By Riley Huntley, Associate and Luke Geary, Partner

Recent developments concerning the Trustees of the Christian Brothers (the Christian Brothers) have brought into sharp focus an issue that has been building for many years: the expanding scope of institutional liability for historical child abuse claims, and the increasing financial pressure this places on charities, religious organisations and other purpose-driven institutions.

In late June 2026, the Christian Brothers announced a proposed creditors’ scheme of arrangement for the Christian Brothers Oceania Province and related entities (Scheme Entities). The proposal was advanced on the basis that the Scheme Entities did not have adequate funds to meet all current and anticipated future civil abuse claims. On 2 July 2026, Justice Nixon of the Supreme Court of New South Wales granted a moratorium pausing civil claims, including settled but unpaid claims, while the scheme process was developed.

The material filed in support of the Christian Brothers’ application to the Court painted a sobering picture. Hundreds of claims already received, with many more anticipated. The Scheme Entities have indicated that they anticipate their liabilities will significantly exceed their liquid assets, and the projected costs of resolving current and future claims threatens their continued existence. The figures not only explained why the moratorium and proposed scheme were sought but also gave practical form to the anticipated liability expansion identified in our earlier case note on the High Court of Australia’s decision in AA v Trustees of the Roman Catholic Church for the Diocese of Maitland-Newcastle [2026] HCA 2.

The proposed scheme was intended to provide a mechanism for resolving abuse claims while preserving value for creditors and survivors alike. It also reflected a reality confronting many institutions: historical abuse liabilities can, in certain circumstances, overwhelm even long-established organisations with substantial charitable assets.

On 24 July 2026, the Christian Brothers announced that they had entered into a memorandum of understanding (MoU) with the Trustees of Edmund Rice Education Australia (TEREA). TEREA is the body that now oversees the Christian Brothers’ education ministry in Australia and, as has been widely reported, had previously received the transfer of many of the Christian Brothers’ schools and other significant assets as part of a broader restructuring of the ministry for little to no (monetary) consideration.

Under the MoU, TEREA has agreed to assume liability for current and future abuse claims once the scheme becomes effective, including by consenting to nomination as the proper defendant. The Scheme Entities’ remaining properties are to be realised for the benefit of a scheme fund, with crystallised monetary claims to be paid in full once sufficient funds are raised and with the remaining funds paid to survivors as and when their claims become crystallised, at the direction of TEREA. While the revised scheme remains subject to creditor and court approval, the arrangement appears to have avoided what may otherwise have been an immediate insolvency process, which would have required the fire sale of assets at significantly reduced value.

While TEREA’s proposed intervention may avoid the toughest immediate outcome for survivors and the Scheme Entities, it also raises the broader policy question: do the current boundaries of tortious liability appropriately balance the interests of survivors with the continued viability of institutions that provide essential public services to vulnerable sectors of society?

If the very organisations delivering education, disability services, aged care, out of home care, homelessness support and other community programs become financially unsustainable, the broader community inevitably bears the consequences. The Christian Brothers’ predicament should therefore be viewed as something of a canary in the coal mine – a warning that the cumulative effect of expanding liability warrants careful policy consideration and potentially further statutory intervention.

In this respect, the ongoing Commonwealth Parliament’s Joint Standing Committee on the Implementation of the National Redress Scheme Inquiry into the operation of the National Redress Scheme (NRS) is worth watching closely. Public hearings have continued throughout 2026 as the NRS approaches its final years and its statutory eight-year review. The Inquiry has a broad remit to examine the NRS’s effectiveness and future operation and presents an opportunity to consider addressing potential vulnerabilities in both the NRS and related civil litigation processes, including the risk of fraudulent or exploitative claims. In parallel with the Inquiry, the Australian Government has appointed former Commonwealth Ombudsman, Mr Michael Manthorpe PSM, to lead the independent Eighth Anniversary Review of the NRS. In parallel with the Joint Standing Committee’s Inquiry, the Review will examine the NRS’s overall operation and provide advice on legislative, policy and operational reforms to improve its administration and application processes, creating a second avenue through which vulnerabilities in the NRS and its interaction with civil litigation may be addressed.

The Christian Brothers predicament also illustrates the importance of governance decisions in managing institutional risk. Corporate restructures, asset transfers and changes to trust or organisational arrangements can have significant legal consequences beyond their immediate operational objectives. The way associated entities are structured may ultimately determine whether responsibility for historical abuse claims extends beyond the original institution. In this case, TEREA appears to have accepted that, in practical terms (for either or a combination of legal / reputational reasons), it could not remain outside the operation of the statutory proper or nominated defendant regimes and may ultimately bear liabilities that were initially directed to the Scheme Entities.

For charities and purpose-driven institutions contemplating structural reform, the message is clear – governance structures should be designed with a thorough understanding of the evolving legislative landscape and potential liability exposures. Obtaining detailed legal advice before implementing restructures or transferring assets is no longer simply prudent, it is essential.

A pathway forward may have been found for the Christian Brothers’ liabilities to be met, through TEREA, but not every institution facing similar pressures will have that option. As historical abuse litigation continues to evolve, organisations should ensure they understand not only their current legal exposure but also how future legislative and structural developments may reshape it.