Pivotal ruling on the revisiting of settlements in historical abuse claims

The Victorian Supreme Court has ruled on the factors relevant to setting aside settlement agreements entered into after the 2015 abolition of the limitation period for historical abuse claims, but prior to the enactment of legislation in 2018 removing legal barriers preventing unincorporated associations from being sued.

In issue

• This proceeding concerned an application by a Plaintiff to set aside a Deed of Settlement & Release entered into in 2017 (the Deed) in relation to a historical sexual abuse claim.
• The key issue for determination by Forbes J was whether it was just and reasonable to overturn the Deed in circumstances where the Legal Identity of Defendants (Organisational Child Abuse) Act 2018 (Vic) (the Legal Identity Act) was not in force at the time of settlement.
• Prior to the introduction of the Legal Identity Act, survivors of childhood sexual abuse could not bring a claim for compensation against an unincorporated association, as it was not recognised at law as an entity capable of being sued. The Legal Identity Act removed this barrier (known as the “Ellis Defence” due to case law) and gave effect to the recommendations flowing from the Royal Commission into Institutional Responses to Child Sexual Abuse.

The background

In 2021, the Plaintiff commenced a claim for damages in the Supreme Court against the Missionaries of the Sacred Heart (the MSCs) in relation to alleged sexual abuse occurring in 1977 and 1978 (the abuse).

Previously, in 2016, the Plaintiff engaged Waller Legal to seek compensation from the MSCs in respect of the abuse (the prior claim). In March 2017, a settlement of the prior claim was reached through an alternative dispute resolution process, in the sum of $140,000, and a Deed executed by the parties.

Due to the existence of the earlier settlement agreement between the parties, the Plaintiff applied to the Court to overturn the Deed under s 27QD of the Limitations of Actions Act 1958 (Vic), so that he could have his earlier claim for compensation revisited.

In support of his application, the Plaintiff submitted that his decision to resolve his earlier claim was founded on his belief about his inability to bring court proceedings against the MSCs, due to the MSCs being an unincorporated association at the time of the abuse.

The key submissions of the MSCs were that:

1. it did not rely on the Ellis Defence to avoid paying compensation to the Plaintiff in the prior claim;
2. it did not apply any discount to its assessment of the claim for the availability of the Ellis Defence;
3. it had an established process with the Plaintiff’s solicitors, Waller Legal, whereby it would nominate a suitable defendant against which damages could be recovered, in the event survivors of sexual abuse wished to litigate; and
4. the Plaintiff instructed Waller Legal not to pursue damages for economic loss in the prior claim, and therefore it would not be just and reasonable for the MSCs to now face a claim that the Plaintiff chose not to make in the prior claim, despite having had the benefit of legal advice.

The decision

Forbes J found:

1. it was just and reasonable to set aside the Deed insofar as it related to the Plaintiff’s claim for general damages (pain and suffering damages) and medical expenses; but
2. it was not just and reasonable to set aside the Deed insofar as it related to the Plaintiff’s claim for economic loss.

Her Honour’s reasonings included:

• Prior to the enactment of the Legal Identity Act, there was nothing that could be done to compel the nomination of a proper defendant by an unincorporated association;
• The evidence demonstrated that the Plaintiff had received advice from Waller Legal that his claim was vulnerable to dismissal by a Court due to the Ellis Defence. Whilst the evidence showed that Waller Legal was aware the MSCs had, in other cases, nominated a suitable entity that could be sued in historical abuse cases, this information was not ever communicated to the Plaintiff;
• Despite the fact the MSCs had not relied on the Ellis Defence in relation to the Plaintiff’s prior claim or raised its ability to rely on this defence at any point during the negotiations, no clear and unequivocal statement had been given that the MSCs would not rely upon the Ellis Defence. Accordingly, it remained ‘something of an elephant in the room’;
• The evidence demonstrated the Plaintiff understood the Ellis Defence was available to the MSCs and could be pleaded against him should he issue legal proceedings. This belief impacted upon the Plaintiff’s decision to ultimately settle his claim for a sum with which he was unhappy;
• There was no evidence that the Plaintiff’s decision to not pursue an economic loss claim in the prior claim was influenced by his inability to sue a viable defendant; and
• The Plaintiff had legal advice at the time of the prior claim, and with the benefit of that advice, he elected not to pursue an economic loss claim.

Implications for you

• Settlements in historical abuse cases that were entered into prior to the introduction of the Legal Identity Act in 2018 are liable to be set aside if the evidence establishes the prior settlement was influenced by the existence of the Ellis Defence.
• Critical to determining whether the prior settlement was influenced by the Ellis Defence will be whether a Defendant:
  • took proactive steps to make known its position that the Ellis Defence would not be relied upon, and
  • provided a Plaintiff with an appropriate defendant to be sued.
• Where a Plaintiff has received independent legal advice, an earlier settlement will not be overturned to enable that Plaintiff to pursue a claim for a head of damage which did not form part of the original agreement.

Barry Nilsson’s Melbourne office acted for the Missionaries of the Sacred Heart in this test case. Please do not hesitate to contact Lucy Mitchell or Sasha Jeffrey-Bailey if you would like any further information about this decision and its implications for institutional defendants.