Note: Since this post the Liberal Democrats have gone through all manner of wrangling to ultimately drop the minor disciplinary case against Lord Rennard of bringing the party into disrepute. Tim Farron, party president, has said lessons have been learned and the party had worked hard to “fundamentally change the way our party treats these matters” (Guardian 20 August 2014)
Liberal Democrat leader Nick Clegg has apologised and said his party “did not respond in the right way” to the allegations of inappropriate sexual behaviour against the party’s former chief executive Chris Rennard. Nick Clegg might be well advised to say nothing more. It is possible that the Lib Dems could be on the hook for this debacle – with the matter being bloodily and expensively fought out in court.
If the Lib Dems want to feel a particular chill running down their spine they might look at the recent Supreme Court De La Salle case (The Catholic Child Welfare Society and others  UKSC 56 Judgment (PDF) ) where vicarious liability for sex abuse was extended to a Catholic organisation, the Brothers of the Christian Schools, who supplied the head and other teachers to an approved school.
The organisation was deemed liable even though it did not employ those teachers – they were members, not employees, of the Brothers. The principle established was that liability for members’ actions may extend to an unincorporated society. Rennard is a member (not employee) of the Lib Dems and a political party is an unincorporated society, arguably with “corporate features, including a hierarchy of authority” as described in the De La Salle case. The position is further explained below, but some legal background is useful first.