A cautionary tale - settling defamation claims

The decision of the Full Court of the Federal Court of Australia in Sarina v Fairfax Media Publications Pty Ltd1 is a reminder to give careful consideration to terms of settlement to ensure all future claims in respect of the settled dispute are covered by the wording.

Background Facts

Mr Sarina sued Fairfax Media Publications Pty Ltd (Fairfax Media) in the Federal Court claiming that in the period after 1 September 2016, four people had downloaded online articles about him originally published on 14 September 2009 (First Article) and 16 October 2010 (Second Article).

Earlier in 2014, Mr Sarina had sued Fairfax Media's related entity Fairfax Digital Australia and New Zealand Pty Ltd (Fairfax Digital), and one of its journalists, in the New South Wales District Court over an online article originally published on 19 October 2010 (Third Article), but which had been downloaded by people in November 2014.

The District Court action was settled in February 2016.  The terms were recorded in a Deed of Release (Deed).  The Deed recorded that:

  • Mr Sarina, as releasor, had sued Fairfax Digital and the journalist (the Releasees) in the District Court for publication of the Third Article.
  • The Releasees denied liability and, without admission, had agreed to settle Mr Sarina’s defamation concerning the Third Article in accordance with the terms of the Deed.
  • The Third Article was to be removed from Fairfax internet sites.
  • Mr Sarina was to discontinue the District Court proceedings.

Clauses 3.4 and 4 of the Deed stated:

3.4   The Releasor [Mr Sarina] hereby:
(a) releases the Releasees (and any persons or entities associated with them) from all actions, suits, causes, debts, claims, liabilities, demands or proceedings whatsoever, whether arising in law, in equity, under statute or otherwise, which the Releasor has or, but for this deed, would or might have had against the Releasees (any persons or entities associated with them), in respect of the Proceedings and/or the subject matter of the Proceedings, including in respect of the publication of the Article on any other website or wheresoever occurring;

(b) covenants not to sue the Releasees (or any persons or entities associated with them) in respect of any of the matters the subject of the releases in paragraph 3.4(a) above.

4.   Bar to proceedings
This agreement may be pleaded in bar and defence to any proceedings issued by the Releasor arising out of or in any way related to the matters the subject of the releases and covenant in clause 3.4 above.2

Clause 14 of the Deed also provided that the Deed would endure for the benefit of, among others, the related bodies corporate, subsidiaries of parent companies, licensees, successors and assigns of each of the parties.3

In the subsequent Federal Court proceedings, Mr Sarina asserted Fairfax Media had defamed him by publishing the First Article and the Second Article.4

Fairfax Media contended that the terms of the 2016 Deed operated to release it from liability as its terms covered the claims brought by Mr Sarina.5

The primary judge summarily dismissed Mr Sarina’s Federal Court action finding that the Deed released Fairfax Media from liability from the publication of the First and Second Articles.  The judge found the First and Second Articles were ‘unquestionably’ in the contemplation of the parties when executing the Deed.6

Mr Sarina appealed the decision to the Full Court of the Federal Court.

Fairfax Media argued that:

  • The primary judge’s reasons were correct, emphasising that the First and Second Articles were part of the “subject matter” of the District Court proceedings, which were referred to in the recitals to the Deed.
  • The Second Article was part of the subject matter of the District Court proceedings as it had been referred to in Mr Sarina’s particulars of malice;
  • It must necessarily be inferred that the parties to the Deed were aware that the Second Article would remain on Fairfax Group’s website and be available for downloading.
  • Mr Sarina, or his lawyers, would have inevitably come across the First Article whilst searching various websites for other material concerning Mr Sarina.7
  • The primary judge was therefore correct in accepting the argument that Mr Sarina’s knowledge and intentions, or lack thereof, in respect of the First and Second Articles at the time he entered into the Deed would have been admissible and relevant evidence.
  • Mr Sarina’s failure to give evidence that he was not aware of either or both of the First and Second Articles at the time of entering into the Deed would have been admissible and relevant evidence, or that he did not intend that the Deed would release any claims he had in respect of the First and Second Articles justified the primary judge’s inference that he knew and intended the release would extend to both the First and Second Articles.
  • Argued that it would have made ‘no sense’ for it to settle proceedings only in respect of the Third Article and leave the Fairfax Group exposed to further proceedings.8

The Full Court dismissed Fairfax Media’s arguments and granted Mr Sarina leave to appeal for the following reasons:

  • The decision in Grant v John Grant and Sons Pty Ltd9 was referred to, with Dixon CJ, Fullagar Kitto and Taylor JJ stating:

Where in a deed (or agreement) a clause provided one party with a release in wide or general words, the common law principles of construction restricted the otherwise wide or general operation of those words by construing the release clause as operating upon only the subject or occasion to which the deed (or agreement) read as a whole referred;10 and

the common law principle was that a written instrument expressed in general terms (be it a deed or statute) had to be construed having regard to the circumstances to which the instrument must have been intended to apply.11

  • Where one of the parties to a release sought to rely upon its wide and general words, equity considered whether it would be ‘unconscientious’ for that party to do so in all of the circumstances.  In such a case, the Court will examine the knowledge and intention of both the releasor and releasee as to the subject matter on which the release would operate.
  • In the circumstances of this case, the Full Court determined that the words of the Deed did not support the wide view of the operation of the release which was taken by the primary judge.
  • The Deed did not expressly refer to any publication other than the Third Article.  It would be unusual that, where parties enter into a Deed to resolve a defamation action dealing with the publication of one article that, without mentioning any other article, the release in that deed should be construed as releasing the publisher, or, indeed, someone not a party to the deed but related to the publisher, from liability for other publications, unless the words were ‘unmistakably clear’.
  • In those circumstances, it could not be said that there was no reasonable prospect of Mr Sarina successfully defending any plea that the Deed precluded him from bringing a claim against Fairfax Media after the date of the Deed in relation to the First and Second Articles.

Lavan comment

Two important messages flow from this decision.

First, very careful consideration has to be given to the definition of the subject matter in a Deed in respect of which all present and future claims are to be released.  It is critical that the wording is clear and unambiguous in covering off on any claim that the releasing party (or a related body corporate or other person of the releasing party) anticipates may potentially arise in favour of the released party in the future.

And secondly, the recitals in a Deed must include a specific reference to all issues that are within the contemplation of the parties and so are to be subject to the releases given under the Deed’s terms.

30 November 2018
In-house Counsel Updates
AUTHOR
Nick Stagg
Partner
AUTHOR
Lorraine Madden
Special Counsel
SERVICES
Litigation and Dispute Resolution
Employment and Safety


FOOTNOTES

[1] [2018] FCAFC 190.
[2] [2018] FCA 521 at 5.
[3] [2018] FCAFC190 at 5.
[4] See 2 supra at 2.
[5] [2018] FCA 521 at 14.
[6] See 5 supra.
[7] See 3 supra at 14.
[8] See 3 supra at 15.
[9] (1954) 91 CLR 112.
[10] See 3 supra at 123-124 Per Dixon CJ, Fullagar, Kitto and Taylor JJ.
[11] See 3 supra at 124 and 131.
[12] See 3 supra at 21.
[13] See 3 supra at 22.
[14] See 3 above at 23.