NSW Bill to permit courts to set aside child sexual abuse settlement agreements

23 December 2020
Trigger Warning: This article contains details about abuse which may be upsetting for some readers. Reader discretion is advised.

A draft bill will be introduced to the NSW Parliament in early 2021 which if passed will grant courts the power to set aside child sexual abuse settlement agreements entered into before the 2016 and 2018 child sexual abuse reforms.

The background

A draft bill has been introduced to address perceived unfairness in relation to past settlement agreements entered into by survivors of child sexual abuse. If passed, the amendments will provide courts with the power to set aside child sexual abuse settlement agreements entered into before the 2016 and 2018 child sexual abuse reforms.

The proposed bill comes off the back of the 2015 Royal Commission into Institutional Responses to Child Sexual Abuse, including findings made that the terms of many child sexual abuse settlements were unfair towards survivors as they were influenced by legal technicalities and unequal bargaining power. In particular, it was found that defendants may have been strong-arming claimants into unfavourable settlements by relying on expiring limitation periods, as well as the so-called ‘Ellis Defence’ which prevented claims against unincorporated associations (Trustees of the Roman Catholic Church v Ellis & Anor [2007] NSWCA 117).

The NSW Government has since addressed these issues by removing limitation periods for child sexual abuse (in 2016) and implementing a requirement that a proper defendant be appointed for cases brought against unincorporated organisations (in 2018). Both of these amendments operate retrospectively and prospectively.

However, the 2016 and 2018 amendments have not been able to assist survivors who entered into unfavourable settlement agreements in reliance on the previous state of the law. The proposed bill will allow claimants to apply to the court to set aside agreements which were influenced by the previous legal technicalities.

Equivalent legislation has already been introduced in Western Australia, Queensland, Victoria and Tasmania and applications to set aside settlement agreements decided by the courts in these jurisdictions. For a recent example, on 30 September 2020, the Victorian Supreme Court overturned a settlement sum of $32,500 on the basis that the sum represented a “very modest and heavily discounted compensation” for the claimant’s loss (WCB v Roman Catholic Trusts Corporation for the Diocese of Sale (No 2) [2020] VSC 639).

The draft NSW bill has been provided to survivors and other stakeholders and is likely to be introduced to NSW Parliament in early 2021.

The existing legal landscape

The current state of the law in NSW presents significant hurdles for claimants seeking to set aside child sexual abuse settlement agreements.

Under the law of unconscionability, a claimant may set aside an agreement where the claimant was suffering a “special disadvantage” which was exploited by the other party. However, this principle may prove difficult to rely on in circumstances where, at the time the settlement agreement was entered, the defendant relied on legitimate legal defences available to it, such as an expired limitation period or the Ellis Defence.

The NSW Supreme Court also recently found that the court is not able to take into account injustice arising from circumstances not reasonably foreseeable at the time the settlement agreement was entered; including the legislative removal of the limitation period for child sexual abuse claims (Magann v Trustees of the Roman Catholic Church of the Diocese of Parramatta [2019] NSWSC 1453).

The proposed bill is designed to overcome these hurdles.

Remaining questions

There are a number of mechanical questions regarding the scope of the bill which are currently uncertain.

For one, it is unclear whether the court will explicitly be required to consider certain factors when deciding whether to set aside a settlement agreement. Aside from Tasmania, the other state jurisdictions (Queensland, Western Australia and Victoria) have not legislated for specific criteria.

Whether legislated or not, in deciding an application to set aside a settlement agreement, the courts are likely to be concerned with identifying whether technical defences influenced or forced the claimant to settle for a lesser amount than they would have in the absence of such defences being available.

There are also questions to be resolved in relation to “mixed” settlements which include both child sexual abuse allegations and other causes of action. If the draft bill allows a court to set aside only that part of the settlement agreement referable to child sexual abuse, the legislation will have to provide guidance on how a court is to apportion that part of the settlement agreement which is not referable to child sexual abuse (and therefore that part of the settlement agreement which cannot be set aside).

Implications for you

If passed, the draft bill will open the gateway for dissatisfied claimants whose claims were settled before the 2016 and 2018 child sexual abuse amendments were effected.

Defendants in previous child sexual abuse claims will be at particular risk where the agreed settlement sum was influenced by an expiring limitation period or the so-called ‘Ellis Defence’. However this will be a developing area and we anticipate that claims to re-open prior settlement will not be limited to such cases.

Questions remain regarding the threshold that a claimant will need to meet to set aside a settlement agreement. However, all things considered, defendants can expect that the amendments will encourage a significant reagitaiton of previously settled claims.

NSW Government: ‘New bill to address unfair child abuse payouts’, 29 November 2020

NSW Government Consultation Page: ‘Setting aside settlement agreements for past child abuse’

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