When matters are settled in which both parties assert a claim against the other, it is common for the parties to enter into an agreement to put an end to all the disputes between them. agreement is often referred to as a ‘Deed of Release’.
The release component of these agreements has the effect of preventing either party from pursuing the other party for any further claim which has been the subject of the dispute. However, these clauses often contain words to the following effect:
‘the parties release and discharge the other from all causes of action, suits, claims, demands which the parties currently have or may have at any time in the future arising from the dispute’
One may be forgiven for thinking this clause has the effect of prohibiting the parties from suing each other in the future if the basis for claim existed at the time they entered into the deed. Not so, said the Queensland Court of Appeal in the matter of Wichman v Domway Pty Ltd 2019 QCA 31.
Ms Wichmann was employed by Domway Pty Ltd (Company) as an office manager. In that position, Ms Wichmann fraudulently diverted money owed to the Company to her personal account. The Company discovered that Ms Wichmann had diverted the sum of $2,809.42 and terminated her employment. Ms Wichmann and the Company entered into a deed of release, the terms of which provided that:
- Ms Wichmann would repay the Company $2,809.42;
- the Company would pay Ms Wichmann a redundancy payment; and
- the Company ‘hereafter’ released Ms Wichmann from any claim that it had.
Soon after the Deed was signed, the Company discovered that Ms Wichmann had, in fact, misappropriated about $320,000.
The Company commenced proceedings against Ms Wichmann in the Supreme Court of Queensland and sought repayment of the misappropriated funds. Ms Wichmann defended the proceedings on the basis that the release contained in the deed was an effective defence to the claim.
On 4 September 2018, His Honour Justice Atkinson heard an application by the Company for summary judgment against Ms Wichmann. Summary judgment is only granted in circumstances where the Court is satisfied that there are no real prospects of success in one party’s case. Ultimately, the Court was satisfied that Ms Wichmann had no real prospects of success and gave summary judgment in favour of the Company. The Court ordered Ms Wichmann pay the Company the money which had been misappropriated.
Ms Wichmann appealed the order for summary judgment.
In dismissing the appeal, the Court noted the following principles:
- It has been settled law since 1751 that releases only operate in respect of matters that were in the contemplation of the parties;
- In considering the terms of a release, the Court will have regard to the known disputes between the parties;
- It would be unconscientious for a party to rely on a release in circumstances where that party only knew of a further liability which the other party did not; and
- A party may not rely on a release where it is aware of a liability which it does not disclose to the other party in circumstances where it is under a duty to disclose.
When negotiating the settlement of a dispute, the terms of the release must be clear and you need to ensure rights are not being given away. Conversely, if you are seeking to shield yourself from a claim for which you think you are liable, ensure the terms of any release are drafted as such.
Carl Hagon and the commercial litigation team at BTLawyers are specialists in dispute resolution. We are able to assist you with the litigation and resolution of any commercial disputes which you may face. Call us on (07) 3211 2233 or send us an enquiry using the form below.
Article prepared by Carl Hagon