Releasing claims not in contemplation of the parties

In August 2023, I posted an article concerning the need to take care when drafting deeds of release. A recent decision of the Full Court of the Federal Court provides a useful reminder of that warning.?

Redbubble Ltd v Hells Angels Motorcycle Corporation (Australia) Pty Limited [2024] FCAFC 15 concerned, in very brief terms, the alleged infringement of registered trade marks owned by Hells Angels. In short, various third parties uploaded designs to the Redbubble website which contain images including the words "Hells Angels" and/or a skull wearing a winged helmet.?

One of the issues on appeal was whether, in relation to some of the examples of infringement relied on by Hells Angels, Redbubble could rely on a release entered into in an earlier settlement agreement. The settlement agreement concerned a dispute which was unrelated to Redbubble’s operation of its website. The principal parties to the settlement agreement were TP Apparel and Hells Angels US. TP Apparel conducted an online marketplace at the teepublic website and Hells Angels US had complained that its conduct of that website had infringed its intellectual property rights.?

Before the execution of the settlement agreement, Redbubble had acquired TP Apparel and had therefore become TP Apparel’s parent company. The manner in which the settlement agreement was drafted had the consequence that Redbubble was a party to it. Further, the terms of the release relied on by Redbubble recorded that Hells Angels US not only gave the release on its own behalf but also on behalf of its licensees, and therefore the release bound Hells Angels Australia since it was Hells Angels US’s licensee of the relevant trade marks. Accordingly, Hells Angels Australia accepted that the settlement agreement was capable of bringing about a contractual release of its rights against Redbubble.?

The debate between the parties turned instead on the identification of the liabilities which the relevant clause in the settlement agreement released. The relevant portion released Redbubble from all actions that Hells Angels Australia may have had against it as at 24 May 2021 if those actions could be said to be such that they were "arising from or related to the Disputes or any other matter".

As to the meaning of "the Disputes", these were defined in the three recitals to the settlement agreement in a way which defined them as "including" certain disputes disclosed in identified correspondence passing between the parties. The Court noted that the use of the word "including" in the definition of "the Disputes" was open-ended and literally extended beyond the disputes disclosed in the identified correspondence to any other dispute between the parties. The same observation could be made in relation to the meaning of "any other matter". Consequently, it was clear that the release was expressed in general terms.

However, there is a prima facie presumption at common law that general words in a release are construed as being limited to the matters which were specifically in the contemplation of the parties at the time the release was given: London and South Western Railway Co v Blackmore (1870) LR 4 HL 610 at 623 per Lord Westbury ("The general words in a release are limited always to that thing or those things which were specially in the contemplation of the parties at the time when the release was given"); Grant v John Grant & Sons Proprietary Limited (1954) 91 CLR 112 at 123-124 and 131 per Dixon CJ, Fullagar, Kitto and Taylor JJ ("The question depends primarily on the application of the prima facie canon of construction qualifying the general words of release by reference to particular matters which recitals show to be the occasion of the instrument"). A similar principle existed in equity.?

On appeal, Redbubble essentially argued that the release clause in the settlement agreement applied to the present claim because that is what it said. The Court (Perram and Downes JJ, Nicholas, Burley and Rofe JJ agreeing) accepted that the terms of the release were, if read literally, wide enough to encompass Hells Angels Australia’s claims in relation to certain of the trade mark infringements on the Redbubble website. However, the Full Court said that this was not the question:?

“The prima facie canon of construction takes the width of the release as its point of departure. Thus, Redbubble’s submission that the release is broad is beside the point. The correct question is whether the dispute about Examples 1 to 7 was in the contemplation of the parties, objectively determined, at the time that the release was given.”?

Here, the evidence made it obvious that the parties to the settlement agreement had in their contemplation only a dispute about the teepublic website. Accordingly, the release did not apply to the claims concerning the Redbubble website.?

The judgment is a reminder that, when drafting releases in settlement agreements, if the intention is to seek to release all conceivable claims (whether known or unknown) clear words will be required. For example, in Doggett v Commonwealth Bank of Australia (2015) 47 VR 302, Whelan JA said at [63]:

“It is possible to enter into an arrangement which does settle ‘all conceivable further disputes’. The equitable principles articulated in Grant v John Grant restrain a party from unconscientious reliance on legal rights. Particular circumstances may reveal that it would be unconscientious to allow the general words of a release to be relied upon. Grant v John Grant was such a case. But there will be no room for the application of those equitable principles if it is clear that the parties intended the general words of a release to encompass all conceivable further disputes.”