Investigations & Dispute Resolutions

Sealing the deal: When is a settlement reached?

15 December 2017


Sealing the deal: When is a settlement reached?

Ellen Davis, Associate

A recent decision of the Full Bench of the Fair Work Commission demonstrates that while the parties may be confident a deal has been struck, the communications between the parties will be essential in determining, objectively, whether an intention existed to make a concluded and binding settlement.

Background

The Applicant, a 77-year-old with 34 years of unblemished service with the Respondent was dismissed based on his failure to follow safety policies, procedures and guidelines while working in a safety critical location, causing significant risk of harm to himself, his team and members of the public. The Applicant disputed the dismissal.

Prior to the matter being heard, the Applicant and Respondent’s representatives engaged in settlement negotiations and it was said that an agreement to settle was reached in principle. The hearing was vacated, with leave to apply for it to be restored should the parties not be able to agree upon the deed. The Applicant disputed that a binding settlement had been reached between the parties and submitted that the Respondent had made a counter offer which he did not accept.

Offer to Settle

The Applicant proposed to settle on the following terms:

  1. the Applicant would be re-employed;
  2. upon re-employment, the Applicant would perform administrative tasks only;
  3. unless required by the Respondent, the Applicant would not perform any work which would attract overtime and/or penalty rates; and
  4. the Applicant was not to receive any back pay or benefits for the period between termination of employment and re-employment.

The Respondent accepted the offer, subject to further qualifications provided in a draft deed for the Applicant’s review. The qualifications specified:

  1. re-employment was subject to the passing of a medical assessment (the “First Qualification”);
  2. the Applicant was excluded from working at any safety critical environments (the “Second Qualification”); and
  3. the settlement would be subject to confidentiality (the “Third Qualification”).

The Applicant was of the view that the qualifications did not constitute an acceptance and he sought to relist the matter for a hearing.

The Decision

In resolving whether the matter was settled and the Applicant was precluded from having the matter heard, the Full Bench made the following comments about when an agreement is reached. Acceptance:

  1. corresponds to an offer if it is an unequivocal acceptance of the terms offered;
  2. is not an unequivocal acceptance of the terms offered if it deviates from the offer, even if that deviation is not material or important. However, as a qualification to this principle, if a new term is included in a purported acceptance of an offer and the new term is solely for the benefit of the offeror, then this can constitute a valid acceptance;
  3. will be effective if it does not depart from the terms of the offer, but simply repeats in the offeree’s own words the effect of the offer; and
  4. will be effective if it sets out expressly what would be implied by law in the absence of express agreement. For example, an offer may contemplate that, were it to be accepted, a document would be prepared to record its terms.

Similarly, if a purported acceptance of an offer merely includes the “machinery of working out what was meant by the offer” it does not revoke the offer and may constitute acceptance of the offer.

Ultimately, the question was whether a “reasonable recipient of the acceptance would have regarded it as corresponding to the offer or whether they would have taken the acceptance to be…such that it would amount to a counter offer, or at any rate not an unconditional acceptance of what was originally offered”1 .

The Full Bench considered the Respondent’s three qualifications to the Applicant’s offer. The First Qualification was held as a term capable of being implied. The Second Qualification was held not to be solely for the benefit of the Applicant and deviated from the offer proposed by the Applicant. The Third Qualification deviated from the Applicant’s original offer of settlement.

In addition, the Full Bench held that confidentiality was primarily for the benefit of the Respondent and that there was reason to believe that the Applicant would have wanted to disclose to his colleagues upon his return to work, his dismissal and re-employment. In these circumstances, it could not be said that confidentiality of the settlement was a term that “went without saying”.

As the second and third qualifications proposed new terms that where not for the benefit of the Applicant, the Full Bench held that the Respondent’s purported acceptance of the offer was not effective and there was no binding agreement to settle.

Key takeaways

  • A binding agreement will not be reached unless acceptance is unequivocal, leaving no terms left to be negotiated.
  • A variation to negotiated terms or proposal of an additional term can constitute acceptance provided the variation or additional term is solely for the benefit of the offeror.
  • The communications between the parties are relevant when determining their intention to enter into an in-principle agreement to settle.
Posted in Investigations & Dispute Resolutions.
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