Is Getting a Release Signed An Implied Expectation When Settling a Legal Case?

A Release Is Used to Embody the Terms of Settlement Including Payment of Monies and Perhaps Conditions Such As Liability Denial and Confidentiality. The Law Presumes and Expects That a Signed Release Will Be Provided As An Implied Condition of Settlement.

A Helpful Guide For How to Interpret and Understand the Common Clauses Within a Release as a Settlement Document

Settlement Release Contract Document

When the parties to a legal dispute agree to resolve the matter prior to an adjudicative decision, there is an implied expectation that a finalizing release agreement will be prepared and executed (signed).  Generally, a Release document will be prepared by the settling party, and the terms embodied within will provide the terms by which the dispute was resolved, such as sum of monetary compensation as well as future conduct expectations.

Promise of Release, implied upon settling

When negotiating a settlement to a legal dispute, it is implied, and typically goes without saying, that a Release document embodying the terms and conditions of the settlement will be executed.  This implied expectation was confirmed within the cases of Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., 1995 CarswellOnt 4182 as well as OZ Optics Limited v. Timbercon, Inc., 2013 ONSC 6439 while citing Cellular Rental Systems wherein such cases it was said:

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.

[8]  The case law is clear that where a settlement is reached, it is normally implied that an executed final release will be provided. This principle was well stated by Chapnik J. of this court in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721, where at para. 24 the decision states:

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.

[9]  I am not persuaded that there was ever any express agreement not to furnish a release. That is evidenced by the fact that there were ongoing negotiations about the wording of that release over a period of several months. The issue is then which of the release documents, if either, reflects the agreement reached by the parties.

Drafting the Release
Memorializing Settlement Negotiations

The purpose and intent of a Release is to contractually memorialize the terms as agreed to within the settlement negotiations as well as  to confirm and to obligate an understanding of finality for the disputed legal issues.  Accordingly, a Release, typically, contains and reiterates, the terms discussed within the negotiated settlement such as the agreed payment of monies or promises of conduct including any supplemental clauses as discussed and agreed to such as non-admission of liability as well as non-disclosure confidentiality clauses; and ultimately of importance, a finality clause.

A finality clause confirms the understanding that the issues in dispute are fully resolved and a finality clause will, if drafted properly, impose an obligation upon the releasing party to forgo any further proceedings that may, directly or indirectly, require the involvement of the released party.  Essentially, the finality clause provides assurance to the released party that the releasing party will refrain from initiating or continuing legal processes that would bring the released party back to the table whereas upon settling the matter, the released party bought peace from the providing any attention or concern for the issues within the dispute.

Conditions Requiring Negotiation

As above, typical within a Release are clauses relating to non-admission of liability or non-disclosure or confidentiality; however, while common, such clauses must be negotiated as terms of settlement rather than be presumed as implied.  If a party fails to negotiate non-admission of liability or non-disclosure or confidentiality clauses and then subsequently demands inclusion of such clauses, it appears that such demand would be an attempt at unilateral change to the negotiated settlement agreement and in a motion to the court the doctrine within the case of Abouchar v. Conseil scolaire de langue française d'Ottawa-Carleton - Section publique2002 CanLII 49423 suggests that clauses relating to terms that were absent from negotiation discussions and the settlement agreement will be struck from the Release.  Specifically, the Abouchar case said:

[8] The parties now all agree before me that the only point of contention is the inclusion of the non-disclosure clause in the release. The plaintiff objects to the inclusion of this clause, whereas the defendants argue that such clause is an implied condition of the settlement reached between the parties and that it is a reasonable one in the circumstances.

[9] There is no dispute as to the applicable law. Both parties rely on the pronouncement of Chief Justice McEachern in the case of Fieguth v. Acklands Ltd. (1989), 1989 CanLII 2744 (BC CA), 59 D.L.R. (4th) 114, 37 B.C.L.R. (2d) 62 (C.A.), at p. 121 D.L.R.:

The next stage is the completion of the agreement. If there are no specific terms in this connection either party is entitled to submit whatever releases or other documentation he thinks appropriate. Ordinary business and professional practice cannot be equated to a game of checkers where a player is conclusively presumed to have made his move the moment he removes his hand from the piece. One can tender whatever documents he thinks appropriate without rescinding the settlement agreement. If such documents are accepted and executed and returned then the contract, which has been executory, becomes executed. If the documents are not accepted then there must be further discussion but neither is released or discharged unless the other party has demonstrated an unwillingness to be bound by the agreement by insisting upon terms or conditions which have not been agreed upon or are not reasonably implied in these circumstances.  (Emphasis added)

[10] This principle enunciated above was followed in a number of decisions of this very court, namely in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721 (Gen. Div.) (Chapnik J.); Pukee v. Durham (Regional Municipality) Police Service, [2001] O.J. No. 1587 (S.C.J.) (C. Campbell J.). However, Justice Chapnik specifically observed about the role of a release:

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.  (Emphasis added)

[11] When, on June 30, 1999, the plaintiff accepted the defendants' offer to settle, the parties also agreed that the plaintiff would execute a "final and complete" release (para. 3) with no further details being discussed. The terms of the release must be in accord with the offer to settle that was accepted by the plaintiff. In my view, a "complete and final" release does not entail the inclusion of a non-disclosure clause. Such clause does not constitute by necessary implication a term of the settlement reached by the parties. The gist of a "complete and final" release is for the plaintiff to discharge the defendants (and other persons referred to therein) from any action, complaint, claim, indebtedness, etc. In my opinion, the non-disclosure clause is not part and parcel of a release. If one wishes to insert one, it must be negotiated. According to the evidence adduced, the parties never discussed the potential need for a non-disclosure clause before the offer to settle was accepted by the plaintiff on June 30, 1999.

[12] The defendants allege that the inclusion of a non- disclosure clause is a common practice at the Commission. They blame the plaintiff for not having made his objections known regarding the inclusion of a non-disclosure clause to the defendants nor to the court in July 2000. In my view, based on the evidence adduced, these allegations have no relevance in the case at bar. Furthermore, the principle of non-admission of liability that was specifically raised in the offer to settle is not inconsistent with the lack of a non-disclosure clause.

[13] The plaintiff seeks a judgment in the terms of the offer to settle tendered by the defendants and accepted by the plaintiff, and the defendants seek an order requiring the plaintiff to execute a release as presented in Exhibit A to the affidavit of Sean McGee sworn on July 2, 2001. Unfortunately, this document was not filed with the court.

[14] Accordingly, the appropriate order to grant is a judgment in the terms of the offer to settle accepted by the parties. I have reviewed the release shown under Tab 2 of the motion book of the Board titled "Complete and Final Release" (attached hereto). In my view, this release (excluding the paragraph containing the non-disclosure clause) is reasonable and fair, and must be acceptable to the plaintiff. As a result, an order will issue requiring the plaintiff to execute a release in the form of the document attached hereto and titled "Complete and Final Release".

Breaches in Terms of Finality

When a party executes a Release the intention is for closure and to bring the disputed issues too an end.  As above, a prominent purpose of settling a legal dispute is to achieve finality and be relieved from further carrying the burden of worry and attention to the legal dispute.  Accordingly, a finality clause within a Release is usually prepared with terms that forbid the releasing party from pursuing any further and in any way that bring the released party.  As per the Court of Appeal in the matter of Sinclair-Cockburn Insurance Brokers Ltd. v. Richards, 2002 CanLII 45031, even in circumstances where a releasing party subsequently brings proceedings against a third party and that third party then brings a claim for contribution or indemnity, and perhaps other things, against the party released earlier, the subsequent proceeding should be stayed so as to ensure the peace previously bought by the releasee.  Specifically, the Court of Appeal said:

[6] Here, Richards issued a performance bond for $5.8 million on behalf of the surety Canadian General Insurance to the principal Wiggins, the mechanical subcontractor on their hospital project, in favour of the obligee Vanbots Construction, the general contractor on the project. Richards acted fraudulently because she knew that Wiggins was not bondable and that she did not have Canadian General's authority to issue the bond. Nonetheless, Canadian General had to honour the bond because it had given Richards general authority to issue performance bonds on its behalf.

[7] When Sinclair-Cockburn discovered Richards' fraud, it fired her. It then negotiated a settlement with Canadian General and Wiggins to limit its financial exposure as Richards' employer. Sinclair-Cockburn, Wiggins and Canadian General signed a settlement agreement in March 1997. Richards took no part in the settlement. Under the terms of the agreement, Sinclair-Cockburn and Wiggins each contributed $172,500 to the settlement. The parties also agreed to mutual releases. The release given by Sinclair-Cockburn, on which this appeal turns, provides that:

Sinclair shall not make any claim or take any proceedings against any other person, corporation, or other entity who might claim contribution or indemnity from . . . Wiggins . . . with respect to any matter to which this release relates, and shall indemnify . . . Wiggins . . . against any such claim. [page109]

[8] Despite giving this release, in 1998 Sinclair-Cockburn brought an action against Richards for recovery of the $172,500 it had contributed to the settlement. Sinclair-Cockburn alleged that the bond issued to Wiggins was fictitious and that Richards was negligent, and had breached her contract of employment and her fiduciary duty. Sinclair-Cockburn also claimed damages from her for losses it allegedly suffered on other transactions. Paragraphs 5A, 6D III) and 6D IV) of the statement of claim set out Sinclair-Cockburn's allegations concerning the bond issued to Wiggins:

5. During the course of her employment, Richards acted dishonestly, and unfaithfully, and in breach of the rules of professional conduct of the Registered Insurance Brokers of Ontario ("RIBO"), the self-governing body for insurance brokers in Ontario. As a result, Richards breached the contract of employment, the duty of care and the fiduciary duty as aforesaid. The breaches, the particulars of which are known to the defendant, are as follows:

A. In the matter of Wiggins Mechanical Contracting Ltd.

("Wiggins"), Richards purported to issue, on behalf of Canadian General Insurance Company as surety a performance bond of $5,800,000 relating to the proposed liability of Wiggins under a tender for a construction contract, when she knew or ought to have known that the bond was unauthorized and fictitious and that Wiggins was not bonded in respect of the proposed liability. In respect of her activities on behalf of Wiggins, Richards was found guilty of professional misconduct by RIBO;

. . . . .

6. As a result of the breaches as aforesaid, Sinclair- Cockburn claims damages as follows:

. . . . .

D. Damages by Way of Mitigation

Sinclair-Cockburn has incurred expenses and losses in its efforts to identify, assess and minimize its damages and in fulfilling its obligation to make appropriate reports to RIBO. Those expenses and losses include, without limitation:

III) The $172,500 cost of negotiating a settlement in respect of the fictitious Wiggins bond as aforesaid;

IV) Legal and accounting fees relating to the internal reviews and investigations, reports to and discussions with RIBO and the settlement in respect of the fictitious Wiggins bond, all as aforesaid, other than legal and accounting fees in respect of which the plaintiff maintains a claim of privilege.

[9] Richards defended the action, counterclaimed against Sinclair-Cockburn and took third-party proceedings against Wiggins. She alleged that she issued the bond "in a moment of weakness" because of pressure from Schrempf. In the third-party [page110] claim, she sought full contribution and indemnity from Wiggins for Sinclair-Cockburn's claim.

[10] Sinclair-Cockburn delivered a reply and defence to counterclaim in which it undertook that it was not seeking to recover from Richards any amounts for which she could claim contribution and indemnity under the Negligence Act, R.S.O. 1990, c. N.1 from Wiggins. Sinclair-Cockburn's counsel gave a similar undertaking directly to Wiggins' counsel. That undertaking provided:

Accordingly, the plaintiff acknowledges that it has no further claim against Wiggins/Schrempf and should the plaintiff obtain judgment against Ms. Richards in action 98- CV-152480, any award of damages should exclude any damages for which Richards could claim indemnity from the third parties, Wiggins/Schrempf. As such, the plaintiff undertakes not to pursue any claim which could result in a (successful) claim by Richards for contribution or indemnity against Wiggins/Schrempf pursuant to the Negligence Act.

[11] Wiggins did not plead to the third-party claim or to the main action. Instead, Wiggins brought a motion under s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, and rule 21.01(3)(b) and (d) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] to stay the third-party claim and the claims in paragraphs 5A, 6D III) and IV) of the statement of claim on the ground of abuse of process. Mesbur J. granted the motion. She held that Sinclair-Cockburn's undertaking was "a transparent attempt to avoid the clear and unambiguous wording of the settlement. Parties should be held to their promises".

[12] I turn to Sinclair-Cockburn's two submissions.

C. Analysis

1. Should Sinclair-Cockburn be permitted to maintain its action against Richards on its undertaking to Wiggins?

[13] The action against Richards unquestionably falls squarely within the terms of Sinclair-Cockburn's release. Sinclair-Cockburn has made a claim against another person -- Richards -- who might, and indeed did, claim contribution and indemnity from Wiggins in respect of a matter -- the performance bond fraudulently issued to Wiggins -- to which the release relates. Nonetheless, Sinclair-Cockburn submits that it should be allowed to continue its action against Richards because it has undertaken not to claim from her any money that she could recover from Wiggins. Thus, Sinclair-Cockburn argues that its claim against Richards does not expose Wiggins to any financial liability.

[14] I do not accept this submission. As Mr. Cadsby, counsel for Wiggins, said during oral argument, his client paid a substantial sum of money to buy peace, not just peace from potential liability [page111] for a judgment, but peace from even having to respond to a claim from Richards. Sinclair- Cockburn signed an unqualified release. Wiggins is entitled to all the benefits that flow from that release, which include its reputational interest and its interest in not being dragged into a lawsuit. Wiggins was entitled to expect the party who signed the release to live up to its bargain. It is not obliged to accept something almost as good. The undertaking proffered by Sinclair-Cockburn amounts to a unilateral amendment to the release. Nothing in the settlement agreement authorizes such an amendment.

[15] Moreover, each party had counsel when the release was negotiated. I find no evidence in the record to suggest that its terms were the product of an error by Sinclair-Cockburn's solicitor. Had Sinclair-Cockburn wanted to preserve its right to pursue Richards on the bond she issued to Wiggins, it should have tried to procure that concession in the settlement negotiations. Apparently, it did not do so.

[16] The terms of the release plainly preclude Sinclair- Cockburn's action against Richards to recover the money it contributed to the settlement. As Mesbur J. accurately said, "[p]arties should be held to their promises." The court is entitled to enforce these promises by exercising its stay jurisdiction under either s. 106 of the Courts of Justice Act or rule 21.01(3)(d) to prevent an abuse of process. A stay works no injustice on Sinclair-Cockburn because its effect is simply to hold Sinclair-Cockburn to its bargain. The motions judge thus committed no error in principle when she stayed Sinclair-Cockburn's claims in paras. 5A and 6D III) and IV) of its statement of claim and the third-party action. See Abitibi Paper Co. v. R. (1979)1979 CanLII 1946 (ON CA), 24 O.R. (2d) 742, 99 D.L.R. (3d) 333 (C.A.).

[17] That Richards indirectly benefits from the stay matters not. That she would benefit must have been or at least ought to have been reasonably foreseeable to Sinclair-Cockburn when it negotiated the settlement agreement. No question of privity of contract arises because Richards has not sought to enforce the stay.

[18] Sinclair-Cockburn submits that two decisions of this court support its position. Both, however, are distinguishable. The closest on the facts is Owen v. Zosky, [2000] O.J. No. 4838 (Quicklaw). The plaintiff in that case had given an undertaking similar to the one offered by Sinclair-Cockburn. The motions judge made the same order as Mesbur J., staying the main action and the third-party claim. On appeal, however, this court allowed the plaintiff's action to proceed.

[19] Owen v. Zosky differs from this case in two crucial respects. First, in Owen v. Zosky, the stay of the third-party claim [page112] was not appealed. Here, Richards has cross- appealed to allow the third-party claim to go forward if the main action against her is allowed to proceed. Second, in Owen v. Zosky, the third party admitted that it had no exposure from a continuation of the main action. Wiggins made no such admission in this case. Thus, Owen v. Zosky does not assist Sinclair-Cockburn.

[20] The other decision of this court relied on by Sinclair- Cockburn is Van Patter v. Tillsonburg District Memorial Hospital (1999), 1999 CanLII 3754 (ON CA), 45 O.R. (3d) 223, 42 M.V.R. (3d) 261 (C.A.). In that case, as Mesbur J. recognized, the result was different because of the different procedure invoked by the third party. In Van Patter, the plaintiff had been injured in a car accident and settled with both the owner and the driver. She signed a release agreeing not to make any claim against any person who might claim contribution and indemnity from them. She then discovered that she had further injuries because of the car accident. She sued her doctors for failing to diagnose these injuries. In turn, the doctors third partied the owner and the driver, who, relying on the release, moved for summary judgment to dismiss the plaintiff's claim in the main action.

[21] The motions judge granted summary judgment, dismissing the plaintiff's claim against the doctors, but the order was set aside on appeal. Borins J.A. held that in bringing their summary judgment motion, the third parties stood in the shoes of the defendant doctors. They had the same rights as the doctors but were also limited to the defences available to these defendants. The doctors, however, had no rights under the release because they were not parties to it. Thus, the summary judgment motion could not succeed.

[22] Here, by contrast, Wiggins has not stood in Richards' shoes in moving for a stay. Instead, it has sought relief directly against Sinclair-Cockburn under s. 106 of the Courts of Justice Act and the rules, which authorize a stay of an action where permitting it to proceed would be an abuse of process. Van Patter, too, does not assist Sinclair-Cockburn. I would not give effect to this ground of appeal.

2. Should the third-party claim alone be stayed?

[23] Sinclair-Cockburn alternatively submits that it should be permitted to sue Richards but her third-party claim against Wiggins should be stayed. I would not give effect to this submission.

[24] As Wiggins acknowledges, it has no independent right to obtain a stay of the third-party claim. The stay of the third- party claim follows from a stay of the claims in paras. 5A and 6D III) [page113] and IV) of the statement of claim. If the stay of those claims in the main action is set aside, so too must the stay of the third-party claim. This alternative argument fails.

[25] I would therefore dismiss Sinclair-Cockburn's appeal. The dismissal of Sinclair-Cockburn's appeal renders Richards' cross-appeal unnecessary.

As very well detailed by the Court of Appeal within the Sinclair-Cockburn case, where a party settles with another party and executes a final Release containing terms precluding the possibility of further proceedings against another person who may respond by initiating related proceedings against the earlier released party, such is a breach of the terms of finality within the original Release; and as a remedy, the subsequent proceedings should be stayed.

Summary Comment

When a legal proceeding is settled, it is implied that a Release document will be prepared and executed (signed).  Essentially, a Release is a type of contract, specific to the settlement of a legal proceeding and which is used to memorialize the negotiated discussions and the terms and conditions agreed to as a resolution to the issues in dispute.  Typically, a Release contains or reiterates the terms of settlement such as details regarding the payment of monies including schedule of payments.  Also, where negotiated and agreed to, a Release may contain clauses regarding non-admission of liability as well as non-disclosure or confidentiality.

If a releasing party breaches a Release, a court may award remedies for the breach so to ensure that the released party, being the party who 'bought peace' via the settlement, receives the peace that was purchased as per the settlement terms.  Such remedies may include compensation, reimbursement of legal costs, and a stay of any subsequent and related proceedings initiated by the releasor in violation of the finality intended as per the Release.


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