When parties settle disputes, releases are used to bring finality. But how far does a release go? Can it bar claims that weren’t specifically contemplated? The Supreme Court of Canada’s decision in Corner Brook (City) v. Bailey, 2021 SCC 29, offers important guidance for anyone drafting or relying on releases in Ontario and across Canada1. Overview of the Case In 2009, Mary Bailey struck a City of Corner Brook employee with her husband’s car. Bailey and her husband sued the City for property damage and personal injury. The parties settled in 2011, and Bailey signed a broad release discharging the City from liability relating to the accident. Years later, Bailey brought a third-party claim against the City for contribution or indemnity in a separate action brought by the injured employee. The City argued that the release barred Bailey’s third-party claim. The lower court agreed, but the Newfoundland and Labrador Court of Appeal reversed that decision. The Supreme Court of Canada ultimately reinstated the lower court’s decision, holding that the release did indeed bar Bailey’s claim. Key Legal Principles from the Supreme Court 1. No special rule for releasesThe Supreme Court confirmed that releases are contracts and should be interpreted using the same general principles as any other contract. The so-called “Blackmore Rule,” which limited releases to matters specifically in the contemplation of the parties, has been overtaken by modern contract law principles. Releases are not subject to any special interpretive rule. 2. The Sattva Approach AppliesThe Court reaffirmed the approach from Sattva Capital Corp. v. Creston Moly Corp.: contracts, including releases, must be read as a whole, giving words their ordinary meaning in the context of the circumstances known to both parties at the time. The focus is on objective knowledge and intention, not subjective belief1. 3. Broad Releases Can Cover Unknown ClaimsA release can bar claims that are unknown at the time of signing, as long as the language is sufficiently clear. The broader the wording, the more important it is to ensure the context matches the parties’ objective intentions. Parties can agree to release even claims they could not have anticipated, provided the wording supports that intention1. 4. Drafting Guidance for Ontario BusinessesThe decision highlights the importance of careful drafting: Implications for Ontario Businesses and Individuals For Ontario businesses, startups, and individuals—especially those settling disputes or entering into business transactions—this decision underscores the need for precise, thoughtful drafting of releases. Overly broad releases may bar future claims, even those not specifically contemplated, while narrowly tailored releases reduce the risk of unintended consequences1. If you are negotiating a settlement or drafting a release, it is crucial to: Conclusion The Supreme Court’s decision in Corner Brook (City) v. Bailey modernizes and clarifies the law on releases in Canada. At Ahlawat Law PC, we help clients navigate the complexities of contract drafting and dispute resolution, ensuring that your agreements reflect your intentions and protect your interests for the long term. This post is for informational purposes only and does not constitute legal advice. The information provided may not reflect the most current legal developments. For advice regarding your specific situation, please consult a qualified lawyer licensed to practise in Ontario Read the decision here: Corner Brook (City) v. Bailey, 2021 SCC 29 (CanLII), [2021] 2 SCR 540, <https://canlii.ca/t/jh43g>, retrieved on 2025-06-26