Implications of Settlement Deeds

It is generally understood by lawyers that a party to a settlement deed cannot contract out of its legislative obligations through a deed. Legislative obligations of typical concern include payment of taxation, payment of superannuation and making an application for compensation pursuant to workers compensation legislation.

In March 2021 the Federal Court looked at whether a settlement deed releases a party from acts of discrimination and harassment, which are legislated against in the Sex Discrimination Act 1984 (Cth). This case, Leach v Commonwealth of Australia [2021] FCA 158, serves as a timely reminder to seek complete client instructions and draft release clauses with proper diligence.

In 2018 Ms Leach commenced an unfair dismissal claim against her former employer, a federal senator. The claim was settled pursuant to a deed of release in 2019, the parties to which were Ms Leach, the senator and the Commonwealth of Australia. The deed included a standard release clause in which Ms Leach released the respondents from any claims relating to her employment.

In 2021 the Federal Court considered whether the deed of release barred Ms Leach from commencing proceedings against her former employer for discrimination and harassment in contravention of the Sex Discrimination Act 1984 (Cth). In considering the issue, the Court referenced the established equitable principal in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 – that a defendant must not use the general words of a deed of release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction.

Ms Leach had the onus of establishing that it would be unconscionable for her former employer to rely on the deed of release and that under the principles of equity she ought to be entitled to bring her claim.

The Court noted that Ms Leach genuinely believed that the deed would not estop her from further claims she wished to pursue against her former employer. However, this belief was not held to have come about because of actions or conduct of the former employer.

Because Ms Leach could not demonstrate any misrepresentation or malice surrounding entry into the deed or any factual premise for a claim in discrimination against her former employer, the Court dismissed proceedings and upheld the release clause in the deed.