The appellant and the respondent had entered into a deed of release following the appellant’s termination of employment for misappropriating funds. The respondent subsequently discovered the appellant had misappropriated a much greater sum. The issue for the Court of Appeal was whether the appellant could rely upon the deed to preclude any claim by the respondent to recover that larger sum. The Court held that the release, properly construed, did not extend to the new claim and in any event any reliance by the appellant on the release would have been unconscientious and her failure to disclose the truth would have amounted to common law fraud.
Sofronoff P and Gotterson and Morrison JJA
26 February 2019
The appellant was employed by the respondent as an office manager. . She falsified the accounts in order to divert some of the respondent's money into her own bank account. . Having discovered that the appellant had misappropriated $2,809.42, the respondent terminated the appellant's employment. . The parties later executed a deed that contained the terms of the appellant's departure. . The deed provided for payments to the appellant by way of redundancy payments and a reimbursement to the respondent of the sum of $2,809.42. . The balance of payments was in favour of the appellant. . Recital E of the deed provided:
"The parties have agreed to settle all matters effective from the 30 April 2018, relating to the employment and the cessation of the employment of [the appellant], and any matters arising therefrom, save as to any statutory rights concerning superannuation or worker’s compensation, or the subsequent enforcement by either party of the terms of this deed; and without any admissions of liability by either Party; as set out herein." .
Clause 4.2 of the deed provided:
"In consideration for the agreements herein, [the respondent] hereby releases and discharges [the appellant] from all causes of action, actions, suits, arbitrations, claims, demands, costs, debts, damages, expenses and legal proceedings whatsoever arising out of or in any way connected with:
(a)The Employment or its termination or any circumstance relating to its termination; or
(b)Any matter, act or circumstances occurring between the date of termination of the Employment and the date of this agreement; save as to any unlawful act; and
(c)Whether arising under statute, common law or equity,
Or any of these which [the respondent] now has or had the right to bring against [the appellant] at any time hereafter, but for the execution of this agreement; save as to any matter relating to the enforcement of this deed." .
The respondent subsequently discovered that the appellant had in fact misappropriated $321,593.85, and commenced proceedings against the appellant to recover that sum. . The appellant defended the claim on the basis that Recital E and cl 4.2 precluded the claim. . The respondent applied for summary judgment, and Atkinson J granted the application. . Her Honour found that at the time of the initial discovery, the appellant had asserted that her diversion of funds had been inadvertent, and had offered to repay the money. .
The appellant appealed. . Sofronoff P (with whom Gotterson and Morrison JJA agreed) noted that "[a]s long ago as 1751 it has been settled law that a release would be construed so that it related to the particular matter that was in the contemplation of the parties". . His Honour noted that "the whole question was considered and settled" by the High Court in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112. . His Honour noted that the recitals did not identify the precise dispute that was the subject of the compromise contained in the deed, but were in general terms. .
The appellant submitted that the release must be taken to have comprehended all of her misappropriations because the respondent did not ever swear that, had it known of the conduct involving the misappropriation of $321,593.85, it would not have entered into the deed. . Sofronoff P rejected that submission, holding that as it was the appellant who relied on the release, it was the appellant that had to plead and prove the material facts that led to the legal conclusion that the present dispute existed at the time of the execution of the deed and was within the parties’ contemplation at that time. . It was not for the respondent to swear that, had it known of the conduct, it would not have entered into the deed. .
His Honour noted that there was no indication in the evidence that the parties were negotiating a compromise of a claim by the respondent against the appellant for fraudulent misappropriation in the order of the sum claimed, and that the terms of the deed suggested the contrary. . His Honour held that Atkinson J rightly concluded that the release must be construed so that it does not extend to the claims made in the present proceeding. . If that were wrong, his Honour noted, the appellant would have been precluded in any event from reliance upon the release for two other reasons:
(b)First, such reliance would have been unconscientious and equity would have prevented the appellant raising the release as a defence. .
(b)Secondly, as an employee who had correctly admitted that she owed the respondent a duty of good faith, it would be arguable that she was under a duty, before the respondent executed the deed, to disclose the truth about her improper diversion of money. . Her failure to disclose the truth, in circumstances in which her silence induced the respondent to execute the deed, would have constituted common law fraud, and the respondent would have been entitled to avoid the whole deed and recover the money paid under the deed. .
In the result, the appeal was dismissed. –.
M J Hafeez-Baig