NSW bill proposes enabling survivors of historic child abuse to reopen settlements

In brief - The NSW Government's Civil Liability Amendment (Child Abuse) Bill 2021 may have a significant impact on religious and educational institutions and insurers managing historic child abuse claims, particularly those who settled claims prior to 2016. 

One of the consequences of the Royal Commission into Institutional Responses to Child Sexual Abuse has been the introduction of legislation to enable survivors to set aside previous settlements. A number of jurisdictions have passed such legislation and on 17 March 2021 the NSW Government introduced the Civil Liability Amendment (Child Abuse) Bill 2021 to Parliament. If the Bill passes, as is likely, it will allow courts to set aside certain previously settled child abuse claims and retrospectively remove restrictions that currently apply to offenders in custody.

In 2016, the NSW Government introduced section 6A of the Limitation Act 1969 to remove the limitation period on claims for sexual abuse, serious physical abuse and connected abuse perpetrated against a child. In 2018, Part 1B was inserted into the Civil Liability Act 2002 introducing three notable reforms: 

1. the imposition of a new statutory duty of care on all institutions that exercise care, supervision or authority over children to prevent child abuse; 

2. the extension of vicarious liability of institutions from employees to non-employees who are akin to an employee; and 

3. mechanisms to allow for the appointment of a proper defendant with suitable assets for cases brought against unincorporated associations.

In introducing the Bill, the Government has sought to address settlements entered into by survivors prior to recent legislative amendments that, taking into account those changes to the law, are unfair and unjust. 

It follows an extensive consultation process with various stakeholders, including survivor groups, religious institutions and the members of the insurance industry. While the 2016 and 2018 reforms addressed recommendations made by the Royal Commission's Redress and Civil Litigation Report, the current Bill before Parliament goes beyond those recommendations. 

Revisiting historic child abuse settlements

The Bill proposes enacting a new Part 1C of the Civil Liability Act to allow courts, if "just and reasonable", to set aside certain settlement agreements in past child abuse claims. 

The Bill differs from other jurisdictions in that it specifically identifies the "affected agreements" that may be set aside as those: 

• that were settled before the removal of limitation periods (in 2016), or 

• where the settlement was against an unincorporated organisation that would have been liable under Part 1B (introduced in 2018). 

It therefore has a potentially more narrow application than similar legislation in other jurisdictions. 

In considering whether setting aside an affected agreement is just and reasonable, proposed section 7D(3) provides criteria that a court may consider including:

(a) the amount paid;

(b) the bargaining position of the parties;

(c) the conduct of the parties and their legal representatives; and

(d) any other matters the court considers relevant.

Particularly relevant to (c) above, the Bill proposes that in applying this criteria, evidence can be adduced even if it would otherwise be prohibited by section 131 of the Evidence Act 1995. This means that "without prejudice" communications created as part of the earlier negotiations can be reviewed and relied upon.

The Bill does not allow for a court to set aside a deed of release under the National Redress Scheme or an agreement under which one defendant indemnifies another. 

As regards quantum, the Bill proposes that if a previous settlement is set aside, despite the agreement being void, an amount previously paid including legal costs and disbursements is not recoverable by the defendant. The amount previously paid, however, may be taken into account in determining damages in respect of the re-opened matter. The practical effect of this is that a court may calculate the value of the previous settlement taking into consideration inflation, and deduct that from the new award of damages.

The Bill does not prevent a settlement deed also being set aside on the grounds of unconscionability under the Contracts Review Act 1980 (NSW), which requires applying principles including whether a claimant was subject to a "special disadvantage" of which the other party took advantage. 

Retrospective removal of restrictions on offenders in custody

The Bill proposes enacting a new section 26B(2A) to the Civil Liability Act, which provides that Part 2A containing special provision for offenders in custody does not apply to, and is taken never to have applied to, an injury arising from child abuse. 

The practical effect of this is that the restrictive provisions in Part 2A (such as restrictions on damages for non-economic loss and past and future loss of earnings, and the requirement for an assessment greater than 15% permanent impairment for entitlement to damages) do not apply to any claims relating to child abuse that occurred in custody, regardless of when the abuse occurred. 

This provision, if enacted, will remove the differentiation between child abuse that occurred in or out of custody.

Issues for insurers

• Should the Bill be passed, the new legislation may have a significant impact for institutions and their insurers who settled claims in relation to historic child abuse prior to the legislative changes in 2016 and 2018. The settlement sums and circumstances in which the matters were resolved may be carefully scrutinised in order to determine whether a court would consider it "just and reasonable" to set aside an agreement. 

We anticipate that caselaw will develop in this regard.

• Insurers should consider carefully policy coverage for potential requests to revisit a previously settled matter, as well as potential exposure on quantum. 

• It is critical that claims files in relation to previously settled child abuse matters be maintained (at least in electronic form) indefinitely, should they be needed if a claim was sought to be reopened. 

A lack of records in relation to the original settlement due to the passage of time (at least since these amendments were foreshadowed) is unlikely to assist an insurer or institution and may be a matter that a court considers relevant. 

Issues for religious and educational institutions

• Reviewing past settlements and maintaining files is equally critical.

• From a pastoral perspective, institutions will no doubt wish to ensure that survivors have been fairly compensated and that any requests to revisit matters are done so mindful of a survivor's wellbeing to avoid any risk of further re-traumatisation. 

• Where a previous settlement is set aside by the court, an apology may be appropriate to address any deficiencies of the institution's processes in dealing with the claim originally. 

• A request to revisit a matter also provides opportunity for learning. Understanding how a survivor perceived what was said and the circumstances in which the matter was handled (however well-intended) can help an institution to understand how it can improve its processes to better support survivors.