Corner Brook (City) V Bailey: Insurers And Defence Counsel Breathe A Sigh Of Release

• Published date: 05 August 2021
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation, Personal Injury
• Law Firm: Cox & Palmer
• Author: Ms Neala J. Kielley

On July 23, 2021, the Supreme Court of Canada released its decision in Corner Brook (City) v Bailey, 2021 SCC 29. The Court allowed the appeal and reinstated the stay of the third party claim.

Background

Bailey suffered injuries when she struck pedestrian worker, Temple, and Temple's employer's vehicle. Bailey sued Temple's employer (the City of Corner Brook), for damages respecting her injuries and the property damage to her vehicle.

The City of Corner Brook settled Bailey's claim for personal injuries and property damage for $7,500 in exchange for a full and final release. The release included standard boilerplate language, including that the City of Corner Brook was released from 'all demands and claims of any kind or nature whatsoever arising out of or relating to the accident which occurred on or about'

Subsequently, Temple brought a separate action against Bailey for damages for his injuries. Nearly five years later, Bailey's insurer filed a defence to Temple's action and issued a third party notice to the City of Corner Brook, seeking indemnity or contribution. The City of Corner Brook brought an application for summary trial to dispose of the third party claim on the basis that the release barred it. This issue ultimately made it to the Supreme Court of Canada.

Summary Trial Decision

At summary trial, Justice Murphy followed the 'Blackmore Rule' when interpreting the release. He explained that upon interpreting a release, the goal is to ascertain the intention of the parties through an objective lens. Accordingly, the Court must first look to the words of the release. Following which, it may also look to the context in which the release was signed to interpret those words. The Court concluded that the release covered the third party claim against the City of Corner Brook and therefore ordered a stay. Bailey appealed.

Court of Appeal Decision

On appeal, Justice Butler, writing for a unanimous Court of Appeal, held that the focus of the release was Bailey's own claim against the City of Corner Brook, noting that the Blackmore Rule had been incorporated into the broader contractual interpretation principles prescribed by the Supreme Court of Canada in Sattva Capital Corp v Creston Moly Corp, 2014 SCC 5.

The Court of Appeal found that the release did not contemplate damages outside of Bailey's claim for personal injury and property damage. At paragraph 71, Justice Butler held that the trial judge made the following errors:

'The trial judge erred in...