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SCC Grants Leave in Dispute Over Release in MVA Claims

The Supreme Court of Canada has granted leave to appeal in a case involving the interpretation of a release in a matter relating to a motor vehicle accident.

The brief facts of the case, City of Corner Brook v. Bailey, are as follows. Bailey was operating a vehicle and struck Temple who was in the course of his employment with the City of Corner Brook.

Temple sued Bailey. Bailey’s insurers advised her that they would take care of the matter.

Bailey then sued the City of Corner Brook for alleged property damage and physical injury. Bailey’s claim settled, and Bailey executed a release.

Several years later, in the claim commenced by Temple, Bailey’s automobile insurers commenced a third party claim against the City of Corner Brook.

Before the trial judge, the City successfully argued that the release executed by Bailey covered the third party claim filed by Bailey’s automobile insurers.

The Court of Appeal of Newfoundland and Labrador overturned the trial judgment. The Court of Appeal stated that the trial judge was required to determine what was specifically contemplated by both parties. It was not sufficient that the broad general wording of the release potentially covered a subsequent third party action for contribution if the surrounding circumstances suggested otherwise.

The Court of Appeal indicated that a trial judge is required to assess the surrounding circumstances for the purpose of determining what an objective bystander would conclude was the specific intent of both parties, and the scope of their understanding.

The Court of Appeal went beyond the strict wording of the release and examined the context in which the claim was settled, as well as the exchange of correspondence between the parties, in determining that the release only applied to Bailey’s claims in the Bailey action and not to the third party claim commenced by Bailey against the City.

It will be interesting to see how the Supreme Court determines this issue. The decision may have an impact on whether the strict wording of a release should be respected or whether inquiries into the intentions of the parties are necessary.

Counsel and parties should pay close attention to the wording of releases in circumstances where a party only wants to resolve one aspect of a matter, not all aspects.

In cases where a person is a plaintiff in one action and a defendant in another action arising from the same incident, counsel acting for the person as plaintiff should carefully review proposed releases to ensure that their client does not prejudice the rights of their insurer in the claim in which the person is a defendant. This could amount to a breach of the insurance policy and make the person personally liable for damages.