Case information

Contracts - Interpretation - Releases - Parties entering into release agreement by which driver released municipality from liability in relation to an accident and, more particularly, in relation to a specified action relating to that accident - Driver’s insurer subsequently bringing third party claim against municipality in separate action relating to same accident - Municipality claiming release agreement barred third party claim - Trial judge finding release barred third party claim - Court of Appeal holding third party claim not barred by release and reinstating third party claim - What standard of review applies? - What is the law of contractual interpretation as it applies to releases? - Whether the Court of Appeal erred in failing to consider the indemnity - How are provincial appellate courts and other common law jurisdictions interpreting releases? - What are the policy implications of the interpretation adopted by the Court of Appeal?

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

The respondent, Ms. Bailey, struck a city employee with her husband’s motor vehicle when the employee was performing roadwork. The employee commenced an action against her (“employee action”). She referred the matter to her insurer. Ms. Bailey and her husband then commenced a separate action against the appellant, the City of Corner Brook (“City”) for alleged property damage and physical injury arising from the accident. The Baileys settled their claim with the City; they executed a release through their respective legal representatives and discontinued their action. Four years later, in the course of the employee action, counsel for Ms. Bailey’s automobile insurers filed a defence and issued a third party notice to the City claiming that the City was liable to the employee. The City took the position that the release precluded such a claim. The trial judge granted the City’s application for summary trial. The Court of Appeal allowed Ms. Bailey’s appeal, interpreting the release as releasing only the claims in the action the Baileys had commenced against the City and not applying to a claim to recover damages of a third party.