In commercial contexts, releases are widely used, but rarely given the attention that they deserve. Often viewed as standard or boilerplate, it is common for parties to use templates for releases, including those downloaded from the Internet, with little thought as to their ultimate meanings, consequences or effectiveness.
A recent decision of the Supreme Court of British Columbia serves as a critical reminder of the importance of carefully drafting releases and is a stark warning for those who take a casual approach to these key documents.
In Dawson v. Tolko Industries Ltd., 2010 BCSC 346 (CanLII), the Court addressed releases in the case of a group of present and former employees who had sued their employer and its firm of actuaries alleging losses resulting from the switch from the defendant employer’s defined benefit pension plan to a defined contribution plan. A number of the plaintiffs ultimately discontinued their claims against the employer, presumably because of the terms of releases that they had signed in favour of the employer in connection with lump sum settlements that such plaintiffs had been paid as a result of having their employment terminated.
The defendant firm of actuaries subsequently brought an application to dismiss the claims against them which had been brought by the plaintiffs who had subsequently discontinued their actions as against the defendant employer on the basis that the releases granted to the employer expressly provided for the release of “agents” of the employer, which, the firm of actuaries argued, included them.
In determining that the releases did not operate in favour of the actuaries, the Court concluded that “[t]he awkward grammar and omnibus language [of the releases] combine to create ambiguity”. As the releases were drafted by the defendant employer, this ambiguity was resolved in favour of the plaintiffs. The Court went on to consider that, if the foregoing conclusion is wrong, if the use of “agents” in the releases extended to the defendant actuaries and if the actuaries could obtain the benefit of the releases. On these two issues, too, the Court found in favour of the plaintiffs on the basis that the parties intended on a more limited definition of agent. The employees had signed the releases in the context of settling their wrongful dismissal and, as such, had not intended to release any person who did something for the employer for remuneration or not.
Although decided on discrete facts and in the context of third party reliance, the general lesson to be learned from Dawson v. Tolko Industries Ltd. is that careful attention should be paid to releases. These are critical documents that are intended to sever, discharge and avoid future claims in relation to matters that the parties have intended to settle and dispose of; if releases are ineffective or deficient, entire bargains can be unintentionally unwound. As a result, it is imperative that parties do not overlook releases and instead obtain proper legal advice before signing or relying upon these important documents.