Guidance Note 14 – Settling monetary claims

The key topics covered in this guidance note are: 

• what is a monetary claim for the purpose of Part 6 of the Legal Services Directions 2025 (Directions)
• when entities are required to seek legal advice to support a decision to settle a monetary claim, and
• factors to be considered when deciding to whether to settle a monetary claim.

1. The obligations in Part 6 apply to all monetary claims, including monetary claims reported as significant issues under section 35 of the Directions and claims brought by or against a person to which Part 9 of the Directions applies.

2. Part 6 applies to all non-corporate Commonwealth entities (NCCEs) and prescribed corporate Commonwealth entities (CCEs)¹, including accountable authorities. 

What is a monetary claim?

3. The definition of claim in section 4 of the Directions applies to Part 6. 

4.  Examples of a monetary claim include (but is not limited to):

• a claim for damages or compensation
• a claim for loss
• recovery of a debt, and
• some costs disputes (though this will depend on the specific circumstances of the dispute). 

5.  This list includes claims brought by or against the Commonwealth or an entity, as well as where an accountable authority or eligible employee (as defined in Part 9 of the Directions) is named in the claim.

• NOTE: A monetary claim does not include those determined under a legislative or contractual mechanism. 

Who is the decision-maker?

6. Part 6 operates in connection with and in addition to entities’ obligations under the Public Governance, Performance and Accountability Act 2013 (PGPA Act) about the proper use of public resources and the spending of public money Part 6 does not in itself confer a power on entities to enter into or commit to make a settlement payment or specify who in an entity can approve a settlement. These powers are found elsewhere, such as section 23 of the PGPA Act. 

• NOTE: The obligation in section 36 of the Directions requiring the approval of the Attorney General (or their delegate) to settle a significant issue is additional to the obligations in Part 6.

7. If there are exceptional circumstances which justify a departure from the obligations in Part 6 then the proposed settlement is to be referred to the Office of Legal Services Coordination (OLSC) for views to inform the decision-maker’s assessment. 

When is it appropriate to settle a monetary claim? 

8. What is a settlement for the purposes of this Part is defined in section 4 of the Directions.

9. The Directions specify different requirements when determining whether it is appropriate to settle a monetary claim: 

• whether the monetary claim is brought against or by the Commonwealth/entity, and
• the need for legal advice depending on the quantum of the proposed settlement (over or under $100,000). 

10. For claims brought against the Commonwealth, the $100,000 threshold includes the claim, and, where applicable, any related claims (inclusive of all taxes).²

11. For claims brought by the Commonwealth, the $100,000 threshold refers to the value of a concession of the proposed settlement (and any related claims).³ For example, the proposed settlement amount is $100,000 less that the amount claimed or assessed by the Commonwealth’s lawyers at the time of bringing the monetary claim as being payable if the claim was successful.

Monetary claims brought against the Commonwealth or an entity

12. Monetary claims can only be settled where:⁴

• it is in accordance with legal principle and practice to do so, and
• either there is a meaningful prospect of liability, or the claim will be resolved by being dismissed, discontinued or otherwise resolved, and there is no financial commitment or concession (other than the Commonwealth agreeing not to seek costs against the claimant).
  • NOTE: These factors must still be met for spurious monetary claims – it is not sufficient to settle just to avoid the cost of defending. 

13. A meaningful prospect of liability being established against the Commonwealth or the entity is necessary but not sufficient justification for why it is appropriate to settle a claim. Whilst it is a matter of judgement, a meaningful prospect of liability is generally a low threshold (for example, there is at least an arguable case that the Commonwealth or the entity would be found liable). 

Monetary claims brought by the Commonwealth or an entity

14. Monetary claims brought by the Commonwealth or an entity may be settled where:⁵

• it is in accordance with legal principle and practice, and
• the settlement is in the best interests of the Commonwealth. 

15. There is no requirement to assess whether there is a meaningful prospect of liability. 

16. Factors which may be relevant when assessing whether settlement is in the interests of the Commonwealth include:

• the prospects of the claim succeeding in court
• the costs of continuing to pursue the claim, including whether pursuing the claim is the most efficient use of public resources
• the likelihood of enforcement of any orders awarded by the court if the Commonwealth or entity were to be successful
• any prejudice to Government in continuing to pursue the claim, including the impacts of national security or other sensitive information being provided in court
• whether the settlement is consistent with established precedent where similar claims have been or will be settled on comparable terms, and
• whether there is a public interest in liability being determined by a court.

When is legal advice required? 

Under $100,000

17. The Directions permit an accountable authority (or delegate) to approve a settlement under $100,000 if they are satisfied on a common-sense basis that the settlement is in accordance with legal principle and practice.⁶ This means there is no obligation to seek external written legal advice (i.e. from the Australian Government Solicitor (AGS), an external legal services provider or counsel). 

18. As such, it is a matter for the entity to determine what type of legal assessment is required to support the decision-maker to be satisfied on a common-sense basis. For example, an entity may wish to obtain legal advice from its in-house legal area or have in place some other documented ‘common-sense’ process.

• NOTE: it remains open to the entity to still seek external legal advice. 

Over $100,000

19. The accountable authority (or delegate) may only approve settling a monetary claim for more than $100,000 if it is supported by written advice from AGS, an external legal services provider or counsel confirming that the settlement is in accordance with legal principle and practice.⁷

What is a fair settlement amount?

20. Factors to be considered when determining whether a settlement amount is in accordance with legal principle and practice include:

• the prospects of the claim succeeding in court
• the costs of continuing to defend the claim, and
• any prejudice to Government in continuing to defend the claim.

21. Entities should ordinarily include a release as a condition to a monetary settlement, except in exceptional circumstances.

Releases and indemnities

22. Entities should ordinarily include a release as a condition to a monetary settlement, except in exceptional circumstances.

23. There is no specific test or criteria for when there may be exceptional circumstances that would justify not including a release or indemnity. Rather the Directions provide flexibility for entities to make their own assessment based on legal advice, statutory obligations and taking into account the Commonwealth’s interests.

• NOTE: this also means that it may be appropriate for an entity to include a limited release as part of a condition for settlement. 

Interaction with other obligations 

24. Part 6 of the Directions does not displace an entity’s obligations under other Parts of the Directions.

25. Entities should also be mindful of any other statutory obligations when settling monetary claims. 

The model litigant obligation

26. The model litigant obligations set out in Division 2, of Part 5 apply when handling and settling monetary claims. 

27. As a model litigant, an entity is required to pay legitimate claims without litigation, make an early assessment of the prospects and liability of a claim, and to consider settlement offers where appropriate. However, as a model litigant, an entity is not required to settle a claim, nor to put a settlement offer forward, merely because there is a meaningful prospect of liability. (see paragraph 12 above). 

28. It may still be appropriate for a claim to be defended even where there is a meaningful prospect of liability. For example, it would be in the public interest for the court to determine the matter as part of a broader group of claims. 

29. Alternatively, if an entity proposes to settle a matter that has a low (but still meaningful) prospect of liability being established against the Commonwealth or the entity, it follows that the proposed settlement amount would be on the lower end of the likely range that a court may order in the circumstances. 

Approach to confidentiality 

30. Section 47 of the Directions also applies to the settlement of monetary claims. It prescribes transparency in Commonwealth settlements as the default approach, with confidentiality only to be sought where necessary to protect the Commonwealth’s interests. 

31. Generally, it is only appropriate for a settlement to be confidential where it is in the Commonwealth’s interests. 

32. There is no test or set criteria in the Directions for when confidentiality is in the Commonwealth’s interests. This should be assessed on a case-by-case basis, including being informed by legal advice and with reference to relevant Commonwealth policy.

Where can I get further help?

33. If you have any questions about settling monetary claims, please contact OLSC at olsc@ag.gov.au. 

Office of Legal Services Coordination
Phone: 02 6141 3642
E-mail: olsc@ag.gov.au 
Issued: March 2026

This guidance material is of a general nature only and does not convey or contain legal advice.

Endnotes

¹ See section 7 of the Legal Services Directions 2025.
² See subsections 64(4) and (5) of the Directions. 
³ See subsection 65(3) and (4) of the Directions. 
⁴ See subsection 64(1) of the Directions. 
⁵ See section 65 of the Directions. 
⁶ See subsection 64(4) for monetary claims brought against the Commonwealth and subsection 65(3) for 7 monetary claims brought by the Commonwealth.
⁷ See subsection 64(5) for monetary claims brought against the Commonwealth and subsection 65(4) for monetary claims commenced by the Commonwealth.