Phrases such as "employees, agents, servants and Related Entities" should be used with care.
A recent decision of the Federal Magistrates Court of Australia has provided a timely reminder that great care must be taken when drafting deeds of release, in particular identifying the claims to be covered.
In Matthews v Hargreaves (No.4)  FMCA 4 Federal Magistrate Lucev found that although the applicant was successful in establishing that his employer discriminated against him because of his disability, the deed of release signed by the applicant provided a valid defence because of the "very broad terms" which operated as an "absolute release".
The alleged discrimination
The applicant, Kelvin Matthews, the former Chief Executive Officer of the Shire of Shark Bay, was employed by the Shire in January 2006 under a five-year contract of employment. He alleged that Timothy Hargreaves, who was elected as a Shire Councillor in 2007, engaged in unlawful discrimination in contravention of the Disability Discrimination Act 1992 (Cth). Matthews claimed that Hargreaves discriminated against him on the basis of his disability, namely Hepatitis C.
In Matthews' complaint to the Australian Human Rights Commission, which formed his complaint to the Court, he submitted that Hargreaves issued and circulated statements concerning Matthews' Hepatitis C by email, fax and letter drops to the community of Shark Bay, various media outlets and government Ministers and departments/agencies.
Hargreaves admitted that during the period he was a Councillor he disseminated information regarding Matthews' Hepatitis C to other Shire Councillors, and Shire ratepayers and residents. In one such email, Hargreaves wrote:
"I HAVE BEEN GIVEN TO UNDERSTAND FROM A SEEMINGLY RELIABLE SOURCE THAT MR MATTHEWS HAS HEPATITIS C. THIS INFORMATION IS NOT GIVEN TO YOU BECAUSE OF A PERCEIVED PERSONALITY PROBLEM AS YOU SO OFTEN SUGGEST BETWEEN MR MATTHEWS AND MYSELF BUT AS A DUTY OF CARE RESPONSIBILITY AS NOT ONLY A COUNCILLOR BUT AS A PRIVATE CITIZEN." [capitals in original]
- a declaration ordering an apology from Hargreaves to be printed in the local newspaper;
- a declaration ordering that Hargreaves not engage in any further unlawful, discriminatory behaviour; and
- an amount of $10,000 in damages for personal hurt and detriment to Matthews' reputation.
Defences raised by the respondent
Hargreaves relied upon a three-fold defence:
- a deed of settlement between the Shire and Matthews which he said operated as a bar to proceedings;
- that Matthews was a vexatious litigant; and
- constitutional issues (which were not pressed at hearing).
In the course of the hearing Hargreaves also raised his alleged obligations of "good governance" under the Local Government Act 1995 (WA) and Matthews' alleged obligation to disclose his Hepatitis C under the Health Act 1911 (WA).
Deed of release
In late May 2010, Matthews entered into a deed of release with the Shire upon termination of his employment.
Hargreaves argued that under the Deed Matthews undertook not to seek any further redress against the Shire, its agent, employees and servants and related entities.
Relevantly, the Deed said that:
- "The parties have agreed to settle the [the unfair dismissal] Application and their respective rights and liabilities in respect of all Claims howsoever arising, including those connected with the Employment [of Matthews as CEO of the Shire] and Application; (emphasis added)
- Claim includes any complaint, action, suit, cause of action, application, arbitration, award, debt, due, cost, claim, demand, liability, right, verdict, judgment or order either at law or in equity or arising out of the provisions of any statute, award, order or determination...;
- In consideration of receipt of the Settlement Sum, each party:
- releases absolutely and forever discharges the other party and the other party's employees, agents, servants and Related Entities from all Claims which the other party may have or but for this deed might have had against those persons arising out of, from, in, or in connection with the Employment or Resignation, including the Application; and
- agrees not to bring, commence, seek, enforce or continue any Claim against the other party, its employees, agents, servants, and any Related Entity arising out of, from, in, or in connection with the Employment or Resignation, including the Application, (emphasis added)
- Related Entity has the meaning set out in section 9 of the Corporations Act 2001; and
- This deed may be pleaded as a bar to any Claim now or in the future commenced or continued by or on behalf of Matthews, or any person claiming through Matthews arising out of, from, in, or in connection with the Employment or the Resignation, including the Application as set out in clause 3.1." [emphasis added]
The central question for the Court was whether Hargreaves, in his capacity as an elected Councillor of the Shire, was captured within the meaning of the Shire's "employees, agents, servants and Related Entities".
Findings regarding discrimination
Direct discrimination is defined under the Act to include a circumstance where "a person (the discriminator ) discriminates against another person (the aggrieved person ) on the ground of a disability of the aggrieved person if, because of the disability, the discriminator treats, or proposes to treat, the aggrieved person less favourably than the discriminator would treat a person without the disability in circumstances that are not materially different" (Disability Discrimination Act 1992 (Cth), section 5(1)).
Federal Magistrate Lucev accepted that Matthews' Hepatitis C is a "disability" as defined in the Act and found that by reason of Matthews having a disability, he was treated less favourably by Hargreaves than Hargreaves would have treated a person who was a senior Shire employee, in circumstances that are not materially different, who did not have Hepatitis C.
Federal Magistrate Lucev found that Hargreaves' conduct was conduct engaged in by the Shire, and that Matthews was at all relevant times an employee for the purposes of the Act. He further found that Hargreaves' conduct, by virtue of the less favourable treatment of Matthews, is conduct which causes a detriment for the purposes of section 15(2)(d) of the Act. Accordingly, he concluded that Hargreaves had engaged in unlawful discrimination in contravention of the Act.
Findings regarding the Deed
Federal Magistrate Lucev noted that the local government, in this case the Shire, is a body corporate with its own legal capacity with the elected council of the Shire its governing body.
He found that although Hargreaves was not an employee, agent or servant of the Shire, the Shire is a body corporate as defined in the Corporations Act and Hargreaves is a "member" of that body corporate by reason of section 1.4 of the Local Government Act. Accordingly, by the definition provided in the Corporations Act, Hargreaves is a "related entity" of the Shire and is therefore captured by the release provided in the Deed.
The Deed itself, as Federal Magistrate Lucev observed, "operates as an absolute release from any claims that Mr Matthews may have or but for the Deed would have had arising out of, from, in, or in connection with his employment as CEO of the Shire."
Federal Magistrate Lucev also noted that:
"The terms of the release are in very broad terms, and apply to the conduct in issue in these proceedings, which preceded Mr Matthews' resignation as CEO of the Shire. Thus, for those to whom the Deed applies, they have been released from any liability, and are protected from any further action, and as a consequence of clause 3.2 of the Deed may plead the Deed in bar to any such claim, as Mr Hargreaves has done."
Ultimately, Federal Magistrate Lucev concluded that due to the nature of the Deed, a reasonable person reading the Deed would consider that Hargreaves' conduct was intended to be covered by the release provisions of the Deed.
The decision of Federal Magistrate Lucev illustrates the importance of careful drafting of deeds of release. Often, deeds of release are drafted broadly and this has the outcome of potentially providing a wider release than is intended by the parties.
Particular care should be taken when identifying the claims to be covered by the deed, and consideration should be had to the use of phrases such as "employees, agents, servants and Related Entities".
Ensuring that the scope of the release is accurate and precise is the key to protecting the rights and interests of the parties.
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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.