New South Wales Bill makes way for Courts to set aside settlement agreements relating to child sexual abuse

The Civil Liability Amendment (Child Abuse) Bill 2021 was introduced into the NSW Parliament and read for the second time on 17 March 2021. The Attorney-General has referred to the legislation as "an historic bill that builds on the foundations of previous reforms in response to the Royal Commission into Institutional Responses to Child Sexual Abuse". In the course of the second reading debate in the Legislative Assembly, which commenced on 25 March 2021, both Government and Opposition Members of Parliament delivered speeches in support of the Bill.

If passed, the Bill will grant Courts the power to set aside certain settlement agreements where:

• the settlement agreement contains releases, the effect of which would otherwise be a bar to any proceedings being brought in relation to the same cause of action;
• the cause of action the subject of the settlement agreement suffered from:
  • the expiry of the applicable limitation period (where the settlement agreement was entered into prior to the commencement of amendments to the Limitation Act 1969 (NSW) introducing the retrospective removal of limitation periods for claims relating to child abuse, ie. before 17 March 2016); or
  • an inability to identify a proper defendant, because the organisation which the claimant sought to sue was unincorporated and lacked "legal personality" (where the settlement agreement was entered into prior to the commencement of amendments to the Civil Liability Act 2002 (NSW) introducing a statutory requirement for a proper defendant to be appointed for cases against unincorporated associations along with new statutory liabilities for child abuse, i.e. before 1 January 2019); and
• it is “just and reasonable to do so”.

Background to the Bill

We've previously outlined the implications of the proposed reforms set out in the Discussion Paper released by the NSW Government in early 2020, in light of the Court of Appeal decision in Magann v The Trustees of the Roman Catholic Church for the Diocese of Parramatta [2020] NSWCA 167.

The decisions last year in Magann and also JMW1 v Salvation Army (NSW) Property Trust [2020] NSWSC 1682 reinforced the limitations placed on a Court’s ability to review, amend or set aside settlement agreements in NSW under the current law.

However, other jurisdictions, including Western Australia, Queensland, the Northern Territory, Victoria and Tasmania have already enacted legislation permitting previous settlements to be revisited where it is “just and reasonable to do so”.

New South Wales appears set to follow these jurisdictions with the Bill likely to pass this year.

The Bill's objects and key provisions

The objects of the Bill are:

• to enable Courts to set aside certain agreements that settled claims for child abuse where it is just and reasonable to do so in circumstances where there were certain legal barriers to the victim of the child abuse being fully compensated through a legal cause of action;
• to ensure Part 2A of the Civil Liability Act 2002 (NSW), which deals with personal injury claims by offenders in custody, does not restrict awards of damages for child abuse.

Under section 7E(1) of the Bill, the Courts are empowered to set aside agreements, as well as any other documents that give effect to these agreements, including contracts, deeds of release, previous Court orders and judgments. However, section 7E(2) prevents Courts from setting aside

• deeds of release signed under the National Redress Scheme;
• agreements between defendants (where the agreement settled a cross-claim between two or more defendants, or where one defendant indemnified another); and
• contracts of insurance.

The reason for these express exclusions is to ensure that an application to set aside a settlement agreement can only be brought by survivors and their representatives. It appears that exclusions 7E(2)(b)-(c) are specifically designed to preclude Courts from  disturbing any underlying arrangements between defendants and their respective insurers.

Under section 7D(1) of the Bill, a claimant is entitled to apply to the Court to have an earlier settlement agreement set aside and, at the same time, commence new proceedings relating to the claim that had been resolved by that settlement agreement.

Section 7D(3) of the Bill outlines the factors that Courts may consider when determining whether it would be "just and reasonable" to set aside a settlement agreement. These factors include:

• the amount paid to the applicant under the agreement;
• the bargaining position of the parties to the agreement; and
• the conduct in relation to the agreement of the defendant and their legal representatives, and other parties involved (e.g. during the negotiation stage); and
• any other matter the Court considers relevant.

In his Second Reading Speech, the NSW Attorney-General indicated that the list of factors outlined in section 7D(3) of the Bill is not intended to be exhaustive. The Court’s discretion to consider any factors it deems relevant to the case presented is not limited to the above factors. For instance, the Bill does not expressly provide that certain other factors (for example, a claimant's physical and mental health at the time of settlement) should be taken into account by Courts when applying the "just and reasonable" test. However, given the wide discretion afforded to Courts under the Bill, these may very well be factors considered by Courts when applying the “just and reasonable” test.

Section 7F(2) of the Bill provides that settlement agreements set aside are only void to the extent that they relate to the claimant. That is, it is only the claimant’s obligations under the effected agreement (e.g. to release the other party from any other proceedings in relation to the claim) which are voided. As a result, defendants are prevented from recovering settlement amounts in the event that a settlement agreement is successfully set aside.

The Bill is silent in relation to how settlement amounts that have already been paid will be taken into account in assessing what damages are to be awarded in any new proceedings. However, the NSW Attorney-General has indicated that, in circumstances where the Court will have considered the circumstances of the case in determining whether to set aside an existing agreement, it is the intention of Parliament that the Court is best placed to then determine whether the amount paid under the agreement set aside should be deducted from the final amount awarded for damages.

Overall, the Bill appears to accord with the direction and objectives proposed in the Discussion Paper released in 2020. It will enable a broad range of claimants to re-litigate matters which had been settled at times when a claim would have been limited by certain legal barriers.