sue himself.

It should be noted that whilst members of unincorporated associations can and should obtain insurance to cover certain risks, certain claims may not be covered within the policy (as was the case in Brady above) which could leave an injured member with no recourse to recover damages.

The case of McGroarty v Kilcullen & Others [2021] IEHC 679, involved a claim for damages by Mr McGroarty who was injured whilst carrying out building works at a golf club. The court ruled that Mr McGroarty was not a member of the golf club at the time of the incident as he had not paid his annual subscription fee. Consequently, he was entitled to damages for the negligence of the defendants who owed him a duty of care. This case exemplifies the unfairness that can arise when club members try to sue the clubs they are part of. If Mr McGroarty had been a current member, it is probable that his claim would have been unsuccessful.

Criminal Liability

The LRC report sets out that in some instances criminal law appears to apply to unincorporated associations as though they were companies particularly with regard to areas such as environmental law, theft & fraud and health and safety. The report sets out an example whereby all members of a club could be criminally liable if there was an oil leak from a tank owned by the club that caused damage to the environment. However, notwithstanding the application of certain statutes to associations, the LRC outline the difficulties in the actual enforcement of these statutes in certain instances and the difficulties in seeking to apply criminal procedure rules to an association without a separate legal personality.

Notwithstanding these difficulties, this position is clearly very concerning for members who whilst not party to the activity could be found financially responsible for the criminal sanctions.

International Approach – Ireland Chasing the Game

It is clear from the LRC report that Ireland is playing catch up with regard to the structure of sporting bodies when we compare the current position here with other jurisdictions.

Jurisdictions such as Canada, Germany and Australia permit unincorporated associations to register as non-profit incorporated associations which provides greater certainty to members as to their personal liabilities (members are not personally liable for debts of the association based on membership alone), as well as enabling these entities to enter into contracts and hold property in their own right.

The UK has not progressed far beyond Ireland when it comes to unincorporated associations but has provided a route for charities to attain separate legal personality through the Charities Act 2011 and registration as a charitable incorporated organisation. The Scottish Law Reform Commission have proposed permitting unincorporated associations to attain separate legal personality where the association has two or more members, is not profit seeking and has a constitution which meets certain requirements. An association satisfying these conditions would be known as "Scottish Association with Legal Personality". It was recommended that these entities should be treated as separate legal entities by default unless they expressly opt out but these reforms have not yet been introduced.

Potential Reform – Getting the Ball Rolling

Current associations could look to incorporate as companies limited by guarantee (CLG) as a way to seek to overcome some of the issues set out above. Such incorporation would afford the organisation with limited liability which would mean that liabilities would remain with the CLG as opposed to falling on its members and would also allow the newly formed CLG to own property and to enter into contracts in its own right. However, given that many associations and sporting associations in particular are run on the basis of people giving their time and expertise voluntarily, the costs and formality associated with incorporation may not be suitable and this is particularly the case for smaller associations. Incorporation of an association involves a significantly greater degree of governance structures and annual reporting which could deter participation of potential volunteers who may not have the time or expertise to manage the additional administrative duties.

There is growing recognition in Ireland of the need for legal reform in this area. The consultation process currently underway is a step towards clarifying the legal status of unincorporated associations and addressing the current issues. As membership grows and club dealings become more complex, the uncertainties arising from the association’s lack of separate legal identity are becoming more and more problematic.

The LRC have proposed three ways in which the law could address the issues as follows:

  • Model 1: Change the law to create “non-profit registered associations” by which separate legal personality can be gained by registration.

Model 1 would be the creation of a new type of entity in Ireland whereby associations that meet the criteria could register with a regulated authority. If an association registered, it would become a legal entity separate from its members. This model would require filings and cost but would solve the issues associated with a lack of legal personality. Other jurisdictions that adopt this approach prescribe oversight and governance requirements in legislation and whilst these are similar to requirements placed on companies, such provisions are specifically tailored to the non-profit sector.

  • Model 2: If an unincorporated association fits certain criteria, it can become a separate legal entity from its members.

Similar to the position proposed by the Scottish LRC, a non-profit association would not need to register but having met certain criteria would benefit from separate legal personality. Non-registration would mean the maximum amount of associations could benefit from the change but would leave the uncertainty of whether a particular entity is a separate legal entity or not when contracting with third parties as organisations may not meet the relevant criteria (whether by choice or inadvertence). Therefore, third parties who contract regularly with unincorporated associations would still not have certainty as to the legal status of the association that they are dealing with in the absence of a public list of non-profit associations with legal personality.

  • Model 3: An unincorporated association would not be a separate legal entity from its members but existing laws would change to make it easier to make an unincorporated association liable in contract, tort and criminal law.

Model 3 attempts to plug the gaps in the law by changing it to the extent required to solve the problems on an individual basis. The approach would be to treat unincorporated associations as if they were a corporate body in certain instances coupled with legislative provision for service of documents, payment of awards and access to information about associations. Change would apply to unincorporated associations across the board but, some gaps would be too difficult or impossible to plug including the ownership of property element which is hugely important to grassroots sporting bodies in particular.

It will be interesting to see the outcome of the LRC consultation process, the aptitude for the above models and the recommendations that emerge. Given the considerable role that voluntary associations and sporting bodies in particular play within the Irish landscape, it is clear that the current position is unsatisfactory. Legal reform that brings clarity with regard to the legal liabilities of unincorporated sporting associations is required so that the current position doesn’t deter member participation.

If you are a member of an unincorporated sporting body or otherwise interested in the points above – the ball is in your court! Submissions can be made to the LRC on or before 15 May 2023.

AUTHOR: Marie Gavin, Partner | Scion Flanagan

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