Setting aside prior deeds of settlement in the ACT and NSW

Over the past year, courts in NSW and the ACT have set aside prior settlement agreements for the first time following amendments to their respective civil liability legislation. These amendments permit survivors to apply for such agreements to be set aside if it is deemed "just and reasonable" to do so. We discuss NSW’s and the ACT’s decisions in this article and their implications.

ACT’s Legislative Framework

On 28 September 2018, ch 8 of the Civil Law (Wrongs) Act 2002 (ACT) (the Wrongs Act) came into force. The chapter had been inserted into the Wrongs Act by the Civil Law (Wrongs) (Child Abuse Claims Against Unincorporated Bodies) Amendment Act 2018 (ACT). These amendments addressed entity barriers, namely unincorporated bodies and institutions and property trusts.

On 10 December 2022, pt 8A.3 of the Wrongs Act, headed “Institutional child abuse—setting aside abuse settlement agreements” commenced operation allowing for survivors subject of a child abuse claim to apply to have prior deeds set aside. Specifically, section 114I provides:

• The object of this part is to provide a way, for a person who is the subject of a child abuse claim because the person suffered child abuse, to seek to have an abuse settlement agreement set aside if—
  • when the agreement was made there were legal barriers to the person being fully compensated through a legal cause of action; or
  • when the agreement is sought to be set aside the agreement is, in all the circumstances, not a just and reasonable agreement.

Section 114K(3) sets out the court’s powers as follows:

• The court may set aside the agreement if the court is satisfied that—
  • when the agreement was made there were legal barriers to the person being fully compensated through a legal cause of action; or
  • when the application is made to set aside the agreement, the agreement is, in all the circumstances, not a just and reasonable agreement.

ACT Cases

Walsh (a pseudonym) v Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn [2024] ACTSC 81

Facts

Between approximately 1966 to 1973, Walsh was a child parishioner of the St Vincent de Paul Catholic Church and alleges that he was sexually abused by Father Lloyd Reynolds, an ordained priest of the Catholic Church of Australia.

In around March 2006, Walsh notified the Defendant of his claim arising from the abovenamed abuse by way of a formal Statement of Complaint.

In the course of the settlement process, Walsh claims to have advised the Defendant that he had limited reading and writing ability and suffered from dyslexia. In addition, he did not seek to engage lawyers. The Defendant provided Walsh with a solicitor, but he claims that the solicitor did not advise him of his rights or the law.

Walsh eventually agreed to settle his claim in the amount of $100,000 and entered a settlement agreement (the Release).

In 2019, Walsh sought to set aside the Release but was advised that he had no reasonable prospects of doing so at the time.  Following the amendments to the Wrongs Act in 2022, Walsh pursued an application to set aside the Release.

The Defendant neither consented nor opposed the application.

Supreme Court Decision

The Court found that in all circumstances, the Release was not a just and reasonable agreement because Walsh was placed in a position of substantial inequality of bargaining power at the time of the negotiations and signing of the Release.

In coming to its decision, the Court found that at the time of the Release being entered into, the limitation period existed and thus was a legal barrier. Further, the Court considered that there was difficulty in identifying the proper defendant and vicarious liability for intentional torts.

Accordingly, the first limb of section 114K(3) of the Wrongs Act was satisfied.

As to the second limb, the Court distinguished that the applicable test is whether the agreement itself is just and reasonable, rather than whether it is just and reasonable to set aside the agreement. To this end, the Court found that Walsh was not:

• legally represented prior to the signing of the Deed;
• advised of his rights that he may have had at the time;
• in receipt of independent advice as to the potential quantum of his claim; and
• advised of the conflict of interest resulting from the solicitor’s separate meetings with the Defendant.

In the circumstances, the Court determined that the Release was not a just and reasonable agreement and ordered it be set aside.

Xavier (a pseudonym) v Trustees of the Marist Brothers [2024] ACTSC 141

Facts

Between 1989 and 1990, Xavier (as a student) was assaulted by a teacher employed at the Marist College Canberra. It was noted that the teacher had a history of sexually abusing boys at the school.

In 2009, Xavier commenced proceedings against the Marist Brothers and the claim was resolved by way of settlement deed in the amount of $50,000 in 2010 (the Deed).

In 2024, Xavier sought to set aside the Deed.

Supreme Court Decision

The Court found that the Deed was not just and reasonable on the basis that Xavier did not have access to all pertinent documents at the time of entering the Deed, namely documents obtained from the Royal Commission into Institutional Responses to Child Sexual Abuse in 2015 which were significant in establishing the Marist Brothers’ liability and quantum of the claim.

The Marist Brothers conceded that where potentially relevant documents were not in Xavier’s possession at the time of the making of the Deed, it was open to the Court to find that the Deed was not just and reasonable.

Accordingly, the Deed was set aside.

NSW’s Legislative Framework

On 18 November 2021, Pt 1C of the Civil Liability Act 2002 (NSW) (CLA), headed ‘Child abuse-setting aide settlements’, commenced operation. The part was inserted into the CLA by the Civil Liability Amendment (Child Abuse) Act 2021 (NSW) in response to the Royal Commission as part of a suite of reforms arising out of the recommendations of its 2015 Redress and Civil Litigation Report.

Relevantly, in 2016, legislation was enacted abolishing limitation periods for child abuse claims both retrospectively and prospectively: section 6A of the Limitation Act 1969 (NSW).

Specifically, section 7D(2) permits a court to set aside an “affected agreement” if it is “just and reasonable” to do so.

An affected agreement is defined at section 7C(1) as follows:

In this Part, an affected agreement means an agreement that prevents the exercise of an action on a cause of action to which section 6A of the Limitation Act 1969 applies, if the agreement occurred—

(a)           before the commencement of that section, and at the time of the agreement, a limitation period applying to the cause of action had expired, or

(b)        before the commencement of Part 1B of this Act, and at the time of the agreement, an organisation, that would have been liable under Part 1B for child abuse had the Part been in force, was not incorporated, or

(c)        before the commencement of Part 1B of this Act, and the agreement is not just and reasonable in the circumstances.

While constructed differently to section 114K of the Wrongs Act, the factors which courts may consider in determining just and reasonableness (set out in section 7D(3) of the CLA) are similar to those contained in section 114K(4) of the Wrongs Act which include the bargaining position of the parties to the agreement, the amount paid to the applicant and the conduct in relation to the agreement.

In addition, in 2018, a requirement was introduced that a proper defendant be appointed for cases brought against unincorporated organisations thereby removing the Ellis defence.

NSW’s Position on ‘just and reasonable’

EXV v Uniting Church in Australia Property Trust (NSW) [2024] NSWSC 490

Facts

In around 2007, EXV commenced an unlitigated claim against Knox Grammar School which was operated by the Uniting Church in Australia Property Trust (NSW) (the Uniting Church) based on the allegation of child sexual abuse perpetrated against him by Adrian Nisbett in 2002. Mr Nisbett was a teacher at the school.

In around December 2008, EXV agreed to settle his claim for $115,000, which left him approximately $83,000 after the payment of costs and disbursements, by way of a deed (the Affected Agreement).

On 24 February 2009, Mr Nisbett was arrested. On 15 October 2010 he pleaded guilty to two counts of sexual assault. Neither of those counts related to EXV’s allegations.

On 8 June 2022, EXV commenced proceedings against the Uniting Church based on the same allegations that were dealt with by the Affected Agreement and filed a motion seeking to set aside the Affected Agreement due to the following legal barriers which prevented him pursuing a claim in 2007:

1. an expired limitation period;
2. an “Ellis” defence being available to the defendant; and
3. that EXV’s lawyers could not certify that his negligence claim had reasonable prospects of success pursuant to s 347 of the Legal Profession Act 2004 (NSW) (LPA), and therefore proceedings could not be commenced at the time of the execution of the Affected Agreement.

Court’s Decision

The Court determined that EXV was barred from making a further claim and found that it would be unjust and unreasonable to set aside the Affected Agreement. Accordingly, the entirety of the proceedings was dismissed.

In determining whether to set aside the Affected Agreement, the Court noted that the onus was on EXV to satisfy the Court that a legal barrier materially influenced his decision to settle, or of the existence of other factors that make it just and reasonable to set aside a settlement deed.

In summary, the Court did not accept that any perceived difficulty in suing an unincorporated association in 2008 presented as a material legal barrier to EXV with respect to the unlitigated claim and had no bearing on the settlement of same. There was also no evidence to establish that the Ellis defence was raised by the Uniting Church during the settlement process.

While the limitation barrier existed, the Court found that EXV’s decision to settle his claim, against legal advice, was driven by his perception that there was insufficient evidence to make out a claim in negligence against the school, and his anxiousness to resolve the claim rather than pursuing litigation.

As to the settlement sum, the Court noted that it was significantly lower than the full value of the litigated claim if he were to succeed however, when looking at the vagaries of litigation and the toll that litigation would likely have on EXV at the time of signing the Affected agreement, the settlement sum was modest and represented a significant compromise.

In all the circumstances, the Court also found that school had not acted in an improper manner nor was there any impropriety on their part leading up to and during settlement negotiations.

Implications

The trend of setting aside prior deeds, particularly in abuse cases, has gained momentum and the above decisions highlight the importance of identifying all factors which may have influenced and/or contributed to the decision of entering into a prior settlement agreement in order to successfully set aside same.

That a survivor compromised their claim and accepted an amount that is significant less than the present value of their claim is not sufficient to set aside a prior deed.  It is also insufficient for a survivor to merely rely on the existence of legal barriers (such as the limitation period and Ellis defence) to establish that it would be just and reasonable to allow the survivor to reagitate their claim that is subject to a prior deed.

Whilst it appears that each state has now had the opportunity to introduce legislation regarding the setting aside of prior deeds in abuse matters, there has been no uniform approach adopted.

The NSW Supreme Court in EXV turned to consider the approach taken by the Victorian Court of Appeal in the matter of Trustees of the Christian Brothers v DZY (a pseudonym) [2024] VSCA 73 and did not accept that there were different state-based approaches to setting aside prior deeds/agreements but rather that each matter had been decided on their unique facts.

Ultimately, it remains to be seen whether a uniform approach can be adopted across Australia despite the differences in wording within the legislation. This question may be addressed by the High Court in the near future as it is set to deliberate on the scope of a court’s power in setting aside prior deeds.