s.394 - Unfair dismissal

Application for an unfair dismissal remedy - whether binding settlement agreement - whether reasonable prospects of success - application dismissed.

• [1] On 16 June 2022, Mr Hans Stenly applied to the Commission for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (the Act). The application was made against The Hour Glass (Australia) Pty Ltd (THG). On 19 July 2022, Mr Stenly and THG reached an agreement to settle the claim. The question is whether their agreement to settle was a binding settlement agreement, and if so, how the Commission can deal with the application.

• [2] I have decided that the agreement to settle was a binding settlement agreement between the parties. It extinguished the cause of action on which Mr Stenly's application relies. For this reason, the application no longer has reasonable prospects of success and will be dismissed. These are my reasons.

• [3] The facts of the matter are not in dispute.

• [4] On 19 July 2022, the parties participated in a conciliation conference conducted by a staff conciliator of the Commission. During the conference, THG offered to settle the claim by:

1. Paying Mr Stenly an amount equivalent to 14 weeks' pay ($18,038.44), including a component as payment for Mr Stenly's legal costs, on provision of an invoice from Mr Stenly's solicitor.
2. Characterising and converting Mr Stenly's dismissal to a resignation, and
3. Issuing a statement of service to Mr Stenly.

• [5] Mr Stenly accepted the offer made by THG. The parties agreed that THG would prepare a Deed of Settlement in terms similar to that previously provided to Mr Stenly and that a notice of discontinuance would be filed in the Commission once the agreed payment had been made. On this basis, the parties confirmed with the conciliator that a settlement agreement had been reached. The conciliation conference was then concluded.

• [6] At 5.02pm on 19 July 2022 (after the conciliation), the conciliator emailed a letter to the parties confirming their settlement agreement. In doing so, the conciliator made an error. The letter sent to the parties was an unaltered version of template letter used by conciliators when a matter is settled, which contains content that can be modified to suit before being sent. As a result of the error, the letter sent to Mr Stenly and THG included the following content:

"Thank you for your participation in today's conciliation in the above case. I confirm that you reached a settlement agreement and I attach terms of settlement /or/ I confirm that the terms of settlement are to be sent out by [insert name] .

Optional: I confirm that the parties have agreed to waive the cooling off period that applied to this agreement. [delete if not applicable]

As discussed, a three day cooling off period now applies. I will hold the file for three business days to allow you (the parties) time to consider the agreement reached at conciliation. Unless I hear from either of you in writing by the close of business the case is resolved in the terms attached and I will close the file accordingly.

If one of the parties does not want to proceed with the settlement and advises me during the cooling off period, I will refer the case for arbitration before a Member of the Commission. Visit our website to find out more about the process for unfair dismissal claims.[delete if not applicable]."

• [7] The error made by the conciliator was obvious on the face of the letter, from the content highlighted above in bold. While the letter confirmed that a settlement agreement had been reached, no reasonable person reading this content would have understood it to be an accurate reflection of the post-settlement position applicable to Mr Stenly's case.

• [8] Having received the letter, on 20 July 2022, the lawyer for THG, Mr John Churchill, sent an email to Ms Wong. The email said this:

I refer to the Conciliation in the Fair Work Commission yesterday and as agreed, have attached a draft Deed of Settlement for your review and if satisfactory, execution by your client.

• [9] This email is evidence of Mr Churchill's post-settlement understanding that what remained for parties to do to give effect to their agreement of 19 July 2022 was to finalise the precise terms of the Deed and then for each to sign it.

• [10] Ms Wong's similar understanding is evident from her response on 21 July 2022, proposing changes to the draft Deed (discussed further below) and providing the invoice for "legal cost component" as had been agreed:

Please see attached the Deed with our request for amendments with track changes.

We also attach our invoice for the legal cost component.

• [11] But for what happened next, it is likely that Mr Churchill and Ms Wong would have completed their negotiation on the precise terms of the Deed and arranged for their clients to sign it. Instead, at 4.25pm on 22 July 2022, Ms Melinda Mina, THG's HR Manager, sent an email to the Commission, forwarding a copy of the conciliator's letter of 19 July 2022 and stating:

As per the attached cooling off period, we no longer wish to proceed with settlement We request to retract the settlement.

• [12] At 5.24pm on 22 July 2022, Mr Churchill forwarded a copy of the email from Ms Mina to Ms Wong without explanation.

• [13] At 4.08pm on 25 July 2022, the conciliator who had conducted the conciliation on 19 July 2022 sent a further email to the parties. The email said this:

I refer to the above matter and the settlement letter sent to the parties following the conciliation conference conducted on 19 July 2022. It has come to my attention that, due to a technical error, the letter sent to the parties was an unedited template of the FWC's standard letters. I attach a copy of the letter that was intended to be attached to that email, for your records.

Please let me know if I can be of any assistance or if you have any questions."

• [14] The letter attached to the conciliator's email replaced the text extracted at paragraph [5] above with the following text (omitting all references to a cooling off period):

"Thank you for your participation in today's conciliation in the above case. I confirm that you reached a settlement agreement and I confirm that the terms of settlement are to be sent out by the Respondent."

• [15] At the same time, a letter was sent to the parties by the Chambers of Commissioner Bissett, the Commission's National Practice Leader for unfair dismissal matters, identifying the dispute about whether a cooling off period applied to the settlement agreement and providing options for Mr Stenly to consider.

• [16] At 5.25pm on 25 July 2022, Ms Wong sent an email to Mr Churchill:

As evident from correspondence with the Fair Work Commission today, it has been clarified that there is no cooling off period and it was never mentioned during the conciliation of a cooling off period.

Please confirm your client's position in relation to the settlement and advise us before 4.00PM Tuesday (26 July 2022).

• [17] At 11.46am on 27 July 2022, Mr Churchill responded. He did not address the purported cooling off period, stating only:

I refer to your email below and I am instructed to advise you that my client's position is that this matter has not been settled.

• [18] At 12.38pm on 27 July 2022, Ms Wong responded:

There are records by the FWC that the parties have reached a settlement in the conciliation of the matter held on 19 July 2022.

To clarify, your client's position that the matter "has not settled" is based on the fact that the parties have yet to execute a Deed to document the settlement reached during conciliation, or that your client is withdrawing the settlement?

• [19] Mr Churchill did not provide the clarification sought by Ms Wong. Later that day, Ms Wong wrote to the Commission indicating that THG had yet to clarify whether they intended to proceed with the settlement offer reached during the conciliation of the matter held on 19 July 2022. In the absence of clarification, Mr Stenly elected to proceed to arbitration.

• [20] Unusually for a case like this, the parties are now as one in submitting that the settlement agreement reached on 19 July 2022 is not binding upon them because it was only an agreement 'in principle' and was conditional upon the execution of a Deed of Release which never eventuated.

• [21] This is a difficult submission to accept, both because the evidence does not bear it out and because it glosses over what really happened. That is, the parties reached agreement to settle the application on 19 July 2022. They understood that this is what had occurred. They were in the process of bringing a formal contract into existence to give effect to their agreement when they received the conciliator's letter referring to a "cooling off period". The reference to a cooling off period was then seized upon by THG as an opportunity to withdraw from the settlement agreement. THG purported to do so when it wrote to the Commission on 22 July 2022 to "retract" the settlement, despite the notion of a cooling off period being novel to the parties in the sense that it had never before been brought to their attention, or discussed with either party at any time before their agreement was reached.

• [22] In Masters v Cameron[1], the High Court considered the difference between binding contracts and non-binding terms agreed to form the basis for negotiation of a contract. It described three separate categories, as follows:

1. The more common form of a binding contract, where parties have agreed on all terms and intend to be immediately bound to perform those terms but at the same time propose to have the terms restated in a form which will be fuller or more precise while not different in effect. The contract is binding whether the contemplated formal document comes into existence or not;

2. A binding contract, where the parties have agreed on all terms and intend no departure from, or addition to, that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. The contract binds the parties to join in bringing the formal contract into existence and then to carry it into execution; or

3. A record of terms, where the intention of the parties is not to make a concluded agreement at all, unless and until they execute a formal contract. A typical example is an agreement made 'subject to contract'.

• [23] There is also a fourth category or class identified by McLelland J in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd where the parties intend to be bound by agreed terms, but on the basis that a further more formalised contract would be substituted for the original agreement.[2]

• [24] I find that there was a binding settlement agreement between the parties to settle Mr Stenly's unfair dismissal application on 19 July 2022. Neither the failure of the parties to formalise their agreement by entering into a Deed of Settlement after that time, nor the inclusion of the words "Without prejudice until signed by both parties" at the top of their proposed Deeds, alters the legal position. Each occurred after the settlement agreement had already been made. One cannot, by agreement, alter the legal consequences of an action after the fact.

• [25] There is no evidence that the agreement reached on 19 July 2022 was 'in principle' or 'subject to' the Deed of Settlement. It was the most common form of accord and satisfaction described in Masters v Cameron. The parties had agreed on all terms of their settlement. They intended to be immediately bound by those terms and had agreed that the terms would be restated in the form of a Deed of Settlement to the same effect.

• [26] There was no mutual intention to depart from, or add to, the agreement of 19 July 2022. No term requiring performance was conditional upon the execution of a formal document. The only conditional term of settlement was that Mr Stenly would file a notice of discontinuance after THG had paid the settlement sum. This was an agreement about performance but not one that conditioned the very existence of the agreement.

• [27] Importantly, the contents of the Deed were largely known to the parties before the agreement was reached on 19 July 2022. A similar draft Deed had been exchanged between them at an earlier time. The parties had a general understanding of the proposed content of the Deed at the time that they reached agreement.

• [28] I agree with the submission that changes to the Deed proposed by Ms Wong were not matters of 'mere machinery' and that the terms giving effect to the resignation of Mr Stenly were important to the settlement agreement. But this is not evidence of the absence of a 'concluded bargain'. Nor does it show that Ms Wong was attempting to depart from what had been agreed. The changes proposed were largely consistent with that agreement:

1. Deleting a reference to the termination being "mutual", as the parties had agreed for Mr Stenly's dismissal to be characterised as a resignation.
2. Specifying the legal cost component of the settlement sum.
3. Providing for notice of discontinuance to be filed after payment of the settlement sum (and completion of other obligations) by THG.
4. Proposing a mutual release of claims, rather than a one-way release in favour of THG.

• [29] To the extent that these proposals went further than had been agreed on 19 July 2022, this was a matter for Mr Churchill and Ms Wong to work through in settling the precise terms of their written agreement. I do not accept it as evidence that the parties were unable to reach agreement. They never reached an impasse, because THG simply withdrew from further discussions, (wrongly) asserting that it was no longer bound by the settlement agreement.

The consequences of making a binding settlement agreement

• [30] The accord and satisfaction of 19 July 2022 binds the parties to give effect to their agreement on its terms, whether a Deed is signed between them or not. It also extinguishes Mr Stenly's existing cause of action and replaces it with a new cause of action based on the agreement of 19 July 2022.[3]

• [31] The Commission can recognise a binding settlement and dismiss an application that has no reasonable prospects of success under section 587 of the Act.[4] The settlement agreement is a complete answer to Mr Stenly's unfair dismissal application. It means that his application no longer has reasonable prospects of success.

• [32] Compliance and enforcement of binding settlement agreements are not matters over which the Commission has jurisdiction. They are matters properly brought before the courts, if necessary, to compel a party to carry their agreement to execution.

• [33] The application is dismissed under section 587(1)(c) of the Act.

[1] [1954] HCA 72.

[2] (1986) 40 NSWLR 622 at [628].

[3] Australia Postal Corporation v Gorman [2011] FCA 975; 196 FCR 126 at [31] per Besanko J.

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