November 27, 2019

Historical child sexual abuse: When is it ‘just and reasonable’ to set aside a settlement agreement?

After the publication of the Royal Commission into Institutional Responses to Child Sexual Abuse’s report, the states and territories across Australia passed legislation making it easier for survivors to bring claims for damages for personal injuries relating to historical child sexual abuse.

All states and territories abolished time limits for bringing such claims. However in the Northern Territories, Western Australia and Queensland, legislation was passed which allowed survivors to apply to set aside prior settlement agreements entered into in respect of claims made for historical child sexual abuse.

The relevant legislation in Western Australia is s.92 of the Limitation Act 2005 (WA) (WA Act) and in Queensland the relevant legislation is s.48 (5A to 6) of the Limitation of Actions Act 2004 (QLD) (Queensland Act).

Both Acts provide that a settlement agreement can be set aside if it is just and reasonable to do so but neither Act sets out any criteria to guide the courts in determining what is just and reasonable.

There have been two judgments handed down since the legislation was passed which have considered this issue: the Western Australian District Court decision of JAS v The Trustees of the Christian Brothers [2018] WADC 169 and TRG V The Board of Trustees of the Brisbane Grammar School [2019] QSC 157, a decision by the Queensland Supreme Court. Those cases demonstrate a differing approach by the Courts in each state.

JAS v The Trustees of the Christian Brothers

The Applicant alleged that he was sexually abused at Castledare Junior Orphanage and St Vincent’s Orphanage Clontarf, both were run by the Christian Brothers. In 1993 a class action was commenced against the Christian Brothers. The Applicant thought he had registered with the action but he discovered his registration form had been misplaced. The class action was settled with each claimant receiving AUD2,000. When the Applicant found out he was not part of the class action he approached the Christian Brothers who in 1998 agreed to pay him an equivalent amount to the class members in full satisfaction of his claim against the Christian Brothers. In 2015, the Christian Brothers paid the Applicant a further AUD100,000. A deed of settlement was signed by both parties. At that time it would appear the Applicant was represented by lawyers.

The Applicant applied to set aside the deed of settlement. Sleight CJDC held that the power to give leave in circumstances where it is “just and reasonable” to do so is a broad power[1] and that the applicant for leave has the onus of establishing that the circumstances of his or her case demonstrate that it is just and reasonable that leave should be granted. The phrasing "just and reasonable" is not defined by the legislation in Western Australia. What is just and reasonable must clearly depend on circumstances of each case.[2]

Sleight CJDC held that in relation to this type of application the focus of the Court should be on the circumstances of the parties at the time the settlement was entered into, rather than on the evidence to establish the Applicant’s cause of action. In that regard in reaching his decision to set aside the judgment Sleight CJDC took into account that at the time the Applicant entered into the settlement the Applicant’s claim was statute barred, which meant his bargaining position was severely curtailed and he was left with no real choice but to accept whatever amount was offered by the Christian Brothers. The other factors that the Sleight CJDC took into account was that the extent of the Applicant’s entitlement had never been decided on its merits and that the Court's decision in granting leave was consistent with the broad intention of the Act to remove legal barriers to claimants commencing an action and having their claims decided on the merits.

TRG v The Board of Trustees of the Brisbane Grammar School

The facts of TRG were as follows, the Applicant was a 13 year old student at Brisbane Grammar School (BGS) where he was was sexually assaulted on numerous occasions during 1986 and 1987 by Mr Lynch, a school counsellor. Dr Howells was the principal of BGS at the time of the abuse. It was alleged that Dr Howell was put on notice of the allegation against Mr Lynch by students. In 2001, the Applicant sued for damages for personal injuries, including psychiatric and psychological damage suffered as a result of the abuse. The proceedings were settled in 2002 by written agreement in which the Applicant agreed to accept AUD47,000 plus costs in full and final settlement of his claim. In the settlement negotiations, the Applicant was represented by lawyers. The settlement agreement contained a clause releasing, indemnifying and forever discharging BGS from any future proceedings. The Applicant applied to the Court, pursuant to the Queensland Act, for an order to set aside the settlement agreement in order for him to recommence proceedings against BGS. The Application was dismissed. In exercising its discretion, the Court found that it was neither just nor reasonable to set aside the settlement agreement previously entered into.

In this case, Davies J said what is “just and reasonable” is to be considered from the point of view of both parties’ interests. He went on to say that the mischief sought to be addressed by s.48 of the Queensland Act was the continuing burden upon a claimant who is the subject of an unfair settlement. Davies J held that settlement which had been reached was the product of fair, arms-length negotiations between parties on equal footing both appropriately represented.

Davies J said when the settlement negotiations were conducted, in order to succeed with his claim, the Applicant would have had to prove the liability of the school for Mr Lynch’s actions on the law as it was then understood. At that time that would have been a significant obstacle. Changes in the law of vicarious liability have now removed that obstacle. While he found that the Applicant had good prospects of recovering significantly more than the settlement amount paid to him in 2002, as the law in vicarious liability had changed, His Honour stated:

It can be accepted that the understanding of the law of vicarious liability has changed and has changed unfavourably to the respondent. The relevance of the change of the law is not in my view that the respondent may now be forced to litigate in a legal climate less favourable to it. The significance of the change of law is more as to the reasonableness or otherwise of the settlement at the time it was reached. It is not the policy of s 48(5A) of the Limitation Act that settlements should be set aside to facilitate new claims based on more favourable views as to the vicarious liability of employers for the criminal actions of their employees.”

His Honour also considered whether the limitation issue had a material impact on the quantum of settlement. He concluded that it did not:

There is no direct evidence that the limitation issue was taken into account in the calculation of the final settlement figure. There is no evidence from any of the solicitors involved that the limitation period was even mentioned after the initial session at the mediation. What emerged at the initial mediation session as critical was Dr Howell’s knowledge of Lynch’s activities.”

Conclusion

It is difficult to reconcile the two decisions. Davis J appears to have put weight on the fact that the Applicant, before bringing the application before His Honour, was legally represented in the settlement negotiations. Whereas Sleight CJDC did not consider this issue, as His Honour emphasised that the limitation issue put the Applicant at a disadvantage. Conversely, in the case before His Honour, Davis J dismissed limitation as materially affecting the quantum of settlement. Sleight CJDC did not consider the changes in the law of vicarious liability. Whereas, Davies J said those changes should be ignored as a factor when determining whether judgment should be set aside.

The issue of vicarious liability has been a factor which prior to the change of law put applicants at a disadvantage in negotiating settlements. If the approach taken by Davies J is accepted as correct, then it will be more difficult for Applicants to demonstrate that it is just and reasonable for Courts to set aside settlement agreements.

In view of the presently polarising decisions, we expect there to be more case law on this issue. Further decisions will provide guidance as to the interpretation to be applied to such applications and the phrasing "just and reasonable".

Footnotes
1. Gilmore v Quittner [2011] NSWSC 89 at 182
2. Gilmore v Quittner [2011] NSWSC 89 at 191