Don't Let Your Release Come Back to Haunt You

Releases are a part of commercial life, but it is important to know what they cover and what they do not.

In particular, many releases are phrased as barring claims relating to all subject-matter, whether known or unknown to the parties. However, it has been unclear how effective such releases are in protecting against claims not known to the parties at the time of signing.

The Ontario Court of Appeal recently clarified that a release may bar litigation arising from an action related to the subject-matter of the release, even if the cause of action could not have been known to the parties when they executed the release.

Biancaniello v. DMCT LLP involved the scope of a broadly worded mutual release signed by parties to settle a dispute about the payment of fees for professional services. Years later, an unanticipated claim came to light. Although the motion judge and the Divisional Court held that the release did not bar the claim, the Court of Appeal disagreed, saying that the subsequent litigation was the type of situation that had been reasonably contemplated by the parties when they signed their release, which was intended to settle fully and finally a dispute about fees and services. The court's decision reminds parties to be precise about their...