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Civil Litigation - Settlement - Release. Haider v. Rizvi
In Haider v. Rizvi (Ont CA, 2023) the Court of Appeal referred to a practical and useful doctrine in settlement law, that a release of liability is implied in a settlement contract:[34] Justice Vella went on to refer to the oft-cited decision of Chapnik J. in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721 (Gen. Div.), aff’d [1995] O.J. No. 3773 (C.A.), in which she stated, at para. 24:It is well established that settlement implies a promise to furnish a release unless there is agreement to the contrary. On the other hand, no party is bound to execute a complex or unusual form of release: although implicit in the settlement, the terms of the release must reflect the agreement reached by the parties. This principle accords with common sense and normal business practice. . Haider v. Rizvi
In Haider v. Rizvi (Ont CA, 2023) the Court of Appeal grappled with an all-too-common settlement situation, that of determining the terms of a undrafted 'standard' release - which are so often left as an afterthought. Here the court addresses the problem as an issue of contractual interpretation, based on the Minutes of Settlement (which were in fact written):3. In this case the motion judge ought to have prescribed the specific form of release that was required to be exchanged
[30] I turn to the final issue: whether the motion judge erred in directing that the parties execute a “standard form Full and Final Mutual Release which releases all claims arising out of the subject matter of [the Actions], and containing a clause, barring claims-over”.
[31] The task confronting the motion judge was to determine what type of release should be signed. Where, as here, the form of release is not prescribed in the settlement agreement, the content and scope of the release depend on an interpretation of the settlement.
[32] Although the motion judge referred to Terranata as authority for the order she made, she did not apply the appropriate interpretive analysis that is set out by Vella J. in that decision. The motion judge referred to two passages from Terranata to conclude, without further analysis, that the appellant should be ordered to sign a “standard form Release” releasing all claims arising out of the subject matter of the Actions and containing a no claims over provision. By contrast, it is clear from Vella J.’s examination of the circumstances before her, including the settlement agreement and the actions that were settled, that her intention was not to default to a standard form of release, but to determine the objective intentions of the parties based on the settlement they had concluded.
[33] In Terranata, Vella J. considered a motion to enforce a settlement, where the issue, as in the present case, was the scope and form of the release agreed to be signed by the plaintiff in an action in favour of the settling defendants. The accepted offer to settle required a “full release” but was silent as to its terms. Vella J. accurately described her task: “to imply the terms of the release that are consistent with the settlement made by the parties”: at para. 30. It is in this context that she stated, at para. 31, that the court will imply that the parties agreed to sign a “standard form general release consistent with the settlement”, and that “the court would imply only those terms that are ‘standard’ or ‘usual’ as those terms have been interpreted in the jurisprudence.”
[34] Justice Vella went on to refer to the oft-cited decision of Chapnik J. in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721 (Gen. Div.), aff’d [1995] O.J. No. 3773 (C.A.), in which she stated, at para. 24:It is well established that settlement implies a promise to furnish a release unless there is agreement to the contrary. On the other hand, no party is bound to execute a complex or unusual form of release: although implicit in the settlement, the terms of the release must reflect the agreement reached by the parties. This principle accords with common sense and normal business practice. [35] Applying this test to the circumstances before her, Vella J. considered the express terms of the parties’ settlement agreement. She observed that the parties bargained for a “full” and not a “partial” release: at para. 36. She noted that the parties agreed to settle “this proceeding”, which she interpreted to mean the whole action, and because it was a “full release”, all matters as between the settling parties arising from the subject matter of the claims that were to be released: at paras. 37-39. In considering whether a no claims over clause should be included, she referred to the authorities and explained why such a clause was consistent with the purpose of the release: at paras. 42-56.
[36] In the present case, in the hearing before the motion judge, the appellant objected to the respondent’s proposed form of release, arguing that the scope of the release was overbroad, because it would apply to claims he might have in the future against the respondent arising out of anything that was raised or could have been raised in the Actions, including damage and loss not now known or anticipated. He also objected to the inclusion in the release of a no claims over clause.
[37] Following the approach in Terranata, the motion judge ought to have considered these arguments in the context of the specific terms of the settlement the parties had reached, including the Actions that had been settled and the Undertaking that would survive the settlement. In the interest of clarity, it would have been helpful if she had reviewed and approved a particular version of a release (there were at least two in the materials), with any changes that were appropriate to reflect her interpretation of the Minutes of Settlement and its surrounding circumstances.
[38] In this regard, the panel asked the parties at the hearing of the appeal to provide the form of release that they believed the motion judge had approved, and the form of release that they were asking this court to approve, if we were to reject the appellant’s first two grounds of appeal. Two things were apparent from their responses: first, the parties did not agree on what the “standard form” ordered by the motion judge should include; and second, they now agree on all of the terms of a Full and Final Mutual Release, except for whether there should be a no claims over clause, and whether such a clause should include an indemnity. The appellant also seeks to add a specific reference to the Undertaking, and to attach the Undertaking to the release, which the respondent says is unnecessary, because it will survive the release in any event by operation of paragraph 13 of the settlement agreement.
[39] Each party provided two draft releases. The appellant provided two versions, both referring to and attaching the Undertaking. The appellant’s preferred version does not have a no claims over clause. The appellant’s second version contains a no claims over clause without an indemnity. The respondent provided a modified version of the release he had originally tendered, and a second release based on a LawPro release form, each containing a no claims over clause with an indemnity.
[40] After having conducted the necessary review in this case – based on the terms of the Minutes of Settlement, including the Undertaking that was to specifically survive the settlement and the pleadings in the Actions – I have concluded that it is appropriate that the Full and Final Mutual Release include a no claims over clause.
[41] As I interpret their settlement, the intention of the parties was that, in consideration of the payment of the settlement funds and the survival of the respondent’s indemnities of the appellant for various matters provided by the Undertaking, the matters raised in the Actions could not be raised again. The settlement would be incomplete and ineffective if the appellant were to commence proceedings against a third party arising out of matters covered by the release. Just as it is implicit in the conclusion of the settlement, and the provision of a release, that the releasees will not commence fresh proceedings against any releasor in respect of the matters covered by the release, it necessarily follows that the releasors will not sue another party in respect of such matters where the releasees could be drawn back into litigation.
[42] In sum, the wording and circumstances of the Minutes of Settlement make clear that, subject only to the various matters carved out of the release by the Undertaking, the parties were agreeing to extinguish each other’s full underlying liability in relation to the subject matter of the settlement. A no claims over clause is a natural extension of their agreement and is consistent with the parties’ goal of providing a full and final release.
[43] In the circumstances of this case, however, I see no basis for the inclusion of an indemnity for breach of the no claims over clause. While this would no doubt aid in the enforcement of the no claims over clause and an indemnity to support and enforce a no claims over clause is frequently included without objection in releases in completion of settlements, in this case, the parties bargained for certain indemnities to survive the settlement – those that are included specifically in the Undertaking. In my view, the indemnity wording proposed by the respondent to reinforce the no claims over clause goes beyond what the parties reasonably bargained for in this case.
[44] As such, I would approve the version of the Full and Final Release that contains a no claims over clause, and attaches a copy of the Undertaking, in the form submitted to the court by the appellant, and I would direct the appellant to sign and deliver to the respondent a copy of that release. As the parties acknowledged, the potential effect of the Minutes of Settlement and the Full and Final Mutual Release on the other proceedings commenced by the appellant will be determined, if necessary, in the other proceedings and is not engaged by this appeal. . Reid v. Bracebridge
In Reid v. Bracebridge (Div Ct, 2021) the Divisional Court considered an appeal on the terms of a litigation settlement:[37] It is well settled that for there to be a binding settlement, the parties must intend to create a legally binding contract and agreement has been reached on all essential terms: Olivieri v. Sherman, 2007 ONCA 491 at para. 41, citing Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 CanLII 2734 (ONCA). Also see: Shete v. Bombardier, 2019 ONSC 4083 (Div. Ct.) at paras. 12-13.
[38] Where the settlement provides for a release, the cases establish that the terms of the release are not terms of the settlement unless the parties have agreed that further agreement to the terms is required. See: Birjasingh v. Coseco Insurance Co. 1999 CanLII 14888 (ONSC) at para. 25; Hedayat v. Murlee Holdings Limited, 2011 ONSC 5826 (ONSC) at para. 19; Sahota v. Sahota, 2016 ONSC 314 (Div. Ct) at para. 32.
[39] As a result, disagreement over the wording of a release does not generally result in repudiation of the settlement. As noted by CJBC McEachern in Fieguth v. Acklands Ltd., 1989 CanLII 2744, (1989) 59 DLR (4th) 114 (BCCA) at para. 44:It should not be thought that every disagreement over documentation consequent upon a settlement even if insisted upon, amounts to a repudiation of a settlement. Many such settlements are very complicated, such as structured settlements, and the deal is usually struck before the documentation can be completed. In such cases the settlement will be binding if there is agreement on the essential terms. When disputes arise in this connection the question will seldom be one of repudiation as the test cited above is a strict one, but rather whether a final agreement has been reached which the parties intend to record in formal documentation, or whether the parties have only reached a tentative agreement which will not be binding upon them until the documentation is complete. Generally speaking, litigation is settled on the former rather than the latter basis and parties who reach a settlement should usually be held to their bargains. Subsequent disputes should be resolved by application to the court or by common sense within the framework of the settlement to which the parties have agreed and in accordance with the common practices which prevail amongst members of the bar. It will be rare for conduct subsequent to a settlement agreement to amount to a repudiation. [My emphasis.] [40] Further, it is also well established that litigation counsel has implied authority to compromise a client’s position based on his or her retainer, unless a limitation of authority has been communicated to the other side: Scherer v. Paletta, 1966 CanLII 286 (ON CA), [1966] 2 O.R. 524 (CA) at paras. 10 & 11.
[41] Rule 49.09 provides that where a party to an accepted offer to settle refuses to comply, the other party may make a motion for judgment in terms of the settlement. The rule gives the judge hearing the motion discretion to grant judgment or continue the proceedings.
[42] The test under Rule 49.09 is whether an agreement to settle was reached and, if so, should it be enforced based on the evidence: Bank of Montreal v. Ismail, 2012 ONCA 129 (CA). . Biancaniello v. DMCT LLP
In Biancaniello v. DMCT LLP (Ont CA, 2017) the Court of Appeal reviews principles of contractual interpretation as they apply to a release from liability, executed as part of a settlement of a lawsuit:Interpretation of the release
(a) General principles
[23] The seminal decision on the proper approach to the interpretation of a release is the House of Lords’ decision in London and South Western Railway v. Blackmore (1870), L.R. 4 H.L. 610. At p. 263, Lord Westbury stated: “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 the release was given.”
[24] In Hill v. Nova Scotia (Attorney General), 1997 CanLII 401 (SCC), [1997] 1 S.C.R. 69, Cory J. cited this principle with approval and noted, at para. 20:What the statement quoted means is that in determining what was contemplated by the parties, the words used in a document need not be looked at in a vacuum. The specific context in which a document was executed may well assist in understanding the words used. It is perfectly proper, and indeed may be necessary, to look at the surrounding circumstances in order to ascertain what the parties were really contracting about. [Emphasis added by Cory J.] [25] This approach was recently addressed again by the House of Lords in Bank of Credit and Commerce International SA v. Munawar Ali, [2001] UKHL 8; [2001] 1 All E.R. 961.
[26] In Ali, a bank terminated the employment of a number of employees and gave them severance packages. In exchange for a release, the bank gave the terminated employees, including the respondent, an extra month’s salary. The release contained the following language:The Applicant [Mr. Naeem] agrees to accept the terms set out in the documents attached in full and final settlement of all or any claims whether under statute, Common Law or in Equity of whatsoever nature that exist or may exist and, in particular, all or any claims rights or applications of whatsoever nature that the Applicant has or may have or has made or could make in or to the Industrial Tribunal, except the Applicant’s rights under the Respondent’s [the bank’s] pension scheme. [27] A year later, during the course of the wind-up of the bank, it was discovered that the bank had been carrying on its business in a corrupt and dishonest manner. A number of employees wished to sue the bank for damages caused by the “stigma” of working for a corrupt bank, a previously-unknown cause of action. The claim was rejected until the case reached the House of Lords, which ruled that such a claim was sustainable in principle. The respondent then wished to pursue a claim for “stigma damages”, and the issue was whether he was barred from doing so by the terms of the release.
[28] Lord Bingham of Cornhill wrote the main decision for the majority. He explained that in interpreting the release, as in interpreting any contractual provision, “the object of the court is to give effect to what the contracting parties intended”: at para. 8. The court does not inquire into the parties’ subjective states of mind, but makes an objective assessment based on the contract as a whole, the impugned words in their ordinary meaning and in the context of the agreement, the parties’ relationship, and all relevant facts surrounding the transaction so far as known to the parties.
[29] Lord Bingham reviewed the jurisprudence from the English and Australian courts on the interpretation of releases. The jurisprudence established that, by using appropriate language, a party can release claims that the party neither knew nor could have known, nor even imagined. However, “in the absence of clear language”, the court “will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware”: at para. 10. At para. 14, Lord Bingham quoted from a decision of Dixon C.J. of the High Court of Australia in Grant v. John Grant and Sons Pty. Ltd. (1954), 91 C.L.R. 112, at pp. 129-130:From the authorities which have already been cited it will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor. [30] Turning to the release before the court, Lord Bingham pointed out that although the wording was wide enough to cover more than all incidents of the employer/employee relationship, the bank’s liquidators acknowledged that they would not seek to apply the release to, for example, a claim for a deposit held in an account at the bank. He concluded from this that the broad words used could not be read literally.
[31] Lord Bingham held, at para. 19, that because the claim for stigma damages was something that the parties to the release “could never have had in contemplation at all”, the parties could not have intended that such a claim would be surrendered by the release.
[32] Lord Nicholls of Birkenhead wrote concurring reasons. He pointed out the problem that often arises when interpreting a release: in settling a dispute, the parties want to wipe the slate clean, but then when an unexpected claim comes to light, it is unclear whether the broad general language used was intended to cover the unexpected claim.
[33] In addressing the problem, he refuted the suggestion that unknown claims are not covered by broad general language. I quote his discussion, at para. 27:The wording of a general release and the context in which it was given commonly make plain that the parties intended that the release should not be confined to known claims. On the contrary, part of the object was that the release should extend to any claims which might later come to light. The parties wanted to achieve finality. When, therefore, a claim whose existence was not appreciated does come to light, on the face of the general words of the release and consistently with the purpose for which the release was given the release is applicable. The mere fact that the parties were unaware of the particular claim is not a reason for excluding it from the scope of the release. The risk that further claims might later emerge was a risk the person giving the release took upon himself. It was against this very risk that the release was intended to protect the person in whose favour the release was made. [34] That said, Lord Nicholls cautioned that this approach “should not be pressed too far”. He explained, at para. 28:However widely drawn the language, the circumstances in which the release was given may suggest, and frequently they do suggest, that the parties intended or, more precisely, that the parties are reasonably to be taken to have intended, that the release should apply only to claims, known or unknown, relating to a particular subject matter. The court has to consider, therefore, what was the type of claims at which the release was directed. [35] For example, Lord Nicholls explained, a mutual general release on a settlement of final partnership accounts might properly be interpreted as being confined to claims arising in connection with the partnership business. It would not extend, for example, to a later claim by one partner against the other that the tree roots of his neighbouring property were encroaching.
[36] Applying this discussion of principles to the issue in Ali, Lord Nicholls held that it was clear from the wording that the parties did not intend the release to be limited to known claims, but that it was limited to claims arising out of the ending of the employment relationship. However, the parties were contracting based on the law as it then stood, and a claim arising as a result of a change in the law could not have been within the contemplation of the parties.
[37] Lord Hoffmann, writing in dissent, began by characterizing the words of the release as very broad, without any deliberate gaps. Nevertheless, he explained that there may still be limitations in the scope of the release which could be inferred from the background.
[38] Often a release is given as part of the settlement of a dispute. In such a case, “the scope of the dispute provides a limiting background context to the document”: at para. 41. Lord Hoffmann adopted the oft-quoted statement of Lord Westbury in London Railway: “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.” Lord Hoffmann noted, at para. 42: “This is a rather sweeping statement. It is almost always dangerous to say ‘always’. But, in cases of a release given in connection with the settlement of a dispute, it is a fair generalization.”
[39] In Ali, the context for the release was not ending litigation, but ending an employment relationship. Therefore, “all claims” meant claims arising from the employment relationship, and included both known and unknown claims. Lord Hoffmann reasoned that because the bank paid specific amounts for the known claims, the extra month’s salary it paid for the release must have been for unknown claims, including those not then known to the law. For the bank, the purpose of the release was finality. For the employee, the more unlikely or remote a claim, the more likely the employee would be willing to release it for extra money.
[40] Lord Hoffmann’s approach was to give effect to what the parties agreed on ordinary principles of construction. He rejected the submission that because the bank conceded that in spite of the very broad language of the release, some claims such as personal injury claims or claims on accounts held at the bank were not covered, therefore all unknown claims were not covered. He explained that while the bank did not advocate for a literal meaning (i.e. covering any claim whatsoever), it argued for a contextual meaning that would exclude claims outside the employment relationship, but would not exclude unknown claims altogether. Further, if the context demonstrated that both parties intended that the release applied to claims unknown to both of them, he saw nothing unfair in giving effect to that intention. He concluded that it would give the language of the release “a strained construction” to interpret it to exclude the stigma claim: at para. 75.
[41] In summary, the real issue in Ali was not whether the general words of the release should be interpreted to include unknown claims. All the Law Lords agreed that the release covered factually unknown claims. Rather, the issue was whether it was fair to conclude that it was in the parties’ contemplation that the release included a claim for stigma damages, where such a claim was unknown in law (and in fact) to the parties when they drafted and signed it.
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