Settlement agreements in the fair work system

It is not uncommon for one party to a settlement agreement of an unfair dismissal case (normally the employee) to seek to walk away from the settlement later. Often there is an understandable reason for this, for example that the employee feels that he or she was forced to settle the case under pressure and when the settlement reached is later regarded as unacceptable to that person.

And I have considerable sympathy for parties in this situation, including small business owners who are also sometimes awed by the process of conciliation.

Nevertheless the law on this issue is harsh, and a change of heart is not an acceptable reason for the law to permit a party who has agreed to settle to walk away from agreement. deal.

Here is an extract from a recent case which contains an excellent summary of the law on this complex and harsh legal issue.

“Legal principles regarding the ‘agreement’

[30] There are several issues are in dispute between the parties in relation to this matter. However, the most pressing is whether a binding settlement agreement had been reached between Ms Harper and St Bart’s to settle the unfair dismissal application of Ms Harper.

[31] In Singh v Sydney Trains (Singh), 39 the Full Bench of the Commission set out the legal principles relevant to the question of whether there was a binding settlement agreement. The Full Bench cited the judgment of Pavlovic v Universal Music Australia Pty Limited,40 in which the relevant principles concerning the intention to create legal relations were traversed. In short, those principles were:

  1. a) the question of whether the parties intended to bind themselves to a contract is to be determined objectively, having regard to the intention disclosed by the language the parties have employed; 41
  2. b) where the case does not depend on the construction of a single document, there is to be an objective determination of the communications between the parties in their context, and the parties’ dealing over the time leading up to the making of the alleged contract –this will inevitably entail consideration of the subject matter of the communication including what the parties said or wrote. 42

[32] In Singh, the matter did not involve complexities where contractual intention is inferred from behaviour, or is imputed. 43 Whether there was a legally binding settlement reached between the applicant, Mr Singh and the respondent, Sydney Trains, involved the interpretation of the express written communications between the parties’ solicitors.

[33] The Full Bench observed that an offer and acceptance must precisely correspond, noting that the following principles were relevant to this requirement:

  1. a) An acceptance corresponds to an offer if it is an unequivocal acceptance of the terms offered. 44
  2. b) An acceptance is not an unequivocal acceptance of the terms offered if it deviates from the offer, even if that deviation is not material or important. However, as a qualification to this principle, if a new term is included in a purported acceptance of an offer and the new term is solely for the benefit of the offeror, then this can constitute a valid acceptance. 45
  3. c) An acceptance will be effective if it does not depart from the terms of the offer, but simply repeats in the offeree’s own words the effect of the offer. 46
  4. d) Acceptance will be effective if it sets out expressly what would be implied by law in the absence of express agreement. 47For example, an offer may contemplate that, were it to be accepted, a document would be prepared to record its terms. In proposing that a deed be prepared as part of an acceptance of such an offer, the offeree would be stating that which would be implied by law arising from the terms of the offer, namely, that it would be documented in some formal manner.48
  5. e) Similarly, if a purported acceptance of an offer merely includes the ‘machinery of working out what was meant by the offer, it is on the same plight as a request for information’. 49Such a request for information does not revoke the offer and may constitute acceptance of the offer.

[34] However, the Full Bench acknowledged that ultimately the question was whether a ‘reasonable recipient of the acceptance would have regarded it as corresponding to the offer or whether they would have taken the acceptance to be qualifying the original offer such that it would amount to a counter-offer or, at any rate, not an unconditional acceptance of what was originally offered’. 50 The Full Bench explained that a purported acceptance which does not correspond to the offer does not necessarily reject the first offer; it is, nevertheless, a counter-offer capable of acceptance.51 A counteroffer accepted by the original offeror creates a binding agreement.

[35] If parties who have been in negotiations reach agreement on terms of a contractual nature and also agree that those terms will be dealt with by subsequent formal documentation,
there are several categories into which such negotiations fall. In Masters v Cameron, 52 the High Court held that a binding agreement could come about in the following manner:

…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.

[36] In Singh, the Full Bench referred to a fourth category derived from the decision in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (Baulkham Hills), where the parties intended to be bound immediately and exclusively by agreed terms while expecting to make a further contract in substitution containing, by concept, additional terms. 53

[37] The Full Bench continued that when parties reach an agreement of the first or fourth category referred to in Masters v Cameron and Baulkham Hills, they will be bound by the terms of their bargain, notwithstanding a later disagreement between the parties about the terms to be included in a deed or written agreement between them. 54

Consideration

[38] First, it is evident that the Deputy President informed the parties that their agreement was binding, and no objection was taken to that statement. Second the parties had articulated in detail, as recalled by Ms Harper, the terms of their agreement. 55 Third, at all material times Ms Harper was represented by Mr Price of the ASU. Fourth, after discussions between Ms Harper’s representative and Mr Searcy, it was agreed that Mr Searcy would prepare the Deed.

[39] Ms Harper has taken issue with the agreement on several fronts, arguing that it is not binding. Ms Harper is incorrect. The agreement is legally binding.

[40] Ms Harper expressed that her understanding was that when one entered a binding agreement one still had room for refusal, and a change of mind. 56 On any objective level the ordinary meaning of the word ‘binding’ would suggest otherwise, and for a person who has clearly occupied positions requiring sound literacy, it appears implausible that Ms Harper did not understand what was meant by the word ‘binding’. The presence of Mr Price must of course not be negated. Accompanied by a representative from the ASU, it was not the case that Ms Harper was absent a resource from whom to seek clarification. Whilst Mr Price may not have been a legal representative, there is no suggestion that he was wanting of industrial experience or expertise – he was after all an employee of a union.

[41] Ms Harper spoke of the inclusion of a clause into the deed that had not been agreed upon in the confines of the conference. That clause appeared to be clause 8(a) of the Deed which stated:

[T]he Employee acknowledges she has entered into this deed voluntarily and without any duress from any Party and has had the opportunity to obtain legal advice.

[42] During the hearing Ms Harper expressed that she felt that she had been coerced into the agreement and placed under duress. Further, she considered that if she had signed the Deed, she would be in fact falsifying circumstances as she had not obtained legal advice. On this point, Ms Harper pressed that Mr Price was not a legal representative. Ms Harper further observed that the Deed contained legal jargon and that she was not refusing to sign the Deed but simply wanted to obtain legal advice.

[43] At the end of the conciliation conference a recording was taken of the terms of the agreement. I have viewed and listened to that recording. Ms Harper stated that in her capacity as the applicant she agreed to the terms as outlined by the Deputy President. In brief, those terms included that Ms Harper’s dismissal would be considered a resignation, she would be provided with a statement of service, precise detail was provided of a payment to be made to Ms Harper, parties agreed to mutual confidentiality clauses and mutual release clauses, and the payment to Ms Harper was to be made within 14 days of settlement. It was also agreed that Mr Searcy would provide a draft of the Deed to Mr Price.

[44] Ms Harper agreed and understood that the agreement would be documented in some formal manner. The parties agreed in the conference to reduce to writing their agreement in the form of the Deed. It is therefore not unexpected that a formal document may include what Ms Harper coined as ‘legal jargon’. The inclusion of such wording does not in and of itself detract from the agreement being binding in nature.

[45] Clause 8(a), which Ms Harper took issue with, outlined that Ms Harper ‘had had the opportunity to obtain legal advice’. The clause did not compel Ms Harper to obtain legal advice or to have received legal advice. It records an acknowledgement that the opportunity was there for Ms Harper to have of obtained legal advice.

[46] Clause 8(a) further refers to Ms Harper having entered the Deed voluntarily and without any duress. During the hearing, Ms Harper expressed feelings of having been coerced and placed under duress in reaching the agreement. Understandably, Ms Harper failed to appreciate the legal meanings of such words and connected the terms as being associated with her mental health or emotional state. For example, Ms Harper described being under duress due to her escalated caregiver burden, and ongoing professional and personal assassination by St Bart’s. There was not however, any evidence to suggest that coercion or duress had a part to play in the agreement reached.

[47] Clause 8(a) of the Deed was not expressly referenced by the Deputy President in the conciliation conference, albeit it was included in the Deed provided to Mr Price by Mr Searcy. In my view, its inclusion does not deviate from the offer accepted. Clause 8(a) sits in the Deed as an acknowledgement that Ms Harper voluntarily entered the Deed and had had the opportunity to obtain legal advice. So much is clear from the plain meaning of the words, and as such did not constitute a deviation from the offer made and accepted. That Ms Harper entered the agreement voluntarily was implicit. That she had had opportunity to obtain legal advice was an acknowledgement only, of such opportunity.

[48] Ms Harper claimed that clause 6 of the Deed was unlawful and violated her human and constitutional rights. Clause 6 provided that the Deed may be pleaded as a bar to any ‘claim’ (a term which was defined) in respect of any matters arising out of, touching on, referred to or contained in this deed. Given the mutual release agreed upon by the parties, clause 6 simply served as the machinery by which to address a potential breach of that release hence again not deviating from the offer made.

[49] The agreement reached between the parties was of the first (Masters v Cameron) or fourth type described in Singh and as such was contractually binding.

[50] Ms Harper asserted that a deed was not binding until such time as it is signed by both parties, or, that business is not concluded until payment has been made, and the agreement met. Whilst levelly no opprobrium toward Ms Harper, the decisions of Singh and Masters v Cameron clearly dispose of such misunderstandings.

[51] Ms Harper detailed at some length that her cognition was impacted negatively on the day of entering into the agreement, the inference being that she lacked competence to enter into such agreement and would otherwise have requested a cooling off period. Ms Harper spoke of mental health challenges and her caring burden of a family member. Whilst not underestimating the challenges faced by those who are carers, or by those who are at times incapacitated due to their mental health, the evidence does not lead to a finding that Ms Harper lacked competence to enter into a binding agreement.

[52] No evidence was led to suggest that the Deputy President was informed that Ms Harper was unfit to participate in the conciliation conference – whether by Ms Harper, her representative or support person from the ASU. Whilst a letter from a medical practitioner was tendered into evidence by Ms Harper, it was dated early March 2022, after the conference, and it made no mention of Ms Harper being unfit. While Ms Harper was said to be receiving treatment for symptoms of anxiety, depression, and PTSD, it is a long bow to draw to suggest that a person in receipt of medical treatment lacks competence to enter into a contractually binding agreement or is otherwise unfit.

Conclusion

[53] For the reasons set out above I am satisfied that a binding settlement agreement was reached between Ms Harper and St Bart’s in settlement of her application made to the Commission for unfair dismissal.

[54] I consider that the unfair dismissal application should be dismissed pursuant to s 587(1)(c) of the Act on the basis that it had no reasonable prospects of success. This is because the binding settlement agreement extinguished Ms Harper’s existing cause of action (the unfair dismissal application) and replaced it with a new cause of action based on the agreement. 57

[55] Section 587(1) of the Act provides that the Commission may dismiss an application:

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.

[56] The powers of the Commission to dismiss an application are not limited to those specified in s 587(1). This much is clear from the words ‘[W]ithout limiting when the FWC may dismiss an application…’. However, even if the powers to dismiss were so limited it would not affect my conclusion, based on the authority in Australia Postal Corporation v Gorman (Gorman), 58 that Ms Harper’s application has no reasonable prospects of success. In Gorman, Besanko J remarked:

31 An accord and satisfaction extinguishes any 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 subsequent litigation of the original claim: it is an answer to the claim.

33 There is nothing in the [Fair Work] Act which suggests that an accord and satisfaction should not be recognised…As I have said, an accord and satisfaction extinguishes the pre-existing cause of action and continued pursuit of an application based on such a cause of action is clearly capable of being considered frivolous or vexatious or without reasonable prospects of success.

[57] The Act provides at s 381 that a ‘fair go all round’ is to be accorded. However, the concept of a ‘fair go’ does not extend to circumstances where an applicant for unfair dismissal has the opportunity to change their mind and seek to agitate their unfair dismissal case after they have reached a binding settlement agreement with the respondent to the matter. Ms Harper stated:

I recognise that I feel less burdened in the knowledge that I am not forced to sign an Agreement or settle for a paltry figure where I have suffered extensive impacts from the results of Discrimination and Unfair work practices of St Barts. I realise that this feeling of being unburdened is because I felt coerced into agreeing with the Deed of Settlement and agreed only because I was under duress and felt there were no other options for justice. 59

[58] Evidently, Ms Harper considered that having entered into the agreement, she had settled her application for insufficient pecuniary benefit – money. Ms Harper however was represented by the ASU and in addition was provided with support by that same registered organisation. The evidence does not support a finding that Ms Harper lacked competence to enter into a binding settlement agreement or that she involuntarily entered into that agreement.

[59] Ms Harper’s narrative was coloured by suggestion that in some way the conduct of the Deputy President was unusual – such that there was interference to reduce the settlement amount by a presiding person and that the process engaged in by having the Deputy President’s Associate remain in the room with her and her support person, was in effect giving a privilege to the respondent employer – such that Ms Harper felt like a criminal. 60

[60] In response to such grievance the following points are made. First, from the evidence led, it is difficult to discern how such alleged conduct rendered the agreement entered as one that was not binding. Second, while Ms Harper may have harboured discontent regarding the way the process was engaged in, she was accompanied by a support person from the ASU and her representative was from the ASU. She therefore was not short of assistance to advocate her position in the conference – which she appears not to have done. That she chose not to do so in the confines of the conference, does not subsequently provide Ms Harper with license to make statements regarding the Deputy President that may border on constituting an offence under s 674 of the Act.”

Harper v St Bartholomew’s House Inc T/A St Bart’s (2022) FWC 534 delivered 16 March 2022 per Beaumont DP