Key takeaways
- ‘Legal barriers’ under s 114K(3)(a) of the Civil Law Wrongs Act 2002 (ACT) (CLWA) can include potential defences.
- Under s 114K(3) of the CLWA, the word ‘or’ should be read in the literal sense, and therefore only one test needs to be met.
- Any relevant matter may be taken into account In deciding whether an abuse settlement agreement is ‘not a just and reasonable agreement’ in the ACT.
Introduction
A Plaintiff has been successful in setting aside an ‘Abuse Settlement Agreement’ for the first time in the Supreme Court of the ACT, following amendments to the CLWA in December 2022.
Background
The Plaintiff alleged that he was sexually abused as a child, from approximately 1966 to 1973, by a priest in the ACT.
He alleged that the abuse had an impact on his schooling and subsequent employment, causing him to frequently be truant from school, which ultimately led to his expulsion at the age of 14. The Plaintiff had significant periods of unemployment during his adult life and alleged psychological injuries including post-traumatic stress disorder, major depressive disorder, and psychological sequelae.
The Plaintiff had disclosed the alleged abuse in or around 1977 to a friend. He later made disclosures to his wife, children, and some siblings.
On or around March 2006, the Plaintiff disclosed the alleged abuse to the Church, lodging a formal Statement of Complaint. The Church opened an investigation into the incident.
The Plaintiff attended a meeting with the investigating Bishop and provided a statement. The Plaintiff alleged that he recalled advising the Bishop that he had limited reading and writing ability and suffered from dyslexia.
Further meetings were held where the Plaintiff was advised that the Church was willing to offer the Plaintiff monetary compensation. The Plaintiff did not seek to engage lawyers for these discussions.
The investigating Bishop introduced the Plaintiff to a solicitor, and advised the Plaintiff that they had provided him with this solicitor due to his difficulties with reading and writing. The Plaintiff alleges that the solicitor did not advise him of his rights or the law, as it was at the time concerning a claim for compensation.
After various negotiations, an agreement of $100,000 was reached.
Approximately one month after agreeing to the settlement, the Plaintiff met with the investigating Bishop and signed a statement taken by a scribe. He also signed a document authorising a police check to occur and a document that recorded that the settlement had been given to the Plaintiff. In reviewing the facts of the case, the Court would infer that the document which authorised a police check was the Deed of Release (the Release).
The Plaintiff was advised by the investigating Bishop to have a Justice of the Peace witness the document, which the Plaintiff attended to following the meeting. The Court would find that there was no lawyer present when the documents were executed, the contents of the documents were not explained to the Plaintiff, and the Plaintiff had not received advice as to the prospects of succeeding in a litigated claim against the Church.
In 2019, the Plaintiff sought to set aside the settlement. However, he was advised that he had no reasonable prospects of doing so at that time.
Amendments to the Civil Law (Wrongs) Act 2002 (ACT) following the Royal Commission
Following the Royal Commission into Institutional Responses to Child Sexual Abuse in 2015, the Royal Commission released its Redress and Civil Litigation Report.
The report made several recommendations and acknowledged the legal and non-legal difficulties and disadvantages faced by victims of child abuse and survivors seeking compensation.
The non-legal barriers include the social and psychological conditions that develop because of the abuse, and subsequent difficulties and disadvantages when disclosing the injury and taking further action. Institutionalisation also constitutes a diverse range of obstacles that further hinder victims’ initiative and progress.
From a legal perspective, the Royal Commission considered that historically there have been ongoing issues with commencing civil litigation, due to the law’s reliance on limitation periods. This was demonstrated by the Ellis Defence (see Trustees of the Roman Catholic Church v Ellis [2007] NSWCA 117; 70 NSWLR 565).
The Ellis defence additionally encompasses the systematic difficulties of addressing institutionalised abuse when working with direct representatives of institutions.
The ACT, like other jurisdictions, implemented legislation in response to the findings of the Royal Commission.
In 2016, amendments were made to the Limitation Act 1985 (ACT), removing the limitation period for actions for personal injury arising from child abuse.
In 2018, Chapter 8 of the CLWA was inserted, to allow for claims of institutional abuse to be brought against institutions in their current capacity. This amendment removed Ellis type defences involving unincorporated entities.
In 2022, Part 8A.3 was inserted into the CLWA, to allow for Abuse Settlement Agreements to be set aside.
The amendments pursuant to Part 8A.3, were as follows:
114I Object—pt 8A.3
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—
(a) when the agreement was made there were legal barriers to the person being fully compensated through a legal cause of action; or
(b) when the agreement is sought to be set aside the agreement is, in all the circumstances, not a just and reasonable agreement.
114J Definitions—pt 8A.3
(1) In this part:
abuse settlement agreement means an agreement—
(a) that settles a child abuse claim and prevents the exercise of an action on a cause of action to which the Limitation Act 1985, section 21C (Personal injury resulting from child abuse) applies; and
(b) that—
(i) happened before the commencement of the Limitation Act 1985, section 21C, and at a time when a limitation period applying to the cause of action had ended; or
(ii) happened before the commencement of this part, and the agreement is not just and reasonable in the circumstances.
applicant—see section 114K (1).
(2) For the definition of abuse settlement agreement, a limitation period that ended at a particular time is taken to have ended even if it were possible to seek the leave of a court to extend the period at the time the period ended.
114K Court may set aside abuse settlement agreement
(1) This section applies if a person (the applicant) is prevented from exercising an action on a cause of action because of an abuse settlement agreement.
(2) The applicant may—
(a) begin a proceeding on the cause of action in a court with jurisdiction to hear the proceeding; and
(b) apply to the court to set aside the agreement.
(3) The court may set aside the agreement if the court is satisfied that—
(a) when the agreement was made there were legal barriers to the person being fully compensated through a legal cause of action; or
(b) when the application is made to set aside the agreement, the agreement is, in all the circumstances, not a just and reasonable agreement.
(4) The court may consider the following in deciding whether to set aside the agreement:
(a) the amount paid to the applicant under the agreement;
(b) the bargaining position of the parties to the agreement;
(c) the conduct of the following people in relation to the agreement:
(i) a party other than the applicant;
(ii) a legal representative of a party other than the applicant;
(d) any other matter the court considers relevant.
(5) The Evidence Act 2011, section 131 (1) (Exclusion of evidence of settlement negotiations) does not prevent evidence being adduced in a proceeding begun under this section, even if the evidence is of a communication made, or a document prepared, in connection with an attempt to negotiate a settlement of the dispute to which the agreement relates.
The Application
Following the 2022 amendment to the CLWA, the Plaintiff received advice that he was now able to pursue an application to set aside the Release under section 114(2).
On the application, it was not disputed that the Release executed by the Plaintiff is an abuse settlement agreement as defined by section 114J(1) of the CLWA. It was also evident that the Plaintiff met the requirement of being prevented from exercising a cause of action because of an abuse settlement agreement pursuant to section 114K(1).
What was in dispute was the interpretation of section 114K(3) in its entirety. The critical issues were the interpretation of:
- ‘legal barriers’ (s114K(3)(a)), and
- ‘not a just and reasonable agreement’ (s114K(3)(b)).
The Plaintiff’s submissions
The Plaintiff submitted that ‘legal barriers’ ‘referred to, and included, any potential legal defence (such as the expiration of a limitation period) or legal remedy (such as a permanent stay) which may have been available to the Defendant at the time the settlement agreement was entered into.’[1]
When considering the interpretation of ‘not a just and reasonable agreement’, the Plaintiff referenced the decision of Justice Sleight in JAS[2]. The Plaintiff proposed that the Court adopt a similar rationale when considering its discretion concerning the ‘not a just and reasonable agreement’ provision’. The rationale, with reference to Western Australian legislation, was as follows:
- the Applicant bares the onus of proving the agreement was not just and reasonable[3]
- each case involves an evaluative judgment of the relevant facts and circumstances[4]
- all the rationales for statutory time limitations are irrelevant because there is no longer a limitation period for child abuse claims[5], and
- the evaluative judgment to be made under s 92 should take into account the remedial principles which were evidently intended by the amendments to the Limitation Act 2005 (WA)[6].
The Plaintiff also submitted that the 2022 amendment to the CLWA intended to bring ‘equality between survivors who had entered into abuse settlement agreements before the statutory reforms and those bringing their legal actions after those reforms had been enacted’. The Plaintiff drew upon the Explanatory Statement for the Justice and Community Safety Legislation Amendment Bill 2022 (ACT):
The Bill ensures that survivors who entered into unjust or unreasonable settlement agreements can have those agreements set aside and bring a new claim for compensation that is adequate, just and equitable by today’s expectations. It places on equal footing those survivors who entered into settlement agreements before the ACT’s earlier reforms, with those who benefited from the reforms.
The legislation is intended to give survivors trapped in a past unjust settlement access to damages according to what they would be assessed as deserving by the standards of today. Considerations of equality must be at the forefront of the decision makers mind – that is, everyone deserves the equal right to access justice, and survivors trapped in a past settlement must have access to the same damages as a survivor bringing their action today. It is intended this legislation operate to the benefit of survivors of institutional child abuse.
The Defendant’s submissions
The Defendant neither consented nor opposed the application. However, they submitted that “legal barriers” could “only be a reference to a legal defence or legal remedy available to a Defendant and which the Defendant had, in some formal way, conveyed to a Plaintiff that that defence or remedy would be availed of at an appropriate time (such as if and when proceedings were commenced).”[7]
The Defendant further submitted that the intention of the ACT’s 2022 amendment to the CLWA[8] was to set aside “unjust” agreements where ‘legal barriers’ existed, not all agreements where “legal barriers” existed. If that was the intention, the additional words ’to the person being fully compensated’ would not be included in s114K(3)(a).
The Judgment
Interpretation of 114K(3)(a) – Meaning of ‘legal barriers’ – Potential or actual?
Acting Justice Curtin noted that the term ‘legal barriers’ has been seldom used in Australian legislation, with the only relevant use contained within similar provisions of the Civil Liabilities Act 2002 (NSW).[9] There have been no decisions by any NSW Court regarding those provisions.
His Honour also noted that the term is not defined by the CLWA, nor in the Legislation Act 2001 (ACT). He concluded that there was nothing contained within legislative material that suggested ‘legal barriers’ need be potential or actual.
His Honour, subsequently, gave careful consideration to the explanatory material from the ACT Legislature, placing significant weight on the Legislature’s intention to create equality among survivors (as emphasised in the Plaintiff’s submissions). He drew particular attention to the following:
- The latter subsection [being s114K(3)(b)] is important, as it recognises that not all barriers faced by survivors that resulted in unjust settlements were legal barriers. This broad approach is intended to result in greater rights for survivors. It reflects what we heard from survivors during the targeted consultation process for the bill: that it was not just legal barriers that prevented survivors from being appropriately compensated.[10]
- The ACT government has heard from survivors and advocates that circumstances that resulted in unjust settlements include but are not limited to the expiry of a limitation period; the inability to identify a proper Defendant; deficiencies in the law of liability at the time, including lack of clear, vicarious liability of institutions for intentional wrongs of an employee, or a person akin to an employee; misconduct of the institution—for example, withholding evidence, making false statements, denying things which they knew were true et cetera; asymmetry of power between the parties; misconduct or weak conduct by the victim’s own lawyer; and inadequate understanding by the court of abuse and the effect of abuse.[11]
- The ACT Government implemented reforms in the civil litigation and redress space following the Royal Commission into Institutional Responses to Child Sexual Abuse (Royal Commission) which included removing limitation periods for child sexual abuse claims. Prior to these reforms many child abuse survivors entered into unfair settlement agreements. Most of these survivors are barred from seeking further compensation as their agreements generally released the institution from any further claims. While the ACT’s reforms to date have removed significant barriers to civil litigation for survivors of institutional child abuse, they do not deal with the unjust products of the previous barriers, which led to survivors accepting inadequate settlements and releasing institutions from future liability.[12]
His Honour concluded that limiting legal barriers to actual defences would, in effect, not resolve the “mischief”[13] in which the legislation was directed and was intending to remedy.[14]
His Honour considered that the inclusion of “potential” defences has the effect of creating a “wide” interpretation of s 114K(3)(a). However, noted that the 2022 amendment to the CWLA deals with a closed class of cases.
It was ultimately determined that to achieve the legislature’s mandate for equality among survivors, ““legal barriers” includes potential defences and remedies (being reasonably, in the sense of non-fancifully, available to a Defendant) whether they are notified by a putative Defendant to the Plaintiff or not.”[15]
The use of the word ‘or’ in 114K(3)
As noted above, section 114K(3) outlines the two considerations for setting aside an agreement, being:
- the ‘legal barriers’ test (subsection (a)), and
- the ‘not a just and reasonable agreement’ test (subsection (b)).
Those subsections are separated by the use of the word ‘or’.
His Honour noted that ‘or’ can sometimes be interpreted as ‘and’,[16] the consequence being that a Plaintiff seeking to set aside a settlement agreement would be required to meet both tests.
However, His Honour considered the following passage from the Explanatory Statement[17]:
This Bill will provide the court with the power to consider settlements entered into because of any of these factors [being expiry of a limitation period, inability to identify a proper Defendant, deficiencies in the law of liability at the time, Misconduct of the institution, asymmetry of power between parties, misconduct or weak conduct by the victims’ own lawyer and inadequate understanding by the court of abuse and the effect of abuse], or any combination of these factors, and to set them aside.
The Court subsequently confirmed that the intention of the Act was for the word ‘or’ to be read in the literal sense,[18] and that Plaintiffs are required to meet only one test.
Interpretation of 114K(3)(b) – meaning of ‘not just and reasonable’ – what factors are considered?
In recent years, each jurisdiction in Australia has amended its Civil Liability or Limitation Legislation to give power to the Courts to set aside abuse settlement agreements.
Acting Justice Curtin provided a detailed contextualisation of each jurisdiction’s amendments and consequential relevant cases,[19] noting a significant distinction in the ACT amendment. Each jurisdiction, save for the ACT, gives a general power to set aside an “abuse settlement agreement” “if it is ‘just and reasonable to do so”. The ACT amendments give a general power to set aside an agreement “if the agreement itself is not just and reasonable”.[20]
Within this context, His Honour determined that the ACT provision should be applied as follows:
The question in s 114K(3)(b) of the Wrongs Act is whether in all the circumstances an agreement is assessed to be not just and reasonable, and not, as in other domestic jurisdictions, whether in all of the circumstances it is just and reasonable to set an agreement aside.
At the risk of oversimplification, the Wrongs Act provides that, in the ACT, if an abuse settlement agreement is assessed as not being just and reasonable it will be set aside. The corollary is that if the agreement is assessed to be just and reasonable, then it would not be set aside.
In deciding whether an agreement is, in all the circumstances, not a just and reasonable agreement, any relevant matter may be taken into account: s 114K(4)(d) of the Wrongs Act.
In particular, the Court may take into account the amount paid to the applicant under the agreement, the bargaining position of the parties to the agreement, the conduct of a party other than the applicant, and the conduct of a legal representative of a party other than the applicant: s 114K(4)(a)-(c) of the Wrongs Act.
The application of the provisions to the facts
In consideration of Section 114K(3)(a), His Honour noted the following:
- the Plaintiff entered into the Release 25 years after the limitation period had expired
- the Plaintiff submitted that he faced other legal barriers, including possible defences based on a denial of vicarious liability and the identification of a proper Defendant
- the Release was purportedly entered into by all current and past Clergy of the relevant Archdiocese, including all current and past staff, servants or agents, suggesting that the Plaintiff faced a legal barrier in identifying a proper Defendant, and
- the Defendant did not formally deny or rely upon any such defences.
His Honour was satisfied that there were legal barriers withholding the Plaintiff from being fully compensated through a legal cause of action when the agreement was executed.
In consideration of Section 114K(3)(b), His Honour noted the following:
- the Plaintiff suffered from dyslexia and had poor reading and writing abilities
- nobody (including a lawyer), explained the contents of the Release to the Plaintiff
- the Plaintiff was not legally represented before signing the Release
- an inference can be made that the investigating Bishop was an educated man with higher-than-average cognitive and reasoning skills, and
- the presence of the solicitor provided by the investigating Bishop was of no benefit to the Plaintiff.
His Honour was satisfied that there was a substantial imbalance of bargaining power at the time of the negotiation and, based on the circumstances listed above, the agreement was not just and reasonable and should be set aside.
Costs
The Plaintiff sought an order that the costs of the application be in the cause. An alternative order was not sought by the Defendant.
His Honour ordered that the costs of the application were to be the parties’ costs in the cause.
Conclusion
The decision establishes an important precedent regarding the ACT Court’s interpretation of the state’s legislation permitting the setting aside of abuse settlement agreements, proceeding the Royal Commission’s recommendations.
Despite the unique statutory configuration, the Court’s interpretation largely puts the ACT in line with Australia’s other jurisdictions. Part 8A.3 of the CLWA allows for broad consideration of the legal and non-legal context when determining if it is equitable to set such agreements aside.
As His Honour noted, the legislation applies to a closed class of cases.
Only time will tell how many cases are in that class, and ultimately, how broadly the unique statute will be applied.
This Case Note was written by Senior Associate Jesse Iliopoulos with the assistance of Paralegal Amy Gasnier. Please contact Jesse if you have any questions or require further information.
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