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A final release is a document used in various areas of law when the parties involved in litigation have reached a settlement of their issues. In exchange for settling the matter, the plaintiff will often be asked to sign a release waiving the defendant party’s liability in any future claims related to the matter at hand. As with any contract, interpreting the scope and meaning of a release can be approached in more than one way. For over a century, the leading case in Canada on contractual interpretation was London and Southwestern Railway v. Blackmore, which addressed the interpretation of a release specifically, and focused on interpreting the meaning of the words in the context of the parties’ intentions at the time the release was signed. However, in the 2014 decision Sattva Capital Corp. v. Creston Moly Corp., the Supreme Court established a new standard for contract interpretation in general, focusing on the ordinary meaning of the words in context with the circumstances known to the parties at the time the contract was created.

A recent Supreme Court of Canada decision has applied this new standard to the interpretation of a full and final release specifically, which should be considered by parties going forward when drafting and signing release documents.

Car Accident Involves Three Parties

In 2009, a woman, B, struck a municipal worker, T, while driving her husband’s car. T was performing road work at the time. B filed a suit against the City of Corner Brook, Newfoundland, for injuries she sustained in the accident. The parties reached a settlement for $7,500 and in exchange, B signed a full and final release exempting the municipality from further liability. The wording of the release stated that B forever discharged the City from all actions, claims and demands, foreseen or unforeseen, of any kind or nature whatsoever.

In 2011, T filed a claim against B for the injuries he sustained in the accident. In 2016, B’s insurer commenced a third-party claim against the City for contribution or indemnity in the event B was found liable in T’s claim against her. The City, citing the release, moved for summary judgment to have the third-party claim dismissed. B’s argument was that the third-party claim hadn’t been contemplated by either B or the City when the release was signed, and therefore should not be barred by the release.

Summary Decision Invokes Blackmore, Finds in Favour of City

The original judgment on the matter looked to Blackmore principles when interpreting the release agreement between B and the City. Examining the broad wording of the release, the court determined that the third-party claim was included, and stayed the claim against the City.

B appealed, and the Court of Appeal reversed the decision, finding that the lower court had placed the Blackmore rule within the broader contract-interpretation principles set out in Sattva, giving too wide a scope to the interpretation of the release. The appeals court found that the release contemplated only claims directly between B and the City, and that the trial judge had erred in placing too much weight on the language of the release, and not enough on what was in the parties’ contemplation at the time the release was signed. The City then appealed to the Supreme Court.

Blackmore Rule No Longer Relevant, as it Has Been Subsumed by Sattva Principles: SCC

The Court noted that there was no specific trick or rule to interpreting the language of a release specifically. Instead, the general rules around contract interpretation should apply. Hence, the Court stated that the Blackmore rule had been rendered irrelevant after the principles set out in Sattva. The Court emphasized the fact that deference should be given to the ordinary meaning of the words in a contract. While contextual factors could assist in providing that meaning, they should never cause a court to deviate from the ordinary meaning of the words to the extent that the Court was essentially creating a new contract between the parties.

In this case, the wording was extremely broad. The release exempted the City from ‘any claims’, ‘forever’ arising out of the accident. While the third-party claim may not have specifically been within either party’s contemplation at the time was not relevant. The Court went on to provide the following advice with respect to the language used in releases:

[T]he drafter of a release might consider wording that makes clear whether the release will cover unknown claims and whether the claims must be related to a particular area or subject matter. This is a sensible approach. I would add that releases that are narrowed to a particular time frame or subject matter are less likely to give rise to tension between the words and what the surrounding circumstances indicate the parties objectively intended.

The Supreme Court has made the interpretation of the language in a release clear in that it should follow regular contract interpretation principles. This should encourage parties to exercise caution going forward when drafting and signing releases. Language that is too broad may unintentionally bar a party from bringing a claim that was not in contemplation at the time the release was signed, as it did here.

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