In State of New South Wales v LSR3 [2025] NSWCA 151 (LSR3), the New South Wales Court of Appeal has confirmed that a plaintiff's application to set aside a prior deed in a child abuse claim pursuant to Part 1C of the Civil Liability Act 2002 (NSW) (CLA) is to be heard concurrently with the underlying claim, rather than being dealt with as a separate and prior determination.  

The plaintiff (LSR3) had previously settled claims against the State of NSW (State) in relation to allegations of historical child abuse. The factual background of these claims is complex and extensive, involving multiple defendants. The claims were ultimately resolved on terms that included the payment of settlement monies and the execution of settlement agreements in both 2003 and 2017.

In 2023, the plaintiff sought to revisit these claims. In 2024, the plaintiff applied to set aside the prior settlement agreements, asserting it was "just and reasonable" to do so under Part 1C of the CLA. An article by our firm on this legislative amendment can be read here.

The State subsequently sought to have the question of whether the 2003 and 2017 settlement agreements should be set aside determined separately and in advance of the underlying claim.

The primary judge refused the application for a separate, advance determination of the set-aside question on the basis that the scope of the controversy remained largely undefined (no defence had yet been filed), there was a risk of prejudice to the plaintiff’s credit from being unfairly tested twice, and the order for separate questions would likely cause delay.

The defendants sought leave to appeal the decision, contending that the primary judge had misconstrued sections 7C and 7D of the CLA. They argued that, while the CLA allows a plaintiff to commence proceedings and apply to the Court to set aside a past settlement agreement, it does not automatically permit the plaintiff to proceed with the underlying claim before the relevant settlement agreement is set aside.

The key issue for consideration by the Court of Appeal was whether the defendants' request to have the plaintiff's application to set aside the settlement agreements heard separately and in advance of the full trial should be granted.

The Court of Appeal dismissed the appeal with costs and upheld the primary judge’s decision, determining that the plaintiff's application should be heard at the same time as the underlying claim. The Court of Appeal’s reasoning largely mirrored that of the lower court. It was noted that Part 1C of the CLA does not mandate that applications to set aside a settlement agreement be determined in advance of the hearing of the underlying claim.

Despite this, the Court of Appeal’s judgment noted that circumstances may exist where a separate and early determination of whether to set aside a settlement agreement would be appropriate, citing EXV v Uniting Church in Australia Property Trust (NSW) [2024] NSWSC 490. The Court of Appeal did not elaborate on what these circumstances might be, but it can be assumed they relate to the degree of overlap between the application and the underlying claim. 

The Court of Appeal's judgment can be read here.

Whether or not it is appropriate for a plaintiff's application to set aside a prior settlement agreement to be heard at the same time as the underlying claim is a question to be answered with reference to the unique facts of each case. It can be assumed that the degree of overlap between the application and the underlying claim will be a key consideration.

One practical impact of running both an application and its underlying claim concurrently may be incurring the significant costs of taking a matter all the way to trial, where a possible outcome is that the prior settlement agreement is upheld and the plaintiff's underlying claim statute-barred.

If you have questions about the implications of this decision or would like to discuss how it may affect your organisation, please contact our Institutional Risk & Liability team.