Settlement agreements and the Fair Work Commission

This decision of the Fair Work Commission is a very interesting analysis of the legal implications of an orthodox settlement agreement to settle an unfair dismissal case.

“[1] On 30 January 2023, Mr Nicholas Azar made an application (Application) to the Fair

Work Commission (Commission) for relief from unfair dismissal under s.394 of the Fair Work

Act 2009 (the Act). The Applicant alleges he was unfairly dismissed by Canterbury Surrey Hills

Community Finance Limited (Respondent) on 15 September 2021.

[2] This decision concerns two key issues. Firstly, as the Respondent contends, is whether

a settlement agreement made by the parties in October 2021 acts as a complete bar to the

application. Second, if the settlement agreement does not act as a bar, should Mr Azar be

granted an extension of time under s.394(3) of the Act to make the Application?

[3] I conducted a hearing of the matter on 2 March 2023. Mr Azar tendered a witness

statement on behalf of himself. The Respondent tendered a statement of Mr Adrian Sbrugnera,

Senior Manager, Employee Relations, for the Respondent. Neither witness was required for

cross-examination.

Factual findings

Background to the current application

[4] The Respondent is a ‘community bank’, trading as part of the Bendigo Bank network.

Mr Azar had been employed with the Respondent since 2016.

[5] There is a procedural history to the dispute between the parties, which is necessary to

briefly explain to understand these reasons. That history began in about March 2021, when the

Respondent informed Mr Azar it was investigating certain allegations. As there remains

sensitivity to the reasons for the termination of employment and because there is a settlement

agreement requiring the parties to maintain confidentiality about those matters, I will not set

out the details of the competing claims here, except so far as to identify the matters I must

decide.

[2023] FWC 697

DECISION

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[6] From around May 2021, it appears Mr Azar was represented by solicitors while that

investigation continued.

[7] In about mid-August 2021, it appears Mr Azar was informed of the Respondent’s

decision to terminate his employment, which would be effective on 15 September 2021.

[8] On 9 September 2021, Mr Azar commenced an application in the Victorian Civil and

Administrative Tribunal (VCAT).

[9] On 15 September 2021, the termination of Mr Azar’s employment took effect.

[10] On 16 September 2021, Mr Azar filed an application for an unfair dismissal remedy (the

2021 application).

[11] On 6 October 2021, the Respondent filed a ‘Form F3’ response to the 2021 application.

That response set out a timeline of events leading up to the termination and stated the reasons

for the termination (which, for the reasons I have described, I will not set out in this decision).

[12] On 21 October 2021, the parties attended a conciliation conference before the

Commission. The matter did not resolve that day but, in the days that followed, discussions

between the parties continued with a view to resolution.

[13] On 25 October 2021, following the discussions between the parties, the Respondent

forwarded a proposed settlement agreement to Mr Azar’s solicitor for review. There was some

further discussion that occurred, which resulted in one amendment before a further (and final)

draft was prepared.

[14] On 27 October 2021, each of the parties executed and exchanged a written settlement

agreement (Settlement Agreement).

[15] On 4 November 2021, Mr Azar filed a Notice of Discontinuance in the proscribed form

in respect of the 2021 Application. It would appear Mr Azar also discontinued his claim in

VCAT at around the same time.

[16] I will return to the terms of the Settlement Agreement below but, for present purposes,

the parties then went their separate ways, with the matter ostensibly resolved, until events

occurring around a year later.

[17] In November 2022, Mr Azar applied for a prospective position at a different financial

institution. As part of that application, Mr Azar gave written consent for the prospective

employer to conduct a reference check. Prior to replying to the reference check request, the

Respondent wrote to Mr Azar setting out the terms in which it intended to respond to the

prospective employer. Mr Azar objected to the proposed response. He considered that the

proposed response would, if sent, amount to a contravention of the Settlement Agreement.

[18] Correspondence ensued between the parties in relation to that matter, without resolution.

In short, the Respondent’s position was that it was permitted, and in fact required, to provide

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the proposed response due to the requirements of the ASIC Corporations and Credit (Reference

Checking and Information Sharing Protocol) Instrument 2021/429 (ASIC protocol).

[19] With the impasse between the parties as to that issue being unresolved, Mr Azar made

a fresh application1

to the Commission to challenge the original basis of his dismissal by the

Respondent.

The Settlement Agreement

[20] The Recitals to the Settlement Agreement record, in a largely orthodox way, that the

Respondent terminated Mr Azar’s employment on 15 September 2021 but that the termination

will be treated as a resignation from employment for all purposes, which was defined as the

“Cessation”. The Recitals noted Mr Azar commenced a proceeding in VCAT, as well as the

2021 application. The Recitals record that the bank was defending both proceedings and denied

liability of any kind in respect of both of them. They also recorded that “without admissions of

any kind”, the parties agreed to settle their differences and all issues between them.

[21] Clause 1 of the Settlement Agreement was titled “Provision of benefits to Mr Azar”.

The benefits, described in that clause, were to be provided within 14 days of the Respondent

receiving a properly executed copy of the Settlement Agreement from Mr Azar.

[22] There were clauses for “withholding”, “discontinuance”, Mr Azar’s “ongoing

obligations”, “non-disparagement”, “costs and expenses”, and “interpretation”. It is not

necessary to explain or set these out.

[23] Clause 5 is titled “release”. Clause 5(a), which applies to Mr Azar, is as follows:

“In consideration for this Agreement, Mr Azar absolutely releases and forever discharges

the Bank from and against all claims, suits, demands, liabilities, actions, damages and

costs of whatsoever kind relating to or arising out of the Employment, the Cessation,

Proceeding 1 and Proceeding 2, which Mr Azar has or may have had in the future against

the Bank but for this Agreement (including but not limited to any action under Federal

or State anti-discrimination legislation or the Fair Work Act 2009 (Cth)), but excluding

any workers’ compensation claim for personal injury under statute or any claim under

superannuation guarantee legislation (Claims).”

[24] Clause 5(b) is a release applying to the Respondent in relevantly similar terms.

[25] Clause 6 is titled “Confidentiality”. It provides:

“(a) The parties must keep absolutely confidential and not divulge or

allow to be divulged to anyone:

(i) the terms of this Agreement; or

(ii) the events, discussions and circumstances leading to the making of this

Agreement.

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(b) This clause does not preclude the parties from disclosing the matters referred to in

sub-clause 6(a):

(i) as required by law;

(ii) with the express written authority of each other party;

(iii) for the purpose of obtaining confidential accounting or legal advice;

(iv) to enforce this Agreement;

(v) in the case of the Bank, where Mr Azar has provided written consent to a

prospective employer for a Conduct Background check to be carried out with

the Bank in accordance with the Australian Banking Association’s Industry

Register – Industry Conduct Background Check (Protocol). Notwithstanding,

the Bank confirms that it considers the misconduct which lead to the Cessation

to not constitute misconduct for the purposes of the Protocol. For the avoidance

of doubt, the Bank confirms it will respond with ‘No’ or ‘N/A’ to the Protocol

questions listed in “Appendix 1- Conduct Background Check”; or

(vi) in the case of the Bank, as may be reasonably required in the ordinary course

of business, including but not limited to, concerning insurance and/or for internal

reporting and operational purposes.

[26] Clause 8 is titled “No admission”. It provides:

“This Agreement will not in any way be construed as an admission by the Bank of any

acts whatsoever against Mr Azar and the Bank specifically disclaims any liability to Mr

Azar.”

[27] Clause 9 is titled “Absolute bar”. Clause 9(a) provides:

“Except by way of enforcement of this Agreement, this Agreement will operate as an

absolute bar to all Claims of whatsoever kind threatened, brought or attempted to be

brought by or in the name of any of Mr Azar against the Bank.”

[28] Clause 12 is titled “Independent advice”. It provides:

“Mr Azar acknowledges that they have:

(a) carefully read and fully understood all the provisions and the legal significance and

effect of executing this Agreement;

(b) had the opportunity to obtain independent legal advice about all aspects of this

Agreement; and

(c) enters this Agreement freely and voluntarily.”

[29] Clause 13 is titled “General provisions” and clause 13(b) provides:

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“This Agreement is governed by the laws of Victoria and the Commonwealth of

Australia. Each party irrevocably submits to the non-exclusive jurisdiction of the courts

of Victoria and the Commonwealth of Australia and the courts hearing appeals from

those courts.”

[30] An extract of the “Australian Banking Association’s Industry Register – Industry

Conduct Background Check” (ABA protocol), referred to in the confidentiality clause of the

Settlement Agreement, was attached to the copies signed by the parties. That extract set out a

list of questions that, evidently, form part of the ABA protocol as follows:

“1A. Was the person dismissed for Misconduct?

1B. If the answer to question 1A is yes, has there been a final determination from a court

or tribunal that:

  1. i) there was no valid reason for the dismissal, or
  2. ii) the evidence did not establish the person was engaged in Misconduct?

1C. If the answer to question 1A is yes, is there any litigation or other legal challenge to

the dismissal currently before a court or tribunal which alleges that:

  1. i) there was no valid reason for the dismissal, or
  2. ii) the evidence did not establish the person was engaged in Misconduct.

2A. Did the person resign from their employment whilst the subject of an open and

continuing Investigation into their alleged Misconduct of which they had been notified?

*If an investigation was concluded subsequent to the resignation of the employee

and the allegation of Misconduct was not substantiated, answer “No” to Question

2A.

2B. Did the person resign from their employment after they were notified of a finding

that they engaged in Misconduct following an Investigation but before any dismissal

took effect?

2C. Is the person still employed but been notified by the employer of an Investigation

into their alleged Misconduct and the investigation is still ongoing?

  1. What is/was the category of actual or alleged Misconduct?”

[31] It can be seen that the ABA protocol adopts a defined term for “Misconduct”. A

complete copy of the ABA protocol was included with the Respondent’s ‘Form F3’ response.

The definition of Misconduct is:

“Misconduct means any one or more of the following types of actual or alleged conduct,

that, if found may give the Employer a basis for dismissal:

  • Bribery or corruption
  • Fraud
  • Material theft, including any theft directly against a customer
  • Dishonesty in relation to the provision of financial and credit services and products,

or market integrity requirements

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  • Material misuse of customer information, including but not limited to breaches of

privacy, or using the information to derive a personal benefit, or any misuse that

directly affects a customer’s safety or the security of their financial transactions

  • Material breach of consumer protection laws, including the National Consumer Credit

Protection Act, the Corporations Act and the Australian Securities and Investments

Commission Act, or

  • Material breach of internal policies that relate to customer outcomes or compliance

with financial services laws, including laws regarding market integrity requirements.

These findings are made using the civil standard of proof, being ‘on the balance of

probabilities’.”

[32] For completeness, the definition of “material”, as it applied to the above definition of

“Misconduct”, was “wilful, serious, deliberate or grossly negligent.”

Settlement Agreement is prima facie enforceable

[33] In my view, the Settlement Agreement is prima facie binding on the parties. Clauses

5(a) and (b) of the Settlement Agreement were expressed to be immediately binding in

“consider for this Agreement”. Similarly, the bar in cl. 9 was expressed to be operable by “this

Agreement”.

[34] The Settlement Agreement was an “accordance and satisfaction” upon being executed

by the parties.2 As such, the discharge of the original cause of action was “immediate”.3

[35] As stated by Besanko J in Australian Postal Corporation v Gorman (2011) 196 FCR

126:

“An accord and satisfaction extinguishes the existing cause of action and replaces it with

a new cause of action based on the agreement. A valid accord and satisfaction is not a

discretionary factor relevant to the subsequent litigation of the original claim; it is an

answer to the claim.”

[36] I consider that Mr Azar’s complaint that the Respondent’s (proposed) response to the

new prospective employer could only, on Mr Azar’s case, constitute a breach of the Settlement

Agreement. As clause 13(b) makes clear, it is the function of a Court, not of the Commission,

to determine the rights and liabilities of the parties to the Settlement Agreement. For avoidance

of doubt, I express no views on whether there was a prospective breach of not.

Should the Settlement Agreement be set aside?

[37] I stated above that the Settlement Agreement is ‘prima facie’ binding on the parties. I

only do so, because Mr Azar seeks to have that agreement set aside for what is broadly described

as “error”.

[38] Mr Azar’s witness statement evidence of the error is as follows:

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“12. I strongly deny the assertions made by the Bank about me, and had been of the belief

that the Agreement resolved the dispute about my dismissal on certain terms, specifically

what the Bank would include in any reference to my prospective employers in the future.

If I had known the Bank did not feel itself bound by those terms I would never have

permitted my solicitor to lodge a Notice of Discontinuance in Application U2021/8446.

  1. I believe that I was misled by the Bank, and that the Notice of Discontinuance was

therefore filed in error.”

[39] In his written submissions, Mr Azar draws attention to the difference between the

Respondent’s current position, in which it intends to describe “misconduct” to the prospective

employer, and the confidentiality provision in cl.6(b)(v) of the Settlement Agreement where

(on Mr Azar’s submission) “[t]he Bank specifically stated there was “no misconduct”.”

[40] I do not accept Mr Azar’s construction of the Settlement Agreement. Clause 6(b)(v) is

specifically aimed at background checks in accordance with the ABA protocol. As set out

above, the ABA protocol provides a specific definition of “Misconduct”. There is no inherent

inconsistency with other uses of the term, particularly as they might apply to the ASIC protocol.

[41] With no disrespect to Mr Azar, who is clearly concerned by how events have turned out,

the evidence before me falls a long way short of demonstrating an “error” or other conduct that

would vitiate the Settlement Agreement. Even assuming some form of misrepresentation is

alleged, the material before me does not disclose a misrepresentation. Specifically, cl. 6(b)(v)

of the Settlement Agreement does not constitute a representation by the Respondent that there

was no misconduct generally or no basis for dismissal. Nor does it constitute a representation

that it would not comply with any valid request under the ASIC protocol (as distinct from the

ABA protocol). Given my understanding that compliance with the ASIC protocol was

mandatory, I cannot see how the Respondent could refuse such a request and it would appear

to fall squarely within the carve out to cl. 6 for disclosures “as required by law”.

[42] So far as there was a pre-contractual representation, any relevant representation

contained in cl. 6 of the Settlement Agreement was only to the effect that the Respondent would

answer “no” to a background check involving the specific definition of Misconduct for a request

made under the ABA protocol.

[43] In any event, I also do not consider that I have power to set aside the Settlement

Agreement. That determination, if it was to be made, is properly within the jurisdiction of a

court, not the Commission.

[44] For this reason, Mr Azar’s application to commence an unfair dismissal application must

be dismissed.

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It would be refused even if his application was within time, because the

Settlement Agreement “extinguishes” his claim.

Extension of time

[45] While it is not necessary for me to do so, given the parties have filed written submissions

on whether an extension of time should be granted, I would briefly record that I would not

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extend the time required for Mr Azar to file a fresh unfair dismissal application for the purposes

of s.394(3) of the Act.

[46] Having regard to the factors in s.394(3)(a) – (f), I consider that factors (b) (becoming

aware of the dismissal after it took effect), (d) (prejudice to the Respondent), and (f) (fairness

between other persons in a similar position) are largely neutral factors between the parties. The

factor in s.394(3)(c) (action taken to dispute the dismissal) is a matter in Mr Azar’s favour, as

history records that he did dispute the dismissal actively.

[47] I consider that the factor in s.394(3)(a) (reasons for delay) tends strongly against a grant

of extension of time. The reason for delay was the execution of a Settlement Agreement,

combined with a dispute that arose a year after execution as to the application of (and entry

into) that agreement. The delay is extensive. More generally, I also do not consider that it is

desirable for a wait-and-see approach to confidentiality terms in settlement agreements to be

taken with a view to recommencing the original claim if the settlement agreement does not fulfil

one party’s private expectations or hopes. As also set out above, I also do not consider it is the

function of the Commission to judicially determine the parties’ rights under such agreements

or whether such agreements should be set aside.

[48] As to the merits of the proposed unfair dismissal application, when having regard to the

terms of the Settlement Agreement, I consider the merits poor – indeed, that claim as been

“extinguished”. But even were the Settlement Agreement to be temporarily disregarded (which

I do not consider appropriate) at best that factor might be neutral between the parties.

[49] It is each of the factors in s.394(3) that must be considered in assessing whether there

are exceptional circumstances.5 Briefly, exceptional circumstances are circumstances that are

out of the ordinary course, unusual, special or uncommon but the circumstances themselves do

not need to be unique nor unprecedented, nor even very rare.6 Exceptional circumstances may

include a single exceptional matter, a combination of exceptional factors, or a combination of

ordinary factors which, although individually of no particular significance, when taken together

can be considered exceptional.7 When having regard to all of the matters listed at s.394(3) of

the Act, I am not satisfied that there are exceptional circumstances of the kind required by the

statute. Were it necessary for me to do so, I would not grant an extension of time.

Disposition

[50] Mr Azar’s application for an unfair dismissal remedy is dismissed. An Order8

to this

effect will be issued in conjunction with this decision.”

 

Azar v Canterbury Surrey Hills Community Finance Limited [2023] FWC 697 delivered 27 March 2023 per Bell DP