The Trustees of the Christian Brothers (the Trustees) have succeeded in appealing a decision of Irving AsJ ([2023] VSC 124) to set aside two settlement agreements in whole. The Court of Appeal held that the Plaintiff's previous settlements should only be set aside insofar as the Plaintiff claimed for General Damages and Medical Expenses. The Trustees submitted that the Plaintiff ought to be precluded from seeking damages on Economic Loss. This was upheld by the Court of Appeal.

In two previous settlements, the Plaintiff included a provision in the Deed of Release confirming he made no claim for Economic Loss. There was no direct evidence that the decision not to claim Economic Loss was influenced by a limitation such as the Ellis Defence. In the decision at first instance, it was not an issue in dispute that the previous settlements should be set aside to allow a further claim for General Damages and Medical Expenses. The Trustees accepted that the existence of a limitations defence and the Ellis defence impacted that aspect of the claim.

The Plaintiff (DZY) in this matter claimed he was sexually assaulted by Brother Robert Best and Brother Gerald Fitzgerald, between 1964 and 1968, when DZY was a student at a school operated by the Trustees.

In December 2012, the Trustees agreed to pay $80,000 inclusive of costs to the Plaintiff, DZY. The Deed included a clause by which DZY effectively promised to release the Trustees from liability for a claim he proposed to issue in a Court.

In December 2015, without undoing the effect of the 2012 Deed, the Trustees agreed to pay DZY a further $20,000 plus costs, in exchange for the same promises in the Deed, in respect of the same alleged assaults.

On both occasions, DZY was represented by a solicitor and Counsel, and his solicitor certified in writing that they gave DZY independent legal advice before he signed each Deed. Both deeds recorded that DZY did not allege that he suffered any economic loss as a result of the alleged abuse [3]. In fact, DZY expressly agreed, in both the 2012 and 2015 Deed, not to bring any further claim for damages arising from the alleged assaults, and if he did so, that the Trustees could rely on the Deeds as a bar to any future proceeding [3].

At the time the 2012 and 2015 Deeds were executed, any action for damages for personal injury accruing from tortious wrongdoing as far back as 1964 and 1968 was likely to be met by a defence under the Limitations of Actions Act 1958 (the Act). As a result of the decision in New South Wales Court of Appeal in Trustees of the Roman Catholic Church v Ellis, any action against an unincorporated association - such as the Congregation - was likely to fail for want of a solvent legal entity that was liable for the claimed loss. This decision has come to be referred to as 'the Ellis Defence'. The Victorian Parliament subsequently "moved to address problem facing those who claim to have suffered personal injuries as a result of physical or sexual abuse while a minor ('child abuse'), perpetrated on them long ago by persons acting under the auspices of an unincorporated association". [8 - 10]

The 2012 Deed was made before any statutory changes.

The 2015 Deed was made after the limitation Defence was removed, but whilst the Ellis defence remained available to Trustees organisations [11].

Notwithstanding the above, DZY commenced fresh proceedings in the Supreme Court in July 2021, seeking damages for personal injuries suffered as a result of the alleged abuse. DZY claimed both General Damages (that is, pain and suffering damages) and Economic Loss. The Trustees pleaded the 2012 and 2015 Deeds as a bar to DZY's cause of action [4]. By summons filed in the proceeding, DZY applied to have both prior Deeds set aside in full. Whilst the Trustees did not oppose this application in relation to DZY's intention to pursue his claim for General Damages, and the Trustees did seek to maintain the effect of the prior Deeds insofar as they barred any claim for Economic Loss [5].

In considering whether it was 'just and reasonable' to set aside the prior Deeds (pursuant to section 27QE of the Act), Irving AsJ considered a number of matters, including:

• The extent to which the existence of the limitation defence and the Ellis Defence played any role in DZY's decision not to pursue an Economic Loss claim in 2012 or 2015;

• The role played in that decision by DZY's desire to preserve a benefit he received from the Department of Society Security;

• Various other particular factors supporting or undermining a conclusion that DZY ever intended to bring a claim for Economic Loss; and

• DZY's capacity to comprehend advice at the time of the settlements, and his stated belief that he felt he had 'no choice' but to settle.

Irving AsJ ultimately ordered that the prior Deeds be set aside in their entirety without distinction as to their operation in respect of the particular heads of loss [5].

The Trustees subsequently sought leave to appeal the decision, specifically in relation to DZY's claim for damages for Economic Loss [6].

The Trustees conceded, both at the time the application was heard before Irving AsJ, and in the appeal, that it was just and reasonable that DZY be permitted to pursue his claim for General Damages. However, because DZY did not seek to advance any claim for Economic Loss, and the reason for not doing so had nothing to do with the limitation defence, Ellis Defence or any conduct on the part of the Trustees, the Court could not be satisfied that it was just and reasonable to aside the Deeds to permit that a claim for Economic Loss being advanced by DZY [13].

The Trustees submitted that the Court should only set aside part of the Deeds, as had been ordered in the Pearce v Missionaries of the Sacred Heart decision; where Justice Forbes J set aside part of a prior settlement that operated as a bar to a claim for General Damages and Special Damages, but did not set aside the part of the prior settlement that extinguished a claim for Economic Loss [60 (d)]. This would effectively allow DZY to continue his proceeding, but not in his claim for Economic Loss [59].

We now summarise some of the key reasons of the decision:

• In approaching the construction of the phrase "just and reasonable", the Court considered the two legal obstacles that had confronted Plaintiffs alleging personal injury as a result of historical child abuse (that is, the time limitations and the Ellis defence), the legislative removal of those obstacles, and the purpose of enacting section 27QE of the Act. [104]

• The Court of Appeal considered the "actual influence of the two legal obstacles to be central to the determination of whether it is just and reasonable to set aside a settlement" [113]; and that it will largely depend on whether a limitations defence or Ellis defence played a role at the time of the previous settlement.

• In the Appeal, the Trustees emphasised the Associate Judge's finding that "an explanation" for DZY's failure to pursue an economic loss claim in either 2012 or 2015 was his desire to avoid DSS claiming back Centrelink benefits out of any settlement sum he received from the Trustees. The Trustees argued that this motivated DZY, and had nothing to do with any potential limitation defences, Ellis Defence or any conduct on the part of the Trustees [115].

Critical Statement:

• There was evidence to show that DZY was fearful of Centrelink clawback. Although Irving AsJ was unable to conclude that this was the sole motivation for not pursing an economic loss claim, "equally the associate judge did not make any explicit finding that DZY's decision not to pursue an economic loss claim was materially influenced by the possible operation of the limitation or Ellis defences. The highest the associate judge put it…was that 'it is not possible to find that the limitations and the Ellis defence issues had no material influence on the Plaintiff's decision not to pursue his economic loss claim''' (this has been referred to as the 'critical statement' for the purposes of the Court of Appeal decision).

• The Court of Appeal concluded that DZY's decision in this case not to pursue an Economic Loss claim was not materially influenced by a limitations defence or Ellis Defence. Here, the Court of Appeal rejected DZY's arguments that "the critical statement could be construed as a positive finding that DZY's decision not to pursue the economic loss claim was materially influenced by the limitation defence / Ellis Defence issues".

• In relation to the Critical Statement, the Court of Appeal found that "it is clear that the critical statement stands for no more than that the associate judge could not exclude the possibility that the limitation/Ellis defence issues might have materially influenced DZY to decide not to pursue an economic loss claim. It rose no higher than that. Despite that, the associate judge thought to include this non-finding - this mere possibility - among the seven reasons for concluding that it was just and reasonable to set aside the deeds in their entirety. To take into account the mere possibility of the existence of a central fact was to take into account an irrelevant consideration" [132].

• The Court of Appeal found that "when DZY had the chance to do so, he did not say that any other factor motivated that decision and there was, as we have said, good reason for him to be apprehensive about the DSS clawback. More particularly, he did not identify the concern about the operation of the limitation or Ellis defences as a reason not to pursue that particular claim" [145].

• The Court of Appeal found that "there is no positive finding that DZY's decision not to pursue an economic loss claim was materially influenced by the existence and potential impact of the limitations and Ellis defences. Instead, a completely unrelated issue was the chief explanation for that decision. In that context, DZY's feeling that he had no choice, that exclusion of a lack of supporting evidence for the claim as an explanation for the decision and the lack of prejudice to the Christian Brothers do not make it just and reasonable to set aside the deeds insofar as they barred pursuit of the economic loss claim" [150].

• Accordingly, the Court of Appeal concluded that the previous settlements should not be set aside in respect of the Economic Loss claim.

• Whilst Justice Lyons also upheld the Trustees' appeal, he expressed doubt about the need for a limitations or Ellis defence, and considered that whilst both are relevant considerations, they are just one of a range of reasons that may be relevant, and that "a decision--maker was not fettered in that respect".

This decision provides guidance as to the factors that could impact on the specific heads of damage available to a claimant seeking to set aside prior settlements. However, the Court of Appeal also found that "at no point in his evidence did DZY say, in, terms, that he decided not to pursue an economic loss claim because of limitations and Ellis defence issues. DZY could not point to any such statement, not did the associate judge identify one". Accordingly, each case will very much depend on its particular facts and the evidence available to the parties.