Deed of Settlement

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It is surprisingly common for former employees to agree to a settlement of an unfair dismissal case at a conciliation conference and then attempt to recant the settlement and continue the case to arbitration. This is ordinarily not permitted and here is a statement of the legal principles.

“Consideration

The issue for me to determine is whether or not a binding settlement agreement has been reached by the parties in this matter.

In Masters v Cameron, the High Court of Australia held that a binding agreement could come about in the following manner:

“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution.” 31

Counsel for the Respondent submits that, in circumstances where the direct evidence is “clear and unambiguous” that a binding settlement was reached, then it follows that post agreement conduct should not be considered. 32 The Respondent further submits that having regard to the evidence as to what occurred at the conciliation conference on 23 July 2020 it is “very clear that a binding agreement was reached”.33 The Respondent submits that if the post agreement conduct is considered it should be viewed in the context of Mr Smith’s admitted “misapprehension about the nature of the Agreement” and that “the respondent had understood” from the conciliator’s correspondence that “they had no option but to proceed”.34

In support of its submissions, the Respondent cites a number of authorities, in particular the decision of Abigroup Contractors Pty Ltd v ABB Service Pty Ltd (formerly ABB Engineering Construction Pty Ltd) [2004] NSWCA 181 (Abigroup). At [63], the Full Court of Appeal states as follows:

“Evidence of subsequent communications between parties is admissible for the light it casts upon their dealings from which a contract is alleged to have arisen: for example, it may show that apparently concluded negotiations were in fact continued, or were not regarded by the parties as contractually binding until entry into a formal contract. Evidence of the parties’ subsequent conduct is also admissible as an admission by conduct of the existence or non existence of a subsisting contract. The probative force of an admission may not be great. If the direct evidence is complete and enables a conclusion, an indirect admission may count for little. Similarly, if an admission is of a matter of law or legal consequences, as to which the admitting party has no expertise or is otherwise to be seen as uninformed or unreliable, the admission will not carry much weight” (citations removed) (emphasis added)

In essence, the Applicant does not dispute that a settlement was reached on 23 July 2020 but contends that it was not immediately binding. The Applicant also advanced the argument that he “didn’t understand” the explanation of the non-disparagement term. I have taken into account the following exchange between myself and the Applicant during the hearing: 35

“You were told that non disparagement meant that neither side bags the other? That’s correct.

And you know what that means I take it, that’s fairly self-evident?—Yes.  She did explain – I don’t think I fully understood as stated in my correspondence to her, but I won’t – I won’t argue with what she said.

What did you take to have been meant by neither side bags the other?—That given being in a small community and with some of the things that were said I would likely, my chances especially at my age getting employment around here would not be helped by any disparaging remarks.  So that was one of the reasons there.

So what is meant by neither side bags the other in your view?—Well, to me looking at it it’s we’re not allowed to talk about each other at all.  That’d be correct, wouldn’t it?”

Although the Applicant accepted that he waived the cooling off period, he contended that he was not told the “importance” of doing so. 36 Further, the Applicant states that he had a “change of heart” overnight. The Applicant also contends that the Respondent’s post-agreement conduct indicates that a binding settlement was not reached.

Findings

There is no dispute between the parties that an agreement was reached on 23 July 2020 with the only point of contention being whether it was immediately binding. It is also not in contest that the terms were agreed by the parties and that the Applicant agreed to waive the cooling off period. Further, the Applicant accepts that he had a “change of heart” overnight after reading the written terms. The Applicant does not contend he was absent legal capacity to agree to the binding settlement.

While the Applicant was self-represented it is apparent from the material in evidence that the conciliator adopted simple and accessible language when communicating legal concepts with the Applicant. Further, in my view the Applicant has displayed a significant degree of aptitude and skill in preparing his material for hearing and my observations of his advocacy skills at hearing is such that I am satisfied that he understood the terms of the agreement reached including the non-disparagement term and the waiving of the cooling off period.

While I am sympathetic to the Applicant’s position that he had a “change of heart”, I am not satisfied that this alters the proper characterisation of the events on 23 July 2020. Despite the Applicant’s submission, an objective assessment of the evidence before me of what transpired on 23 July 2020 favours a finding that the Applicant entered into an agreement with the Respondent that was intended to be immediately binding. Further, the letter from the conciliator to the parties on 23 July 2020 together with the attached deed of release serve as a contemporaneous file note of the outcome of the conciliation, with the letter specifically noting that “you reached a settlement agreement…” and “I confirm that the parties have agreed to waive the cooling off period that applied to this agreement”. The Applicant’s concession at the hearing that this letter was reflective of what was “said at the time” 37 supports this conclusion. I also accept the Respondent’s submission that the Applicant’s waiving of the cooling off period manifests an objective intention to be immediately bound by the settlement agreement. I also have regard to the unchallenged evidence of each of the Respondent’s representatives that they believed the matter to be binding from 23 July 2020. Therefore, the material before me favours a conclusion that “accord and satisfaction”38 was reached between the parties.

Contrary to the Respondent’s assertion, I believe it is appropriate in this case to consider the post-settlement conduct of the parties and I have done so in coming to my conclusion. It is not in dispute that, following the Commission conciliation, the Respondent agreed to timetable this proceeding towards a hearing on merits, sent a letter to the Applicant on 3 August 2020 and had a telephone call with the Applicant on 14 August 2020. I note that there is some contest between the parties as to what was said during 14 August 2020 telephone call. The Respondent submits that Mr Smith attempted to execute the terms of the 23 July 2020 binding settlement, the Applicant denies this and states that the telephone call is further evidence that a binding settlement was not reached.

I have considered the correspondence of 3 August 2020, referred to at paragraph [20] above. The letter contains two parts, one dealing with terms as agreed on 23 July 2020 and the other dealing with alternative terms. With respect to the former, the letter contains the following heading: “Resolve the dispute as agreed on 23 July 2020” (underline added). As to the latter, Counsel for the Respondent contended that this was a proposed “variation” to the binding agreement reached on 23 July 2020 and as such is not inconsistent with a binding settlement being reached. Regardless of whether the latter part of the letter constituted a “variation” to the binding settlement, which for completeness I note has not been accepted, I am satisfied that the letter of 3 August 2020 is not inconsistent with a binding settlement having been reached at the conciliation conference on 23 July 2020.

I accept Mr Smith’s evidence that he proceeded under a misapprehension following the conciliator’s email, referred to at paragraph [18] above. As such, I am not satisfied that the matters that occurred after 24 July 2020 are of sufficient significance to overcome the objective evidence that a binding settlement was reached on 23 July 2020. That said, I do not need to resolve the dispute between the parties as to the 14 August 2020 telephone discussion.

Having regard to the material before me, I am satisfied that a binding settlement was reached on 23 July 2020 of the second type in Masters v Cameron.

Conclusion

In Australia Postal Corporation v Gorman, 39 Besanko J held that the existence of a binding settlement or “accord and satisfaction” extinguishes the existing cause of action and replaces it with a new cause of action based on the agreement.40

His Honour stated:

“[33] There is nothing in the Act which suggests that an accord and satisfaction should not be recognised. At a general level the object of Chapter 3 Part 3-2 and the general statements of the manner in which FWA is to perform its functions and the matters to which it is to have regard are consistent with the recognition of an accord and satisfaction. Furthermore, the words of subsection 587(1) are wide enough to include the recognition of an accord and satisfaction. As I have said, a valid and effective accord and satisfaction extinguishes the pre-existing cause of action and continued pursuit of an application based on such cause of action is clearly capable of being considered to be frivolous or vexatious or without reasonable prospects of success.” 41

As can be seen from Australia Postal Corporation v Gorman, if there is a binding agreement between the parties, the Commission has the power under s.587(1) of the Act to dismiss an application on the basis that it has no reasonable prospects of success.

Section 587(1) of the Act provides as follows:

“587 Dismissing applications

(1) Without limiting when the FWC may dismiss an application, the FWC may dismiss an application if:

(a) the application is not made in accordance with this Act; or

(b) the application is frivolous or vexatious; or

(c) the application has no reasonable prospects of success.”

As I have found that the parties reached agreement at the conciliation conference on 23 July 2020 and I am satisfied that the agreement was of the second type discussed in Masters v Cameron, I am persuaded that I should exercise my power under s.587(1)(c) of the Act to dismiss the application on the basis that it has no reasonable prospects of success. The settlement agreement that was made is a complete answer to the Applicant’s case that he was unfairly dismissed.

Consequently, the Applicant’s application for unfair dismissal remedy is dismissed.”

Baum v K & J Baker Cartage Pty Ltd (2020) FWC 5185 delivered 29 September 2020 per Cirkovic C