The first consideration of section 7D of the Civil Liability Act 2002 (NSW)

The NSW Supreme Court refused an application to set aside a settlement deed for an abuse claim on the basis that, in the particular circumstances, it would not have been just and reasonable to do so.

In issue

• In the recent decision of EXV v Uniting Church in Australia Property Trust (NSW) [2024] NSWSC 490, the Court was asked to set aside a prior deed of settlement pursuant to section 7D of the Civil Liability Act 2002 (NSW). This is the first time section 7D has been considered by the judiciary since it came into effect on 18 November 2021.

The background

Between late 2006 and December 2008 EXV pursued an unlitigated claim against the Uniting Church in Australia Property Trust (NSW) (the defendant), in relation to alleged sexual abuse perpetrated on EXV by a teacher of a school run by the defendant in 2002. The unlitigated claim was settled for $115,000 inclusive of costs (the settlement) following mediation in December 2008. A settlement deed (the deed) was signed by EXV and the defendant, which included a term in which EXV released the defendant from any further liability in relation to the alleged abuse.

On 8 June 2022 EXV commenced proceedings against the defendant in the Supreme Court of New South Wales, seeking damages arising out of the alleged abuse. The defendant filed a defence to the proceedings in which it pleaded the deed was a complete bar to the proceedings. In response, EXV filed a motion seeking that the deed be set aside pursuant to section 7D of the Civil Liability Act 2002 (NSW) (Act).

Section 7D of the Act permits the Court to set aside an ‘affected agreement’ where it is ‘just and reasonable to do so’. An ‘affected agreement’ is defined in section 7C of the Act as being an agreement which prevented the commencement of proceedings arising from child abuse where:

• the agreement was entered into prior to 17 March 2016 (being the date section 6A was inserted into the Limitation Act 1969 (NSW)) and at the time of the agreement, a limitation period applying to the cause of action had expired; or
• the agreement was entered into prior to 1 January 2019 (being the date Part 1B was inserted into the Act) and at the time of the agreement, the relevant organisation was not incorporated but would have been liable for child abuse had Part 1B been in place; or
• the agreement was entered into prior to 1 January 2019 and the agreement is not just and reasonable in the circumstances.

In considering whether it would be just and reasonable to set aside an affected agreement, the Court may consider various factors including the amount paid under the agreement, the bargaining position of the parties to the agreement and the conduct of the parties and their legal representatives.

In support of the motion, EXV argued he had accepted the settlement and executed the deed because at the time he faced the following barriers in respect of his claim:

• an expired limitation period;
• the prospect the defendant would rely on the 'Ellis' defence (a reference to the judgment in Trustees of the Roman Catholic Church for the Archdioceses of Sydney v Ellis [2007] NSWCA 117 where it was held the proposed defendant could not be sued because it was an unincorporated association and not a legal entity); and
• EXV’s concern that his lawyers would not be able to certify a claim against the defendant in negligence as required under section 347 of the Legal Profession Act 2004 (NSW), because they did not consider the claim had reasonable prospects of success due to a lack of evidence.

The decision

Justice Weinstein ultimately dismissed EXV’s motion and did not set aside the deed. In summary the Court found:

• the issue of an expired limitation period did not have any material impact on EXV’s decision to agree to the settlement and execute the deed. Justice Weinstein otherwise highlighted that on 21 March 2008, approximately 9 months prior to the mediation, the solicitors representing the defendant wrote to the EXV’s lawyers to advise that if EXV commenced proceedings against the defendant, the defendant did not intend to raise the expiry of the statutory limitation period as a defence.
• there was no evidence the Ellis defence had any material impact on the EXV’s decision to accept the settlement and execute the deed. There was, in fact, no evidence the Ellis defence had been considered by the plaintiff at all.
• EXV’s concern about the lack of evidence was what prompted EXV to accept the settlement and execute the deed. While EXV’s lawyers had raised these concerns with EXV prior to the mediation, EXV accepted the settlement and executed the deed against his lawyer’s advice. Justice Weinstein further noted that the requirement to certify a claim under section 347 of the Legal Profession Act 2004 (NSW) does not constitute a legal barrier for the purposes of section 7D.

Justice Weinstein otherwise noted that while the settlement under the Deed was ‘not a very significant amount’, and that the bargaining power of the defendant as an institution would have inevitably been stronger than that of EXV in the mediation, he did not consider either of these factors rendered it just and reasonable for the deed to be set aside.

Implications for you

This decision suggests that, when considering whether a prior settlement should be set aside, the Court will consider the totality of relevant circumstances which prevailed at the time it was entered into. The deciding issue in this case appears to have been the fact that there was significant circumstantial evidence to demonstrate that the Ellis defence had not been a factor in the decision to reach a settlement.

EXV v Uniting Church in Australia Property Trust (NSW) [2024] NSWSC 490