Setting aside a historical institutional abuse settlement

Setting aside institutional abuse settlements made before 1 July 2018 is possible in Victoria because of:

• Sections 27QA(2) and 27QD of the Limitation of Actions Act 1958 (Vic)(the Act) permits courts to set aside settlement agreements and judgments entered before 1 July 2018 in historical child abuse claims where it is “just and reasonable” to do so.

• the Limitation of Actions Amendment (Child Abuse) Act 2015 (Vic) abolished the limitation period for bringing historical abuse claims as of 1 July 2015.

• The Legal Identity of Defendants (Organisational Child Abuse) Act 2018 (Vic) effectively permits an institutional defendant that is an unincorporated association to be sued were previously they were not recognised by law as a juridical entity and could not be sued. This was known as the “Ellis defence"

Practitioners retained to revisit and overturn historical settlements need to be across and monitor recent case authorities in this continually developing area to give their client the best chance of setting aside the prior settlement.

“Just and reasonable” is not defined in the Act. Whether it is just and reasonable to set aside a settlement will be determined by a court on the particular facts of each case. Applying statutory construction principles, a court will have regard to the legal context in which the provisions were enacted, the purpose and object of the provisions, as well as extrinsic materials such as the Explanatory Memorandum and Second Reading Speech.

The extent to which the plaintiff’s earlier decision to settle was influenced by the main prior legal obstacles for plaintiffs, being the operation of a limitation period, the Ellis defence or difficulties establishing institutional liability at the time, are important factors. Victorian courts have set aside deeds where claimants have given evidence that they had believed a limitation period or Ellis defence would be a barrier to their claim, and this belief impacted their decision to settle the case for an amount they would not have otherwise accepted.

The case authorities and extrinsic materials also refer to a range of factors that may be relevant including:

• the specific terms of the settlement agreement, the intention of the parties at the time and the binding nature of the agreement
• whether the plaintiff was legally represented at the time of the earlier settlement, and the extent of any advice prior to entering the settlement on the prospects of success of the claim
• the evidence available to the plaintiff at the time of the earlier settlement
• the bargaining position of the parties at the time
• the conduct of institutional defendants at the time
• the reasonableness of the settlement process
• the amount of compensation obtained and whether it is deemed acceptable by today’s standards
• a plaintiff’s feelings of guilt and shame, compounded by the burden of having to give evidence and be subject to cross-examination
• the reasons the plaintiff entered into the settlement
• the plaintiff’s mental health may also be relevant. For example, in the case of DZY v Trustees of the Christian Brothers [2023] VSC 124, the plaintiff gave evidence he experienced significant anxiety at the time of settlement discussions which compromised his ability to comprehend advice
• prejudice to the defendant.

Whichever factors are relevant to a particular case, it will be important that sufficient evidence is before the court so it can consider whether the factors mean it is just and reasonable to set aside the settlement agreement.

In Pearce v Missionaries of the Sacred Heart [2022] VSC 697, the court considered there was insufficient evidence about the reasons why the plaintiff did not pursue economic loss claims in the earlier settlements. As a result the court refused to set aside the settlement agreement in relation to the plaintiff's claim for loss of earnings. This meant the plaintiff could not now claim that part of his loss and damage from the institutional defendant.

In DZY v Trustees of the Christian Brothers [2023] VSC 124, the court at first instance found that it was not possible to find that the limitation and the Ellis defences had no material influence on the plaintiff’s decision not to pursue his economic loss claim. The court went on to allow the settlement to be set aside in its entirety, including the economic loss claim. However on appeal to the Court of Appeal and the High Court it was found that there was no direct evidence the plaintiff decided to renounce his right to economic loss claim based on the limitations defence or the Ellis defence and that there was not sufficient evidence that it was just and reasonable to set aside the settlement in relation to the economic loss claim.

The High Court in DZY also made it clear that a finding of ‘just and reasonable’ pursuant to s 27QE of the Limitation of Actions Act is not limited to circumstances where the limitation defence or the Ellis defence materially influenced the claimant's decision to settle. The court went on to say one or both defences are not irrelevant and will ordinarily play some part in the findings of just and reasonable. It is clear that each matter will be decided on its facts and the evidence before the court.

The Supreme Court has new case management practices to better manage the very large number of new proceedings being filed in the Institution Liability List. The Institutional Liability List Case Management and Listing Update sets out the changes to the procedures.

The court highlights the need for litigation in this area to be conducted with maximum efficiency, in the interests of the proper administration of justice.

The case management procedures for historic institutional child abuse claims:

• target a trial within 14-16 months of an appearance first being filed

• place more onus on practitioners to keep proceedings moving in accordance with a standard interlocutory timetable

• require applications to set aside prior judgments/deeds to be issued as early as possible, once it’s known the issue is contested

• require parties and counsel to confer and narrow issues prior to the hearing of any interlocutory application

• expect parties to be ready to attend a court-ordered mediation within 12 months of service of the writ

• require all parties to exchange medical/expert reports and particulars of special damages 2 months prior to mediation

• There will be limited scope for parties to seek leave to serve new expert evidence after a mediation has occurred. Delaying preparation of expert material until after a mediation will not generally be considered acceptable unless it is in response to a new development which couldn’t have been anticipated.

These modified procedures require practitioners to prioritise early case preparation. It is important to consider when taking on new cases. Do you have the capacity to do the large amount of work required early in the matter?

They represent good practice in any civil litigation but given the special vulnerability of clients bringing compensation claims for historic institutional child sexual abuse, they are particularly important in this List.

The Court has powers under the Civil Procedure Act to visit cost or other consequences upon a defaulting client or legal practitioner and may be expected to exercise them in appropriate circumstances.

Tips to ensure your case management practices comply with the court procedures:

• ensure clients are made aware that Court deadlines need to be observed and their case may be prejudiced by any non-compliance.

• seek documents relevant to the claim as soon as possible (e.g. institutional records, school records, employment records, treating practitioners/hospital notes and reports, medico-legal reports, vocational reports, Centrelink, NDIS, ATO, Department of Justice, police)

• create checklists to ensure receipt of key documents are not missed or delayed.

• identify required expert evidence early and exchange it in a timely manner.

• brief counsel early to ensure the matter is expertly prepared with an eye to the adequacy of pleadings and particulars and the evidence required to best advance the client’s claim or defence.

Thanks to Simon Ellis, a partner at Lander & Rogers, for assistance in writing this article.