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Case Summary – Trustees of the Christian Brothers v DZY (a pseudonym) [2024] VSCA 73

Published on April 26, 2024 by Joshua Dale and Kate FlaniganJoshua Dale and Kate Flanigan

On 23 April 2024, the Victorian Court of Appeal handed down their judgment in Trustees of the Christian Brothers v DZY (a pseudonym). [1] The case involved two prior settlement Deeds between the Plaintiff (‘DZY’) and the Trustees of the Christian Brothers (the ‘Trustees’) releasing the Trustees from liability for a claim DZY proposed to issue in a court. DZY had alleged that between 1964 and 1968 when he was a student at a school operated by the Congregation of the Christian Brothers (the ‘Congregation’), he was sexually abused by two members of the Congregation. The first Deed was entered in December 2012 for $80,000 inclusive of costs and the second, without undoing the first, in 2015 for $20,000 inclusive of costs. Both Deeds acknowledged that DZY did not allege that he suffered economic loss and made no demand for such loss as part of those settlements.

Importantly, the first Deed was entered into during a period in Victoria when the limitation period was not yet abolished in child sexual abuse cases and therefore a defence to the claim was available under the Limitation of Actions Act 1958. The limitation defence was later removed on 1 July 2015 and therefore no longer applied when the second Deed was signed in December 2015. Further, at the time both Deeds were entered, and as a result of the New South Wales Court of Appeal decision in Trustees of the Roman Catholic Church v Ellis,[2] any application against an unincorporated association such as the Congregation would likely fail for want of a legal entity that was liable for the claimed loss. This became known as the ‘Ellis defence’ and was abolished in Victoria from 1 July 2018 when legislative amendments required the nomination of a proper defendant on behalf of non-government organisations in child abuse cases.[3] In light of the removal of two significant barriers to prior litigation, s27QD and s27QE of the Limitation of Actions Act 1958 (Vic) (‘Limitation Act’) now operates to allow prior settlement agreements entered into prior to 1 July 2018 to be set aside in whole or part when it is ‘just and reasonable’ to do so.

In the present claim, the Trustees agreed to set aside both Deeds in part on the basis they accepted the existence of the limitation defence and/or the Ellis defence may have had an unjust impact on the negotiation of the amount to settle DZY’s earlier claims, but contended that the Deeds ought to be upheld so as to prevent the DZY from bringing and/or maintaining a claim for economic loss in circumstances where that claim was abandoned in the two prior settlements.

At first instance, an associate judge of the Supreme Court of Victoria ordered that both Deeds be wholly set aside. On appeal there were effectively six grounds brought by the Trustees paraphrased by their Honours Beach and Macauley JA as follows:

1. The associate judge erred by applying a wrong legal principle in finding that it was just and reasonable to set aside the deeds after finding that DZY’s explanation for not an pursuing economic loss claim was to avoid repayment of DSS benefits (Centrelink payments), and also not finding that either the limitation defence or the Ellis defence played any role in that decision.
2. The associate judge erred in finding that DZY’s ability to comprehend advice was compromised in 2012, by failing to take into account certain other evidence.
3. The associate judge erred in finding that DZY felt he had ‘no choice’ but to accept offers made in 2012 and 2015, as such a finding was not reasonably open or was made by failing to take into account other evidence.
4. The associate judge erred by not taking into account the lack of evidence to support DZY’s economic loss claim at the time of the 2012 and 2015 deeds.
5. The associate judge erred in finding that DZY had continued to assert his loss of earnings claim after the 2012 and 2015 deeds were executed, by failing to take into account material considerations.
6. The associate judge erred by taking into account the opinion of a particular doctor in 2020 as being relevant to the impact of the alleged abuse on DZY’s education and employment.[4]

The Court of Appeal determined at the oral hearing that all issues enumerated under grounds 2-6 could be seen as elements of the single issue raised by ground 1. On that basis, the single question articulated by the Court for the purposes of the appeal was ‘in finding that it was just and reasonable to set aside the deeds, did the associate judge act on a wrong principle or draw an inference that was not open (ground 1)?’.[5] By unanimous decision, the Court of Appeal found in favour of the Trustees agreeing that the associate judge erred and that the Deeds should be set aside only insofar as they bar DZY from pursuing a claim for general damages.

In addition to the points of appeal the Trustees sought to draw on existing authority in Pearce v Missionaries of the Sacred Heart [2022] VSC 697 which was a case that also prevented a plaintiff from bringing a claim for economic loss based on the operation of a prior deed.

The decision in Trustees of the Christian Brothers v DZY (a pseudonym) establishes authority for a number of important points in historical abuse cases but also appeals more generally.

What is the correct standard on appeal?

Importantly, the Court of Appeal was asked to consider and determine the applicable standard of appellate review when assessing the grounds of appeal concerning legal error as between the two High Court tests, being the ‘correctness standard’ from Warren v Coombes (1979) 142 CLR 532 (‘Warren’) and the House standard as articulated in House v King (1936) 55 CLR 499 (‘House’).

The reason for this consideration arose from the more recent judgment of GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32 (‘GLJ’) which confirmed that a decision to stay a proceeding was not an exercise of discretion requiring the application of the House standard and therefore the correctness standard as set out in Warren applied to the question on appeal. By applying GLJ by analogy, the Trustees advanced the appeal on the basis that the correctness standard set out in Warren applied, namely that there was a binary answer to whether a deed should be set aside and it was not open to decision makers to exercise a discretion (which would attract the House standard).

The relevant tests for the standard of appellant review are best summarised by reference to the relevant judgments:

1. Warren v Coombes –standard of appellate review upon an appeal by way of rehearing:

“Shortly expressed, the established principles are, we think, that in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it. These principles, we venture to think, are not only sound in law, but beneficial in their operation.”[6]

2. House v King – standard of review on appeal from a decision involving the exercise of a judicial discretion:

“the manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the material for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.”[7]

Beach and Macauley JJA observed that the High Court in GLJ considered the appellate standard in the context of deciding to grant or refuse a permanent stay, namely that the decision as to whether a trial would be necessarily unfair or so unfairly and unjustifiably oppressive as to constitute an abuse of process is an evaluative judgement, but not a discretionary one. In other words, the proceedings are or are not capable of being the subject of a fair trial, or are or are not so unfairly and justifiably oppressive as to constitute an abuse of process.[8]

The Trustees in this appeal submitted that the question of setting aside a previous settlement under s27QD and s27QE of the Limitation Act similarly does not involve the exercise of discretion even though it requires an evaluative judgement. In contention, DZY argued that it would be wrong to apply that standard and that the proper standard would be the House standard, arguing that the statutory test in s27QE admits a range of legally permissible outcomes and was therefore discretionary.

In their reasons, and in line with the approach taken by the Court in GLJ in respect of the permanent stay provisions, Beach and Macaulay JJA considered the context of the amendments of the Limitation Act and the insertion of s27QE and s27QF. This included consideration of the community’s confidence in the adversarial system to deliver just outcomes and that judgments and settlements should therefore be accorded a high degree of protection and only be set aside when that judgment or settlement has been obtained by a process or in a circumstance that violates a clear principle fixed by the law. On this basis they found that:

“93. In this case, the applicable legal principle set by Parliament is that a court must be satisfied that it be ‘just and reasonable’ to set aside a judgment. It is that legal criterion that fixes the boundary that must be crossed before a judgment or settlement of a personal injury claim for child abuse, otherwise validly obtained, may be set aside. It is only if that legal criterion is satisfied that a defendant who has bargained for a release of any further legal liability should be deprived of that right, or a plaintiff who has relinquished the right to further pursue a claim should be permitted to relitigate it.

94. These contextual considerations aid the construction of ss 27QC and 27QE. They support the view that the ‘just and reasonable’ test should not be construed as a mere gateway that enlivens a discretion to choose whether or not to set aside a previous settlement, but rather, as a strict legal rule which, if satisfied, will require that the settlement be set aside. If that criterion is satisfied, the settlement will be set aside because it was obtained in circumstances that are incongruent with a fair adversarial system that allows parties to agree a just outcome to bring an end to legal rights and liabilities.

95. Although there may be a range of factors to be taken into account, and the strength of them weighed, ultimately the question is whether it is just and reasonable to set aside the judgment. The question is not whether there is a risk of injustice or unreasonableness lying somewhere on a scale between high and low, calling for a personal judgment as to whether the previous settlement should be set aside depending on the position on that scale.

96. The legal rule does not describe a range of legally permissible outcomes. It is a rule that leads to binary outcomes. Adopting the language of GLJ, either it is just and reasonable that the parties should not be bound by a previous judgment or settlement, or it is not.”

Therefore, their honours conclude that the question of whether to set aside a Deed in whole or in part in s27QE of the Limitation Act is not a discretionary question but a binary one. They considered that on proper construction of the test in s27QE(1)(a), the provision does not give the judge a range of options once generally satisfied that it is just and reasonable to set aside a settlement to some extent, and the making of any orders under s27QE(1)(b) is conditional on whether it is just and reasonable to do so.[9] On this basis, their honours concluded that the power to set aside settlement agreements is not discretionary and as such any appellate review of a decision made under s27QE(1) is to be approached on the correctness standard. Beach and Macauley JJA otherwise confirmed that if a House standard was applied, they would still be satisfied on that test that the appeal ought to be allowed.[10]

What does ‘just and reasonable’ mean?

When considering the content of ‘just and reasonable’ in s27QE, Beach and Macauley JA reference the decision of Roman Catholic Trusts Corporation for the Diocese of Sale v WCB (‘WCB’).[11] The Victorian Court of Appeal in WCB recognised that s27QE of the Limitation Act does not prescribe matters that the Court should have regard to in determining whether it is just and reasonable to set aside a settlement.[12] That said, in approaching the construction of the phrase, the Court in WCB considered at length the two legal obstacles that confronted plaintiffs in historical abuse matters, that is, the limitation defence and the Ellis defence as well as the legislative removal of those obstacles and the purpose for enacting s27QE of the Limitation Act.

Beach and Macauley JJA in this case confirmed that in WCB, ‘the Court said that ss27QD and 27QE were introduced to enable claimants who had suffered historical sexual abuse to litigate their claims where, due to the unfair legal obstacles that obstructed their path, they had previously settled those claims on terms that were not just and reasonable.’[13] By determining those obstacles as unfair, the legislative intention was clearly to allow agreements to be set aside against that backdrop of technical defences. In confirming this, Beach and Macauley JJA found that:

1. The s27QE remedy requires that a settlement that is sought to be set aside was entered into at a time when the limitation and/or Ellis defences were capable of unfavourably influencing settlements for claimants. That influence is what led to the ‘mischief’ which s27QE is seeking to remedy and ‘that observation reinforces the centrality of the actual influence of one or both of those two barriers in the consideration of whether it is just and reasonable to set aside a settlement agreement.’[14]
2. At least in an ordinary case, it would be expected that one of the two legal barriers (the limitation or Ellis defence) would play some part in explaining why the claimant entered into the settlement agreement now sought to be set aside and thus a cogent ground would exist to conclude that it was just and reasonable to set aside the settlement. Their honours confirmed that ‘if no finding was made that either legal barrier had such an impact, it is doubtful that any cogent ground would exist to conclude it was just and reasonable to set the settlement aside.’[15]
3. While the Court does not deny that, other than the actual influence of those legal obstacles, there could be other additional factors that might be legitimately taken into account when considering whether it is just and reasonable to set aside a settlement, including for example the prospects of success, the respondent’s conduct, unequal bargaining power or any feelings of guilt or shame, this is not the particular mischief that s27QE was seeking to remedy.[16] On this basis, Beach and Macauley JJA found that ‘consideration of the actual influence of the two legal obstacles is central to the determination of whether it is just and reasonable to set aside a settlement’ and that ‘apart from the influence of those obstacles, other factors should be seen as supportive rather than leading factors in determining whether it is just and reasonable to set aside a settlement.’[17]

Application of the principles and decision of the majority

Beach and Macauley JJA confirmed that the question to be answered in the appeal was ‘whether the associate judge erred in finding that it was just and reasonable to set aside the two deeds in their entirety – rather than set them aside only insofar as they barred a claim for general damages, leaving intact the bar to a claim for damages for economic loss.’[18] In applying the correctness standard from Warren as set out above, their honours found that the trial judge was wrong to conclude that it was just and reasonable to set aside the deeds in their entirety and that, deciding the matter for themselves, they would find that it was just and reasonable to set aside the deeds only insofar as they bar a claim for general damages.[19]

In their reasoning, Beach and Macauley JJA had consideration to the following relevant factors:

1. The fact DZY was in receipt of Centrelink payments for the care of his son and was worried that the Department of Social Services (DSS) would clawback his carer’s pension was ‘probably the dominant motivation’ in deciding not to pursue economic loss;[20]
2. When DZY had the chance to do so, he did not say that any other factor motivated his decision not to claim economic loss and more particularly he did not identify the concern about the operation of the limitation or Ellis defences as a reason not to pursue that aspect of the claim;[21]
3. Little weight was given by the appeal judges to the evidence that the plaintiff was drinking heavily and had anxiety around the time of both settlements which allegedly impacted his comprehension of the settlements;[22]
4. On both occasions DZY signed the Deeds he was not rushed (noting offers were left open for a considerable period of time), was legally represented, and in 2012 had a support person present;[23]
5. DZY’s evidence that he felt he had ‘no choice’ but to settle was not related to any conduct on the part of the Trustees and was not relevant to his decision not to pursue a claim for economic loss; [24] and
6. There was no positive finding that DZY’s decision not to pursue an economic loss claim was influenced by the limitation or Ellis defences.[25]

Overall, despite finding that there would be no other prejudice to the Trustees from the continuation of the economic loss claim, beyond the loss of the release from the exposure to such a claim acquired through the bargain secured under the Deeds, Beach and Macauley JJA (as the majority) found that as the decision to abandon any economic loss claim was for issues unrelated to the relevant defences, it was not just and reasonable to set aside the deeds insofar as they barred pursuit of the economic loss claim.[26] On this basis, the appeal was allowed and orders made that pursuant to s27QE(1)(a) of the Limitation Act, the 2012 Deed and 2015 Deed would be set aside only in part, such that DZY would be permitted to bring his claim for damages excluding any economic loss.

The judgment of Lyons JA

In a separate judgment, Lyons JA agreed with the majority as to the ultimate outcome of the application and the appeal and the orders proposed by the majority. Lyons JA did however find that he did not consider it necessary to conclude that:

“the court’s power under s27QE is fettered such that it is doubtful that any cogent ground would exist to conclude it was just and reasonable to set aside a settlement agreement if no finding was made that either the limitations period or the Ellis defence had a ‘material impact’ on the claimant’s decision to settle his or her claim and/or was a ‘leading’ factor in this decision.”[27]

Lyons JA instead suggests that ‘in light of the language used in s27QE, the exercise of the power under that section will depend upon all the relevant circumstances.’[28] On his assessment of the wording and intent of s27QE, his honour considered that the court should not be so constrained so as to limit the enquiry to whether a limitations or Ellis defence factor was material to the decision making of a plaintiff, but that the court ought to consider all of the relevant circumstances in which a settlement was entered into.[29]

Lyons JA confirms that while in an ordinary case, one of the two legal barriers would play some part in determining whether it was just and reasonable to set aside a settlement agreement, based on the circumstances of DZY’s claim he did not consider it necessary to conclude that a claimant needs to establish that one or more of the relevant defences has a ‘material’ impact on the claimant’s decision to settle the claim, nor does it need to be a ‘leading’ factor before the court can exercise the power under s27QE of the Limitation Act as found by the majority.[30]

Regardless of the agreed application of the test in s27QE, Lyons JA found that in the circumstances of this claim, the evidence did not allow the court to be satisfied that it was just and reasonable to set aside the prior Deeds in full and that DZY should be barred from bringing an economic loss claim.

His honour otherwise agreed that the correctness standard is the relevant standard to be applied in cases concerning whether it is ‘just and reasonable’ to set aside a Deed.

Implications of the Court of Appeal decision

The practical effect of this decision is that DZY will not be able to recover damages for economic loss, however, the implications of this decision are far reaching. In particular:

1. It has been confirmed that the power of the Court to set aside a prior settlement or judgment in accordance with s27QE of the Limitation Act is not a discretionary one. As such, any appeals on decisions made under that section will be required to meet the correctness standard but not the House standard.
2. In determining whether it is ‘just and reasonable’ to set aside a prior deed (in whole or part), the leading factor in any decision must be whether the limitation and/or Ellis defences were material factors impacting the settlement and leading to an unfair outcome. Any other factors impacting a claimant’s decision to accept an earlier settlement should be seen as supportive factors only in determining whether it is just and reasonable to set aside a settlement.
3. As in this case, it may be that the relevant defences were material factors in leading a claimant to accept a lower settlement, but not material factors in a decision being made to abandon a head of damage entirely. In these cases, it would be appropriate for the prior settlement to be set aside in part to only allow for a claim for the heads of damage which were impacted by the relevant defences.
4. In any case, a court is obliged to take into account all of the circumstances of a particular settlement and not simply conclude that because the limitation and/or Ellis defences were available that this alone gives rise to a right to set aside a Deed in full.

While this decision considered the relevant provisions of the Limitation of Actions Act 1958 (Vic), it could be seen as persuasive precedent in any jurisdiction where a Limitation Act contains provisions allowing for prior deeds in claims relating to historical child abuse to be set aside when it is ‘just and reasonable’ to do so and when the legislative context of those amendments, and the applicable dates in the relevant provisions, reflect the abolition of the limitation and Ellis defence in those jurisdictions.

Please note that this article does not constitute legal advice. If you are seeking professional advice on any legal matters, you can contact Carroll & O’Dea Lawyers on 1800 059 278 or via our Contact Page and one of our lawyers will be able to assist you.

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[1] [2024] VSCA 73 (23 April 2024).

[2] (2007) 70 NSWLR 565; [2007] NSWCA 117.

[3] Legal Identity of Defendants (Organisational Child Abuse) Act 2018.

[4] Trustees of the Christian Brothers v DZY (a pseudonym) [2024] VSCA 73 [14].

[5] Ibid [15].

[6] (1979) 142 CLR 531, 551 (Gibbs ACJ, Jacobs and Murphy JJ).

[7] (1936) 55 CLR 499, 504-505 (Dixon, Evatt and McTiernan JJ).

[8] Trustees of the Christian Brothers v DZY (a pseudonym) [2024] VSCA 73 [68] referring to GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore (2023) 97 ALJR 857, 865 [15] (Kiefel CJ, Gageler and Jagot JJ).

[9] Ibid [98-102].

[10] Ibid [125-133].

[11] (2020) 62 VR 234.

[12] Trustees of the Christian Brothers v DZY (a pseudonym) [2024] VSCA 73 [103] referencing WCB (2020) 62 VR 234, 270 [121].

[13] Ibid referencing WCB (2020) 62 VR 234, 266 [112].

[14] Ibid [109].

[15] Ibid [110].

[16] Ibid [111-112].

[17] Ibid [113].

[18] Ibid [125].

[19] Ibid [134].

[20] Ibid [144].

[21] Ibid [145].

[22] Ibid [146].

[23] Ibid [147].

[24] Ibid [148];

[25] Ibid [150].

[26] Ibid [149 – 150].

[27] Ibid [155].

[28] Ibid [156].

[29] Ibid [156-164].

[30] Ibid [164-165].