Interpreting Releases: The Decision in Corner Brook (City) v. Bailey, 2021 SCC 29

**Written by Adele Zhang, Summer Student at Lee Workplace Law

A release is a contract in which one party, the releasor, agrees to gives up their right to sue the other party, the releasee, regarding a certain matter or action. Releases often arise in the context of a settlement agreement where the releasor forfeits their claim against the releasee in exchange for something of value, such as a settlement payment.

Given the unique nature of releases, questions have arisen about the proper approach to interpreting the scope of a release, including whether there are any special rules that specifically apply to them.

This question was recently considered in Corner Brook (City) v. Bailey, 2021 SCC 29. In this case, the Supreme Court of Canada concluded that releases are regular contracts and do not require special interpretation. This means that that the general principles of contractual interpretation, also known as the Sattva approach, apply.


On March 3, 2009, Mrs. Bailey struck an employee of the City of Corner Brook (the "City") while driving her husband's car. The employee was performing road work at the time of the accident. Mrs. Bailey sued the City for property damage and physical injury. They reached a settlement, and Mrs. Bailey signed a release, releasing the City from liability relating to the accident.

In a separate action, the City employee sued Mrs. Bailey for his injuries. During this proceeding, Mrs. Bailey brought a third-party claim against the City for indemnity. However, the City argued that the release prevents Mrs. Bailey from bringing a third-party claim against them.

The case was originally heard by an application judge. He found that the release covered third-party claims. Then, the Court of Appeal unanimously allowed the appeal and concluded that the release did not clearly cover the third-party claim. Subsequently, this issue went before the Supreme Court.


Interpretive Approach

The Supreme Court of Canada was asked to determine which interpretive approach should be applied to releases: the Blackmore Rule or the Sattva Approach.

Initially, the Blackmore rule provided for special interpretation of releases. The Blackmore rule was unique as it allowed courts to consider the factual context surrounding the release, which was not the norm when interpreting contracts. Over time, however, the principles of contractual interpretation have evolved to the point where taking account of surrounding circumstances has become the general rule. As a result, the Supreme Court concluded that because the Blackmore Rule no longer adds or deviates beyond the general principles, it is no longer useful.

Instead, the Supreme Court reaffirmed that the general approach to contractual interpretation as laid out in Sattva Capital Corp v. Creston Moly Corp., 2014 SCC 53 applies to release. The Sattva approach requires courts to |read the contract 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."

In this case, the release covered "all actions, suits, causes of action . . . foreseen or unforeseen . . . and claims of any kind or nature whatsoever arising out of or relating to the accident which occurred on or about March 3, 2009." The Supreme Court determined that the wording of the release clearly encompassed all claims arising from the accident, including third-party claims.

It was also found that Mrs. Bailey had already been served the action brought by the City employee when she signed the release. Therefore, interpreting the release as barring Mrs. Bailey from bringing a third-party claim against the City is consistent with the language of the release and her knowledge of the surrounding circumstances.

Judicial Review

Higher courts only intervene in contractual interpretation rulings where there is an extricable error of law. In this case, the Court found that the application judge's reasoning followed the Sattva approach and that there were no reviewable errors. Therefore, the Supreme Court reinstated the original decision: that the release was enforceable and Mrs. Bailey was barred from bringing her third-party claim against the City.


Releases should be interpreted as a normal contract, following the Sattva approach. Although this seems straightforward, the actual interpretation of releases can be complicated and context specific. Employers and employees alike are encouraged to consult an employment lawyer before signing a release or when disagreements arise regarding the interpretation of a release. Lee Workplace Law would be happy to help.