Imagine a scenario where a party dealing with Government becomes an impassioned and persistent agitator of concerns about probity-related matters. Can the relevant agency simply do a deal to make them go away?
The NSW Ombudsman recently tabled a report to the NSW Parliament which discusses its findings in relation to a disclosure that a Deed of Settlement and Release (Release Deed) which contained a provision that prohibited signatories from making complaints to integrity bodies.
What was in the Release Deed?
Release Deeds are commonly used to quickly resolve disputes by releasing the respective parties from their obligations. A common feature of Release Deeds is a provision preventing the relevant party from making future legal claims or disparaging the other party. In this case, the Release Deed was prepared by Revenue NSW and took this provision further by obliging the other party to:
- cease pursuing and/or withdraw any existing complaints or applications for investigation or relief lodged with the NSW Ombudsman, the Independent Commission Against Corruption (ICAC) and other external bodies; and
- not make any new claims or complaints to the NSW Ombudsman, the ICAC and other external bodies.
The Revenue NSW Release Deed also contained a confidentiality clause which prohibited the disclosure of its terms except in very limited circumstances.
The Ombudsman’s opinion on the Revenue NSW Release Deed’s legality and practical implications
The NSW Ombudsman recognised the utility of Release Deeds in appropriate cases by rapidly bringing disputes to an end alongside acknowledging that the freedom of contract principle underpins the ability of parties to make those agreements.
However, the unifying theme of its objections to Revenue NSW’s use of the Release Deed is that the freedom of contract is not absolute when it comes to the public interest, and that there is a legitimate public interest in ensuring concerned people are able to come forward to make complaints about government agencies.
Impeding the work of integrity agencies
Integrity bodies such as the NSW Ombudsman and the ICAC play an important role in the oversight of the public sector through a variety of functions such as investigations and dispute resolution. The report highlighted that their roles are essential to the public interest, and this is further assisted by the statutory right of people to make complaints to them about suspicions of corruption, maladministration and other wrongdoing. The ability to freely make those complaints drive the effectiveness of those integrity bodies. Conversely, any limitations on those complaints (such as in the Revenue NSW Deed of Release) will impede their function.
The NSW Ombudsman also discussed that while individual complainants may be satisfied with a proposed settlement, suppression of complaints in this way may lead to outcomes that fail to enable government to remedy potentially systemic issues and/or to hold wrongdoers accountable.
Potential legal invalidity and ineffectiveness of the prohibition on complaints provision
The report makes three points as to why the Release Deed prohibition on complaints is likely to be legally invalid and ineffective:
1. The statutory right to complain to an integrity body cannot be superseded by the freedom of contract
The report cites the High Court case of Commonwealth v Verwayen (1990)[1] where the ability to contract out of statutory rights ‘hinges on the scope and policy’ of the relevant statute.
The NSW Ombudsman opines that where the specific statutory right delivers a collective benefit to the community (as opposed to a predominantly individual benefit) then it is less likely able to be waived by contract. An example of an individual right that can be waived is the right to commence civil proceedings where someone is seeking compensation. By contrast and as discussed above, the ability to make complaints to integrity bodies is solidly oriented to the public interest rather than for individual benefit.
As it was put by the majority of the High Court in Westfield v AMP, it is the “policy of the law” that contractual efforts to circumvent statutory rights conferred, or statutory purposes with connection to the public interest are legally invalid and unenforceable.[2]
2. Agencies attempting to enforce the prohibition may be engaging in a criminal offence
Complainants are protected from detrimental action for making a complaint or otherwise assisting an integrity agency. For example, section 79I of the Independent Commission Against Corruption Act 1988 (NSW) and section 31R of the Ombudsman Act 1974 (NSW) both criminalise taking detrimental action against a person assisting either of the Ombudsman or the NSW ICAC with a maximum penalty of 200 penalty units and/or 5 years’ imprisonment. These protections are very similar to those offered to public officials who make a public interest disclosure to their agency in relation to concerns they may have regarding serious wrongdoing.
3. Integrity bodies are still able to act on a complaint regardless of the Release Deed’s enforceability
Even if complainants were forced to withdraw or not make any complaints, integrity bodies have statutory powers to inquire into and investigate possible wrongful conduct by NSW Government agencies regardless of the existence of the complaint.[3]
NSW Government agencies evading proper scrutiny
The legality of the Revenue NSW Release Deed aside, the NSW Ombudsman commented that the Release Deed discourages complainants from making complaints or further assisting integrity agencies for pre-existing complaints. This issue is compounded by the fact that complainants are unlikely to be aware of its potential enforceability issues.
The report emphasised that this attempt to shield agencies creates an inappropriate and unacceptable evasion of proper scrutiny.
Considering false, misleading or vexatious disclosures
It is plausible that the circumstances prompting the restrictions in the Release Deed included frustration or concern as to potentially vexatious or improperly motivated complaints. This is not in itself uncommon.
There are pathways to address that kind of conduct consistent with maintaining overall integrity of the complaint and oversight framework. For example, the public interest disclosure regime includes a carve out for false or misleading disclosures[4] whereby an agency could respond to such a communication without breaching that legislation. However fine distinctions and caution are required. By way of illustration, we are aware that the ICAC of South Australia has provided concise commentary on unpacking these types of concerns – including distinguishing between the existence of extraneous motives and an actual malicious or vexatious complaint. This commentary includes cautionary examples where matters of intent or motive have taken centre-stage, rather than an objective assessment of the substance of the allegations raised.
Takeaways from the report
The report highlights the inappropriateness of attempts to engineer ‘shields’ against scrutiny by integrity bodies in the public sector in respect of any sort of complaint. Use of these clauses would be especially egregious in the context of reporting concerns regarding potential corrupt conduct, maladministration and other serious wrongdoing.
When working within an agency to handle complaints or difficult issues, agencies should ensure they take care to respect a person’s statutory right to make a complaint and ensure, in facilitating any resolution of a matter, that no steps are taken which could interfere with the public interest in allowing integrity bodies to properly scrutinise alleged and suspected wrongdoing.
As a legal provider to the government sector, the McCullough Robertson NSW Government team can assist agencies to evaluate and practically implement those expectations in a pragmatic and concise fashion.
Please contact the McR Government team for a conversation about how we can best assist your agency.
[1] 170 CLR 394.
[2] Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129, [46].
[3] Independent Commission Against Corruption Act 1988 (NSW) s 20.
[4] Public Interest Disclosure Act 2022 (NSW), s 21(2).
