The Interpretation of Releases

November 3, 2015 Nick Esterbauer Litigation Tags: , , , , , , , 0 Comments

In Biancaniello, Romano, Prinova Technologies Inc. v. DMCT LLP, Collins Barrow, a recent decision by the Divisional Court, the dismissal of a motion for summary judgment was upheld despite the presence of a Release that appeared to bar the action in question.  The Defendants sought summary judgment on the basis that the action was barred by execution of a broadly-worded Release as part of the settlement of a prior action between the same parties.

Under the Release previously signed by the Plaintiffs in 2008, they agreed to release and discharge the Defendants:

“of and from all manner of actions, causes of actions, suits, debts, duties, accounts, bonds, covenants, contracts, claims and demands which against each other they had, now have or hereafter may, can or shall have for or by reason of any cause, manner or thing whatsoever existing to the present time with respect to any and all claims arising from any and all services provided by [the Defendants] to [the Plaintiffs] through to and including December 31, 2007 and, without limiting the generality of the foregoing, with respect to any and all claims, counterclaims or defences that were pleaded or could have been pleaded in the action commenced in the Ontario Superior Court of Justice, as court file No. 08-CV-349246 PD3” (para 7).

The motions judge determined that the Release did not bar a negligence claim that had arisen in 2011, three years after the Release had been executed, notwithstanding its broad language and seemingly all-encompassing nature.  The Ontario Superior Court of Justice had noted that the alleged negligence of the Defendants had not yet been adjudicated and should not have been subject to the Release that referred to claims “existing to the present time“, being 2008.

The Divisional Court recognized that a negligence claim may have been contemplated by the parties at the time that the Release was executed.  However, the nature of the negligence claim (and the significant tax liabilities resulting from same, in the approximate amount of $1,200,000.00) was unknown by the parties at the time of the 2008 settlement.  Justices Wilton-Siegel, Corbett, and Baltman found that the negligence claim was not barred by the Release, as it lacked any reference to the relevant transaction, language specifically releasing against claims resulting from “potential or undiscovered negligence”, and was limited in its scope through the reference to causes existing only at present, when the damages, in fact, resulted at a later time.

Although the motion for summary judgment and subsequent appeal did not involve an estate or trust, this decision is nevertheless relevant within the context of estate litigation, in which so many disputes are settled outside of court and settlements formalized by execution of Minutes of Settlement and Full and Final Mutual Releases.  When assisting clients in settling disputes, it is important to adequately consider claims that could potentially arise in the future and whether the terms of the release should explicitly refer to and waive such causes of action.

Thank you for reading.

Nick Esterbauer

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