What Happens When the Terms of a Deed of Settlement does not Reflect the Terms Agreed Between Parties

deed of settlement

In a recent matter, an employee was seeking recourse regarding terms of a Deed that were agreed to between the parties upon cessation of employment.

The employee had agreed to a settlement amount which comprised various amounts, on the basis that a large percentage of the amount was to be characterised as a redundancy payment for tax purposes. The employer agreed to this and drafted a proposed Deed which the parties executed shortly after.

A few months later, upon completion of the former employee’s tax return by her accountant, she realised that the settlement amount had in fact been characterised as a 3 months’ ex-gratia payment instead of a redundancy which had severe tax implications for her.

The key take-away from this case is that parties must always obtain their own legal advice prior to signing any document, but particularly, a Deed of settlement to ensure the terms proposed in the Deed reflect those that the parties had agreed to prior to execution of the Deed.

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