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Competent and capable - Federal Court upholds Settlement Deed

A former Qantas employee has been unsuccessful in attempting to overturn a 2008 settlement deed entered into by the employee and the airline regarding a workers’ compensation claim by the employee. In the decision, the Federal Court upheld the deed, determining that the employee had the requisite mental capacity at the time of signing the deed to agree to its terms.


The employee lodged a worker’s compensation claim in 2006, alleging that she sustained a workplace injury between 2001 and 2003. The employee argued that Qantas had engaged in sexually harassing conduct, resulting in the employee developing a chronic adjustment disorder with mixed anxiety and depressed mood. The employee voluntarily resigned from her employment in 2003.

In 2009, the employee agreed to receive a payment of $75,000 from Qantas in full and final settlement of any claims relating to her employment at the airline and entered into a settlement deed. In 2019, the employee made a claim to set aside the deed on the basis that her psychological injuries at the time meant that she was a ‘handicapped person’ under the Victorian Country Court rules and, therefore, lacked the mental capacity to enter into the deed.


Despite finding the employee suffered from a major depressive order at the time of negotiating and signing the deed and was anxious, angry and upset as events played out, the Federal Court upheld the deed. The Federal Court held there was insufficient evidence to suggest that the employee did not have the capacity to understand the operation of the deed or the compromise it reflected. The Court formed this opinion having regard to the employee’s level of engagement in the settlement process (including her negotiation of a higher settlement figure).


Whilst the deed was ultimately upheld, employers should be careful where negotiating with employees:

  • Deed provisions: Include in the Deed provisions around capacity.

  • Advice: Give employees the opportunity to ask questions or review a deed, including obtaining advice.

  • Conduct: Ensure that no undue pressure or influence is exerted on the employee.

  • Capacity: If you have any concerns about an employee’s capacity, seek advice.


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