Enforcing Releases (Civil)

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Date Retrieved:	2024-04-19
CLNP Page ID:	1852
Page Categories:	[Legal Principles]
Citation:	Enforcing Releases (Civil), CLNP 1852, <5w>, retrieved on 2024-04-19
Editor:	Sharvey
Last Updated:	2022/01/21

Taske Technology Inc. v. Prairiefyre Software Inc., 2004 CanLII 66295 (ON SC)

[17] A valid release is a bar to any subsequent action against the releasee which purports to deal with the released claims. (see Browne supra at para.9) It is well settled that law that parties who reach settlement must be held to their bargains.2 In Abundance Marketing Inc. v. Integrity Marketing Inc., [2002] O.J. No. 3796 (Ont. S.C.J.), Whitten, J. states at para 22 “A Release, as the name suggest, is intended to liberate once and for all, party from any liability to another party arising out of particular circumstances”. I agree with the defendants that the policy reasons for enforcing a valid release mirror the policy principles underlying the doctrines of res judicata and issue estoppel. Malone J.A. sets these out, in Apotex Inc. v. Merck & Co. (2002), 2002 FCA 210 (CanLII), [2003] 1 F.C. 242 (Fed. C.A.) para. 26-29 leave to appeal dismissed (2003), [2002] S.C.C.A. No. 323 (S.C.C.):

Issue estoppel applies to preclude relitigation of an issue which has been conclusively and finally decided in previous litigation between the same parties and their privies,…It applies not only to issues decided finally and conclusively, but also to arguments that could have been raised by a party in exercise of reasonable diligence. (Fidelitas Shipping Co, Ltd. v. V/O Exportchleb, [1966] 1 Q.B. 630 (C.A.); Merck v. Apotex Inc. (1999), 1999 CanLII 9235 (FCA), 5 C.P.R. (4th) 363 (F.C.A.)) Issue estoppel applies where an issue has been decided in one action between the parties, and renders that decision conclusive in a later action between the same parties, notwithstanding that the cause of action may be different.

(emphasis mine)

[18] Schroeder J. in Hoyer reviewed the law of releases Hoyer v. Toronto Transportation Commission (1951), [1952] O.W.N. 261 (Ont. H.C.). In that case, the Plaintiff was injured while riding as a passenger in a bus owned and operated by the Defendant. He was taken to the hospital given emergency treatment and a few days later made a settlement. About a week after the settlement the condition of the Plaintiff’s back became worse and he was hospitalized for an extended period of time. It was determined to be reasonably probable that the trauma to which the Plaintiff had been subjected had caused an aggravation of an earlier condition suffered by the Plaintiff. In the action subsequently commenced by the plaintiff, the trial judge only had to consider the issue of the settlement and of the release. He had this to say at paragraph 9:

In all these cases, where settlements of this nature have been arranged, there must be some finality, and, has been stated in judgments of high authority, “persons must not be allowed to play fast and loose with settlements made”, particularly when they are made deliberately, intentionally and with full knowledge of all of the facts; see Gissing v. T. Eaton Co. (1912), 25 O.L.R. 50. In that case the Court did not allow the Plaintiff to re-open the case even though he had not realized the seriousness of his injuries at the time that he had concluded his settlement.

Fehr v. Gribilas, 2022 ONSC 275 (CanLII)

[93] With respect to the second issue, Justice Laskin said that Wiggins Mechanical had no independent right to obtain a stay of the third party claim, which was brought by Richards; however, the stay of the third party claim followed from the stay of the main action, which was the catalyst for Richards’ claim over for contribution and indemnity.

[94] As a matter of doctrinal analysis, there are four features of Sinclair-Cockburn Insurance Brokers Ltd. v. Richards that need to be noticed and emphasized for the purposes of understanding the application of its law to the facts of the immediate case.

• First, the stay of the main action and of the third party claim was based on the court’s procedural jurisdiction to stay actions that are an abuse of process. Thus, both Justice Mesbur and Justice Laskin referred to Re Abitibi Paper Company Limited v. The Queen, where the Court of Appeal held that the Crown’s breach of an agreement not to prosecute constituted an abuse of process.

• Second, and this is a corollary of the first feature, the stay of the main action and of the third party claim was not based on the law of contract, although contractual principles including the concept of privity of contract are mentioned. Thus, a non-party to the release, someone without privity of contract (i.e., Richards) through procedural law was a beneficiary of the court’s exercise of its jurisdiction to stay an action as an abuse of process.

• Third, Sinclair-Cockburn had not contracted for the possibility of suing Richards. In other words, a party can carve out exceptions to the scope of the no-claims-over provision in a release but Sinclair-Cockburn had not done so and was held to its bargain which barred it from suing Richards who foreseeably would claim over against Wiggins Mechanical.

• Fourth, the court did not stay the claims against Richards in the main action for which she had no claim over against Wiggins Mechanical. Those claims did not and could not precipitate a claim over against Wiggins Mechanical and thus were not connected to the no-claims-over provision.

[95] As will appear from the discussion below, these features of the Sinclair-Cockburn case are particularly important to the immediate case, and thus these features are worthy of additional analysis. With respect to the first, second, and third features, it is the court’s abuse of process jurisdiction and not contract law that enforces releases that include a no-claims-over provision. That said, it is the policy of holding contracting parties to their bargains that explains the exercise of the court’s jurisdiction to stay or dismiss the proceedings that breach the contractual obligations. It is possible to limit the scope of a no-claims-over provision, but Sinclair-Cockburn had not bargained for a limitation to the no-claims-over provision.

[96] With respect to the fourth feature, Wiggins Mechanical had no contractual relationship with Richards to enforce directly against Richards, and thus Justice Laskin concluded that Wiggins Mechanical had no independent right to stay the third party proceeding brought by Richards. However, pursuant to the release, Wiggins Mechanical, had a way to stay the main action, which provided the mechanism to stay the claims for contribution and indemnity in the third party proceeding.

[97] There is an additional feature of Sinclair-Cockburn Insurance Brokers Ltd. v. Richards that should be noticed as it is connected to the other features of the case. The fifth feature of the case emerges from paragraph 6 of Justice Mesbur’s brilliantly incisive decision where she states:

6. Ms. Richards was not a party to the settlement agreement, and therefore cannot raise it as a defence to the plaintiff's claims against her, unless she can bring herself within the exception to the privity of contract doctrine as enunciated by the Supreme Court of Canada in the Fraser River case. Whether she can or not remains for another day. For the purpose of this motion, the settlement agreement is not a defence that the third party can now raise to the claim since it is not a defence available to the defendant. As a result, it cannot pursue a motion for summary judgment to dismiss the claim. The third party is in a position where it is drawn into a lawsuit which it believes the plaintiff agreed never to institute. Rather than pursue summary judgment to dismiss the claim and third party proceedings, it frames its motion under rules 1.04, 21.01(3)(b) and (d) of the Rules of Civil Procedure, and section 106 of the Courts of Justice Act.[19]

[98] The jurisprudential point that Justice Mesbur is making is that as a matter of the law of privity of contract, Richards (or Wiggins Mechanical, which as a third party could plead Richard’s defences in the main action) had the defence of being protected by the release - unless she could bring herself within the exception to the privity of contract doctrine as enunciated by the Supreme Court of Canada in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd. Justice Mesbur was emphasizing that the outcome of the motion in Sinclair-Cockburn was based on an abuse of process rationale and the result was not based on a substantive contract law defence.

...

[109] The facts of Ieradi v. Gordin case were as follows.

a. The plaintiff, Joseph Ieradi, retained Philip Gordin and the law firm, Berholz, Gordin & Fluxgold, with which Mr. Gordin practised in association, to close a share purchase transaction to acquire two land properties. The vendors were the Guerrieris.

b. The transaction did not close, and Ieradi sued the Guerrieris for specific performance. The litigation settled and the Guerrieris paid Ieradi $52,000. Under the minutes of settlement, the parties signed mutual releases. The parties agreed not to sue any person that may have a claim over for relief against the other party.

c. After the settlement was implemented, Ieradi sued Gordin and Berholz, Gordin & Fluxgold. Ieradi alleged that it was because of Gordin’s professional negligence that the purchase transaction had failed to close.

d. Gordin and Berholz, Gordin & Fluxgold issued third party claims against the Guerrieris claiming contribution and indemnity.

e. Relying on the no-claims-over provision, the Guerrieris brought a motion for a stay or dismissal of the main action (the action against the lawyers) and of the third party proceeding brought by the lawyers.

f. Relying on the no-claims-over provision, the lawyers sought an order staying or dismissing the main action.

[110] In Ieradi v. Gordin, applying Sinclair-Cockburn Insurance Brokers Ltd. v. Richards, Justice Lederer stayed the third party proceeding. Then Justice Lederer concluded that the stay of the third party proceeding did not mean that the main action should be stayed. Justice Lederer declined to exercise the court’s abuse of process jurisdiction to stay the main action.

...

[112] Justice Lederer’s analysis yielded the legal proposition that a litigant, to have the benefit of the protection of a no-claim-over provision in a release for which the litigant was not a signatory, the litigant must satisfy two preconditions; namely (a) he or she must have been sued with respect to the subject matter of the release; and (b) he or she must have a viable claim-over to trigger the protection of the no-claim-over provision.

[113] The explanation for the first precondition to the protection of the no-claim-over provision is that the cases examined by Justice Lederer demonstrate that a stay on the grounds of abuse of process will be granted only to preclude claims that are connected to the claims that are being released. Claims against the litigant seeking a stay that are independent of the subject matter of the release will not be stayed. This legal phenomenon is demonstrated in Sinclair-Cockburn where Sinclair-Cockburn’s claims against Richards about her fraudulently issuing a construction bond for Wiggins Mechanical were stayed - but its claims for other breaches of her employment contract were not stayed. There is therefore nothing controversial about Justice Lederer’s first precondition to the enforcement of a no-claims-over provision.

[114] Justice Lederer’s explanation for the second precondition to triggering the protection of the release, i.e., that the litigant must have a viable claim-over is found in paragraphs 23 of his judgment, where he states:

23. The question this proposes is whether the claim for negligence brought against the defendant solicitors, Gordin, Berholz and Fluxgold, is independent of their claims made in the third party proceeding. If a third party proceeding is not sustainable, it does not require the protection offered by the release. If a third party proceeding without merit can still be stayed based on a "no action clause" in a prior release and, on that basis, the main action stayed, then any defendant can get that advantage simply by issuing a third party proceeding even though it has no chance of success. I fear that is what is being hoped for here.

...

[117] The proposition from Ieradi v. Gordin that if there is no viable legal basis for the claim against the third party, then the promise by the plaintiff not to make a claim against anyone who might claim indemnity from the third party does not justify a stay of proceedings was followed by the Divisional Court in Searle v. McCabe, Filken & Garvie LLP by a single judge on a leave to appeal decision.

[118] The Court of Appeal’s decision in 1562860 Ontario Ltd. (c.o.b. Shoeless Joe's) v. Insurance Portfolio Inc. (Shoeless Joe’s) is also consistent with the principles developed by Justice Lederer in Ieradi v. Gordin.

...

[134] In Van Patter v. Tillsonburg District Memorial Hospital, the no-claims-over provision was not enforced on technical procedural grounds.

[135] In Van Patter, the plaintiff who had been injured in a motor vehicle accident settled with the defendants, the driver and owner of the vehicle, involved in the accident. The plaintiff signed a release that included a no-claim-over provision. Subsequently, discovering more injuries from the accident, the plaintiff sued the treating doctors who in turn brought third party proceedings making a claim-over for contribution and indemnity against the driver and owner of the vehicle. The third parties, driver and owner, delivered a defence in the main action and moved for a summary judgment relying on the no-claims over provision. Reversing the motion judge who granted a summary judgment dismissing the plaintiff’s claim, Justice Borins in the Court of Appeal held that in bringing summary judgment the third parties were limited to the defences available to the doctors who had no substantive law right to rely on the no-claims-over provision. Thus, the summary judgment could not succeed, and the action would have to be tried.