The brief

The Civil Liability Amendment (Child Abuse) Act 2021 (Amendment Act), which has the effect of amending the Civil Liability Act 2002 (CLA), has recently been enacted in NSW. The Amendment Act provides for some significant changes to the way that institutional child abuse claims are managed and determined. In particular:

1. Courts will be able to set aside settlements of certain child abuse claims entered into prior to legislative changes in 2016 and 2018.
2. Restrictions that previously applied to offenders in custody have been retrospectively and prospectively removed.

These changes will have far-reaching ramifications for both private and government institutions in NSW and their insurers, both in respect of previously settled claims and claims involving juvenile offenders in custody.

Background

The changes have their genesis in the Royal Commission into Institutional Responses to Child Sexual Abuse. Following the recommendations made by the Royal Commission, changes were made to the NSW Limitation Act so that there is no time limit to bring a claim for child abuse (being sexual abuse, serious physical abuse or connected abuse perpetrated against a person under the age of 18). Further, Part 1B was inserted into the CLA which provides for:

• a statutory duty of care to prevent child abuse imposed on certain institutions that exercise care, supervision or authority over children

• the extension of vicarious liability from employees to non-employees who are akin to an employee

• the appointment of a proper defendant with suitable assets for cases brought against unincorporated associations.

The rationale for Courts being able to set aside previous settlements is to extend the above post-Royal Commission reforms to settlements that would now be considered unjust in light of the reforms. The Amendment Act goes beyond the Royal Commission’s recommendations and was drafted in consultation with many stakeholders, including survivor groups. It also brings NSW in line with other states and territories that have already enacted similar legislation.

What are the changes?

Setting aside settlements

The Amendment Act inserts a new Part 1C into the CLA, which provides that Courts may set aside settlement agreements (and, if necessary, ancillary documents such as deeds and judgments):

• entered into before the removal of the limitation period (in 2016) and that were subject to an expired limitation period when they were entered into
• entered into before the commencement of Part 1B (in 2018) and involved an unincorporated organisation that would have been liable had Part 1B been in force at the time
• entered into before the commencement of Part 1B, and the agreement is not just and reasonable in the circumstances.

It must also be just and reasonable for the settlement agreement to be set aside. In determining whether it would be just and reasonable to set aside a settlement agreement, the Court can consider the amount paid to the plaintiff, the respective bargaining positions of the parties, the conduct of the defendant/s and their legal representatives and any other matter the Court considers relevant. The Court can also look at ‘without prejudice’ communications between the parties and/or their legal representatives which would usually be prohibited by the Evidence Act 1995 (NSW). These factors mean the Court has a very wide discretion to set aside eligible settlement agreements.

Part 1C does not, however, allow for Courts to set aside agreements under the National Redress Scheme, certain agreements between defendants or contracts of insurance. The provision is aimed at allowing plaintiffs to apply, to set aside eligible settlement agreements, rather than providing an opportunity for defendants and/or their insurers to do so.

If a settlement agreement is set aside by a Court, the defendant cannot recover the amount paid to the plaintiff under the agreement. Rather, that amount is taken into account by the Court in determining the new amount of damages payable.

Offenders in custody

Part 2A of the CLA previously applied to child abuse claims brought by plaintiffs who were offenders in custody at the time of the abuse (such as certain juvenile detainees). It had the effect that the plaintiff would have to meet at least 15% permanent impairment (in their daily functioning and ability to earn income etc) to recover damages and that the amount of damages would be restricted, sometimes to the extent that no damages would be payable. Further, any Court-awarded damages would need to be paid into a trust fund on which victims of the plaintiff’s crimes could then claim (the plaintiff having been an offender in custody).

The Amendment Act inserts a new section 26B(2A) into the CLA, which provides that Part 2A of the CLA does not apply, and is taken never to have applied, to child abuse claims (being sexual abuse or physical abuse against a child, but not an act that was lawful at the time that it was done). The practical effect of this is that claims for child abuse that occurred in custody are now determined no differently to child abuse that occurred in other institutional settings.

The Amendment Act also provides Courts with the power to set aside settlement agreements or judgments involving a plaintiff or claimant who suffered child abuse as an offender in custody if it is ‘just and reasonable’ to do so (although no specific guidance as to what is considered to be just and reasonable is provided). Like Part 1C, the Court can take into account any amount paid in respect of damages or costs.

Key takeaways

It is clear that these changes will have a significant impact on both private and government institutions and their insurers. Given the extent of the changes and the wide discretion afforded to the Court, many settlement agreements and judgments entered into before the legislative changes in 2016 and 2018, as well as those involving child abuse perpetrated against juvenile offenders in custody, can now be re-litigated. Further, juvenile offenders who may not have met the previous permanent impairment threshold of 15%, or for whom there would have been no damages payable, may now decide to bring a claim. This means that institutions and their insurers may be dealing with a large number of new and reopened claims.

It will be critical that files and records relating to previous settlements be maintained indefinitely in case those claims are reopened. Insurers may also need to consider policy coverage for reopened claims, as well as reserving issues for affected claims. It may be appropriate to review and potentially audit previous settlements that could be liable to be reopened, such as those where low settlement sums were agreed based on limitations issues, Part 2A applying or other legal barriers that would now be considered unjust. Issues such as re-traumatisation will also need to be borne in mind when dealing with reopened claims.

We anticipate that case law will start to develop around the circumstances in which a settlement agreement can be set aside and we will be watching with interest as to the Court’s approach to dealing with affected claims. In the meantime, case law from states and territories that have already enacted similar legislation is likely to provide some guidance on what can be expected.