Judgment-Proofing Voluntary Sector Organisations from Liability in Tort

• Author: Phillip Morgan
• Position: Senior Lecturer, York Law School, University of York
• Pages: 220-259

Judgment-Proof‌ing Voluntary

Sector Organisations from Liability

in Tort

Phillip Morgan*

Voluntary sector organisations (VSOs) may use ordinary principles of law to protect

themselves from tort liabilities by rendering themselves judgment-proof. ere are two

viable judgment-proof‌ing systems available to VSOs: (1) charitable purpose trusts,

and (2) group structures. Whilst these systems are not fool-proof, they of‌fer signif‌icant

protection from tort liabilities. However, judgment-proof‌ing may come at a high price

to the voluntary sector.

* Senior Lecturer in Law at the University of York. Elements of this

paper have been presented at workshops and seminars at University

College London, and the Universities of Hong Kong, York, Leicester,

and Cambridge. e author would like to thank participants for their

comments. e author would also like to thank Dr. Kim Bouwer,

Professor Charles Mitchell, Professor Paul Mitchell, Professor Richard

Nolan, Professor Debra Morris, and Professor Paula Giliker for useful

comments and discussions in relation to this topic. All errors remain my

own.

221

(2020) 6 CJCCL

I. I

II. T V S

A. What is the Voluntary Sector?

B. Role of the Sector

C. Scale of the Sector

D. VSO Organisational Form

III. T L   V S

IV. W  J-P

V. W J-P

VI. W J-P M  A  VSO

VII. C P T

A. Challenges to Charitable Trust Judgment-Proof‌ing

VIII. G S J-P

A. Challenges to Group Structure Judgment-Proof‌ing

IX. V S-S C T J-P

A. Voluntary Sector Reputation

B. Public Relations Examples

C. Reduced Volunteering?

X. C

I. Introduction

Judgment-proof‌ing is the careful structuring of organisations so as

to render them men of straw for the purposes of litigation. Whilst

typically found in a private sector context, judgment-proof‌ing may also

be used by voluntary sector organisations (“VSO”s). Such structures,

whilst not fool-proof, provide signif‌icant protection to VSOs from tort

litigation. However, judgment-proof‌ing may come at signif‌icant cost to

the voluntary sector.

VSOs may use ordinary principles of law to protect themselves from

tort liabilities by rendering themselves judgment-proof. is structuring

provides for a form of organisational protection which achieves a similar

function to an immunity or damages cap. e existing literature on

judgment-proof‌ing is concerned with for-prof‌its and not the voluntary

sector. is article is original in considering judgment-proof‌ing from

222

Morgan, Judgment-Proof‌ing Voluntary Sector Organisations

the perspective of the voluntary sector. Judgment-proof‌ing has also not

yet been considered from an English law perspective, and this article

addresses this gap.

Judgment-proof‌ing may provide signif‌icant asset protection for

VSOs, and discourage tort claims against VSOs. It allows a VSO to

externalise its accident costs, resulting in them falling on victims or

individual volunteers. Whilst some scholars have doubted that judgment-

proof‌ing is viable, this article demonstrates that it is used in some high-risk

industries. is article demonstrates that there are two viable judgment-

proof‌ing systems available to VSOs: charitable purpose trusts and group

structures. e latter uses incorporation and a symbiotic relationship

between a risk generating entity and an asset holding entity designed to

insulate the second from risk. ere is a risk that both systems may be

challenged by courts and legislatures, but doctrinally they should of‌fer

signif‌icant protection.

Whilst judgment-proof‌ing may provide signif‌icant protection to

VSOs from tort liabilities, particular problems may arise with it in the

voluntary sector context. Judgment-proof‌ing may come at a cost for a

VSO or the broader voluntary sector in terms of reputation, and reduced

volunteering levels. A lower sector reputation may mean that it is more

dif‌f‌icult for the sector to carry out many of its important roles. Judgment-

proof‌ing may also encourage greater state regulation, undermining the

sector’s independence. Legislatures and courts may also intervene in

some cases. VSO judgment-proof‌ing, whilst possible, may come at a high

price for the sector.

Whilst this article focuses on the English common law, it makes

reference to and draws upon material from other common law

jurisdictions, and its conclusions apply throughout the common law

world.