The 1966 Act imposed almost no personal liability on the people who ran an association. The 2023 Act imposes a great deal, and then carves out a protection for the volunteer that is unusual in Papua New Guinea law.
The shield for unpaid committee members
A person who serves as a committee member “without remuneration or expectation of remuneration must not be liable to the incorporated association or its members for monetary damages for any action taken, or any failure to take any action, as a committee member, except liability for — (a) the amount of a financial benefit received by the committee member to which the committee member is not entitled (plus expenses, including legal fees, accrued in recouping the financial benefit); or (b) an intentional infliction of harm to the incorporated association or its members; or (c) a violation of this Act in relation to the duty to disclose a material interest; or (d) a conviction under or intentional violation of the Criminal Code Act, or a violation of any other laws of Papua New Guinea that result in a criminal conviction”.
The unpaid committee member who makes an honest but careless decision that loses the association money cannot be sued for it. Reasonable expenses and indemnity or insurance under section 49 do not count as remuneration (section 38(5)). A paid committee member has no such shield and answers in damages for breach of the duty of care; public officers are treated the same way by section 58(3).
Civil proceedings
- By a member for breach of duty. Section 51 of the Associations Incorporation Act 2023: “A member or former member may sue a committee member of an incorporated association for breach of a committee member’s duty owed to the member in that capacity.” The duty must be one owed to the member, such as the right to inspect records or to be given notice of meetings, rather than the general duty of care, which is owed to the association.
- By a member for a compliance order. Under section 52 the National Court may, on a member’s application and if just and equitable, order the committee to take any action required by the rules or the Act, with consequential relief.
- For an injunction. Under section 50 the National Court may restrain an association or a committee member from conduct that would contravene the Act or the rules, on the application of a liquidator, receiver, member, committee member, creditor, or (for a public benefit association) the Registrar; interim orders are available but completed conduct cannot be enjoined.
- By the association. The association may sue a committee member for breach of duty, recover an improper benefit, and avoid an undisclosed-interest transaction under section 41.
- For removal. Members holding 20 per cent of the votes, and for a public benefit association the Registrar, may apply under section 45 to remove a committee member for bad faith, dishonesty, gross abuse of authority, non-disclosure of a material interest or serious breach of the rules, and the Court may bar him from serving for a period.
Criminal liability
| Offence | Section | Maximum penalty |
|---|---|---|
| Serious breach of duty to act in good faith and in the association’s best interests | 44 | K50,000 or 2 years, or both |
| Exercising a power with an undisclosed material interest | 40(8) | K50,000 or 2 years, or both |
| Misuse of the association’s private information | 43(4) | K50,000 or 2 years, or both |
| False or misleading statement in a document or report | 163 | K50,000 or 6 months, or both |
| Fraudulent use, concealment or destruction of property | 164 | K50,000 or 2 years, or both |
| Falsification of records | 165 | K100,000 or 2 years, or both |
| Carrying on business with intent to defraud creditors or donors | 166 | K50,000 or 2 years, or both |
| Failing to keep accounting records; no annual report; no annual return; no financial statements or audit | 72, 74, 77, 78, 80 | K5,000 to K10,000, or 3 to 6 months |
| Failing to file notices of changes, rules alterations or special resolutions | 17, 21, 28, 56, 64, 69 | K500 to K2,500, or 1 to 3 months |
Most filing offences are committed by “every member of the committee” when “the committee” fails to comply, so the whole committee, not just the secretary, is exposed. The Registrar, or a person with the Registrar’s written consent, prosecutes (section 162), and fines are recoverable by the Registrar as a debt. See the full table of offences.
The reasonable-steps defences
Section 46 provides that it is a defence for a committee member charged with an offence relating to a duty imposed on committee members, or on the association, to prove that the committee (or the association) took all reasonable and proper steps to ensure compliance, or that the committee member charged took all reasonable and proper steps to ensure the committee (or the association) complied, or that in the circumstances the committee member could not reasonably have been expected to take such steps. The committee member who moved a motion to file the annual return, was outvoted, and recorded his dissent has a defence; the one who never attended and never asked does not. Section 39 adds a further answer where the committee member relied in good faith on competent advice.
Liability does not end with office
Section 26(2) provides that a former committee member “remains liable under the committee member liability provisions of this Act for his conduct while a committee member”, and under section 114 removal of the association from the register leaves a former committee member’s liability for earlier acts untouched. Section 49 restricts the association’s ability to indemnify: never for criminal liability, and not for liability to the association or under sections 39, 41 or 44 unless the rules provide otherwise. See indemnity and insurance.
Sources
- Associations Incorporation Act 2023 — ss 17, 21, 26(2), 28, 38–46, 49–52, 56, 58, 64, 69, 72, 74, 77, 78, 80, 114, 162–166
Before relying on anything here, read the current text of the Associations Incorporation Act 2023 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.