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Can a Third-Party Claim be Release-Barred?

July 23, 2021

Corner Brook (City) v. Bailey, 2021 SCC 29 July 23 2021 

The Supreme Court of Canada had a case before them, Corner Brook (City) v. Bailey, 2021 SCC 29, that required the revisiting of contractual interpretation – namely, what is covered by a release. 

The facts of the case are as follows: in 2009, Bailey collided with a City employee, Temple, who had been doing road work. Two proceedings arose out of this incident, the first between Temple and Bailey, and the second between Bailey and the City. Temple began an action against Bailey for the injuries resulting from the accident, and Bailey commenced an action due to damage to the car and the injuries sustained. 

By 2011, Bailey received the Statement of Claim from Temple’s proceeding and gave it to her insurance company. 

Bailey’s action against the City was settled for $7,500, with Bailey and her husband signing a release. The court document excerpts the relevant passage [at para. 7]: 

. . . the [Baileys], on behalf of themselves and their heirs, dependents, executors, administrators, successors, assigns, and legal and personal representatives, hereby release and forever discharge the [City, its] 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 from all claims raised or which could have been raised in the [Bailey Action] . . . . [Emphasis added.]

By 2016, Bailey brought forward a third-party action in the proceeding between them and the City employee, Temple; because the City is not a party to this proceeding, it was necessary for the Bailey’s to present their claims against them as third-party claims. Bailey was claiming that, in the event she is found liable in Temple’s case, the City should act as a contributor and provide some of the compensation to Temple. Bailey also claimed indemnity, so that the entire fault of the damage be shifted to the City.

The City asked for a summary trial on the basis that the release signed by Bailey prior bars the third party claim, while Bailey argued this was not the case because the proceeding between Temple and Bailey was not considered in the release. 

The Supreme Court of Newfoundland and Labrador felt the third party claim brought forward by Bailey was barred by the release, while the Court of Appeal of Newfoundland and Labrador disagreed and permitted the third party claim to go forward. The Supreme Court of Canada disagreed and reinstated the initial decision to stay the third party claim. 

Particular attention was given at each court level to the quoted passage from the release, the Blackmore rule and its relevance, and Sattva: 

“The general words in a release are limited always to that thing or those things which were specially in the contemplation of the parties at the time when the release was given. But a dispute that had not emerged, or a question which had not at all arisen, cannot be considered as bound and concluded by the anticipatory words of a general release” [quoted at para. 21]. 

The 1870 case was described as being helpful in the development of contract law and, more specifically in this case, in how releases are read; however, the court document also explains that Blackmore  has been “overtaken” by Sattva, another case regarding the reading of contracts. 

What is a Third-Party Claim?

A third-party claim typically refers to a claim made by an individual or entity against someone who is not directly involved in a contract or agreement but has caused some sort of harm or damage. In insurance, it often refers to a claim made against the insurance policy of another party who is responsible for causing harm or damage. 

Civil lawyers are involved in handling these claims, representing either the plaintiff or the defendant depending on the circumstances.

Breach of Contract Claims & Karrass Law

Your civil litigation lawyer at Karrass Law will help you navigate through the intricacies of contract law with knowledge, skill, and experience. Our team will handle all processes of the legal process, including investigation, negotiation, and litigation if necessary, to pursue the best possible outcomes for you. To get started, book a legal consultation with our team of lawyers and specialists. 


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