By Sonya Parsons, Partner and Ella Adams, Law Graduate

A full copy of the case can be accessed here.

Background

The plaintiff alleged that in 1977 and 1978 he was sexually assaulted and sexually abused by two religious brothers at a Catholic school, where the plaintiff was a student. The school was run by the Missionaries of the Sacred Heart (MSC).

MSC is an unincorporated association, which means it is not recognised by law as a juridical entity that is capable of being sued. Historically, this has prevented claimants bringing legal action against some religious institutions and has been colloquially known as the ‘Ellis Defence’.[1]

Despite the availability of the Ellis Defence, defendants such as MSC were, by or about 2015, generally amenable to entering into out of court settlement discussions to resolve claims such as that brought by Mr Pearce.[2] This was due to increased public awareness of historic sexual abuse within church institutions, which had been brought about as a result of the Royal Commission into Institutional Responses to Child Sexual Abuse.[3]

In 2017 MSC and Mr Pearce reached an out of court settlement, resolving his claim for a payment of $140,000, and a deed of release was entered into (Prior Settlement). Notably, the Prior Settlement was confined so as to exclude an amount for economic loss.[4]

In 2018, the Legal Identity of Defendants (Organisational Child Abuse) Act 2018 (Vic) (Legal Identity Act) was enacted. The purpose of the Legal Identity Act was to rectify the difficulty faced by historic abuse claimants by permitting those plaintiffs to sue an unincorporated association (referred to in the legislation as a ‘non-government organisation’ or NGO’)[5] and requiring the NGO to nominate an entity capable of being sued to act as the proper defendant to a claim and incur any liability arising from the claim on behalf of that NGO.[6]  In the absence of such nomination, the plaintiff can seek an order to proceed against the trustees of an associated trust of the NGO.

In 2019, amendments to the Limitation of Actions Act 1958 (Vic) were introduced that enabled actions to be brought on previously settled causes of action and for settlement agreements, judgments, and orders to be set aside.[7] These amendments served as an acknowledgment that claimants had previously resolved claims on terms that were not just or reasonable due to unfair legal obstacles, including the Ellis Defence.[8]

In 2021, the plaintiff commenced proceedings against MSC seeking to set aside the Prior Settlement. Pursuant to the Legal Identity Act, MSC nominated the Corporation of the Society of the Missionaries of the Sacred Heart (defendant) as the proper defendant. [9]

The plaintiff submitted that setting aside the Prior Settlement was just and reasonable on the basis that the plaintiff:[10]

• believed at the time of the Prior Settlement that he had no recourse to the Court and could not commence court proceedings because of the Ellis Defence and therefore settled his claim for less than it was worth; and
• sought to take legal action for damages for pain and suffering and for economic loss but was instead required to participate in an ADR process and accept a settlement that did not reflect the true value of his claim.

At the time of the Prior Settlement, the defendant’s solicitors’ ‘riding instructions’ from the defendant’s insurer was to not rely on the Ellis Defence and instead seek to resolve the claim as if it was a proper defendant.[11] The defendant submitted that as a result of these instructions, the Ellis Defence was not a discounting factor and therefore should not have materially affected the settlement outcome.[12] The plaintiff argued that the defendant’s position on the Ellis Defence was not communicated to him and influenced his decision to accept the final settlement amount.[13]

The plaintiff’s evidence was that he did not instruct his former legal representatives in the course of the Prior Settlement to make a claim for economic loss but that he did not understand why that was.[14]  The advice given to the plaintiff in the Prior Settlement was subject to a claim of privilege and accordingly was not put before the Court in the proceedings.[15] There was no other evidence to suggest that the advice given to the plaintiff was so inadequate to be considered negligent.[16] The defendant argued that it would not be just and reasonable for the defendant to now face a claim that the plaintiff chose, for reasons that are not explained, not to make in the Prior Settlement, having had the benefit of legal advice.[17]

Decision

At [79] – [86] of the judgment, the Court considered the principles for the exercise of the discretion to set aside a prior deed. In determining whether to set aside a deed of settlement, the Court must determine whether it is just and reasonable to do so.[18] Relevant to this determination is whether the agreement sought to be set aside constituted a just and fair resolution of the plaintiff’s claim.[19]  It is evident from the case law considered, that a relevant question is whether a barrier (such as a limitations issue, or negligent legal advice) materially affected the quantum of settlement.[20]

Notwithstanding the defendant’s solicitors’ riding instructions from its insurer not to rely on the Ellis Defence, the Court found that this was not communicated effectively to the plaintiff and that this materially impacted his decision to ultimately settle his case for a sum with which he was unhappy.[21] Accordingly the Court determined that the settlement deed should be set aside.

However, the Court decided that it was not just and reasonable to set aside the settlement deed insofar as it would permit the plaintiff to make a claim for economic loss. The Court did not find on the evidence before it that the barrier of the Ellis Defence played any part in the decision to confine the claim to exclude economic loss.[22] The Court reasoned that in circumstances where the plaintiff had the benefit of legal advice and elected to accept that advice, it would not be just and reasonable to disturb the legal rights and obligations of the defendant.[23]

Accordingly, the Prior Settlement was set aside in part so as to permit Mr Pearce to bring a further claim against MSC for his general (pain and suffering) damages, but not his claim for economic loss.

Practical Points for Future Litigation

This judgment clearly indicates that Victoria continues to lead the way in being the most plaintiff-friendly of the Australian States and Territories in which to bring a claim in respect of historic abuse.  It is novel in setting aside part of a deed, rather than the entirety of the settlement.

What is also striking about this case is that the plaintiff’s apparent lack of understanding of the position is likely to have ultimately made no difference to the settlement, as his lawyers appeared to understand that the defendant was not pressing the point about a lack of a proper defendant, and it was never raised at the settlement conference by either party. The defendant’s settlement advice referred to a ‘gulf’ between the medical experts and ultimately, the defendant settled the claim within its proposed range.

The focus of Keogh J in an earlier Victorian Supreme Court decision, in WCB v Roman Catholic Trust Corporation for the Diocese of Sale (No 2) [2020] VSC 639 was on whether the legal barriers in place at the time of the settlement (in 1996) impacted on the modest settlement achieved in circumstances where there was no other particular reason that the plaintiff’s claim would have failed.  Justice Forbes appears to have set the bar lower in considering that absent a clear and unequivocal statement that the Ellis defence was not applicable or would not be raised (despite it not having been explicitly raised by the defendant), it remained the ‘elephant in the room’.  It was not a concrete barrier, but the spectre of a barrier.

For defendants, the judgment means that institutions should consider settlements prior to the relevant Legal Identity Act in each State and Territory coming into effect to see whether the issue of a proper defendant was raised and if so, what legal advice was given to the defendant, what response was provided to a claimant, and whether the issue was raised during negotiations.

For claimants, settlements made prior to the Legal Identity Act coming into effect, even after the limitation periods were removed, may be able to be re-opened where a claimant understood that a defendant may rely on the Ellis Defence and relied on that in deciding to settle a claim.

[1] See Trustees of the Roman Catholic Church v Elis & Anor (2007) 70 NSWLR 565; [2007] NSWCA 117.

[2] Pearce v Missionaries of the Sacred Heart [2022] VSC 697 (Pearce) at [24] and [91].

[3] Ibid.

[4] Ibid, [34].

[5] Legal Identity of Defendants (Organisational Child Abuse) Act 2018 (Vic), s 5.

[6] Legal Identity of Defendants (Organisational Child Abuse) Act 2018 (Vic), s 7.

[7] Limitation of Actions Act 1958 (Vic), s 27QA, 27QD.

[8] Roman Catholic Trusts Corporation for the Diocese of Sale v WCB [2020] VSCA 328.

[9] Pearce at [14].

[10] Ibid, [68].

[11] Ibid, [45], [48] and [75].

[12] Ibid, [75].

[13] Ibid, [68].

[14] Ibid [60].

[15] Ibid, [103]

[16] Ibid.

[17] Ibid, [74].

[18] Limitation of Actions Act 1958 (Vic), ss 27 QD and 27QE.

[19] Pearce at [84].

[20] TRG v Board of Trustees of Brisbane Grammar School [2019] QSC 157; Roman Catholic Trusts Corporation for the Diocese of Sale v WCB [2020] VSCA 328.

[21] Pearce at [92] – [93].

[22] Ibid, [110].

[23] Ibid.