How Should a Court Settle the Terms of a Release in Contentious Settlements?
Constructive Thoughts Newsletter
June 2023 - 5 min read
Haider v Rizvi highlights the Court's role in resolving disagreements when parties fail to agree on the terms of a release following a settlement. In this case, the Court determined the contents of a full and final mutual release. It emphasized the importance of not simply imposing a standard form release, but instead determining the contents of the release in light of the objective intentions of the parties based on their settlement.
Haider v Rizvi concerns parties involved in litigation that arose out of their Minutes of Settlement. Two outstanding elements of the settlement remained: the exchange of a full and final mutual release and the consent dismissal of the actions. Disputes arose when the parties failed to agree on the specific terms of the release.
Haider's counsel objected to the release of unknown claims and a “no claims over” clause that would prohibit claims against other parties seeking contribution or indemnity from Rizvi as a releasee. Haider intended to commence legal action against other parties who might issue third party claims against Rizvi. Rizvi's counsel provided a draft release.
Approximately a month later, Haider initiated a new lawsuit against unrelated parties, with Rizvi being third-partied in the action. That new lawsuit was held in abeyance pending the Court of Appeal’s decision in this case.
Rizvi subsequently filed a motion seeking a declaration that the parties had settled the actions, an order requiring Haider to enter into a full and final mutual release, and an order and declaration affirming that the form of release sent to Haider’s counsel complied with the release as contemplated by the Minutes of Settlement.
In response, Haider argued that if the parties were obligated to sign a full and final mutual release, it should not contain certain language included by Rizvi’s previous counsel, such as the release of unknown claims and a “no claims over” clause.
The motion judge determined that since the Minutes of Settlement did not address the form of release, the parties should sign a standard form release that releases all claims arising from the action’s subject matter, including a provision barring claims over.
The motion judge referenced Terranata Winston Churchill v Teti Transport Ltd et al, 2020 ONSC 7577 (“Terranata”) where the Court stated that if the parties agree to execute a release but the settlement agreement is silent on the content of the release, the Court will imply that the parties agreed to sign a standard form general release consistent with the settlement – nothing more and nothing less. The motion judge further concluded that the Court will imply ‘standard’ or ‘usual’ terms, including a claims over clause, since this kind of clause is part and parcel of a standard full and final release.
The Court of Appeal’s Decision
The Court of Appeal determined that the motion judge erred in directing that the parties execute a standard form full and final mutual release that releases all claims arising out of the actions’ subject matter and that included a clause barring claims over.
The motion judge’s task was to determine the appropriate type of release to be signed. When the settlement agreement does not prescribe the release’s form, the release’s content and scope depend on interpreting the settlement. The Court concluded that the motion judge did not apply the appropriate interpretive analysis, as outlined in Terranata. The Court’s intention in Terranata was not to default to a standard form of release, but to discern the parties’ objective intentions based on their settlement.
The Court of Appeal affirmed that settling implies a promise to furnish a release unless agreed otherwise. However, no party is obligated to sign a complex or unusual form of release. The terms of a release must reflect the agreement reached by the parties.
In this case, the motion judge should have considered Haider’s objections to Rizvi’s proposed form of release. Haider explicitly argued that the release was overbroad as it could apply to potential future claims against Rizvi arising from anything raised or that could have been raised in the settled actions, including unforeseen damages. Further, Haider objected to the inclusion of a no claims over clause.
The Court confirmed that even without a signed release, Rizvi was released from claims based on the terms of the Minutes of Settlement. The Court determined that the settlement implied a promise to provide a release, and as long as the settlement remained in effect, subsequent proceedings falling within its scope would be barred. After reviewing the Minutes of Settlement and the actions’ pleadings, the Court also concluded that it was appropriate that the full and final release include a no claims over clause.
The parties’ intention was that, in exchange for the settlement funds and the survival of Rizvi’s indemnities of Haider concerning various matters, the issues raised in the actions could not be raised again. The settlement would be incomplete and ineffective if Haider were to initiate proceedings against a third party concerning matters covered by the release.
This case confirms that the Court has the authority to define the terms of a release in a manner consistent with the settlement agreement, in the event the parties cannot reach agreement. The Court’s objective is to determine the parties' intentions and ensure the finality and clarity of the settlement. While it is always preferable for the parties to agree on their own form of release for a dispute, going to Court to settle the terms of a release is an option.
Drafting the terms of a comprehensive release in a complicated dispute is not as simple as cutting and pasting from a precedent. Contact Rob Rakochey or Anthony Burden in Calgary, or Jeremy Taylor in Edmonton, or any member of Field Law's Construction Law Group with any questions about drafting and enforcing release documents.
Link to decision: Haider v Rizvi, 2023 ONCA 354