Equity and human rights – discrimination and sexual harassment allegations – claim of vicarious liability of the Commonwealth – whether the Commonwealth restrained from unconscientious reliance on legal rights based on general words in deed of release

In Leach v Commonwealth of Australia [2021] FCA 158 (2 March 2021) the court considered the equitable principle in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 by which equity will restrain a party from unconscientious reliance on legal rights based on general words in a release.

The applicant (Ms Leach) was employed by the second respondent, a former Senator of the Commonwealth on behalf of the first respondent (the Commonwealth). Ms Leach claimed that her former employer discriminated against her on the ground of sex and engaged in sexually harassing conduct in contravention of ss5, 14, 26, 28A, 28G(2) and 28L of the Sex Discrimination Act 1984 (Cth).

She also claimed that the Commonwealth was vicariously liable for the actions of the former Senator in accordance with s106 of the Act. Following an unfair dismissal claim by Ms Leach, there was a Fair Work Commission conciliation that ultimately led to Ms Leach signing a deed of release made on 16 January 2019 (the deed), by which Ms Leach released the Commonwealth from any “Claims” arising out of, or any way related to her former employment settling and bringing to an end the unfair dismissal claim.

The question arose as to whether the release in the deed barred Ms Leach’s subsequent claims against the Commonwealth for vicarious liability for the discrimination and sexual harassment alleged against the former Senator for whom she was previously employed.

More specifically, the court determined a separate question directed to whether or not Ms Leach was entitled to declaratory relief against the Commonwealth in relation to the deed. It was common ground that, if Ms Leach was entitled to the declaration, then she would be entitled to pursue her other substantive claims against the Commonwealth; if she was not entitled to the declaration (meaning the deed was able to be enforced according to its terms), she would be prevented from maintaining her claims in relation to sexual harassment against the Commonwealth and her proceeding against the Commonwealth must necessarily be dismissed.

Ms Leach, as the moving party, bore the onus of establishing that the reliance by the Commonwealth on the legal terms of the deed would, in all the circumstances, be contrary to conscience such that equity would intervene (at [19]; see also [23]). Lee J found that Ms Leach did genuinely (but mistakenly) believe that in signing the deed, this step would not prevent her maintaining the claims that she wished to pursue (at [41]).

However, Lee J explained (at [42]): “To state the obvious, however, this is a necessary but not sufficient basis upon which Ms Leach seeks relief. The objective theory of contract stands in command of the field: Taylor v Johnson (1983) 151 CLR 422 (at 429 per Mason ACJ, Murphy and Deane JJ). Although I am prepared to accept Ms Leach was operating under a genuine misapprehension, her mistake was entirely unilateral and her subjective misapprehensions as to the nature of the bargain she struck with the Commonwealth, without more, are neither here nor there. The inquiry relates to the state of knowledge of both parties concerning the existence, character and extent of the liability in question (as well as the actual intention of Ms Leach): Grant (at 129–30 per Dixon CJ, Fullagar, Kitto and Taylor JJ). Hence, the real question for me in the present circumstances is whether the misapprehensions: (a) were known to be held by Ms Leach by representatives of the Commonwealth; and/or (b) came about by reason of some action or conduct of the Commonwealth which renders the Deed being enforced according to its terms by the Commonwealth as being contrary to conscience”.

The court found that Ms Leach fell well short of proving, in accordance with s140(1) of the Evidence Act 1995, the factual premises on which her claim for declaratory relief was based (at [43]-[44]). Consequently, the deed could be enforced in accordance with its terms and the proceeding against the Commonwealth was dismissed (at [47]).

Dan Star QC is a Senior Counsel at the Victorian Bar, ph 03 9225 8757 or email danstar@vicbar.com.au. The full version of these judgments can be found at austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment.

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