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

DATE PUBLISHED: December 10, 2024

Overview

The Supreme Court of New South Wales refused to set aside a prior settlement deed giving consideration for the first time to the operation of Part 1C of the Civil Liability Act 2002 (NSW).

key takeaways

Part 1C of the Civil Liability Act 2002 (NSW) (CLA) provides a mechanism for setting aside agreements that were affected by legal technicalities, ie the legal barriers of the limitation period, and/or an unincorporated defendant.
A legal barrier will only be a barrier if it had some real or material influence upon the Plaintiff’s decision to settle their claim.
The existence of such barriers is not determinative, and the Court may consider other factors such as those set out in s7D(3) of the CLA.
The onus is on the Plaintiff to satisfy the Court that a legal barrier materially influenced their decision to settle, or of the existence of other factors that make it just and reasonable to set aside a settlement deed.

The background Facts

In 2007, the Plaintiff pursued an unlitigated claim against a school he attended as a student (the School) based on an allegation he was sexually abused in 2002 by a teacher (Teacher) (the Initial Claim).

The Initial Claim was mediated in December 2008. As a result, the Plaintiff agreed to accept the sum of $115,000 inclusive of costs in full and final satisfaction of the Initial Claim. A Deed of Agreement was executed by the parties releasing the School from liability for any further claims relating to the Plaintiff’s allegations against the Teacher (Deed).

In June 2022, the Plaintiff commenced proceedings against the School, based on the same allegations that were the subject of the Initial Claim (2022 Proceedings).

In its Defence, the Defendant pleaded the Deed as a complete answer to the 2022 Proceedings. In response, the Plaintiff filed a Notice of Motion seeking an order pursuant to section7D of the CLA that the Deed be set aside and that the part of the Defendant’s Defence which relied upon the Deed be struck out.

Legal Principles

The Court set out the following legal principles:

1
Part 1C of the CLA, understood in its context, is to provide a mechanism for setting aside agreements that were affected by legal technicalities, ie the legal barriers of the limitation period, and/or an unincorporated defendant; andA legal barrier will only be a barrier if it had some real or material influence upon the Plaintiff’s decision to settle their claim.

There is essentially only one question for the Court – whether or not it is just and reasonable to set aside an affected agreement. In answering that question, the Court must consider the position of the Plaintiff at the time of the Deed.

If the settlement was materially influenced by either the expiry of the limitation period or the Ellis defence, it will likely be just and reasonable to set an agreement aside. However, the existence of those barriers is not determinative, and the Court may consider other factors such as those set out in section7D(3) of the CLA:

(a) the amount paid to the applicant under the agreement,

(b) the bargaining position of the parties to the agreement,

(c) the conduct in relation to the agreement of--

(i) the parties other than the applicant, or

(ii) the legal representatives of the parties other than the applicant,

(d) any other matter the court considers relevant.

The onus is on the Plaintiff to satisfy the Court that a legal barrier materially influenced their decision to settle, or of the existence of other factors that make it just and reasonable to set aside a settlement deed.

Basis to set aside the Deed

The Plaintiff submitted that the following factors, in combination, would cause the Court to find that it was ‘just and reasonable’ for the Deed to be set aside:

1
the Plaintiff faced legal barriers that prevented him from being fully compensated during the Initial Claim: a limitation issue and Ellis defence;
2
the Plaintiff entered the Settlement Deed on a false factual footing that was only discovered when the Royal Commission subsequently unearthed material about the School’s failure to take action against the Teacher prior to the alleged abuse of the Plaintiff in 2002;
3
the Plaintiff received only a trivial amount of compensation; and
4
the conditions of the Mediation were harsh and uncomfortable.

Court’s determination

Limitation period

The Court accepted that while the limitation period had expired at the time of the Mediation - although not with respect to the vicarious liability claim - the limitation period was not a material consideration at the date of the Mediation.

Further, there had been several communications between the parties in 2007 and 2008 concerning the limitation period. The School’s solicitors had sent a letter to the Plaintiff’s solicitors in March 2008, many months prior to the Mediation, which stated:

“We confirm our current instructions, as indicated to you during the settlement conference on 14 December 2007 that our client does not propose to raise the expiry of the statutory limitation period as a defence in the event that the plaintiff commenced a proceeding against our client outside the statutory limitation period.

We will inform you if we anticipate those instructions changing or if the instructions change.”

The Court was therefore not satisfied the limitation period was a material consideration to the Plaintiff entering into the Deed.

Ellis Defence

The Court determined there was simply no evidence to draw an inference that either the School proposed to rely on an Ellis defence or that the Plaintiff’s legal representatives considered that it might arise in the future.

The Court observed that the School was not required to lead evidence about its internal structure to disprove that an Ellis defence was available to it in circumstances where the issue was not raised by the Plaintiff, except in a cursory way.

Incorrect factual footing

While the School was in possession of a report relating to complaints against the Teacher made prior to the alleged abuse of the Plaintiff in 2002, the School’s solicitors were under no obligation to provide the report to the Plaintiff. The School’s solicitors were acting in the interest of their client and in the discharge of their professional obligations.

The Plaintiff’s complaint that had he been in possession of that report, his legal representatives could have certified that he had reasonable prospects of success and commenced proceedings, was not to the point. The School had no obligation to disclose its internal investigations or any weak points in its defence, and that there was nothing improper about a settlement being reached through means of alternative dispute resolution without both sides completely revealing their hands.

Trivial compensation

The Court accepted that the amount paid to the Plaintiff in the Deed was significantly lower than the full value of his claim if the 2022 Proceedings were to succeed on liability and causation of damages issues. The Court also accepted that the amount paid to the Plaintiff under the Deed, even in 2008, was a modest sum and represented a significant compromise.

However, the Court was not satisfied the amount paid to the Plaintiff was so manifestly inadequate to set aside the Deed.

Mediation conditions

The Plaintiff argued that the room in which the Mediation occurred was hot due to faulty air conditioning and that it took several hours before the first offer was received from the School’s representatives.

The Court determined that the conditions of the Mediation did not amount to impropriety on the part of the School, and were not said by any witness to have influenced the outcome.

Impact

The decision highlights that it is the Plaintiff’s onus to satisfy the Court that a legal barrier materially influenced their decision to settle, or of the existence of other factors that make it just and reasonable to set aside a settlement deed.