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INTERPRETATION - General principles - Ordinary meaning - Context - Consider the entire contract - Surrounding circumstances

Friday, July 23, 2021 @ 1:26 PM  


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Appeal by the City of Corner Brook from a decision of the Court of Appeal for Newfoundland and Labrador that reinstated the respondent Bailey’s third party notice against it. In 2009, Bailey struck a City employee while driving her husband’s vehicle. Bailey and her husband sued the City for property damage to the vehicle and the personal injuries sustained by Bailey. They settled their action with the City in 2011, released the City from liability related to the accident and discontinued their action. In 2016, Bailey brought a third party claim against the City for contribution or indemnity in the separate action brought against her by the City employee. The summary application judge found that at the time the release was executed, the parties contemplated that Bailey could no longer bring any claim against the City related to the accident. He concluded the release barred Bailey’s third party claim against the City and stayed the claim. The Court of Appeal allowed Bailey’s appeal and reinstated the third party notice.

HELD: Appeal allowed. No special interpretive rule applied to releases. Releases, like all contracts, were to be read as a whole, giving the words their ordinary and grammatical meaning consistent with the surrounding circumstances known to the parties at the time of formation of the contract. The Blackmore Rule had been overtaken by the general principles of contract law set out in Sattva Capital Corp. v. Creston Moly Corp and should no longer be referred to. A release could cover an unknown claim with sufficient language and did not necessarily need to particularize with precision the exact claims that fell within its scope. Contractual interpretation was a fact specific exercise and was a mixed question of fact and law for the purpose of appellate review, unless there was an extricable question of law. The application judge made no extricable errors of law that warranted appellate intervention. There was no reviewable error in the application judge’s conclusion that the release included Bailey’s third party claim. The claim came within the plain meaning of the words of the release, the surrounding circumstances confirmed the parties had objective knowledge of all the facts underlying Bailey’s third party claim when they executed the release, and the parties limited the scope of the release to claims arising out of a particular event. Whether analyzed on the basis of the Blackmore Rule or not, the result was the same. The application judge’s reliance on the Blackmore Rule was of no moment.

Corner Brook (City) v. Bailey, [2021] S.C.J. No. 29, Supreme Court of Canada, R. Wagner C.J. and R.S. Abella, M.J. Moldaver, A. Karakatsanis, S. Côté, R. Brown, M. Rowe, S.L. Martin and N. Kasirer JJ., July 23, 2021. Digest No. TLD-July192021011-SCC