Deeds of release and their effectiveness - update 2019

Introduction Releases and in particular, deeds of release, play a significant role in resolving disputes across a wide range of issues and at different stages in their evolution. It is a reasonable expectation to have, as the beneficiary of a release, that it will provide certainty going forward and that the person providing the release (releasor) will cease to have any further claim.

However, in a small number of cases, the expectations of the person released (releasee) have been dashed, with claims being brought following the entering into of a deed of release. The outcome of a number of fairly recent decisions of the Federal Court and Federal Circuit Court in the employment setting, have brought into sharp focus, issues around deeds of release (usually somewhat of a legal backwater).

This article looks at factors which may impact upon the certainty and durability of deeds of release and also the extent if any, to which a deed of release entered into in the employment setting, operates to minimise or preclude the intervention of the Fair Work Ombudsman in exercising its functions under the Fair Work Act.

This article looks at 3 decisions:

Kowalski vs Trustee, Mitsubishi Motors Australia Ltd Staff Superannuation Pty Ltd and anor [2003] FCAFC 18 (28 Feb 2003). Atkins Freight Services Pty Ltd vs Fair Work Ombudsman [2017] FCA 1134 (22 September 2017). Doyle vs Oil Basins Ltd [2017] FCCA 2758 (14 November 2017). Decision in Kowalski vs Trustee, Mitsubishi Motors Australia Ltd Staff Superannuation Pty Ltd In Kowalski the applicant, a former employee of Mitsubishi, had in earlier proceedings asserted that a mediation agreement entitled 'Heads of Agreement' entered into between him and his employer, should be disregarded on the basis that his employer had not entered into the agreement in good faith.

On appeal from the Federal Court to the Full Bench of the Federal Court, the employee argued, not that the 'Heads of Agreement' did not bind him, but rather that the agreement could not keep him from an entitlement to receive monies that were said by him to be lawfully his, if those monies exceeded the amount payable under the agreement.

In essence, the employee asked the Court to calculate whether more was due to him by way of award and other statutory entitlements and under the superannuation deed (to which he was a beneficiary) than he had received under the Heads of Agreement, and to pay him the excess.

The Full Bench of the Federal Court noted that the consideration involved in the Heads of Agreement was over $250,000 (if costs foregone were included). In the absence of the employee seeking to set aside or repudiate the Heads of Agreement, it determined that the agreement should be upheld notwithstanding that it dealt with "statutory public rights" (being in this case award entitlements). In the Full Bench's words:-

"[17] In these circumstances to view the Heads of Agreement as simply involving some diminution of the appellant's statutory rights is to misunderstand the agreement reached. Plainly the appellant and the second respondent had litigation outstanding. Plainly enough each party was put in a particular position in that litigation. There were risks to each. True it is that statutory public rights cannot be waived or compromised. However, this does not prevent the parties from compromising litigation on foot and in contemplation, having regard to the various risks to the parties in that litigation. See e.g. Lieberman vs Morris [1944] HCA13; (1944) 69CLR69 at 80. That is clearly what occurred in this case."

The Full Bench also agreed with the judgment of Mansfield J (being the judge whose decision was appealed against) that to the extent to which the claim encompassed common law, that in the face of the Heads of Agreement, any such claim had no prospect of success.

Decision in Atkins Freight Services Pty Ltd vs Fair Work Ombudsman In Atkins Freight, a claim was brought by 2 employees of Atkins Freight and also by the Fair Work Ombudsman (FWO) on behalf of 8 other employees, seeking payment of award and statutory entitlements.

On appeal from the decision of the Industrial...