Deed of release – proper construction

It is common ground that the principles of construction of a Deed of Release flow from the decision of the High Court in Grant v John Grant & Sons Pty Ltd [1954] HCA 23; 91 CLR 112 at 123 ff.

(a) [F]irst, the common law requires general words in a release to be construed by reference to the subject-matter of the particular dispute(s) which the recitals said the parties had resolved on the terms of the deed. In this way, ‘the general words of a release should be restrained by the particular occasion’. Regard will be had to the background facts known to the parties, to the nature of the claims made (and proceedings commenced) prior to the release being executed, and the particular objective intent of the parties by whom the release is executed. The intention of the parties ascertained from this process will control the operation of general words in a release. The general words should not be permitted to subvert what the parties should be taken to have intended when the release is properly construed in its context;

(b) secondly, Equity operates to achieve an analogous result. An alleged releasor enjoys an equity ‘to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances.’ The ‘state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor’ will be relevant matters in this context. Equity therefore ‘permits an investigation of the circumstances, including consideration of the actual intentions of the parties, in order to determine whether enforcement of the general words of a release would be against conscience’.”

Also relevant are the observations of Pembroke J in The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322 at [22] and [30] as follows:

“The principle for which Grant v John Grant & Sons (above) stands is sometimes described more widely than is justified. It is not, and never has been, authority for the proposition that the general words of a release can only ever apply to matters then known to the parties.

…

…the joint judgment in Grant v John Grant & Sons (above) also recognised that there will always be cases where, properly characterised, the parties should be taken to have intended that the general words of a release should operate to encompass all conceivable further disputes, whether disclosed or not and whether within the knowledge of a party or both parties, or outside of it… In such a case there is no room for the application of equitable principle. The equitable principle only has a role to play when it appears from the terms or the context or other admissible evidence, that the enforcement of the legal right would, by a literal application of the general words of a release, be against conscience. It would not be against conscience if the court is satisfied that the parties intended ‘upon a particular and solemn composition for peace’ to release uncertain demands and presently unknown claims…”. [Citations omitted]

Pembroke J’s observations were endorsed by the Victoria Court of Appeal in Doggett v Commonwealth Bank of Australia [2015] VSCA 351 at [63] per Whelan JA.