Read time: 3 minutes (approx.)
Written by: Weston McArthur (Student-At-Law)
Corner Brook (City) v Bailey, 2021 SCC 29.
In Corner Brook (City) v Bailey, the Defendant struck the Plaintiff with her car. The Plaintiff, an employee of the City of Corner Brook, Newfoundland, was performing road work at the time of the accident.
The Defendant sued the City of Corner Brook (hereinafter “the City”) “for property damage to the car and physical injury suffered by [the Plaintiff]” [para 6]. In settlement discussions, the Defendant and the City came to an agreement: the Defendant would receive a settlement, but would sign a release agreeing that she could not bring any further claims against the City related to this accident.
The Plaintiff sued the Defendant and this lawsuit continued for years after the Defendant and the City’s release agreement. During this lawsuit, the Defendant brought a third-party claim against the City for indemnification in the event she was found liable for the Plaintiff’s injuries. The City contended that the release agreement prevented the Defendant from bringing this third-party claim against it.
The Supreme Court of Canada had to determine if the terms of the release agreement between the Defendant and the City would apply to the Defendant’s third-party claim, or if it was outside of the scope of this release.
Chief Justice Richard Wagner of the Supreme Court of Canada (SCC) decided that the release agreement barred the Defendant from bringing a third-party claim against the City. In so doing, the Court clarified the law around the interpretation of release clauses. Release clauses are to be interpreted the same way as any other contract, pursuant to the SCC’s decision Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53. Chief Justice Wagner wrote that “Sattva directs courts to ‘read the contract as a whole, giving the words used their ordinary meaning and grammatical meaning, consistent with the surrounding circumstances known to parties at the time of formation of the contract’ ” [para 20].
When the Court applied the law, it reasoned that it was clear that the release agreement applied to third-party proceedings. The Court expressed that it would be odd to have to force parties to use particularized language to re-clarify the scope of the agreement when the parties originally used broad language to describe the release’s scope.