July 23, 2021 by Greg Meckbach
As the late singer Prince said, forever is a mighty long time. While his 1984 tune “Let’s Go Crazy” is not about tort claims, a Supreme Court of Canada decision released Friday should serve as a reminder of the significance of the word “forever” in release agreements settling lawsuits out of court.
“A general release, if interpreted literally, could prevent the releasor from suing the releasee for any reason, forever,” Justice Malcolm Rowe wrote for the Supreme Court of Canada in Corner Brook (City) v. Bailey.
The Corner Brook case arose when David Temple, a city employee, was struck Mar. 3, 2009 by a vehicle in Corner Brook, Nfld. At the time, Temple was performing road work. The vehicle was driven by Mary Bailey and owned by her husband, Gerald Bailey.
Mary Bailey filed a lawsuit against the City of Corner Brook for injuries she sustained in the 2009 accident. Bailey settled her lawsuit with the city out of court in 2011 for $7,500. In exchange for the $7,500, Mary Bailey signed a release that is nearly 600 words long; it precluded her from filing claims “of any kind or nature whatsoever” against the city.
Meanwhile, Temple filed a lawsuit against the Baileys. Allegations that any party is at fault have not been proven in court.
In 2016, the Baileys’ insurer issued a third-party notice against the City of Corner Brook. The insurer argues the city is liable for damages to Temple. In the alternative, the Baileys’ insurer claims that if the Baileys were liable, they are entitled to contribution from the city.
For its part, the city argued that the release – which settled Mary Bailey’s personal injury claim against the city for $7,500 – stops the Baileys from filing their third-party claim against the city. The Supreme Court of Canada sided with the municipality in its ruling released July 23, 2021.
“The releasor takes on the risk of relinquishing the value of the claims he or she might have had, and the releasee pays for the guarantee that no such claims will be brought. The uncertainty or risk that is allocated to the releasor is precisely what the releasee pays for,” Justice Rowe wrote, of release agreements, for the Supreme Court of Canada in Corner Brook.
The high court’s decision restores a 2018 Supreme Court of Newfoundland and Labrador ruling and overturns a 2020 Court of Appeal of Newfoundland and Labrador ruling.
The release that Bailey signed with the city includes “all actions, suits, causes of action . . . foreseen or unforeseen . . . and claims of any kind or nature whatsoever arising out of or relating to the accident which occurred on or about Mar. 3, 2009,” Justice Rowe wrote for the court in its unanimous ruling.
“If this wording [of the release] is held to be insufficient to include a claim arising out of the accident, it is hard to imagine what wording would be sufficient, aside from listing every type of claim imaginable one by one (third party claims, cross claims, counter claims, subrogated claims, claims in equity and common law, statutory claims, etc.). There is no principled reason to require parties to particularize the scope of the release in this fashion.”
Initially in 2018, Justice George Murphy of the Supreme Court of Newfoundland and Labrador dismissed the third-party claim filed by the Baileys’ insurer against the City of Corner Brook. That ruling stemmed from the 2011 release agreement between the city and Mary Bailey.
Justice Murphy’s ruling was reversed by the Court of Appeal of Newfoundland and Labrador in a decision released Feb. 4, 2020. Had the appeal court decision stood, it would have paved the way for the insurer’s third-party claim against the city.
Writing in 2020 for the Newfoundland and Labrador appeal court, Justice Gillian Butler reasoned that the focus of the 2011 release agreement was on the Baileys’ own claims against the City of Corner Brook; it does not contemplate losses unrelated to the Baileys’ damages. The appeal court found that Justice Murphy erred in finding that the city, in drafting the release agreement, was contemplating something “not determinative of mutual intent.”
But the appeal court’s finding is a mischaracterization of what Justice Murphy originally wrote in 2018 for the Supreme Court of Newfoundland and Labrador, Justice Rowe wrote for the Supreme Court of Canada. Instead, Justice Murphy “explicitly considers what was in the contemplation of both parties,” wrote Justice Rowe.
Justice Murphy “explains that the Baileys could have negotiated the terms of the release, but that they chose not to,” Justice Rowe wrote.
Instead, Justice Murphy concluded that what Mary Bailey and the city contemplated, in agreeing to the settlement, was that Bailey “could no longer bring any claim or demand whatsoever against the city relating to the accident.”
So Justice Murphy made his ruling based on his examination of the circumstances surrounding the release agreement, the Supreme Court of Canada argued.
“Even though [the Baileys and the city] may not have explicitly turned their minds to the possibility of a third-party claim in particular, it was their objective, mutual intent to cover such a claim within the scope of the release. This holding is a fact-specific application of the principles of contractual interpretation, and it was owed deference [by a hi9gher court],” Justice Rowe wrote.
Bailey’s release with the city read as follows:
“the Releasors, on behalf of themselves and their heirs, dependents, executors, administrators, successors, assigns, and legal and personal representatives, hereby release and forever discharge the Releases their servants, agents, officers, directors, managers, employees, their associated, affiliated and subsidiary legal entities and their legal successors and assigns both jointly and severally, from all actions, suits, causes of action, debts, dues, accounts, benefits, bonds, covenants, contracts, costs, claims and demands whatsoever, including all claims for compensation, loss of use, loss of time, loss of wages, expenses, disability, past, present or future, and any aggravation, foreseen or unforeseen, as well as for injuries presently undisclosed and all demands and claims of any kind or nature whatsoever arising out of or relating to the accident which occurred on or about March 3, 2009, and without limiting the generality of the foregoing form all claims raised or which could have been raised in the action entitled 2011 04G 0062, between MARY BAILEY, as First Plaintiff, GERALD BAILEY, as Second Plaintiff, and THE CORNER BROOK CITY COUNCIL as Defendant, which was commenced in the Supreme Court of Newfoundland and Labrador, Trial Division (General) (the “Action”), including but not restricted to claims for:
AND for the consideration aforesaid, the Releasors on behalf of themselves and their heirs, dependents, executors, administrators, successors, assigns and both legal and personal representative hereby covenant, agree and undertake to indemnify and save harmless and to keep indemnified the Releasees, their servants, agents, officers, directors, managers, employees, their associated, affiliated and legal entities and their legal successors and assigns, both jointly and severally, from any further claims, demands, actions or suits which may be brought by or on behalf of or in the name of the Releasors against the Releasees, their servants, agents, officers, directors, managers, employees, their associated, affiliated and legal entities and their legal successors, either jointly or severally, for and in respect of any of the matters or things hereinbefore set forth;
AND for the consideration aforesaid Releasors further agree not to make any claim or take any proceedings against any other person, corporation or entity who might claim contribution or indemnity or other relief against the Releasees, their servants, agents, officers, directors, managers, employees, their associated, affiliated and legal entities and their legal successors and assigns, either jointly or severally, under the provisions of any applicable law or at equity in relation to any causes, matters or things released hereunder;
AND the Releasors hereby declare that at all times relative hereto they have been represented by legal counsel of their own choosing who has advised them concerning this Release and that they fully understand the terms of this Release, and that in executing this Release they have done so with full knowledge of any and all rights which they may have as against the Releasees and the issues raised in the Action, and that the aforesaid consideration is accepted by them voluntarily in order to make a full and final compromise, adjust and resolution of all claims, causes, matters and things released hereunder.
Feature image via iStock.com/David Purchase