Last week, the Supreme Court of Canada released a decision, in which it affirmed the application of modern contractual interpretation rules to releases in a case between a city and a driver relating to an automobile accident.

Parties Involved in Car Accident

In 2009, a driver struck a city employee as he was performing road work in the City of Corner Brook, Newfoundland (the “City”). At the time, the driver was using her husband’s car.

The driver and her husband commenced an action against the City for property damage to the car and physical injury suffered by the driver.

Around the same time, the city employee commenced a separate action against the driver seeking compensation for the injuries he sustained in the accident.

Driver and City Enter into Settlement and Sign Release

In 2011, following settlement discussions, the driver and her husband accepted an offer of $7,500 from the City in consideration for the signing of a full and final release. The relevant portion of the signed release read:

“. . . the [driver and her husband], … hereby release and forever discharge the [City] …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 … and without limiting the generality of the foregoing from all claims raised or which could have been raised. . . .”

Driver Commences Third Party Claim Against City

Later, in 2016, the driver commenced a third party claim against the City in the employee’s court action, claiming contribution or indemnity from the City in the event she was found liable to the employee in his claim against her.

The City brought a summary trial application claiming that the release barred the driver’s third party claim.

The driver argued that the release did not bar her claim, because the third party claim had not been specifically contemplated when the release was signed.

Lower Court Rules Against Driver

At trial, the Supreme Court of Newfoundland and Labrador concluded that the signed release barred the driver’s third party claim against the City and stayed her claim.

The application judge reached his conclusion by applying the “Blackmore Rule”, which is an interpretative approach applied to releases. He explained that in interpreting a release, the goal is to ascertain the intention of the parties and the court must first look to the words of the release. The court may also look to the context in which the release was signed to interpret those words and the review must be carried out from an objective perspective.

As a preliminary matter, the judge held that, based on the words of the release alone, it covered and therefore barred the driver’s third party claim. However, this did not end his analysis, because the Blackmore Rule required him to consider what was in the contemplation of the parties at the time the release was signed and the specific context in which it was signed. Because the driver had already been served with the employee’s claim when she signed the release, the judge concluded that she was aware of the facts underlying the third party claim at that time. As such, he held that the parties had contemplated any and all types of claims relating to the accident in the release, including the third party claim, and the driver was therefore barred from pursuing her claim against the City.

The driver appealed the decision.

Court of Appeal Rules in Favour of Driver

The Court of Appeal unanimously concluded that the application judge made three extricable errors of law, in holding that: (1) what was in the contemplation of the City was determinative of mutual intent, (2) it was not necessary to determine what was “specially” in the contemplation of the parties, and (3) it was sufficient that the broad general wording of the release covered the third party claim when the surrounding circumstances suggested otherwise.

The court explained thatthe Blackmore Rule had, over time, been subsumed into modern principles of contractual interpretation. As such, it found that the broad phrases in the release must be considered against the more specific references to the employee’s claim, and that the pre-contract exchange of correspondence made no reference to his or any future third party action.

The Court of Appeal therefore concluded that the words, the context, and the exchange of correspondence were all consistent with the release being interpreted as a release of only the driver and her husband’s claims in their action.

The Court of Appeal therefore allowed the driver’s appeal and reinstated the third party notice.

The City appealed the decision to the Supreme Court of Canada.

Supreme Court of Canada Discusses the Blackmore Rule 

The court began by noting that there exists no special rule of contractual interpretation that applies only to releases. It stated that a release is a contract, and the general principles of contractual interpretation apply.

It further held that the Blackmore Rule, first established in 1870, has since been overtaken by the general principles of contract law, which directs courts to read the contract (or release) as a whole, giving the words used their ordinary and grammatical meaning consistent with the surrounding circumstances known to the parties at the time of formation of the contract.

As such, the court directed that the Blackmore Rule should no longer be referred to, as its function has been subsumed entirely by modern rules of contractual interpretation.

Supreme Court of Canada Rules in Favour of City

The court therefore applied modern contractual interpretation rules to the parties’ release and ultimately ruled in favour of the City, stating:

“To conclude, there is no reviewable error in the application judge’s conclusion that the release includes [the driver]’s third party claim. The claim comes within the plain meaning of the words of the release, the surrounding circumstances confirm that the parties had objective knowledge of all the facts underlying [the driver]’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.”

As a result, the court allowed the appeal and the driver was barred from pursuing her third party claim.

Get Advice 

In the event of serious injury following a car crash, retaining a lawyer can help you to get the long-term support you need from your insurance company and the compensation that ought to be paid by the parties at fault for your accident.

At Campbell Litigation, we investigate your claims arising from a car accident, and we seek the compensation you need to recover from your injuries. In the event you have sustained a catastrophic physical impairment or any permanent, serious impairment of any important physical, psychological or mental function, we will help obtain your insurance benefits and fair compensation from those at fault for the motor vehicle accident. We are experienced in handling cases for the most severely injured. We understand the challenges and worries faced on a day-to-day basis by those dealing with newfound hardships.

Legal advice can help you make sure you have what you need following a car accident. To speak with the Waterloo car accidents lawyers at our firm, call us at 519-886-1204 or contact us online. We offer prospective accident clients a free initial consultation.