Think Nicholsons

Dec 17

How broad is your release?



Granting releases can be dangerous, as illustrated by a recent Queensland Supreme Court decision about recovering money from a fraudulent employee (Dormway Pty Ltd v Wichmann [2018] QSC 277)

Wichmann was terminated for misuse of company credit cards, after being office manager for seven years. Evidence in the matter indicates Wichmann admitted that "I may have inadvertently put some personal expenses in relation to my renovation onto the business credit card due to confusion."  (para [19])
The employer (Dormway) and employee signed a deed of agreement and confidentiality to end the employment relationship. Around $2,800 was recovered from Wichmann - offset against a redundancy payment of around $42,000 which Dormway was to pay. The deed included some clauses which said, amongst other things: 
"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 WICHMANN, 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 set out as herein.";  and
"DORMWAY hereby releases and discharges WICHMANN from all causes of action, action 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 circumstance 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 DORMWAY now has or had the right to bring against WICHMANN at any time hereafter, but for the execution of this agreement; save as to any matter relating to the enforcement of this deed." (paras [27] and [28])
After Wichmann had left, creditors began to call the employer, claiming that they were unpaid. The employer discovered that, over a 2 ½ year period, Wichmann had transferred over $320,000 in a series of payments from the company's bank account. Those payments should have gone to the creditors, but actually went to Wichmann's bank account. The court considered those facts to be established by undisputed evidence and/ or admitted (para [12]).
It is likely that the employer seriously regretted the redundancy payment at this time. The employer sought to recover a bit over $320,000 from Wichmann, and the court had to consider (amongst other issues) whether Wichmann was effectively released from the employer's claim by the deed of agreement and confidentiality. 
No doubt to the great relief of Dormway, the court concluded that: "There is no language in this deed of release which suggests that fraud or theft is to be forgiven by this deed of release." ; then granted judgement to the employer.
The case contains an interesting summary of the law relating to releases and also sets out some principles for when a court may consider the external context of an agreement, as a factor in what the agreement means. See paragraphs [31] to [38] of Atkinson J's judgment for more detail. 
I suggest there are some important things to consider and remember from this case, including:
- If you're including a release, then be thoughtful about how broad it is - don't just include standard words without considering their effect.
- Do the parties understand what the release is doing and what it might cover? It may be helpful to consider and discuss some examples, and even to include them in the document if appropriate.
- Consider what the parties know ... and may not know. Consider that there may be - probably is - an imbalance in information between them. 
- Is your client hoping for too much from the release? Perhaps they are not telling you everything you need to know, for their own secret reasons.
- Should any specific things be included in or excluded from the release? Specific words will probably be needed, if you want to deal with specific issues.
- Words in a release may be read down (i.e. they may end up with a narrower meaning than you originally expected).
- No matter what the words say, some parts of a release may be unenforceable for public policy reasons - even if they seem superficially broad enough.
When you're about to consider granting a release - do you really need to?  It may appear the 'lesser of two evils' at the time, but is it really?  If you absolutely must grant a release, then how broad does it need to be, and where should you draw the line?

Stephen Robertson

Partner
Stephen is a commercial lawyer with extensive experience in advising businesses in areas of acquisitions and divestments, commercial agreements, structuring, legal risk and revenue issues. He also advises on property law, with a focus on commercial and industrial property.