To set aside or not to set aside, that is the question

In brief

The introduction of Part 1C of the Civil Liability Act 2002 (NSW) (CLA) enables courts to set aside "affected agreements" in previously settled child abuse claims where it is "just and reasonable" to do so. This article discusses the new powers bestowed upon various judiciaries in Australia to set aside settlement agreements in civil child abuse claims, with a focus on legislative amendments in New South Wales (NSW). 

NSW legislative framework

The object of Part 1C is to remedy situations where, at the time of the agreement, a claimant faced legal barriers including an expired limitation period and the absence of a proper defendant (the Ellis defence) where legislative reforms removed these barriers in 2016 and 2018 respectively. The rationale is that many claims brought after these reforms would have been in a better position and negotiated a higher settlement. 

The court's discretion is unfettered and section 7D clearly demonstrates an intent to impose no restraint on that discretion. The court may consider the amount paid, bargaining position and conduct of the parties, but also "any other matter the court considers relevant".

What's happening around the rest of the country?

All Australian jurisdictions have now implemented similar deed set aside legislation. A NSW court has yet to consider Part 1C as far as we are aware, however, intermediate appellate authority in Western Australia, Victoria and Queensland, on similar and near identical legislation, provides some guidance on this issue.  

Queensland  and Victoria have provided informative precedents, with the latter generally displaying an approach favouring plaintiffs seeking to set aside deeds.

The courts in Queensland have thus far indicated that for a settlement agreement to be set aside, the legal barriers must have had a "material influence" on a plaintiff's decision to settle and on the quantum of the settlement. In TRG v Board of Trustees of the Brisbane Grammar School (2020) 5 QR 440 the Queensland Court of Appeal upheld the primary judge's decision to not set aside a settlement agreement from 2002 in circumstances where an expired limitation period was found to be immaterial to the settlement.

Victorian precedents demonstrate the court's willingness to set aside deeds on the basis of the plaintiff's perception of any barriers to their claim, regardless of whether or not these perceptions are informed by evidence, and if a limitation or Ellis defence was an "immaterial" consideration to settlement. Put simply, a Victorian plaintiff would likely succeed if they convince a Court that at the time of settlement they believed a limitation or Ellis defence would be a barrier to their claim, even in the absence of any evidence of same. 

Where to from here?

We await to see what approach the courts in NSW take and anticipate a significant body of caselaw developing in this space. Reviewing past settlements may be a prudent exercise for institutions where there is a risk that they may be set aside. Insurers should carefully consider policy coverage for requests to revisit a previously settled matter, as well as potential exposure for quantum. 

Our team is currently briefed in a matter that we expect to be the first precedent for applications under Part 1C of the CLA and we are closely monitoring the developments in caselaw around the country.