CHAPTER 9: Challenging a Release

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CHAPTER 1: Introduction to Releases CHAPTER 2: Release Formation and Wording CHAPTER 3: Effectiveness and Enforcement of Releases CHAPTER 4: Releases and Settlement CHAPTER 5: Interpretation of Releases CHAPTER 6: Scope and Application of Releases CHAPTER 7: Releases and Multi-Party Liability CHAPTER 8: Anticipatory or Pre-Emptive Releases CHAPTER 9: Challenging a Release 9.1 Introduction 9.1.1 Legal Advice 9.1.1.1 Failure of Releasor’s Lawyer to Explain a Release 9.2 Injuries or Damages Greater or Different Than Expected 9.3 New Evidence 9.4 Improvidence or Inadequacy of Consideration 9.5 Disability and Incapacity 9.7.1 Minors 9.7.1.1 Release Signed by Parent on Behalf of Minor 9.7.2 Intoxication or Other Temporary Impairment Affecting Capacity 9.8 Failure to Understand, Mistake and Non Est Factum 9.8.1 Mistake 9.8.1.1 Unilateral Mistake 9.8.1.2 Common Mistake 9.8.2 Non Est Factum 9.9 No Consensus Ad Idem 9.10 No Negotiation of Release Terms/Consent Not Freely Given 9.11 Non-Disclosure of Material Information 9.12 Unconscionability 9.12.1 Canadian Case Law Pre-Dating Uber v. Heller 9.12.1.1 Decisions Involving Insurance Adjusters that Pre-Dated Uber v. Heller 9.12.1.2 Other Decisions that Pre-Dated Uber v. Heller 9.13 Undue Influence 9.14 Duress and Pressure 9.14.1 Pressure Felt By Releasor Not Amounting to Duress 9.14.1.1 Pressure on Releasor Not Exerted by Releasee 9.14.1.1.1 Releasee Not Aware of Duress or Pressure 9.14.2 Contractual Provision Acknowledging No Duress 9.14.3 Efforts to Seek Payment of Amounts Claimed to be Owing 9.15 Authenticity and Legitimacy of a Release 9.16 Misrepresentation and Fraud 9.16.1 Fraud and Fraudulent Misrepresentation 9.16.2 Non-Fraudulent Misrepresentation 9.16.2.1 Innocent Misrepresentation 9.16.3 Deceptive Advertising 9.17 Breach or Non-Performance of Contract by Releasee 9.17.1 Repudiation of Release 9.17.2 Breach of Collateral Agreement 9.18 Relief from Forfeiture CHAPTER 10: Jurisdiction, Procedure and Remedies in Release Cases CHAPTER 11: Releases in Particular Situations

9.1 Introduction

The jurisprudence reveals that litigants seeking to challenge the validity or enforceability of a release do not lack for inventiveness, not to speak of ingenuity. Thus, Canadian courts have considered a wide range and variety of arguments in cases where releases have been challenged – although of course the extent to which these arguments have succeeded in achieving judicial acceptance is an altogether different matter.

The following sections of this chapter canvas the impressive range of arguments and issues that has emerged from cases in which Canadian courts have considered challenges to the validity or enforceability of releases. The large number of topics covered in this chapter, and the exceedingly large number of decisions summarized under these topic areas, should not, however, be taken as an indication that Canadian judges are always warmly receptive to efforts to impugn the validity of a release. The courts understand the important purposes served by a release (see, for example, section 3.1 above, Finality and Certainty, in Chapter 3: Effectiveness and Enforcement of Releases) and the connection between releases and matters of policy, such as the well-established policy of encouraging settlement of claims (see, for example, section 4.2 above, Policy of Encouraging Settlement, in Chapter 4: Releases and Settlement). In the words of an Ontario judge: “Parties cannot be permitted to ‘play fast and loose with settlements’ they have made, and broad releases they have executed, with the assistance of legal advice, and in full knowledge of all the relevant facts.” (See Disera v. Bernardi, 2014 ONSC 4500 (CanLII) , referring to Hoyer v. Toronto Transportation Commission, [1952] O.W.N. 261 (H.C.J.) and Taske Technology Inc. v. PrairieFrye Software Inc., 2004 CanLII 66295 (ON SC), at paragraphs 17-18, appeal dismissed, [2005] O.J. No. 2683.)

Manko v. Ivonchuk, 1991 CanLII 11983 (MB QB)

A party seeking to have a settlement agreement in the form of a final release and notice of discontinuance set aside bears the heavy onus of satisfying the court on compelling evidence that, for whatever ground raised, such relief ought to be granted. More so when the party is a practicing lawyer represented by counsel. In this case, the plaintiff had issued a statement of claim in relation to a particular cause of action following the execution of a final release in favour of the defendants and the filing of a notice of discontinuance in respect of an earlier statement of claim for the identical cause of action. The court said that the settlement agreement must be afforded the “presumption of validity” unless set aside.

Ermineskin Cree Nation v. Foureyes, 2005 ABQB 522 (CanLII)

In this case, the respondent signed a release and there was no evidence that she did not understand what the release was and what its effect would be if she signed it. In general terms, therefore, the court said, there was a heavy onus on the respondent to avoid the normal effect of a contract that she had signed.

Isailovic v. Gertner, 2008 CanLII 1537 (ON SC) , appeal dismissed, 2008 ONCA 895 (CanLII)

A release can be challenged if there are problems with the release or the negotiations surrounding the release. However, it is not open to an individual who has signed the release to later attack the release on the basis that he or she was right in the original dispute (citing Radhakrishnan ).

Malley v. Red River 2010 MBQB 111 (CanLII)

The court quoted the proposition set out in Manko v. Ivonchuk (above) that a party seeking to have a settlement in the form of a final release and notice of discontinuance set aside bears the heavy onus of satisfying the court on compelling evidence that, for whatever ground raised, it ought to be granted

Valic v. Workers’ Compensation Board, 2010 NWTSC 97 (CanLII)

Courts will not hesitate to strike an action that appears to litigate a settled dispute. And a heavy burden is placed on anyone who wants to set aside a settlement. In this context, the court quoted a passage from Malley v. Red River (above) which included the quote from Manko v. Ivonchuk about the heavy onus on a party seeking to have a settlement in the form of a final release and notice of discontinuance set aside.

Adejuyigbe v. Torstar et al., 2022 ONSC 4447 (CanLII)

The plaintiff pleaded detrimental reliance to prevent the defendants from relying on a release that she signed in 2017 when she received a severance package due to the termination of her employment with the defendant Torstar. More specifically, the plaintiff pleaded that she detrimentally relied on an alleged promise to pay further monies to her and to re-open the release. However, in the correspondence relied on by the plaintiff there was at most a promise to refer the matter to Torstar’s lawyer, which was done. Further, the statement of claim failed to plead the constituent elements of promissory estoppel with respect to the release. The court struck the statement of claim in its entirety without leave to amend and dismissed the action.

9.1.1 Legal Advice

Lack of independent legal advice is not a free-standing “defence” to a settlement: Huma et al. v. Mississauga Hospital and Queensway Health Centre (Trillium Health Partners) et al., 2019 ONSC 5115 (CanLII) , at paragraph 33, appeal on other grounds dismissed, Huma v. Mississauga Hospital, 2020 ONCA 644 (CanLII) . In an earlier case which involved summary judgment on a guarantee, Zwaig Associates Inc. v. Mok, 2005 CanLII 458 (ON CA), the Ontario Court of Appeal said (at paragraph 2) that “[l]ack of independent legal advice is not a free-standing defence”. See also, for example, Lewis v. Central Credit Union Limited, 2012 PECA 9 (CanLII), at paragraph 52. The comment by the Ontario Court of Appeal has been repeated in decisions concerned with the enforcement of releases and settlement agreements, including not only Huma, but also Thompson v. Rogers Communications Inc., 2013 ONSC 6975 (CanLII) and Arisoft Inc. v. Ali, 2015 ONSC 7540 (CanLII).

While a lack of independent advice is not enough on its own to defeat or upset a settlement or release, evidence that full and effective legal advice was received by a party seeking to challenge a settlement may be sufficient to defeat the challenge. In Cain v. Clarica Life Insurance Company, 2005 ABCA 437 (CanLII) , at paragraph 55, the Alberta Court of Appeal said that, where unconscionability or undue influence is alleged, independent legal advice is usually a complete answer to the claim. The court cited Ronald Elwyn Lister Ltd. v. Dunlop Canada Ltd., 1982 CanLII 19 (SCC) and, in Lister, at page 745, the Supreme Court of Canada said: “Where, as here, the persons engaged in the commerce at hand were fully and continuously in contact with their legal advisors, there is neither need not warrant for the intervention of the courts to remake or set aside these contracts.”

But the comments made by the Alberta Court of Appeal in Cain did not entirely find favour with the Newfoundland and Labrador Court of Appeal in the Downer decision summarized below. And the views expressed in Downer about the implications of independent advice when relief is sought on the ground of unconscionability seem more or less to presage those of the majority of the Supreme Court of Canada in Uber Technologies Inc. v. Heller, 2020 SCC 16 (CanLII). (See Unconscionability, section 9.12 below.) The majority of the Supreme Court indicated in Uber (at paragraph 83) that independent advice is relevant to the determination of whether a bargain is unconscionable only to the extent that it ameliorates the inequality of bargaining power experienced by the weaker party. It can assist a weaker party in understanding the terms of a contract, but might not ameliorate a weaker party’s desperation or dependence on a stronger party. Even where advice might be of assistance, pro forma or ineffective advice may not improve a party’s ability to protect their interests (Uber, paragraph 83).

The nature of the evidence that may be led in order to prove that a party received legal advice was discussed in New Vision Renaissance MX Ltd. v. The Symposium Café Inc., 2020 ONSC 1119 (CanLII) : see Chapter 11: Releases in Particular Situations, section 11.1.2.2, Contracting Out or Release Not Allowed by Statute. In New Vision, it was argued that a certificate of independent legal advice was needed to show that the plaintiffs had received legal advice. The court said that, while a certificate is one means of demonstrating that independent legal advice was obtained, legal advice can be evidenced in other ways. The court referred to the role of counsel for the plaintiffs in this case as a way in which legal advice can be evidenced. The plaintiff’s counsel, an experienced lawyer, was directly involved in the negotiation of settlement and release language at issue in the litigation.

Hall v. Hall, 1986 CanLII 3251 (SK CA)

Cameron, J.A. dealt with a waiver/release in a separation agreement and said that, even if the wife acted upon faulty legal advice as she said she did in entering into the agreement, that fact, in the circumstances of this case, did not afford her any ground for releasing her from her undertaking to make no further claim upon her husband’s estate.

Taplin v Walsh, 2016 ONSC 2998 (CanLII)

The parties entered into a separation agreement and a full and final release of claims including any claim for spousal support. The applicant commenced an application to set aside the separation agreement. In addressing the applicant’s arguments, the court said that the absence of independent legal advice is not a ground in and of itself to set aside an agreement. Absence of independent legal advice is to be considered when viewing the fairness of the agreement as a whole and in particular whether a party understood the nature, effect and consequences of the agreement and whether duress was involved in the making of the agreement.

Downer v. Pitcher, 2017 NLCA 13 (CanLII)

The Court of Appeal noted the statement in Cain v. Clarica Life that “lack of independent legal advice or other suitable advice” was a requirement of entitlement to relief on grounds of unconscionability. The court disagreed with this view, which would mean that being legally or otherwise suitably advised would automatically be fatal to a claim. When a person facing serious disadvantage has received legal advice, it is open to question what the nature of the advice was and whether there might also have been other aspects of the inequality of bargaining power that influenced the relief-seeker to proceed anyway. The most one can say is that the presence of advice may, in a particular circumstance, level the playing field and may remove any concerns about victimization, thereby providing a defence to an otherwise apparent claim. The Court of Appeal preferred not to state the absence of legal or other suitable advice as a requirement for relief; rather, the presence of relevant advice may be strong evidence that the claimant was not taken advantage of as a result of the inequality of bargaining power.

Xerox Canada Ltd. v. GP Global Pacific Holdings Inc., 2019 BCSC 1997 (CanLII)

The defendants argued that release clauses in agreements between the parties should not be enforced due to duress, but the court noted that the defendants received legal advice throughout the negotiation of the agreements. The court referred to Williams v. Good Call Productions Ltd., 2003 CanLII 14631 (ON SC), where it was said that: “Counsel for the defence raised no case where economic duress was advanced when the negotiations occurred between counsel.” The court in this case went on to say that the fact the agreements were reached with the benefit of legal advice, and in the context of seeking resolution of a pre-existing dispute, weighs heavily against a finding of duress.

Best v Hendry, 2021 NLCA 43 (CanLII)

The Court of Appeal concluded that the executor of an estate was not entitled to rely on a release in defence of an action against him. The releasor executed the release on the basis of incomplete and legally irrelevant information respecting the disbursement of the estate which was provided to her by the executor. The court said the executor could not be excused from liability on the basis that he gave the releasor the opportunity to seek independent legal advice when the basis on which he suggested she do so was uninformed.

9.1.1.1 Failure of Releasor’s Lawyer to Explain a Release

In the decision summarized below, the court considered an argument that a release should be set aside because the releasor’s lawyer did not explain the release to her.

More generally on issues pertaining to the adequacy of legal advice received by a party to a settlement, see, for example, the decision of Pearlman J. of the British Columbia Supreme Court in Gaida v. McLeod, 2013 BCSC 1168 (CanLII). Certain of the defendants in the case before Pearlman J. sought a declaration that the parties had made a binding settlement agreement. In this context, Pearlman J. said (at paragraph 94) that the plaintiff’s complaint that her counsel provided inadequate legal advice and representation in the settlement of the action was a matter for the plaintiff to pursue in separate proceedings. A similar statement was made in Davis v. Cooper, below, about the allegation that the plaintiff’s lawyer did not adequately explain a release to her.

In Arvanitis v. Slater Vecchio, 2016 BCSC 1612 (CanLII), the plaintiff, who had been injured in two automobile accidents, signed a release of all claims against the Insurance Corporation of British Columbia, including rehabilitation or treatment benefits, known as Part 7 benefits, for both accidents. She brought an action in negligence against her former lawyers and, among other things, alleged that she was never given proper legal advice on the implications of releasing her Part 7 rights, and did not know that she was releasing her right to rehabilitation benefits. After a detailed review of the evidence, the court found that the lawyers acted reasonably and the plaintiff understood she was releasing her claim to Part 7 benefits.

Davis v. Cooper, 2010 ONSC 4230 (CanLII) , appeal dismissed, 2011 ONCA 323 (CanLII) , motion for extension of time to serve and file leave to appeal application dismissed, Andria Davis v. CGU Group Canada Ltd. et al., 2012 CanLII 62858 (SCC)

In support of her motion for an order setting aside a release signed by her, the plaintiff asserted, among other things, that the release should be set aside because her counsel failed to explain its contents to her. The motion judge said that courts have held that, if the other party to an agreement is unaware that the party seeking to set aside the agreement was ill-informed or not informed of the terms of the agreement, the court will not set aside the agreement (referring to Robertson v. Walwyn Stodgell and Dos Santos v. Waite ). In this case, there was no evidence that the other parties were aware of any alleged failure by the plaintiff’s counsel to explain the release. The motion judge found that, if the plaintiff’s counsel did not adequately explain the contents of the release, that did not provide grounds to invalidate the release. That was a matter between the plaintiff and her counsel.

9.2 Injuries or Damages Greater or Different Than Expected

The Supreme Court of Canada made clear in Uber Technologies Inc. v. Heller, 2020 SCC 16 (CanLII) that the elements of unconscionability are an inequality of bargaining power and an improvident bargain which unduly advantages the stronger party or unduly disadvantages the more vulnerable: see section 9.12, Unconscionability, below. Hence, evidence that a release was signed before the releasor’s injuries or damages were fully or properly understood may be relevant to a court’s consideration of whether the release was an improvident bargain for the purposes of the unconscionability doctrine.

Cases (pre-dating Uber) in which uncertainty about the releasor’s injuries at the time of a release was a factor in a finding of unconscionability include Williams v. Condon, 2007 CanLII 14925 (ON SC) and Nery v. Nery, 2012 ABQB 484 (CanLII). (These decisions are summarized in section 9.12.1.1 below.) It should not be overlooked, though, that, insofar as unconscionability is concerned, improvidence is measured at the time the contract is formed; unconscionability does not assist parties trying to “escape from a contract when their circumstances are such that the agreement now works a hardship upon them” (Uber, paragraph 74, quoting from John-Paul F. Bogden, On the ‘Agreement Most Foul’: A Reconsideration of the Doctrine of Unconscionability (1997), 25 Man. L.J. 187, at page 202 – emphasis in original article).

In the absence of evidence supporting a broader ground of challenge, such as unconscionability, a release or settlement will not be set aside simply because the releasor’s injuries or damages later turn out to be greater or different than was expected at the time of the release: see The Law of Releases in Canada, at pages 179-83.

Kavanaugh v. ING Insurance Company of Canada, 2005 CanLII 45971 (ON SC)

The plaintiff was involved in a motor vehicle accident and she retained a paralegal, the defendant Calise, to assist her in her claim for accident benefits under an automobile insurance policy issued by the defendant insurer, ING. ING and the plaintiff, through her representative Calise, agreed to settle the plaintiff’s entire accident benefits claim and the plaintiff executed a release. On a motion for summary judgment by the defendant ING, the court considered whether the release was binding on the plaintiff or should be set aside. The defendant Calise alleged that the plaintiff’s claim was settled a mere four months after the accident when her medical condition had not stabilized. The court said there was no evidence whatsoever that ING attempted to pressure or influence the plaintiff into settling the claim and that an insurer is not required to resist settlement until such time as further and better information is available. An order was granted dismissing all claims against ING.

Fountain v. Katona, 2007 BCSC 441 (CanLII)

The plaintiff reached a settlement of his claims arising from a motor vehicle accident with an insurance adjuster and he signed a release. Prior to concluding the settlement discussions, the adjuster asked the plaintiff how he was and received a response that was unlikely to have raised any suspicion that the plaintiff’s injury was more than a mild to moderate whiplash. There was evidence that the plaintiff’s injuries turned out to be more serious than a mild to moderate whiplash, but this evidence only came to light after he signed the release. The court said that it had the greatest sympathy for the plaintiff in these circumstances. Nevertheless, absent proof that the bargain was unconscionable, the court said it must enforce the contract. The court referred to an obvious need to maintain consistency and predictability in commercial transactions.

Richmond v. Matar, 2009 NSSC 113 (CanLII)

The position of the plaintiff in this case was that she was pressured into signing a release of her claims arising from a motor vehicle accident because the claims adjuster told her that her injury was only minor and would resolve fairly quickly. In hindsight, the plaintiff seemed to be saying to the court that she settled because she thought she was going to get better and she did not and thus had received inadequate compensation for her injuries. The release was held to be valid and enforceable and the plaintiff’s claim was dismissed. The court said it had no doubt that the plaintiff entered into the settlement with eyes wide open, understanding completely the finality of the settlement.

Murray v. Marcoux, 2009 CanLII 60092 (ON SC)

As stated by the motion judge, the issue to be decided in this case was whether a settlement agreement, specifically a release signed by one of the plaintiffs with the benefit of independent legal advice, should be enforced on a motion for summary judgment where a serious complication, which was an identified risk at the time of settlement, occurred after the settlement. The plaintiff argued that the settlement should not be enforced on the grounds that it was improvident and unconscionable and based on negligent legal advice. The motion judge said that the plaintiff did not meet three of the elements of a pre-Uber test for unconscionability and that, whether or not the settlement was improvident at the time it was made given the medical evidence available – and whether or not the appropriate legal advice was given to the plaintiff by his lawyer – were issues to be addressed in an action alleging professional negligence against the lawyer. The court went on to say that, if every settlement agreement entered into with the benefit of independent legal advice, without any imbalance in bargaining power and without the opposing party taking advantage of any vulnerability, could be set aside when, with the benefit of hindsight, the settlement turned out to be improvident, then very few settlement agreements would be enforceable. Such a situation would lead to wasteful additional litigation, would prevent litigants from ever achieving any finality, and would make settlement agreements effectively unenforceable. This would discourage parties from resolving their disputes by entering into settlement agreements before trial, which is conduct that should be encouraged. In the circumstances of this case, a settlement agreement that is not unconscionable should be binding on the parties even if the settlement turns out to be improvident with the benefit of hindsight

McIsaac v. McIsaac, 2010 BCSC 691 (CanLII)

The defendant sought to dismiss the plaintiff’s claim arising from injuries suffered in a motor vehicle accident on the basis of a prior settlement and release. The court said that a settlement with an unrepresented claimant will not necessarily be invalid simply because all of the symptoms stemming from any injuries have not been fully resolved. In any event, there was no evidence in this case that the injuries sustained by the plaintiff were, at the time of the settlement, any worse than what was understood by the plaintiff, nor was there any evidence that the plaintiff’s injuries had become any worse since the settlement was entered into.

Hanna v. Polanski et al, 2012 ONSC 3229 (CanLII)

The plaintiff suffered injuries as a result of a motor vehicle collision involving a vehicle in which he was a passenger. He argued that a release signed by him should be set aside and that he had not reached maximum medical recovery when the release was signed. That, the court said, did not by itself render a settlement improvident (citing Burkardt v. Gawdun ).

Gwininitxw v. British Columbia (Attorney General), 2013 BCSC 1972 (CanLII)

The plaintiffs commenced an action in which they advanced a claim for aboriginal title over certain areas of land. They also advanced various causes of action in relation to a number of mineral permits and tenures that were issued to Roxgold Inc. Later, the plaintiffs signed a release in favour of Roxgold and agreed to dismiss the proceeding against Roxgold. The plaintiffs argued in this action that, when they signed the release, they did not understand the full scope of Roxgold’s activities. The court referred to The Law of Releases in Canada for the general proposition that a settlement cannot be avoided because the damages arising under one of the headings contemplated are greater than expected. The court said that the assertion of the plaintiffs seemed to be that there was more harm to their lands than they had understood and that such assertions did not avail the plaintiffs nor curtail the efficacy of the release.

Veinotte v. Haugen, 2020 NSSC 167 (CanLII)

Unless there has been fraud or some other equitable reason, such as unconscionability, to set aside a release, it is to be upheld. Injuries or damages turning out to be worse than expected at the time of settlement is not amongst such equitable reasons.

9.3 New Evidence

In the circumstances of the case below, the releasor had suspicions of fraud at the time when he signed a release and he argued that evidence subsequently gathered by him proved his suspicions.

Bittman v. Royal Bank of Canada, 2007 ABCA 102 (CanLII) , application for leave to appeal dismissed, George Bittman v. Royal Bank of Canada, Verne Stahl, Donna Price (Née Larson), William W. Miller, Leanne C. Mussak (Née Kiez), Burnett Duckworth & Palmer LLP: Patricia Quinton-Campbell, Kelly Bourassa, Richter Allan & Taylor Inc., J. Stephens Allan and Robert Taylor, 2007 CanLII 37202 (SCC)

A release was not vitiated by fraud as it was executed at a time when the appellant had suspicions of what he supposed to be fraudulent conduct and the fact that the appellant thinks he has been able to gather evidence to prove his suspicions does not entitle him to undo the release.

9.4 Improvidence or Inadequacy of Consideration

While, again, an improvident bargain may be relevant to a broader ground for challenging a release, such as unconscionability, the decisions below indicate that improvident or inadequate consideration for a release is not on its own a basis for setting aside the release. See also The Law of Releases in Canada, at page 83.

Brock and Petty v. Gronbach, 1953 CanLII 60 (SCC) , [1953] 1 SCR 207

In order to secure a release from an agreement to sell a business and certain lands, the respondents paid a large amount demanded by the purchaser. The Supreme Court said that, while the sum demanded for the release was large, it could not find that any relationship existed between the purchaser and the respondents to make it the duty of the former to take care of the latter. As stated by Sir Raymond Evershed M.R. in Tufton v. Sperni [1952] 2 T.L.R. 516 at 519: ”Extravagant liberality and immoderate folly do not of themselves provide a passport to equitable relief.” Therefore, the respondents’ claim to set aside the release failed.

Berube v. LeTourneau, 1984 CanLII 3966 (NB QB)

An action commenced by the applicant against her former husband for a declaration that she held a 50% interest in the former matrimonial home was discontinued, the applicant received a cheque for funds paid in settlement of the action and the applicant signed a release (described by the court as a standard form used by insurance companies for settlement of damage claims). When the applicant subsequently sought a division of marital property, this claim was dismissed because the matter had already been determined in a prior proceeding. Among other things, the court referred to the apparent improvidence of the settlement in light of the amount paid to the applicant, but it was impossible to say, based on the evidence before the court, that the settlement was unconscionable. And the court said that a delay of over six years in “doing anything about this matter” should clearly disentitle the claim for division of marital property from any further consideration.

Keewatincappo v. Clearsky, 1992 CanLII 12964 (MB QB)

The fact that someone chooses to accept a lesser amount by way of settlement than she or he might otherwise be entitled to, or accepts an amount that she or he believes to be fair, only to find later that there were unanticipated factors which made it insufficient, does not necessarily justify setting aside a release. Here, however, where an insurance adjuster enjoyed a massively advantageous negotiating position and where the plaintiff was subservient, both in terms of understanding and need, it was conspicuously unfair to extract a release in exchange for the amount paid to the plaintiff.

Kiff v. Lundquist, 2006 BCPC 446 (CanLII)

The strong policy of the law is to let parties negotiate their own settlements. Absent material inducement by misrepresentation, fraud, duress or undue influence, the courts steadfastly refuse to look at adequacy of consideration.

Deschenes v. Lalonde, 2020 ONCA 304 (CanLII) , application for leave to appeal dismissed, Roman Catholic Episcopal Corporation of the Diocese of London in Ontario, et al. v. Irene Deschenes, 2021 CanLII 8830 (SCC)

There is a strong presumption in favour of the finality of settlements. A settlement agreement will not be rescinded on the basis of information that has come to light following the settlement indicating that a party has entered into an improvident settlement. As the motion judge recognized in this case, “it is not enough to revisit a settlement decision based on the better vision of hindsight”.

9.5 Disability and Incapacity

The requirements of a valid release are discussed above in Chapter 2: Release Formation and Wording. As can be seen from section 2.3.1 of that chapter, in order for a release to take effect as a legally binding contract, the parties to the release must have the capacity to agree to the terms of a contract. Generally-speaking, those considered not to have capacity fall into one of two “limited classes of protected individuals”, namely, minors and individuals of unsound mind. As well, individuals who, at the time of entering into a contract, were so intoxicated as to be unable to understand what they were doing also lack capacity to contract; intoxication is treated, in effect like a temporary mental disorder: see section 2.3.1, Capacity of Parties to Release.

It is also noted in section 2.3.1 that, insofar as releases are concerned, issues about the capacity of a party generally arise in the context of a challenge to the validity or enforceability of a release. Accordingly, jurisprudence in which Canadian courts have addressed issues about the capacity of a party to a release is presented here in chapter 9, rather than in section 2.3.1.

In Grant v. Jovic, 2005 ABQB 323 (CanLII) , the applicant sought summary judgment to enforce an alleged settlement agreement with two other parties. One of the other parties gave evidence which referred to the stress of the litigation and its effect upon his capacity. The court accepted that contentious litigation is stressful but said (at paragraph 51) that, absent other evidence, this does not equate to mental incapacity.

The legal concepts of “incapacity” and “disability” are used in other areas of law than the law of contract and their meaning when used for other purposes is not necessarily the same as when the point at issue is whether a person is capable of making a contract. An example can be seen in rule 1.03(1) the Ontario Rules of Civil Procedure. This rule says, in summary, that when the word “disability” is used in the Rules in respect of a person, it means that the person is a minor, mentally incapable within the meaning of certain sections of the Ontario Substitute Decisions Act, or an absentee within the meaning of the Absentees Act.

See Riddle v. Canada, 2018 FC 901 (CanLII), at paragraph 15, for an example of a class proceeding in which an order was made that a release was binding on all class members, including those who were under a disability.

Kempfert v. Continental Casualty Company, 1932 CanLII 240 (SK QB), appeal allowed on other grounds, Kempfert v. Continental Casualty Company, 1932 CanLII 250 (SK CA)

The plaintiff claimed under an insurance policy covering accident and sickness and he challenged a release of his claims that he signed “while he was sick in bed”. The plaintiff suffered from a disease described as type “A” disseminated sclerosis which affects the spinal cord and the brain, producing hardening of the nervous system. The trial judge found that, at the time of execution of the release, the plaintiff was not mentally competent to transact business affairs. The trial judge also found that the execution of the release was obtained by an insurance agent knowingly taking advantage of the plaintiff’s condition and unduly influencing him in his weakened condition to agree to a proposed settlement of his claim. An appeal from the decision of the trial judge was allowed on the ground that the facts of the case did not bring the plaintiff’s claim within the clause of the insurance policy relied on by him. Martin J.A. said that it was unnecessary to consider the evidence as to the plaintiff’s mental condition, and the complaint that by reason of his mental condition there was undue influence on the part of the defendant’s agent. Even if the plaintiff was by reason of his sickness in an enfeebled condition mentally, readily subject to suggestion and incapable of resisting pressure as found by the trial judge, and if for these reasons the release executed by him should be regarded as made under undue influence, and the defendant called upon to show that the agreement was fair and reasonable, in the result it had been established that the consideration given by the defendant for the release was more than fair, in that the plaintiff received much more than he was entitled to under the terms of the insurance policy.

Bjelakovic v. Accenture Global Services GmbH, 2008 CanLII 32802 (ON SC)

A contract is binding on a person of unsound mind unless: (a) the person of unsound mind was incapable of understanding what was being done; and (b) the other party had knowledge, either actual or constructive, of the incapacity. The onus is on the person asserting the incapacity to establish both the incapacity, and the other party’s actual or constructive notice of that incapacity. If there is a finding that a person must have had a suspicion that a party lacked capacity, and deliberately refrained from inquiring or satisfying himself or herself about the other party’s capacity, constructive notice will be established. In this case, the plaintiff’s affidavit evidence was that, at the time when her employment was terminated, she was suffering from severe, but undiagnosed, mental illness and she did not have the capacity to understand a release that she signed. The court did not accept the plaintiff’s argument that evidence of incapacity at that time could be found in the fact that the plaintiff was in a state of anxiety some six weeks thereafter, and was diagnosed, yet later, as suffering from bipolar affective disorder. The court said that, if there was evidence that the plaintiff was suffering from bipolar affective disorder at the time she signed the release – which there was not – an argument that this was tantamount to evidence that the plaintiff was incapable of understanding what was being done was “almost shocking”. Moreover, the plaintiff did not plead that she was without capacity and the suggestion that she suffered from mental illness at the time she executed the release was inconsistent with her pleading.

Thompson v. Rogers Communications Inc., 2013 ONSC 6975 (CanLII)

The releasor said that she suffered from chronic back pain, immobility and sleep deprivation and that, when she signed a release as part of a settlement agreement, she was in a state of heightened pain, stress and exhaustion. The court said that, although the releasor alleged a physical disability, it was not satisfied that she lacked capacity to enter into the agreement.

Foisey v. Green, 2017 ONSC 7140 (CanLII)

The Public Guardian and Trustee, in its capacity as the litigation guardian of a beneficiary of an estate, brought an application to compel the estate trustee to pass the estate accounts. The beneficiary had executed a release of the estate and estate trustee but within three months thereafter was assessed as incapable of managing her own affairs. The PGT argued that the beneficiary lacked capacity to sign the release. Pursuant to the Ontario Substitute Decisions Act, a person is entitled to rely upon the presumption of capacity with respect to another person unless he or she has reasonable grounds to believe that the other person is incapable of entering into the contract (see section 2.3.1, above). In a proceeding in respect of a contract entered into by a person while his or her property is under guardianship, or within one year before the creation of a guardianship, the onus of proof that the other person who entered into the contract did not have reasonable grounds to believe the person incapable is on that other person. The court found that the beneficiary had been suffering from a longstanding mental illness and that “red flags” precluded a finding that the estate trustee did not have reasonable grounds to believe that the beneficiary was incapable. On the issue of whether the release would stand to block the requirement for an accounting, the court found that an accounting was required.

Zubovits v. Ontario Human Rights Commission, 2007 CanLII 48996 (ON SC)

The applicant was dismissed from his employment with the Ministry of Environment and Energy. He filed a grievance alleging dismissal without cause, which was settled. As a term of the settlement, the applicant released all claims against the Ministry. He made a complaint to the Ontario Human Rights Commission alleging discrimination by the Ministry on the basis of age and disability. The Commission refused to investigate his complaint. On this application for judicial review, the applicant argued that disability played a role in his agreement to the settlement. However, the court said, there was no medical or other evidence before the Commission to show the nature and extent of his alleged mental disability and the specific impact it had on the applicant’s ability to enter into the settlement agreement. In contrast, in Brine v. Canada (Attorney General, 1999 CanLII 8725 (FC), on which the applicant relied, the complainant had put forward information about his vulnerable mental condition at the time of a settlement, including reports from medical experts about his condition. In this case, the applicant alleged a mental disability without any explanation of any impairment caused by that disability that negatively affected his ability to negotiate and agree to a settlement.

Marek v. McKinnon., 2014 ONSC 342 (CanLII), appeal dismissed, Dick v. McKinnon, 2014 ONCA 784 (CanLII)

The Plaintiff, Steve Marek, whose son David Marek acted as his litigation guardian, objected to enforcement of a settlement reached in August of 2005. Although Steve was represented by counsel at the time of the settlement agreement, and an assessment of his capacity was not done until mid-2012 and a litigation guardian only appointed on January 23, 2013, it was David’s position that the August 2005 settlement could not be enforced as Steve was too impaired to have properly instructed counsel and to have settled the action. The motion judge canvassed shortcomings in the evidence regarding Steve’s capacity in August of 2005 and granted an order implementing the terms of the settlement agreement. The Court of Appeal said the motion judge had clearly found the appellant had not discharged the onus of proving, among other things, that Steve lacked capacity and that the respondents were aware of any lack of capacity or of any limits on the lawyer’s authority.

Caponero v Alberta Human Rights Commission (Office of the Chief of the Commission and Tribunals) and Kaizen Auto Group Ltd., 2024 ABKB 2 (CanLII)

9.7.1 Minors

Generally, at common law, a contract entered into by a minor will not be enforceable against the minor, although contracts for necessaries, including beneficial contracts of service, are enforceable. The effect of this common law rule is that a release signed by a minor will not stand as a bar to an action asserting claims on behalf of the child: see The Law of Releases in Canada, Chapter 8, pages 191-192.

The common law rule was discussed in a 2009 report of the Manitoba Law Reform Commission on the subject of waivers (referred to in rlaw.online as pre-emptive releases) for sports and recreational injuries. The Commission observed that waivers are commonly obtained from minors and their parents and that, while they may have some practical force in persuading minors that they cannot sue, the legal validity of such waivers is doubtful. (As to parental waivers, see section 9.7.1.1 below.) The Commission noted the common law rule that contracts for services which are not necessaries are enforceable by the minor but not against the minor and said that waiver agreements (and the underlying contracts for sporting or recreational services) are unlikely to be construed as “necessary”, referring to Miller (Next friend of) v. Sinclair (c.o.b. Sinclair’s Riding Stables) (1980), 5 A.C.W.S. (2d) 442 (Ont. H.C.J.). See Manitoba Law Reform Commission, Waivers of Liability for Sporting and Recreational Injuries (Report #120, January 2009), 2009 CanLIIDocs 275, at page 14.

In British Columbia, it has been held that the Province’s Infants Act is intended to establish the sole means of creating contractual obligations that bind minors: see Wong v. Lok’s Martial Arts Centre Inc., summarized in section 9.7.1.1 below and see Law of Infant Waivers: Wong v. Lok’s Martial Arts Centre Inc., (2011) 44 UBC L Rev 407, at page 421 (case comment by P. Bowal, T. Brierton and J. Rollett).

Crawford v. Ferris [1953] O.W.N. 713

The defendant sought the dismissal of the claim on the basis that the infant plaintiff had signed a register containing a release before going horseback riding. The plaintiff denied signing the register. The court found there was no negligence. The court did not base its decision on the argument about a pre-emptive release, but said that: “The plaintiff who was only 17 years old at the time of the accident is probably not bound by the heading with respect to risk found on the register.”

Swanson et al v. Hanneson et al; Sterna et al v. Henkel Enterprises Ltd. et al (1972), 26 D.L.R (3d) 201 (Man. Q.B.), affirmed on appeal 1973 CanLII 1062 (MB CA)

The trial Judge said, in respect of a release signed by an infant, that the infant’s “position was governed under the principles expressed in” Butterfield v. Sibbitt and Nipissing Electric Supply Co. , where Ferguson, J. said, among other things, that one cannot make a contract with an infant containing stipulations that cannot be for his benefit but must be to his disadvantage and a release given by an infant of his rights is in that category.

M. v. Sinclair (1980), 15 C.C.L.T. 57

The court held that an infant was incapable of signing a waiver on his own behalf. In the words of the court, it was hardly necessary to state that the infant plaintiff and his sister “were clearly not bound by their undertakings to waive any rights to claim because they were under the age of accountability”. The court also briefly commented on whether the father of the infants could waive any right to claim (see section 9.7.1.1, below).

Erickson v. Elsom, 1992 CanLII 649 (BC SC)

At a time when he was 17 years of age, the plaintiff was injured while riding his bicycle, as a result of a collision with a motor vehicle. In the month before the plaintiff reached the age of majority, and without the knowledge of the plaintiff, the Public Trustee reached a settlement of the plaintiff’s claim arising from the collision with the Insurance Corporation of British Columbia. A release was signed on behalf of the plaintiff. The court set aside the settlement and found the release to have no force with respect to the plaintiff.

Abdulrahim v. Air France, 2011 ONSC 398 (CanLII)

The terms of a settlement agreement reached in respect of a class action provided that class members would execute a release in exchange for payment. The court approved the class action settlement and, further, it approved the settlement on behalf of minors who were members of the class: the monies due to minors under the settlement would be paid into court and could be drawn out as each minor attained the age of majority, subject to the execution of a release.

Dewitt v. Strang et al., 2016 NBCA 63 (CanLII)

A minor, Thomas Dewitt, was left a paraplegic as a result of an accident which occurred while he was participating in a motocross competition. Prior to participating in the event, both he and his father had signed a “Minor Participant Waiver” in favour of some of the respondents. These respondents argued that the waiver released them and all organizers of the event from any liability in the event of personal injury or death. Dewitt sought a determination of whether the waiver was a bar to his right of action. The motion judge dismissed the motion, finding it was an unsuitable procedure for the resolution of unsettled, complex and difficult questions. The Court of Appeal said it was possible that there was an extricable question of law. A court might conclude – as submitted by DeWitt – that a waiver signed by a minor and by a parent is never, as a matter of law, binding on the minor. If this conclusion were reached, it would end the analysis of whether “the” waiver signed by DeWitt barred his right of action. But in the event of a conclusion that sometimes a waiver signed by minor and parent can be binding, depending on the wording of the waiver and the circumstances in which the waiver was obtained, then the analysis would continue. Although the motion judge did not articulate his approach in terms of this analytical framework, it was clear he was of the view both questions were more appropriately addressed as part of the entire proceeding. This was an option available to him.

9.7.1.1 Release Signed by Parent on Behalf of Minor

Given that a release or waiver signed by a minor will generally not be enforceable against the minor at common law, providers of recreational and sporting activities for minors often require parents to sign releases or waivers on behalf of their children. Although parental waivers or releases are widely used, much doubt has been cast on whether they are effective in law.

The report of the Manitoba Law Reform Commission referred to in section 9.7.1 above indicates that the enforceability of a waiver signed by a parent on behalf of a minor is “doubtful”. An earlier report of the Law Reform Commission of British Columbia indicated that parental waivers are unenforceable. See Manitoba Law Reform Commission, Waivers of Liability for Sporting and Recreational Injuries (Report #120, January 2009), 2009 CanLIIDocs 275, at page 14, and Law Reform Commission of British Columbia, Report on Recreational Injuries: Liability and Waivers in Commercial Leisure Activities (October 1994), 1995 CanLIIDocs 125, at page 51.

In the Wong v. Lok’s decision summarized below, the court did not have before it any directly applicable Canadian cases on parental “pre-tort” releases (pre-emptive releases), but it did refer to law on the settlement of infant claims “after the fact”. In the result, the court concluded that the British Columbia Infants Act does not permit a parent or guardian to bind an infant to an agreement waiving the infant’s right to bring an action in damages in tort.

The report of the Manitoba Law Reform Commission also discussed an alternative to a parental release or waiver. As stated by the Commission, providers of sporting or recreational services may attempt to foreclose the action of a child by means of an indemnity agreement signed by the parent. This indemnity agreement says that the parent will indemnify the provider for any legal costs or payments made pursuant to a settlement or trial judgment in favour of the child. Its intention is to shift the loss from the provider to the parent and it can be expected to have the effect of deterring a parent from instigating an action on behalf of the child. The Commission referred to authority declaring such agreements to be against public policy (Stevens v. Howitt, 1969 CanLII 322 ), but said the use of such agreements continues and “the matter has not been tested recently”. See the report of the Commission, at page 14.

A related area of case law involves parental permission or consent forms signed on behalf of minors. Such a form was considered by the Ontario Court of Appeal in Thomas v. Hamilton (City), Board of Education, 1994 CanLII 739 (ON CA). On the facts of that case, Jeffry Thomas, then 16, made what appeared to be a routine tackle in a high school football game, but, in the course of making the tackle, he broke his neck. His mother had signed a “consent to play” form. Jeffry and members of his family sued a number of defendants, including the Hamilton Board of Education and his team’s coaches. The Court of Appeal said that “the injury came within the ambit of those risks inherent in a contact sport such as football”. Jeffry did not give a consent which would overcome negligent conduct on the part of the Board or his coaches. The Court of Appeal agreed, however, with the trial judge’s findings that neither the Board of Education nor the coaches were negligent and that Jeffry and his mother “consented to the normal risks of the game”. In other cases, such as Moddejonge et al. v. Huron County Board of Education et al., 1972 CanLII 440 (ON SC) and Bain v. Calgary Board of Education, 1993 CanLII 7301 (AB QB), courts have alluded to the existence of a parental consent form without commenting on the legal implications, if any, of the form.

M. v. Sinclair (1980), 15 C.C.L.T. 57

As to a waiver signed by the father of an infant plaintiff and his sister, the court said that, assuming the father of the infants could, on his own behalf, waive any right to claim “and if the tenuous argument was successfully made that he could bind his children”, the waiver would still fall on other grounds.

Toews v. Weisner and South Fraser Health Region, 2001 BCSC 15 (CanLII)

This case concerned a vaccination given to a minor by a community health nurse. The court found that the nurse honestly believed she had the consent of the minor’s parent when she administered the vaccine. The court also found that there was an error and neither of the child’s parents had given consent to the vaccination. The court concluded that the vaccination of the child constituted a battery. Although the nurse believed she had verbal consent from the parents, she should not have proceeded in the face of a statement to the contrary by the child. The child’s statement should have put the nurse on notice that there might have been a mistake or a revocation of consent.

Wong v. Lok’s Martial Arts Centre Inc., 2009 BCSC 1385 (CanLII)

In this case, the court considered a parental waiver signed by the parent of an infant who allegedly was injured at a martial arts centre. The court said that the parties were unable to find any directly applicable Canadian cases, although the court did refer to cases on the settlement of claims “after the fact”, such as Stevens v. Howitt . In Stevens, it was said that a release executed by an adult on behalf of a minor as part of the settlement of a claim following a motor vehicle accident was so contrary to the established procedure for a settlement of infant claims that it could not be upheld as a binding agreement. The court noted that the B.C. Law Reform Commission had expressed the view that signed waivers in connection with minors’ participation in sports activities are unenforceable under the B.C. Infants Act. Referring to authorities from the United States, the court said it was cognizant of the policy reasons for permitting parents to sign limited releases (Scott v. Pacific West Mountain Resort, 834 P. 2d 6 (Wash. 1992); and Wagenblast v. Odessa School Dist. (1988), 110 Wn.2d 845, 758 P.2d 968) and the arguments that such releases are permissible in the common law (Malamud and Karyan “Contractual Waivers for Minors In Sports-Related Activities” (1991-1992) 2 Marquette Sports L.J. 151; Doyice J. Cotten & Sarah J. Young, in “Effectiveness of Parental Waivers, Parental Indemnification Agreements, and Parental Arbitration Agreements as Risk Management Tools” (2007) 17 J. Legal Aspects Sport 53; Robert Nelson, “The Theory of the Waiver Scale: An Argument Why Parents Should Be Able to Waive their Children’s Tort Liability Claims” (2001-2002) 36 U.S.F. L. Rev. 535) Reading the Infants Act as a whole, however, the court concluded that the legislature intended the Act to establish the sole means of creating contractual obligations that bind minors. In coming to this conclusion, the court placed some weight on the fact that the rationale for prohibiting parents and guardians from releasing infants’ claims after a cause of action has arisen applied with some force to “pre-tort releases” as well. The Act did not permit a parent or guardian to bind an infant to an agreement waiving the infant’s right to bring an action in damages in tort.

Piccioni v. Carriere, 2015 BCSC 1299 (CanLII)

After the plaintiff was injured while traveling on a bus, her mother reached a settlement agreement pursuant to which a payment of money was made in exchange for a full release. The defendants relied on the settlement agreement in their pleadings responding to the plaintiff’s claim. The plaintiff asserted that the settlement had never been approved by The Public Guardian and Trustee in compliance with the British Columbia Infants Act. The plaintiff argued that the settlement agreement could not be of any force and effect and that the “relevant pleadings” should be struck out. However, the court said that, on an application to strike, the issue is the pleadings, not the evidence, and that it was not able to deprive the defendants of the opportunity to provide evidence supporting their reliance on the settlement, “notwithstanding the apparent strength of the plaintiff’s position”. The plaintiff’s application was dismissed, although the court said that the plaintiff “obviously” might renew that application at some stage of the proceedings in advance of trial.

Bajenaru v. Marchie, 2017 ONSC 2864 (CanLII)

The plaintiffs in this case relied on Stevens v. Howitt in support of the submission that the term of a release proposed by the defendants was contrary to public policy in that it required a parent to indemnify a potential defendant for subsequent claims made by his or her child. The court noted that the obiter in Stevens on this point had not been followed by another court in Ontario and it distinguished Stevens because the release in Stevens was provided before the commencement of an action on behalf of the minor plaintiffs, whereas in this case the release was provided after the commencement of the action and the plaintiffs had the benefit of counsel in arriving at a figure for compensation.

Dewitt v. Strang et al., 2016 NBCA 63 (CanLII)

9.7.2 Intoxication or Other Temporary Impairment Affecting Capacity

In the general law of contract, mere drunkenness is not a ground for relief from a contract, nor is habitual drunkenness or alcoholism. A contract entered into by an intoxicated person will be enforceable unless the person was so intoxicated as to be unable to understand what he or she was doing and the other party knew or ought to have known of the incapacity, in which case the contract will be voidable. Further, the Supreme Court of Canada made clear in Bawlf Grain Co. v. Ross, 1917 CanLII 51 (SCC), 55 SCR 232 that a contract which is voidable on these grounds will be enforceable unless the party who was intoxicated disaffirms the contract after regaining sobriety: see Fred D. Cass, Releases, Intoxication and Unconscionability (2008) 35 Adv. Q. 19, at pages 19-20.

Williams v. Condon, 2007 CanLII 14925 (ON SC)

The authorities are clear that the contract of an intoxicated person may be set aside for lack of consent if the person was so intoxicated that he or she was incapable of understanding what he or she was doing, and if the other contracting party was aware of the intoxication (citing Bawlf Grain Co. and Murray v. Smith (1980), 32 Nfld. & P.E.I.R. 191, aff’d. 35 Nfld. & P.E.I.R. 382). The contract must be rescinded promptly upon the person becoming aware of the circumstances entitling him or her to disavow the contract. In this case, the court found that there was insufficient evidence to establish that the plaintiff was intoxicated to the point of incapacity on the day that he signed releases. According to the plaintiff, his consumption on the day when he signed the releases at the office of the defendant’s insurer was no different than what had been occurring on a daily basis and yet in that state he had engaged in telephone conversations with the insurer on each of the two preceding days, which he recalled clearly while testifying at trial.

Ermineskin Cree Nation v. Foureyes, 2005 ABQB 522 (CanLII)

The evidence of the respondent was that, when she signed a release, she was intoxicated by both prescription and non-prescription drugs. The court quoted a passage from a text on contract law indicating that mere drunkenness is not itself a ground for relief from a contract unless the state of intoxication was so deep as to amount to temporary lunacy: the person intoxicated must not have realized properly the nature of what she or he was doing. The court found that, even if the respondent in this case was slightly impaired by prescribed and non-prescribed drugs, including alcohol, she was not so impaired as to not have realized what she was doing. She was not too intoxicated to sign an effective release.

Valic v. Workers’ Compensation Board, 2010 NWTSC 97 (CanLII)

The plaintiff argued that a settlement agreement and release should be set aside on a number of grounds, including an assertion that he did not understand what he was signing either because of language difficulties or because of the effect of his medication. The court said that no specific evidence was offered in support of this argument. Further, the court noted the general rule that, if a person seeks to set aside a contract allegedly entered into when in an impaired state, that person must take prompt and positive steps to disavow the contract. Here, the plaintiff did not take such prompt steps. On the contrary, he took steps that were inconsistent with his claim that he did not know what he was signing.

In support of her motion for an order setting aside a release signed by her, the plaintiff asserted, among other things, that she lacked the capacity to enter into a contract due to her consumption of medication and sleep deprivation. The motion judge referred to Williams v. Condon, above, and said that there was no evidence that the plaintiff was intoxicated by medication and suffered from sleep deprivation beyond her bald assertions. The motion judge also said that courts have refused to accept bald assertions by the party seeking to set aside an agreement. There were relatives and close acquaintances present who would reasonably have observed the plaintiff’s mental and emotional state, but the plaintiff did not obtain evidence from these persons to support her assertion. There is a requirement that the other contracting parties have knowledge of any incapacity and there was no evidence to support such a finding.

9.8 Failure to Understand, Mistake and Non Est Factum

The majority decision of the Supreme Court of Canada in the Crystal Square Parking case makes the point that misunderstandings, errors and other irregularities which may arise during the contract formation process are generally addressed through the doctrines of mistake, misrepresentation, non est factum and — at least to some extent — unconscionability, as well as through the remedies of rectification and rescission: see Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29 (CanLII). Case law on unconscionability is presented in section 9.12 below and case law on misrepresentation and fraud is presented in section 9.16. Other areas of law relating to contractual misunderstandings and errors are the subject of this section.

Morgan v. Saquing, 2009 CanLII 16742 (ON SC)

The mere existence of a misunderstanding in relation to settlement instructions does not render a settlement unenforceable. The other factors mentioned in Milios v. Zagas, 1998 CanLII 7119 (ON CA) must also be considered. In Milios, instructions from a client to a lawyer in relation to settlement were miscommunicated to the lawyer by the client’s wife. The Court of Appeal held that the settlement reached on the basis of this misunderstanding should not be enforced. In this case, the plaintiff’s evidence was that he mis-read settlement instructions that had been handwritten by his lawyer. The court said that the factors mentioned in Milios favoured declining to enforce a settlement: no order had been taken out and thus the pre-settlement positions remained intact, apart from losing the benefit of the settlement the defendant would not be prejudiced if the settlement was not enforced, the plaintiff would suffer the prejudice of being deprived of his day in court if the settlement was not enforced, and no third parties would be affected if the settlement was not enforced.

9.8.1 Mistake

Mistake in the law of contract is a subject of such breadth that an entire book could be written about it. Indeed, Mistake in Contracting, (Toronto: LexisNexis, 2018) by Bruce MacDougall is just such a book.

No attempt will be made here to offer a full review of the legal implications of a mistake by one or more of the parties to a contract. Rather, the intent is simply to collect case law relating to releases where courts have discussed the law of mistake. A “legal framework” for the application of contract law principles in cases of mistake can be seen, for example, in Kasian Estate v Kasian, 2021 BCSC 2164 (CanLII), at paragraphs 70 to 79.

For organizational purposes, case law is presented below under two headings, Unilateral Mistake (section 9.8.1.1) and Common Mistake (section 9.8.1.2). These categories of mistake, as well as mutual mistake, are distinguished from one another in Mistake in Contracting. As explained in that text, unilateral mistake means a situation where one party is mistaken “(thinking X)” and the other is not mistaken “(thinking Y)”. Mutual mistake is when “one thinks X and the other Y, and neither is clearly right”. And common mistake is when “both parties … think X about their contract, but X does not exist, is impossible, is or otherwise erroneous”. See Mistake in Contracting, at page 454.

Nova Scotia (Housing Commission) v. Ellen Cooperative Housing Ltd., 1980 CanLII 2637 (NS SC)

In connection with the refinancing of a mortgage loan, the plaintiff gave a release of its prior mortgage on the advice of its lawyer, who had concluded that the subsequent mortgage would maintain a priority over the lands of the mortgagor. The court found that this advice was wrong and the court said it could not find any relief for the plaintiff based on mistake. The plaintiff’s lawyer made a mistake in law for which he was accountable.

Scotia Mortgage Corp. v. Tucker, 1991 CanLII 4414 (NS SC)

First and second mortgages were recorded on a property. Due to a lawyer’s error, the first mortgage named Bank of Nova Scotia rather than Scotia Mortgage Corporation as the mortgagee. Scotia Mortgage instructed the lawyer to prepare a new mortgage naming the proper mortgagee and a release of the Bank of Nova Scotia mortgage, but, first, to determine if there were any subsequent encumbrancers. The lawyer ignored or overlooked the explicit instructions of Scotia Mortgage and recorded the new mortgage and the release without doing further searching at the registry. The position of the mortgagee under the other mortgage was that his mortgage, which was second in rank to the original Bank of Nova Scotia mortgage, took a first position in priority to the Scotia Mortgage Corporation instrument. The court adopted the reasoning and the conclusions in the Ellen Cooperative decision, above, and directed that the mortgage which was originally a second mortgage acquired priority over the Scotia Mortgage document by virtue of the recording of the Bank of Nova Scotia release.

National Trust Company v. Newmaster, 2003 CanLII 64233 (ON SC)

A lender made two loans to a borrower, namely, a first mortgage, which was repaid, and a line of credit, which was not repaid. The first mortgage was security for both loans and it was discharged, leaving the line of credit unpaid, with no security for that loan. The court said it is trite law that the discharge of the security, without repayment or forgiveness of the debt, does not extinguish the debt. The lender did not forgive or release the loan: there had been neither accord and satisfaction nor compromise and release. There was no intention on the part of lender to forgive the line of credit; this was a mistake, pure and simple. Accordingly, as a matter of law, the borrower still owed the lender the unpaid balance of the line of credit, plus accrued interest.

Patrick et al v. Telus Communications Inc., 2006 BCSC 854 (CanLII) , appeal dismissed, Patrick v. Telus Communications Inc., 2007 BCCA 200 (CanLII)

Upon the termination of his employment, one of the plaintiffs, Mr. Bjorge, entered into a comprehensive settlement of his employment and pension claims. His pension claims were made under a plan which provided that members with twenty-five years of service could retire on full pension at age fifty-five and those with thirty years of service and “with consent of the company”, could retire before age fifty-five on full pension (referred to by the court as a “consent pension”). It was argued that the settlement was based on the mutual misunderstanding that Mr. Bjorge did not qualify for a consent pension because he was not fifty-five years old at the time of his termination. That interpretation was subsequently found to be incorrect in Cho v. Telus Communications (B.C.) Inc. 2001 BCSC 1434 (CanLII). The argument in this case was that the settlement and release signed by Mr. Bjorge were invalid because they were based on a misrepresentation and mutual mistake. The court said that, despite the incorrect interpretation of the “consent provision requirements”, Mr. Bjorge’s potential entitlement to a consent pension was a live issue during the settlement negotiations. Mr. Bjorge sought compensation for what was considered to be the lost opportunity of earning an unreduced pension. The settlement reached by the parties specifically provided that he would receive a reduced pension, not a full consent pension, and Mr. Bjorge executed a release on that basis. The court found that the release was effective (although the court went on to find that the release was “waived”).

Psarros Estate v Cook, 2017 ONSC 3903 (CanLII)

Before their wedding, Nikolaos Psarros and Lorraine Cook, entered into a marriage contract. There were numerous provisions in the contract by which the parties provided various releases with respect to property, including under the Family Law Act, the Succession Law Reform Act and at equity. Also before the wedding, Mr. Psarros and Ms. Cook bought a house together. They took title as tenants in common but the marriage contract wrongly recorded that they owned the house as joint tenants. Mr. Psarros and Ms. Cook were married for a number of years when Mr. Psarros died without a will. Ms. Cook challenged the validity of her release of claims under the SLRA in the marriage contract, on the basis of what she claimed was a mutual mistake in the marriage contract about how title to the property was held. The estate’s pleading admitted that this was a mutual mistake. The court concluded that, notwithstanding the error in the marriage contract, it was not appropriate to set aside Ms. Cook’s release of her claims under the SLRA. The court reached this conclusion for several reasons that turned on the specific facts of this case, including a finding that Mr. Psarros knew that the matrimonial home was held as a tenancy in common and intended his interest in the home to benefit his children. The court was not satisfied in any event that the error in the marriage contract extended to the SLRA release. Ms. Cook had not established that she and Mr. Psarros intended for her to have the house on Mr. Psarros’s death. In effect, she was asking the court to rectify her agreement with Mr. Psarros, not simply the instrument recording it. It was not the court’s role to rewrite their contract (citing Fairmont Hotels, section 10.10.1 below, Rectification).

9.8.1.1 Unilateral Mistake

Unilateral mistake is where only one party is mistaken, but the other party knows or ought to have known about the mistake: Kasian Estate v Kasian, 2021 BCSC 2164 (CanLII), at paragraph 70, citing Hannigan v. Hannigan, 2007 BCCA 365 (CanLII), at paragraph 63, quoting Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co., 2003 ABCA 221 (CanLII), at paragraphs 12-13. In cases of unilateral (or mutual) mistake, the party alleging a mistake is denying that an agreement ever existed. This is based on the premise that there was never any meeting of the minds and, as a result, no agreement could ever have resulted: Kasian, at paragraph 71. See also Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Company Limited, 2003 ABCA 221 (CanLII), at paragraph 13.

In Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 (CanLII), [2002] 1 S.C.R. 67, at paragraph 35, Justice Binnie wrote, on behalf of the majority of the Supreme Court, that:

As stated, high hurdles are placed in the way of a businessperson who relies on his or her own unilateral mistake to resile from the written terms of a document which he or she has signed and which, on its face, seems perfectly clear. The law is determined not to open the proverbial floodgates to dissatisfied contract makers who want to extricate themselves from a poor bargain.

Unilateral mistake will justify the rescission of an otherwise binding contract where it would be unconscionable to enforce the bargain. This will be the case where a party is found to have been mistaken as to a material term, and this error was actually or constructively known by the non-mistaken party, leading to an unconscionable result: 1001790 BC Ltd. v. 0996530 BC Ltd., 2021 BCCA 321 (CanLII). Lack of due diligence by the mistaken party in failing to read the document may weigh against unconscionability: 1001790 BC, referring to 256593 BC Ltd v 456795 BC Ltd, 1999 BCCA 137 (CanLII), at paragraph 24 et seq.; Performance Industries Ltd., above and Fraser v Houston, 2006 BCCA 66 (CanLII), at paragraphs 67-69.

In support of her motion for an order setting aside a release signed by her, the plaintiff asserted, among other things, that she was mistaken about the fact that her case was completed after she signed the release; she thought she could continue with her case. The motion judge referred to Dos Santos v. Waite as a similar case where the court said that, if there was a mistake, it was between Mr. Waite and his own lawyer and not between the parties in question. The motion judge found that, in this case, if the plaintiff was mistaken about the effect of the release on her right to continue her claims, then it was a unilateral mistake. There was no evidence that the other parties were aware of the mistake. This was a matter between the plaintiff and her counsel and not a ground on which to refuse to enforce the release.

Marjadsingh v. Walia, 2012 ONSC 6659 (CanLII) , appeal dismissed (except on costs), 2013 ONCA 336 (CanLII)

Wolseley v City of London, 2016 ONSC 1307 (CanLII)

The general contractor on a sewer and water main construction project went into bankruptcy and a subcontractor moved for an order that a release signed by the trustee in bankruptcy on behalf of the general contractor was not a bar to the general contractor’s claims against the defendant City of London. In considering whether leave should be granted to allow the subcontractor to pursue a crossclaim against the City, the court addressed whether the release barred such a crossclaim. The court said there was every opportunity with the exercise of reasonable diligence for the trustee to discover whether a crossclaim had been made. Both before and after the bankruptcy, the general contractor was represented by counsel. The minutes of settlement and the release were reviewed by the trustee with the advice of counsel. They were prepared with the knowledge that the City required a comprehensive and mutual release. They were signed after a full review of the pleadings by the trustee’s adviser. There was no exception for a crossclaim in the language of the documents. The court rejected any suggestion of a unilateral mistake in these circumstances.

Coco Homes Inc. v. Caleron Properties Ltd, 2017 ABQB 15 (CanLII)

Where a party seeks rescission of a settlement agreement on the basis of its unilateral mistake, it must show that it made a mistake on a material term which the other party actually or constructively knew about and the result of enforcing the settlement agreement would be unconscionable. The authorities are not unanimous on whether unilateral mistake means no contract was made because, despite appearances, there was no real correspondence of offer and acceptance, or whether a contract exists buy may not be enforceable in equity.

Sojka v Sojka, 2018 BCSC 562 (CanLII)

In this case, all parties signed minutes of settlement and a mutual release was signed by all parties except two defendants who refused to sign the release. The court said the issue was whether the two defendants were under a mistaken belief of fact, which justified their request that the settlement agreement and release be deemed unenforceable. The court’s view was that the defendants were essentially arguing that they did not properly understand the strength of their legal position. Even if the court were to make a finding that there was such a misunderstanding (and it made no such finding), this misunderstanding would not be a valid basis for overturning a concluded settlement agreement.

The respondent settled an action and signed a release. In respect of the respondent’s claim for rescission of the settlement agreement, the Court of Appeal concluded that rescission was warranted under the framework of innocent misrepresentation. Unilateral mistake analysis simply did not fit this case. A contracting party may obtain rescission on the basis of its own unilateral mistake where the mistake goes to a material term of the contract (something that goes to the root of the contract, or is fundamental to the contract), where the other party knew or ought to have known of the mistake, and where it would be unconscionable for the second contracting party to rely on the contract. Where there has been a unilateral mistake by the innocent party to a contract, a contract can be rescinded only if the non-mistaken party knew, or ought to have known, of the innocent party’s mistake. The core element of knowledge is that of the non-mistaken party. Here, the mistake was not that of the respondent who sought to rescind the settlement agreement; it was a mistake of one of the parties with which she agreed to the settlement. To support an analysis based on rescission for unilateral mistake, the motion judge would have had to have found that the respondent was the mistaken party and that the other party was trying to take advantage of her mistake.

9.8.1.2 Common Mistake

Common mistake is where both parties make the same mistake: Kasian Estate v Kasian, 2021 BCSC 2164 (CanLII), at paragraph 70, citing Hannigan v. Hannigan, 2007 BCCA 365 (CanLII), at paragraph 63, quoting Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co., 2003 ABCA 221 (CanLII), at paragraphs 12-13. Common mistake generally requires that both parties make the same mistake; ambiguity among the parties may, however, also be the basis for finding a common mistake: Bruce MacDougall, Mistake in Contracting, (Toronto: LexisNexis, 2018), at page 455. Where a party alleges common mistake, they are admitting that an agreement existed. The question to be determined is whether “the mistake was so fundamental as to render the agreement void or unenforceable on some basis”: Kasian, at paragraph 71, citing Hannigan at paragraph 63. See also Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Company Limited, 2003 ABCA 221 (CanLII), at paragraph 13.

A number of leading English authorities on common mistake were discussed by the Ontario Court of Appeal in Miller Paving Limited v. B. Gottardo Construction Ltd., 2007 ONCA 422 (CanLII) (summarized below) at paragraphs 21-26. The Court of Appeal’s comments about the English authorities were as follows:

As in other areas of law, the Canadian doctrine of common mistake has drawn heavily on its English antecedents. The two most important cases are the 1932 decision of the House of Lords in Bell v. Lever Brothers Ltd. …and the 1949 decision of the English Court of Appeal in Solle v. Butcher … .

Bell articulated the test for determining whether a contract is void for mistake at common law. The well-known opinion of Atkin L.J. in that case is most often cited. His view was that for the doctrine to operate, it must be shown that the subject matter of the contract has become something essentially different from what it was believed to be. At p. 218 A.C., he said this:

Mistake as to quality of the thing contracted for raises more difficult questions. In such a case a mistake will not affect assent unless it is the mistake of both parties, and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be.

In Solle, Denning L.J. developed the equitable jurisdiction to set aside as voidable contracts that might be found enforceable at common law. This allowed the court to relieve for common mistake when it would be “unconscientious” in all the circumstances to allow a contracting party to avail itself of the legal advantage it had obtained, and where this could be done without injustice to third parties.

… I think it is now undeniable that not just the common law doctrine of common mistake, but also the equitable doctrine, have been woven into the fabric of Canadian contract law.

In England, however, the decision of Great Peace Shipping Ltd. v. Tsavliris Salvage (International) Ltd., [2003] Q.B. 679, [2002] 4 All E.R. 689 (C.A.), may have changed things for that country. In that case, after a detailed analysis, the Court of Appeal was of the view that Solle could not stand with Bell and therefore should not be followed. In addition to apparently eliminating the equitable doctrine, the court also elaborated and restated the test for declaring a contract void at common law. At p. 703 Q.B., the following is said:

[T]he following elements must be present if common mistake is to avoid a contract:

(i) there must be a common assumption as to the existence of a state of affairs;

(ii) there must be no warranty by either party that that state of affairs exists;

(iii) the non-existence of the state of affairs must not be attributable to the fault of either party;

(iv) the non-existence of the state of affairs must render performance of the contract impossible;

(v) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.

Great Peace appears not yet to have been adopted in Canada and, in my view, there is good reason for not doing so. The loss of the flexibility needed to correct unjust results in widely diverse circumstances that would come from eliminating the equitable doctrine of common mistake would, I think, be a step backward. … However, I need not finally decide that question here because … this case does not turn on the existence or non-existence of the equitable doctrine.

On the subject of common law and equitable remedies in respect of contracts entered into as a result of a common mistake, see also, for example, Stone’s Jewellery Ltd. v. Arora, 2009 ABQB 656 (CanLII), at paragraphs 27-28.

Hall v. Hall, 1986 CanLII 3251 (SK CA)

The appellant entered into a separation agreement with her husband, the respondent, in which she waived any further claim against the property and estate of her husband. In respect of a challenge to the validity of the contract on the ground of mistake, the trial judge found that the parties had made a common mistake, which he characterized as a common mistake of law and not of fact. This conclusion, the Court of Appeal said, was critical because at common law a mistake of law does not vitiate a contract. The parties were thus held by the trial judge to be bound by the contract. The Court of Appeal said that where a law exists but the parties are not aware of its extent or its application to them, there is a mistake of law. On this basis, the Court of Appeal held that the characterization of the mistake by the trial judge as one of law as opposed to fact was correct and it dismissed the appeal. One of the appellate judges agreed with the result but left open the issue of whether a court might, in a proper case, grant relief to a party to a matrimonial property agreement entered into on a mutual or common mistake of law.

Royal Bank of Canada v. Kesebi, 1997 CanLII 15014 (NS SC)

In this case, the court found that the plaintiff Bank clearly made an error when it provided a release of mortgage although the mortgage had not been paid off. This, the court said, was a mistake. However, the defendants also were mistaken. They believed that the mortgage must have been paid off by a provider of insurance “referable to the mortgage debt”. Arguments were made to the court about mutual mistake and unjust enrichment, but the court chose to base its decision on mutual mistake. Although one might have said that the mistaken belief of each party may have arisen from a different premise, they were in effect mutual or common mistakes. As this was a case of mutual or common mistake, the cases cited to the court on unilateral mistake did not apply. No third party had been affected by the release of mortgage being recorded. The court found that Shiner et al. v. Varadeff et al. 1975 CanLII 404 (ON SC) could be applied in this case and the release could be rescinded – but the court went on to fashion a different remedy than in Shiner.

Miller Paving Limited v. B. Gottardo Construction Ltd., 2007 ONCA 422 (CanLII)

The Court of Appeal said there could be no doubt that this was a case of common mistake. Miller and Gottardo reached an agreement on the terms of a memorandum of release, but they shared an error with respect to an important contextual circumstance, namely that all material supplied by Miller had been paid for by Gottardo. The question was whether in all the circumstances the contract should be set aside because of this common mistake. In considering whether to apply the doctrine of common mistake either at common law or in equity, the court should look to the contract itself to see if the parties have provided for who bears the risk of the relevant mistake, because if they have, that will govern. The memorandum of release clearly provided that the supplier acknowledged and agreed that payment in full had been received for the materials supplied. Moreover, the billing practice here, as with most supply contracts, made it the responsibility of the supplier to determine what was owing for the material supplied and to then invoice for that amount. When read in the context of the factual matrix, the contract clearly allocated to Miller the risk that payment in full had not been received. The agreement required Miller to bear the consequence when that risk transpired, rather than allowing it to invoke the doctrine of common mistake. However, even if Miller could resort to the doctrine, it could not succeed in setting aside the agreement. First, to apply the common law approach found in Bell , above, Miller must show that as a result of the common mistake, the subject matter of the contract had become something essentially different from what it was believed to be. That subject matter was the release of all further claims, as the title of the agreement clearly implied. Nothing about the mistaken assumption changed that subject matter. Second, to engage the equitable doctrine of common mistake as described in Solle , above, Miller needed to show that it was not at fault. The finding of the trial judge that the mistake was due to unexplained errors in Miller’s own procedures and was not in any way the responsibility of Gottardo made this impossible.

9.8.2 Non Est Factum

The doctrine of non est factum was recently explained by the British Columbia Court of Appeal, in 1001790 BC Ltd. v. 0996530 BC Ltd., 2021 BCCA 321 (CanLII), at paragraphs 48-49. As stated by the Court of Appeal, the plea of non est factum is a concept intended to give relief to the signer of a contract whose consent was genuinely lacking, who signed a contract by mistake, in the belief of having signed something fundamentally different. Where successfully established, non est factum renders the contract void, but it is limited in its application. To succeed on a plea of non est factum, the party asserting the defence bears the burden of demonstrating that the document they signed was fundamentally different in nature from what they believed it to be, that they signed it as a result of a misrepresentation, and that they were not careless in doing so (citing Marvco Colour Research Ltd v Harris, 1982 CanLII 63 (SCC) and Bulut v Carter, 2014 ONCA 424 (CanLII), at paragraphs 23-24, and referring as well to the discussion in Argo Ventures Inc. v Choi, 2020 BCCA 17 (CanLII), at paragraphs 10-17).

Other recent authorities that discuss non est factum include Spiridakis v. Li, 2020 ONSC 2173 (CanLII), at paragraph 50, appeal dismissed, 2021 ONCA 359 (CanLII), Business Development Bank v 1956680 Alberta Inc, 2021 ABQB 141 (CanLII), at paragraphs 31-41, Sutton Group-Admiral Realty Inc. v. Taborovska, 2021 ONSC 2837 (CanLII), at paragraph 7, and Alphera Financial Services Canada (BMW Canada Inc.) v. Ambihaipalan, 2021 ONSC 3530 (CanLII), at paragraphs 32-42. In the Sutton Group case (paragraph 50), the court gave a crisp description of non est factum, as follows:

Non est factum is a defence of mistake. Its translation from Latin means “it is not his deed”. It has been described more colloquially as “the mind not following the hand”. See Marvco Colour Research Ltd. v. Harris [above] … . If successful, it renders an instrument signed by the party asserting the defence void ab initio.

As to the notion of a person’s mind not going with his or her hand, see also, for example, Bank of Montreal v. McIntosh, 1995 CanLII 5643 (SK QB), quoting from G.H.L. Fridman, The Law of Contract in Canada, 2nd Edition, 1986, starting at page 264.

Dicus v. Halovich, 1997 CanLII 4233 (BC SC)

The plaintiff Matson was a passenger in a motor vehicle that was involved in a collision. She engaged in ongoing discussions with insurance adjusters about her claims arising from the accident. The defendants alleged that, in a release signed by her, the plaintiff settled her claims, while the plaintiff alleged that she gave only a partial release. The court said that, although the plaintiff made numerous allegations, her arguments essentially came down to a claim that the settlement was unconscionable and/or a plea of non est factum. In respect of the second of these two arguments, the court found that an adjuster carefully reviewed the release form with the plaintiff, that the adjuster fully explained the import of such a document and that the plaintiff was fully capable of understanding the document. The court also found that the plaintiff’s contention that she reasonably believed the document to be a partial release was not credible. In the result, the court found that the plaintiff was fully cognizant that the document she was executing was a final release.

Arcand v. Abiwin Co-operative Inc., 2010 FC 529 (Can LII), appeal dismissed, 2011 FCA 170 (CanLII)

The court said, in respect of the applicant’s arguments about a release signed by her, that she was fully represented by counsel throughout and thus could not make any claim of non est factum.

Marjadsingh v. Walia, 2012 ONSC 6659 (CanLII) , appeal dismissed (except on costs), 2013 ONCA 336 (CanLII)

A motor vehicle driven by one of the plaintiffs was damaged when struck by the defendant’s vehicle and the plaintiff was injured when he jumped out of the way. The parties agreed to a settlement and the plaintiff signed a release. The plaintiff argued that he should not be held to the terms of the release, on grounds including non est factum. The court said that non est factum is a doctrine that allows a party to avoid adhering to a contract signed by the party on the basis of a mistake as to the kind of contract. Citing Marvco , above, the court said that an agreement or document is void at common law if a person is induced by fraudulent means to sign a written document to which the person has not genuinely agreed. In this case, the plaintiff had not shown that he was induced, much less by fraudulent means, into signing the release. He had days to think about whether to sign it and to seek advice. There was no evidence, except his self-serving assertion, indicating that he did not freely sign the release of his own will or that he did not genuinely agree to its terms.

Adams v. British Columbia, 2013 BCSC 557 (CanLII)

The plaintiff claimed that he was sexually abused at the Jericho Hill School for the Deaf and Blind. He had received a payment and executed a release following his participation in a program known as the Jericho Individual Compensation Plan. The payment and signing of the release were in respect of the same alleged sexual assaults as those which were the subject matter of this lawsuit. The plaintiff argued that the otherwise binding effect of the release he acknowledged having signed was vitiated by reason of the doctrine of non est factum. The court said that the burden to prove the application of non est factum rested on the plaintiff. The doctrine of non est factum goes to negate a party’s obligations under an agreement when that party can establish that the agreement was fundamentally or radically different from what he or she believed, or intended it to be, and where the execution was not the result of that party’s negligence in failing to take reasonable precautions (citing Frolick v. Frolick, 2007 BCSC 84). Not only must the plaintiff establish that the agreement, in this case, the release, is fundamentally different from that which he believed he was signing, but also that he was free of contributory negligence when signing the document. The court accepted that the plaintiff was functionally illiterate and, would not have been able to comprehend clearly the contents of the release if left to read it on his own, but the court was satisfied that the terms of the release were explained to him. Further, the court concluded that, even if it were to accept that the plaintiff did not understand the full import of the release, he could not avoid its consequences based on his own negligence in failing to make proper inquiry as to the consequences of the document which he willingly signed.

Alton v. Lower Mainland Motocross Club, 2017 BCSC 2460 (CanLII)

The decision in Farrell Estates v. Win-Up Restaurant Ltd., 2010 BCSC 1752 indicates that non est factum is a narrow doctrine that applies when a party fails to realize the essential nature of the transaction. It is often induced by fraud and should be kept within narrowly prescribed limits for persons of full capacity. The analysis is not purely subjective and involves an objective component, namely, what would a reasonably careful person believe when reading the contract. In this case, a reasonably careful person would have realized the existence and significance of the release and waiver in the documents signed by the plaintiff.

Zaky v. 2285771 Ontario Inc., 2020 ONSC 4380 (CanLII)

In this decision involving an electronic waiver document containing release provisions, the court said that it concurred with and adopted paragraphs of the factum filed by the defendant. In these paragraphs of its factum, the defendant said there are three exceptions to the general enforceability of waivers. The first exception was said to be where the circumstances establish non est factum, meaning that the signature on the waiver was not truly the act of the plaintiff. This “first exception” arises where the plaintiff “has signed a document mistaken as to its nature and character”. An example of non est factum is where the document was not presented to the plaintiff as a waiver, but something more innocuous like a registration form (citing Crocker v. Sundance ). However, carelessness on the part of the signer “does not equate to non est factum”. Where the signer simply did not read the waiver, did not ask questions, and did not ask for the opportunity to obtain legal advice, non est factum does not apply.

Sharif v. Shaikh et al., 2021 ONSC 6834 (CanLII)

On this summary judgment motion, the moving party defendants relied on a release signed by the responding party defendants, who argued that they should not be held to the terms of the release on the ground of non est factum. The responding party defendants alleged that their English language skills were poor, and the document was not explained to them. The court said that the defence of non est factum is available to “someone who, as a result of misrepresentation, has signed a document mistaken as to its nature and character and who has not been careless in doing so”, referring to Bulut, above, Marvco , above, and The Guarantee Company of North America v. Ciro Excavating & Grading Ltd., 2016 ONCA 125. As noted in Alphera Financial, above, the approach to the defence of non est factum is “based not only upon the principle of placing the loss on the person guilty of carelessness, but also upon a recognition of the need for certainty and security in commerce”. The court concluded that the defence of non est factum was not available to the responding party defendants. Even on their own evidence, they were careless in signing the release. Failing to read a document, ask questions about it, ask for an opportunity to obtain independent legal advice about it, ask for a translation of it, or ask to speak to a friend about it is careless (citing Guarantee Company, Bulut and Alphera Financial Services). Moreover, the court concluded that there was no misrepresentation inducing the responding party defendants to sign the full and final release.

Bui v Pacific Gate Development Group Ltd., 2023 BCSC 1700 (CanLII)

The plaintiff argued that a release signed by him should be set aside on the basis of non est factum. The plaintiff said that he had very limited English language skills and that he believed the document he signed to be a letter of apology rather than a release. The court noted that the law on non est factum starts with the assumption that an individual signing a written agreement intends to be bound by its terms (citing Karroll v. Silver Star). The court quoted passages from Hsu v. Hsu, 2023 BCSC 683, indicating that non est factum can apply in circumstances in which the party does not speak English and that, where a party does not read and comprehend English, it is not careless for them to sign, without reading, a document provided by a trusted advisor. The court accepted that the plaintiff in this case did not speak good English and did not have a detailed or sophisticated understanding of documents provided to him, including the release. The court also concluded that the content of the release was not adequately explained to the plaintiff. However, this was not a sufficient basis for concluding that the release was fundamentally different from what the plaintiff believed he was signing. The court did not accept the plaintiff’s evidence that he believed he was signing an apology letter. The court also said that it would have been difficult for the plaintiff to understand an exchange of payments that took place commencing two days later if he did not have a general understanding of the nature of the document he was signing. Further, even if the court had accepted the testimony that the plaintiff believed he was signing an apology letter, it would nonetheless have found against his non est factum argument because the plaintiff was careless in failing to take reasonable precautions in the execution of the document. According to the Hsu decision, where a party does not read and comprehend English, it is not careless for them to sign without reading the document where it was provided by a “trusted advisor”, but the court did not accept that the release in this case was provided to the plaintiff by a trusted advisor.

Caron v. Bluteau, 2023 ONSC 419 (CanLII)

The plaintiff argued that, when she signed a release in favour of her former lawyer, she intended to release him only from her claim for costs against him personally relating to an earlier proceeding. She relied on the doctrines of non est factum and duress. The court said that there was no evidence to support either a defence of non est factum or of duress because the plaintiff was represented by counsel throughout, had the benefit of independent legal advice and also had a period of nine months to consider the terms of a proposed settlement and the wording of the release.

9.9 No Consensus Ad Idem

In order to form a binding contract, parties must come to a meeting of the minds, or consensus ad idem. In Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55 (CanLII), the Supreme Court of Canada considered the requirements for an agreement to abandon a contract and, in this context, quoted the following passage from Paal Wilson & Co. A/S v. Partenreederei Hannah Blumenthal, [1983] 1 All E.R. 34 (H.L.), at pages 48-49:

To the formation of the contract of abandonment, the ordinary principles of the English law of contract apply. To create a contract by exchange of promises between two parties where the promise of each party constitutes the consideration for the promise of the other what is necessary is that the intention of each as it has been communicated to and understood by the other (even though that which has been communicated does not represent the actual state of mind of the communicator) should coincide. That is what English lawyers mean when they resort to the latin phrase consensus ad idem and the words that I have italicised are essential to the concept of consensus ad idem, the lack of which prevents the formation of a binding contract in English law.

Thus, as stated in Salminen v. Garvie, 2011 BCSC 339 (CanLII), at paragraph 27, and repeated in a host of British Columbia decisions, the test for determining consensus ad idem at the time of contract formation is objective. It is “whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract”; it is “whether a reasonable… [person] in the situation of that party would have believed and understood that the other party was consenting to the identical term”: Salminen, at paragraph 27, quoting from G.H.L. Fridman, The Law of Contract in Canada, 5th Edition (Toronto: Thomson Canada Ltd., 2006), at page 15. The actual state of mind and personal knowledge or understanding of the promisor are not relevant in this inquiry (Salminen, paragraph 27). In short, if a reasonable person would find that the parties were in agreement as to a contract and its terms, then a contract would exist at common law (Salminen, paragraph 27). See also, for example, Berthin v. Berthin, 2016 BCCA 104 (CanLII), at paragraph 46, Shannon v Gill, 2018 BCSC 135 (CanLII), at paragraph 35, Fairchild Developments Ltd. v. 575476 B.C. Ltd., 2020 BCCA 123 (CanLII), at paragraph 51, 1001790 BC Ltd. v. 0996530 BC Ltd., 2021 BCCA 321 (CanLII), at paragraph 41, and C.W.C. v L.A.W, 2021 BCSC 1774 (CanLII), at paragraph 115.

There are, of course, many reasons why parties may never reach consensus ad idem on the terms of a contract – and mistake (section 9.8 above) is one of them: see Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Company Limited, 2003 ABCA 221 (CanLII), at paragraph 10.

In the cases below, Canadian courts considered whether parties reached a meeting of the minds on the terms of a release.

Arif v. Li, 2016 ONSC 4579 (CanLII)

In connection with pre-emptive releases signed by the plaintiff before participation in a rock climbing and rappelling course, the court considered whether there was an “Objective Lack of Consensus Ad Idem”. In doing so, the court addressed two issues, namely, whether a reasonable person would have known that the plaintiff did not intend to agree to the releases and, if so, whether the defendants took reasonable steps to bring the content of the releases to the plaintiff’s attention. Despite its finding that a reasonable person would not have known that the plaintiff did not intend to agree to the releases, the court went on to consider the second issue and ultimately the court found against the plaintiff on both issues.

Brunet v. Brunet, 2018 ONSC 2993 (CanLII)

In this case, the parties obtained a consent order that transferred one-half of the respondent’s pension to the applicant and the court considered whether they had reached an agreement that, in exchange for the division of the pension, the applicant would release all other claims. The court found that the parties were not ad idem in respect of any such agreement. The respondent believed that the pension transfer satisfied all claims, but the applicant believed that there was a final disposition only of the pension. There was therefore no agreement beyond what the parties agreed to in their consent order.

McCallum v. Jackson, 2019 ONSC 7077 (CanLII)

The court followed the line of analysis in Arif v. Li, above, regarding consensus ad idem and considered, first, whether a reasonable person would have known that the plaintiff did not intend to agree to indemnity provisions of a release and, second, whether the defendants took reasonable steps to bring the content of the release to the plaintiff’s attention. The court said there was so much “legalese” in the indemnity clause that it failed to say what it meant and a reasonable person should have known that the plaintiff was not consenting because the indemnity provisions had no discernable meaning.

9.10 No Negotiation of Release Terms/Consent Not Freely Given

Sometimes a challenge to a release does not turn on the legal principles or framework of a well-established doctrine, such a non est factum or duress. Rather, a party who questions the validity or enforceability of a release may put forward a position that avoids the legal requirements, tests or analytical framework of established doctrines by taking the argument to a more basic level, for example, by challenging whether there is evidence supporting a conclusion that the party consented to the particular terms of the release. Arguments of this nature did not prevail on the facts of the cases summarized below.

It may be, though, that evidence of circumstances which raise doubt about whether consent was freely given by a releasor may be a factor when a court considers whether the release was an unconscionable agreement. In Rubin v. Home Depot Canada Inc., 2012 ONSC 3053 (CanLII) , the court said that the defendant took advantage of the plaintiff’s vulnerability when it presented to him a termination letter which presumed that a release would be signed. No other option was offered. This approach was arranged in the expectation that it would direct, if not compel, the plaintiff to sign the release. The plaintiff did not agree to anything; rather, he simply accepted what he was misled into thinking was his only option. Rubin was decided before the Supreme Court of Canada clarified the law relating to unconscionability in Uber Technologies Inc. v. Heller, 2020 SCC 16 (CanLII), but by no means is this observation intended to suggest that the result of Rubin would necessarily be different if determined under current law.

The Tilden decision referred to in one of the cases below was considered in a leading authority involving a pre-emptive release, Karroll v. Silver Star Mountain Resorts, 1988 CanLII 3094 (BC SC) . See the discussion of Tilden and Karroll in Chapter 8: Anticipatory or Pre-Emptive Releases, section 8.3.4, Failure to Read Pre-Emptive Release.

Marjadsingh v. Walia, 2012 ONSC 6659 (CanLII) , appeal dismissed (except on costs), 2013 ONCA 336 (CanLII)

A motor vehicle driven by one of the plaintiffs was damaged when struck by the defendant’s vehicle and the plaintiff was injured when he jumped out of the way. The parties agreed to a settlement and the plaintiff signed a release. The plaintiff argued that he should not be held to the terms of the release. Among other things, he attempted to rely on authorities that have allowed a party to avoid contractual obligations when the party signed a complex standard form contract. The court referred to Tilden Rent-A-Car as authority for the proposition that a party can only be bound to a signed standard form contract when it is reasonable to believe that the party consented to the terms. In this case, the release was generated by the defendant through a computer search. Except for filling in some particulars, the defendant was not the author of any other part of the release. The release was one page and the court said that its terms could easily be comprehended by many or could easily be explained by a lawyer to someone of the plaintiff’s background, if necessary. This was not the type of standard form contract contemplated in Tilden Rent-A-Car.

R. v. Horner, 2013 SKQB 340 (CanLII)

Pursuant to Saskatchewan legislation as it existed at the time, the plaintiff lost her ongoing benefits, as a spouse of a deceased worker, upon her subsequent remarriage in 1980. After the Charter came into force in 1985, Saskatchewan passed legislation under which the plaintiff was entitled to a lump sum payment provided that she gave a release of all claims and a waiver of future rights of action. The plaintiff signed the release and accepted the lump sum payment, but proceeded thereafter with an action for declaratory relief pursuant to section 52 of the Constitution Act, 1982 and for reinstatement of her survivor’s benefits. The plaintiff argued that the release did not bar her claim because she did not freely waive her Charter rights. The plaintiff’s central argument was that her consent was not freely given and consequently not voluntary by reason of the fact she had no power to negotiate the terms of the release. While comments were made in Syndicat Northcrest v. Amselem and Godbout v. Longueuil (City) to the effect that a waiver of rights must be freely expressed, in both these cases the court found the alternatives unreasonable to the point of not constituting a choice at all. Here, while it is true that the plaintiff had no opportunity to negotiate the terms of the release inasmuch as it was a prescribed form, she had choices. The fact that the plaintiff had no input into the wording of the release document was irrelevant and disconnected from her underlying decision to accept settlement funds. There was nothing before the court to undercut the voluntariness of that decision. The court found that the plaintiff’s claim was barred by the release.

9.11 Non-Disclosure of Material Information

There is no general duty to reveal facts when negotiating an ordinary contract: Radhakrishnan v. University of Calgary Faculty Assn., 2002 ABCA 182 (CanLII) , at paragraph 34, citing authorities including Spencer Bower, The Law Relating to Actionable Non-Disclosure, at § 5.04 (pages. 92-3, 2nd Edition, 1990) and Cheshire, Fifoot and Furmston’s Law of Contract, pages 278-79, 309 (13th Edition, 1996). But there are situations where there is a duty to disclose before contracting, as in cases involving contracts of the utmost good faith, and some contracts between fiduciary and beneficiary: Radhakrishnan, at paragraph 55; The Law of Releases in Canada, at page 219. Even though non-disclosure may, in some circumstances, be a basis upon which to attack a release, a party may not be able to rely on the non-disclosure if he or she elected to proceed with inadequate information: Isailovic v. Gertner, 2008 CanLII 1537 (ON SC) , at paragraph 27 (summarized below; appeal dismissed, 2008 ONCA 895), citing The Law of Releases in Canada, at page 226.

In Corner Brook (City) v. Bailey, 2021 SCC 29 (CanLII) , Rowe J. of the Supreme Court of Canada said he would make no comment on the possibility that the law may provide a remedy for the sharp practice of a releasee who intentionally does not disclose the existence of a claim to the releasor. He referred in this context to paragraphs 32-33 of the judgment of Lord Nicholls in Bank of Credit and Commerce International v. Ali [2001] UKHL 8 and paragraphs 67-71 of the judgment of Lord Hoffmann in the same case. The views expressed by Lord Nicholls about “sharp practice” at paragraphs 32-33 of his judgment included the following:

Thus far I have been considering the case where both parties were unaware of a claim which subsequently came to light. Materially different is the case where the party to whom the release was given knew that the other party had or might have a claim and knew also that the other party was ignorant of this. In some circumstances seeking and taking a general release in such a case, without disclosing the existence of the claim or possible claim, could be unacceptable sharp practice. When this is so, the law would be defective if it did not provide a remedy.

… I prefer to leave discussion of the route by which the law provides a remedy where there has been sharp practice to a case where that issue arises for decision. That there is a remedy in such cases I do not for one moment doubt.

In his discussion of sharp practice Lord Hoffmann said, among other things, that:

It is not difficult to imply an obligation upon the beneficiary of [a general] release to disclose the existence of claims of which he actually knows and which he also realises may not be known to the other party. There are different ways in which it can be put. One may say, for example, that inviting a person to enter into a release in general terms implies a representation that one is not aware of any specific claims which the other party may not know about. That would preserve the purity of the principle that there is no positive duty of disclosure.

… there is obviously room in the dealings of the market for legitimately taking advantage of the known ignorance of the other party. But, both on principle and authority, I think that a release of rights is a situation in which the court should not allow a party to do so. On the other hand, if the context shows that the parties intended a general release for good consideration of rights unknown to both of them, I can see nothing unfair in such a transaction.

… in my opinion the principle that a party to a general release cannot take advantage of a suggestio falsi or suppressio veri, in other words, of what would ordinarily be regarded as sharp practice, is sufficient to deal with any unfairness which may be caused by such releases.

Crighton v. Roman / Roman v. Toronto General Trusts Corp. et al., 1960 CanLII 13 (SCC), [1960] SCR 858

The appellant Crighton gave a release under seal of his interest in shares of a mining company. The majority of the Supreme Court said that, on the view of the evidence most favourable to the releasee Roman, he was in the position of a trustee purchasing from his cestui que trust the latter’s beneficial interest in the trust property. The majority quoted from authority indicating that there is no absolute rule against a trustee purchasing trust property from the cestui que trust, but that, if the transaction is impeached within a reasonable time by the cestui que trust or a person claiming through him, the trustee must show, among other things, that there has been no fraud or concealment or advantage taken by him of information acquired by him in the character of trustee. The majority found that Roman did not make full disclosure of material circumstances and it concluded that Roman did not obtain a valid release or transfer of Crighton’s beneficial interest in the shares.

Maiklem v. Springbank Oil & Gas Ltd., 1994 CanLII 9089 (AB QB)

The plaintiff (defendant by counterclaim) had been a director of the defendant corporation and owed a fiduciary duty to the company. At the time when a release of the plaintiff was signed, the company did not have full knowledge of matters later raised in the company’s counterclaim, because of the plaintiff’s failure to provide full and complete disclosure and his misleading representations. The release was obtained as a result of deliberate non-disclosure and misrepresentation and the counterclaim should be permitted to proceed to trial.

Segal v. Plazavest, 2004 CanLII 35087 (ON SC)

The plaintiffs sought to assert certain claims notwithstanding a settlement reached by the parties and a broad mutual release of claims. The plaintiffs argued that the defendants, contrary to their assurances, did not provide all relevant documents in their possession to the plaintiffs and that the default of the defendants caused the plaintiffs to be unaware of the claims that the plaintiffs sought to advance. The Master said that, if the plaintiffs wanted an opportunity to revisit the settlement in the event that documents obtained thereafter raised new issues, they should have made full documentary disclosure a condition in the minutes of settlement and release.

MacCulloch Holdings Ltd v. Canada, 2005 FCA 287 (CanLII)

The appellant was assessed for income tax on a gain she realized on the sale of property she had purchased from her late husband’s estate. She objected and then appealed to the Federal Court. That tax appeal was settled. As part of the settlement, the appellant signed a general release of all claims against the Crown or its employees. In this litigation, there were allegations in the appellant’s statement of claim to the effect that the release signed by her when she settled her income tax appeal should be vitiated by the failure of the Crown to disclose certain facts to her. For the purposes of the appeal, the court was prepared to assume that, at the time the appellant signed the release, there may have been facts known to the Crown, but not known to the appellant, that would or might have caused her to decide not to sign the release (even though it was not clear from the statement of claim why the alleged undisclosed facts could have been relevant to that decision). Even with those assumptions, the court was unable to discern from the statement of claim any basis for concluding that the Crown was under a legal obligation to disclose those facts to the appellant. The statement of claim was not capable of supporting a claim for damages based on a wrongfully obtained settlement agreement and release.

Isailovic v. Gertner, 2008 CanLII 1537 (ON SC) , appeal dismissed, 2008 ONCA 895 (CanLII)

While non-disclosure, fraud or misrepresentation can vitiate a release, the non-disclosure, fraud or misrepresentation must be material to the person entering into the agreement. Furthermore, an agreement cannot be set aside for failure to disclose what was suspected, even if the other party had a duty to disclose (citing Radhakrishnan ). On the facts of this case, the court said there was no evidence that the failure of the releasee to report on what was done with certain funds (if there was such a failure) induced the plaintiff to sign a release. Rather, the evidence was that the plaintiff had longstanding concerns about the lack of reporting regarding how the funds were being spent but he was willing to enter into a settlement agreement notwithstanding the fact that his concerns were not satisfied. The court concluded that there were no genuine issues of material fact requiring a trial with respect to the claim against the releasee. On appeal, the Court of Appeal said that it agreed substantially with the reasons of the lower court judge. It noted the material facts of which the appellant had knowledge and that “with all this knowledge” the appellant nonetheless decided to compromise his non-disclosure claim and he signed the release. He did so with the benefit of legal advice. The Court of Appeal said that, in these circumstances, the appellant could no longer complain about the respondent’s conduct.

Bronson v. Hewitt, 2010 BCSC 169 (CanLII) , appeal allowed on other grounds, 2013 BCCA 367 (CanLII)

A trustee submitted that a beneficiary’s claim with respect to an alleged breach of trust relating to a sale of shares by the trustee was barred by a release signed by the beneficiary. The court said that, if a beneficiary acquiesces in a breach of trust after its occurrence, the beneficiary is barred from suing the trustee in the event of a loss from the breach. The beneficiary, who acquiesces, however, must have full information of all pertinent facts and circumstances and must understand his or her rights in what he is consenting to, concurring in or acquiescing to. In this case, the beneficiary did not know that the trustee was not authorized to sell the shares; this information had been carefully concealed from the beneficiaries. In the face of his non-disclosure, the trustee could not rely on the release.

McCann and Guffie v. Canada Mortgage and Housing, 2010 ONSC 65 (CanLII), appeal on other grounds dismissed, Lacroix v. Canada Mortgage and Housing Corporation, 2012 ONCA 243 (CanLII), applications for leave to appeal dismissed, Nicole Lacroix et al. v. Canada Mortgage and Housing Corporation et al., 2012 CanLII 68759 (SCC)

In the context of an estoppel argument, the Divisional Court referred to cases dealing with breach of fiduciary duty based upon material non-disclosure. The court said that, if there was a breach of fiduciary duty based upon non-disclosure, the case law supported the proposition that the respondents in this case might not be entitled to enforce any release signed.

Goodswimmer v. Canada (Attorney General), 2016 ABQB 384 (CanLII), appeal dismissed, Goodswimmer v Canada (Attorney General), 2017 ABCA 365 (CanLII), application for leave to appeal dismissed, Chief Melvin Goodswimmer, et al. v. Attorney General of Canada, et al., 2018 CanLII 61050 (SCC)

The plaintiff Band entered into a Treaty Land Entitlement Agreement with Canada, resolving certain claims arising out of a treaty. The Treaty Land Entitlement Agreement incorporated very general release wording, referring to “claims or demands of whatsoever nature or kind”. The court at first instance considered allegations in the statement of claim that the Band did not provide informed consent and that Canada obtained the Band’s consent through “breach of trust, fiduciary duty, equitable fraud, deceit or negligent misrepresentation” and without fully informing the plaintiffs of the impact of the Agreement on their rights. The court said there was no evidence that the agreement and the releases contained in the agreement were obtained by fraud, misrepresentation or a failure to disclose material information. The court concluded that there was informed consent.

Jamieson v. Whistler Mountain Resort Limited Partnership, 2017 BCSC 1001 (CanLII)

A pre-emptive release given in advance of events or activities that could result in injuries or damages does not operate like informed consent. The two concepts are distinct. Filtering the facts of a case through the lens of “informed consent” cannot be the measure by which to test the adequacy of a release.

Gastle v. Gastle, 2017 ONSC 7797 (CanLII)

When Arthur Gastle passed away, he was survived by two sons, Calvin and Robert. The deceased and Robert had five joint bank accounts. Arthur’s will provided for the residue of his estate to be divided equally between Calvin and Robert and, pursuant to the will, Calvin and Robert were appointed as co-executors of their father’s estate. Robert signed a certificate and warranty regarding the estate in which he certified that, to his knowledge, the interim distribution statement that was attached accurately described all of the realizable assets of the estate. The next day, Calvin executed a release and indemnity which released Robert and others. The same interim distribution statement was attached to both Robert’s certificate and Calvin’s release. Subsequently, Calvin found out about the five joint bank accounts. Calvin argued that the joint accounts should be distributed through the estate and Robert relied on the release. The court said the evidence was clear that Calvin did not know about the existence of the joint accounts until after signing the release and Robert should not be entitled to rely on that release to defend Calvin’s application. Calvin was clearly not fully informed as the certificate upon which he relied when he signed the release did not disclose the existence of the joint accounts. His signing of the release reflected his partially informed intention to be legally bound by what was disclosed in the incomplete and patently false certificate. Upon discovering the existence of some of the joint accounts, Calvin immediately made inquiries and sought information. Material information was withheld from Calvin. Robert’s withholding of such material information and his subsequent delay in releasing the information effectively concealed from Calvin the fact that he might have a claim against Robert.

York University v. Markicevic, 2018 ONCA 893 (CanLII) , application for leave to appeal dismissed, Michael Markicevic v. York University, 2019 CanLII 64819 (SCC)

Best v Hendry, 2021 NLCA 43 (CanLII)

In her will, the testatrix bequeathed her home and contents to one of her nieces, Ms. Hendry, and the residue of her estate to another niece, Ms. Best. She appointed the lawyer who prepared the will as executor of her estate. Prior to her death, the testatrix moved from her own home to a care home and the house was sold. Almost three years later, the testatrix passed away. As stated by the Court of Appeal, this appeal concerned the distribution of an estate where property that was the subject of a specific bequest was not in the estate at the time of the death of the testator. This circumstance engaged the doctrine of ademption, according to which, if property that is the subject of a specific bequest in a will does not exist in a testator’s estate at the time of the testator’s death, the bequest adeems, or fails. In this case, the executor of the estate proposed to the beneficiaries that Ms. Hendry receive cash equal to the sale proceeds from the house and Ms. Best receive the cash balance after deduction of his fees. The beneficiaries made a private arrangement for Ms. Hendry to give $40,000.00 to Ms. Best and they told the executor that they were content with his proposal. The executor presented a release to them, which they both signed. The Court of Appeal said that in order for a release to be valid it must be executed on an informed basis. The court cited Bank of British Columbia Pension Plan where the British Columbia Court of Appeal adopted views expressed in Chitty on Contracts, Vol. 1 (London: Sweet and Maxwell Ltd., 1994) at 1074-1075, including the proposition that a release will not be construed as applying to facts of which the party making the release had no knowledge at the time of its execution or to objects which must then have been outside the party’s contemplation. The court said that the executor’s reliance on the release executed by Ms. Best was akin to Robert’s reliance on Calvin’s release in Gastle, above. Like the judge in Gastle, the court was of the view that the executor was not entitled to rely on Ms. Best’s execution of the release in defence of her action against him. Ms. Best executed the release on the basis of incomplete and legally irrelevant information respecting the disbursement of the estate which was provided to her by the executor. The executor could not be excused from liability on the basis that he gave her the opportunity to seek independent legal advice when the basis on which he suggested she do so was uninformed. As stated in Kaiser, the release could not be construed to apply to facts of which Ms. Best had no knowledge when she signed it. Accordingly, the executor could not rely on the release to escape liability.

9.12 Unconscionability

Unconscionability is an equitable doctrine used to set aside “unfair agreements [that] resulted from an inequality of bargaining power”: Uber Technologies Inc. v. Heller, 2020 SCC 16 (CanLII), at paragraph 54, referring to John D. McCamus, The Law of Contracts (2nd Edition, 2012), at page 424. This doctrine has been applied with great frequency in Canadian cases involving releases. Indeed, in Releases, Intoxication and Unconscionability (2008) 35 Adv. Q. 19 (referred to above), at page 29, the unconscionability doctrine was described as the preponderant analytical framework applied by Canadian courts in deciding whether or not to give effect to the express wording of releases.

Canadian law on the unconscionability doctrine was clarified by the June 26, 2020 decision of the Supreme Court of Canada in Uber Technologies. Prior to this decision, as recognized by the Supreme Court (Uber, paragraph 55), the doctrine had been applied inconsistently by the lower courts. Indeed, this inconsistency had existed and had been acknowledged for many years; in 2005, for example, the Alberta Court of Appeal noted that the tests for unconscionability were “not always stated the same way, or even firmly”: Cain v. Clarica Life Insurance Company, 2005 ABCA 437 (CanLII) , at paragraph 31.

In a seminal decision from 1965, Morrison v. Coast Finance Ltd., 1965 CanLII 493 (BC CA), Davey J.A. of the British Columbia Court of Appeal, identified (at page 713) two “material ingredients” of an unconscionable bargain. But the Ontario Court of Appeal later articulated and reiterated a four-part test for unconscionability in a number of cases and, in one of these cases, it pointedly observed that it had not “endorsed the 1965 Morrison test”: see Phoenix Interactive Design Inc. v. Alterinvest II Fund L.P., 2018 ONCA 98 (CanLII), at paragraph 39; see also Titus v. William F. Cooke Enterprises Inc., 2007 ONCA 573 (CanLII) , Kielb v. National Money Mart Company, 2017 ONCA 356 (CanLII) and Brown v. Hanley, 2019 ONCA 395 (CanLII).

In Downer v. Pitcher, 2017 NLCA 13 (CanLII), at paragraph 16, the Newfoundland and Labrador Court of Appeal indicated that “the descriptors used in setting out the applicable principles” were not uniform in case law or in academic discussion. The court also said (paragraph 17) that, although the Supreme Court of Canada had not (as at that time) dealt with unconscionability from a comprehensive doctrinal point of view, the Supreme Court had, when referring to the nature of the unconscionability jurisdiction tangential to dealing with other issues, employed descriptive language that was “equally non-uniform”.

Now, the Supreme Court of Canada has dealt with unconscionability from a comprehensive doctrinal point of view. In Uber, the Supreme Court took note of questions about the content of the doctrine, which, it said (paragraph 55), required “examining underlying contractual theory”. In their comprehensive discussion of the unconscionability doctrine on behalf of the majority of the court, Abella and Rowe JJ. discussed many issues, including for example, the relevance of independent advice to the application of the doctrine (a subject touched on in section 9.1.1, Legal Advice, above) and the implications of the doctrine for boiler-plate or standard form contracts: see Uber, paragraphs 83 and 87-91.

Decisions on unconscionability that pre-dated June 26th of 2020 must now be read in light of the Uber decision. More specifically, as far as releases are concerned, there is a vast body of pre-Uber case law that cannot be assumed to be authoritative without consideration of the extent to which it comports with the decision of the majority of the Supreme Court in Uber. These cases are gathered below under a heading that plainly identifies them as law pre-dating Uber: see section 9.12.1, Canadian Case Law Pre-Dating Uber v. Heller.

In Uber (paragraph 60), the majority of the Supreme Court said that the court had often described the purpose of unconscionability as the protection of vulnerable persons in transactions with others. Unconscionability, the majority said, is meant to protect those who are vulnerable in the contracting process from loss or improvidence to that party in the bargain that was made.

The views of the majority of the Supreme Court as regards the elements of an unconscionable transaction are set out rather simply and directly in the following excerpts from the decision of Abella and Rowe JJ. (paragraphs 62 to 65):

Most scholars appear to agree that the Canadian doctrine of unconscionability has two elements: “an inequality of bargaining power, stemming from some weakness or vulnerability affecting the claimant and . . . an improvident transaction” … . …This Court has long endorsed this duality. …We see no reason to depart from the approach to unconscionability endorsed in [Hunter Engineering Co. v. Syncrude Canada Ltd., 1989 CanLII 129 (SCC) , Norberg v. Wynrib, 1991 CanLII 65 (SCC) and Douez v. Facebook Inc., 2017 SCC 33]. That approach requires both an inequality of bargaining power and a resulting improvident bargain.

The majority of the Supreme Court in Uber elaborated on the two central elements of the unconscionability doctrine. Abella and Rowe JJ. said (paragraph 66) that an inequality of bargaining power exists when one party cannot adequately protect their interests in the contracting process. There are no “rigid limitations” on the types of inequality that fit this description (Uber, paragraph 67). Differences in wealth, knowledge, or experience may be relevant, but inequality encompasses more than just those attributes. These disadvantages need not be so serious as to negate the capacity to enter a technically valid contract. In many cases where inequality of bargaining power has been demonstrated, the relevant disadvantages impaired a party’s ability to freely enter or negotiate a contract, compromised a party’s ability to understand or appreciate the meaning and significance of the contractual terms, or both (Uber, paragraph 68).

Unconscionability can be established without proof that the stronger party knowingly took advantage of the weaker (Uber, paragraph 84). Such a requirement improperly emphasizes the state of mind of the stronger party, rather than the protection of the more vulnerable. Unconscionability focuses on the latter purpose. Parties cannot expect courts to enforce improvident bargains formed in situations of inequality of bargaining power; a weaker party, after all, is as disadvantaged by inadvertent exploitation as by deliberate exploitation (paragraph 85).

Independent advice, the majority said, is relevant only to the extent that it ameliorates the inequality of bargaining power experienced by the weaker party (Uber, paragraph 83). It, for example, can assist a weaker party in understanding the terms of a contract, but might not ameliorate a weaker party’s desperation or dependence on a stronger party. Even where advice might be of assistance, pro forma or ineffective advice may not improve a party’s ability to protect their interests (paragraph 83).

The majority of the court referred to “necessity” cases for one common example of inequality of bargaining power, where the weaker party is so dependent on the stronger that serious consequences would flow from not agreeing to a contract (Uber, paragraph 69). A second common example of an inequality of bargaining power noted by the majority is where, as a practical matter, only one party can understand and appreciate the full import of the contractual terms, creating a type of “cognitive asymmetry” (Uber, paragraph 71).

Abella and Rowe JJ. went on to say that these examples of inequality of bargaining power are intended to assist in organizing and understanding prior cases of unconscionability. They provide two examples of how weaker parties may be vulnerable to exploitation in the contracting process. Regardless of the type of impairment involved, what matters is the presence of a bargaining context “where the law’s normal assumptions about free bargaining either no longer hold substantially true or are incapable of being fairly applied” (Uber, paragraph 72, quoting from Rick Bigwood, Antipodean Reflections on the Canadian Unconscionability Doctrine (2005), 84 Can. Bar Rev. 171, at page 185).

As for the second element of unconscionability, Abella and Rowe JJ. indicated (paragraph 74) that a bargain is improvident if it unduly advantages the stronger party or unduly disadvantages the more vulnerable. Improvidence is measured at the time the contract is formed and it must be assessed contextually (paragraphs 74-75). Fairness, the foundational premise and goal of equity, is inherently contextual, not easily framed by formulae or enhanced by adjectives, and necessarily dependent on the circumstances (paragraph 78).

In essence, the question is whether the potential for undue advantage or disadvantage created by the inequality of bargaining power has been realized (paragraph 75). Because improvidence can take so many forms, this exercise cannot be reduced to an exact science (paragraph 78).

As to the approach taken in family law proceedings when a release is challenged on the ground of unconscionability, see Chapter 11: Releases in Particular Situations, section 11.4, Family Law.

Bayes v. RBC, 2021 ONSC 6836 (CanLII)

The defendants sought to have the plaintiff’s action dismissed due to a contractual release the plaintiff signed when his employment with the defendant Bank was terminated without cause. The plaintiff argued that the release was not enforceable because, among other things, it was unconscionable. The court drew from Uber Technologies the proposition that, when one of the parties to a contract is vulnerable in the contracting process, and as a result of that vulnerability, has entered into an unfair or improvident agreement, the traditional assumptions underlying contract enforcement lose their justificatory authority. In these circumstances, the court will grant relief from contract enforcement to protect the vulnerable. The court considered the two elements of unconscionability confirmed in Uber Technologies, namely, an inequality of bargaining power and a resulting improvident bargain. The court noted that there will always be some inequality of bargaining power when an employee is terminated. It found that, while the plaintiff was vulnerable due to his termination and health condition, the Bank had taken sufficient and appropriate steps to narrow the difference in relative bargaining power through the accommodations it offered to him and by encouraging him to seek independent advice. As well, the court did not find that the release resulted in an improvident bargain. The plaintiff received, in consideration for the release, an amount that did not reflect an unreasonable settlement amount that was manifestly unfair to the plaintiff or unduly advantageous to the Bank.

ALC v. Bergmark Guimond et al., 2023 PESC 48 (CanLII)

The plaintiff claimed damages allegedly sustained as a result of a construction project involving the removal and reconstruction of a grandstand. Pursuant to the terms of the construction management contract, the plaintiff expressly waived and released claims as of the date of total performance of the contract. The contract specifically stated that the waiver of claims included without limitation those that might arise from negligence or breach of contract. This statement expressly contemplated claims that might arise in the future and also specifically identified the two types of claims – breach of contract and negligence – advanced by the plaintiff in this case. Pursuant to the terms of a cost plus contract, the plaintiff expressly waived and released claims as of the date of the final certificate for payment. This contract also expressly contemplated claims that might arise in the future and specifically identified the two types of claims made by the plaintiff in this case. The court said that the intention of the parties, as expressed in these contractual provisions, was to waive all claims, including future claims that might arise from negligence or breach of contract, as of the date of a specific event – the date of total performance of the project under the construction management contract and the date of the final certificate for payment under the cost plus contract. The contracts were standard form agreements prepared by the Canadian Construction Association and the Canadian Construction Documents Committee for use in the commercial construction industry. The plaintiff argued that allowing reliance on the waivers found in the contracts would result in manifest injustice to the plaintiff. The court referred to law from the Supreme Court of Canada (BG Checo International Ltd. v. British Columbia Hydro & Power Authority, 1993 CanLII 145) which recognized that parties are entitled to arrange their affairs, and to assume risks, in ways that are different than what would otherwise be done by the common law. The court also noted that the contracts provided a reciprocal waiver in favour of the plaintiff on certain terms. The court said that the record did not reveal a situation of unequal bargaining power or a case of serious misconduct on the part of one of the parties. There was nothing unconscionable, contrary to public policy, or manifestly unjust about giving effect to a waiver clause in a freely negotiated contract that is widely used in the commercial construction industry, particularly in circumstances where the parties were sophisticated and capable of organizing their commercial affairs by allocating risks in a manner different from that which would otherwise be provided by law.

Caponero v Alberta Human Rights Commission (Office of the Chief of the Commission and Tribunals) and Kaizen Auto Group Ltd., 2024 ABKB 2 (CanLII)

A Human Rights Tribunal decided that a release signed by the applicant at the time of termination of his employment was valid, that the applicant had settled his human rights claim against his former employer and therefore that there were no grounds upon which the human rights claim could proceed. An application for judicial review of the decision of the Tribunal was dismissed. On the application for judicial review, the applicant argued, among other things, that the Tribunal had applied too high a threshold to the issue of unconscionability and had improperly discounted the evidence that the applicant continued to suffer adverse effects from a stroke that left him unable to appreciate the content and meaning of the termination documents, including the release, that were provided to him. The court said that unconscionability is the equitable doctrine that may be invoked to set aside unfair agreements that result from an inequality in bargaining power, citing Uber Technologies. In order to make out a case of unconscionability, one must establish both inequality of bargaining power, in the sense that one party is incapable of adequately protecting his or her interests, and undue advantage or benefit secured as a result of that inequality by the stronger party. The court disagreed with the applicant’s argument that the Tribunal’s use of the modifier “serious”, when referring to a lack of stroke-related symptoms, meant that the Tribunal had applied an unreasonably high standard in assessing whether the release was unconscionable. Not every impairment or disability will necessarily give rise to a successful claim of unconscionability. The impairment or disability must be of sufficient gravity that it renders a party incapable of adequately protecting his or her interests. In respect of the applicant’s suggestion that the Tribunal had imposed a threshold more akin to an assessment of capacity rather than unconscionability, the court said that the threshold for a determination that an agreement is unconscionable is different, and lower than, the threshold for finding a party lacked capacity to enter an agreement. However, the Tribunal had clearly differentiated between considerations of capacity and unconscionability and had concerned itself only with the threshold of unconscionability. The court said further there was no evidence before the Tribunal that the settlement of the applicant’s claim was improvident. Settlement or compromise of a claim is not, in and of itself, evidence of an improvident bargain. The applicant also argued that the release was unconscionable because he was under economic duress when he accepted the terms presented by his employer. The court said that, certainly, the doctrine of unconscionability may operate to release a contracting party from an improvident contract if that party was particularly vulnerable due to “financial desperation”, citing Uber. Again though, not every claim of financial duress will be sufficient to relieve a contracting party from their bargain. The Tribunal’s decision dismissing the applicant’s claim of economic duress was reasonable: it was based on the application of the proper legal test for economic duress and the reasons for the conclusion reached were transparent and cogent and did not demonstrate any fatal flaws in reasoning.

9.12.1 Canadian Case Law Pre-Dating Uber v. Heller

Below are decisions pre-dating Uber Technologies v. Heller in which Canadian courts considered challenges to releases on the ground of unconscionability. These decisions may continue to offer some guidance regarding the view that courts take of different circumstances and considerations when determining whether a release is an unconscionable bargain. But of course, all decisions that pre-dated Uber must now be read and understood in light of the Supreme Court’s decision.

9.12.1.1 Decisions Involving Insurance Adjusters that Pre-Dated Uber v. Heller

The fact situation of the cases on unconscionability summarized in this section is generally one in which communications between an insurance adjuster and a claimant have resulted in the execution of a release by the claimant. These insurance adjuster cases are presented here under their own heading largely because of the sheer number of decisions that arise from this particular fact situation. Additional insurance adjuster cases, as well as discussion of unconscionability in the context of a release given by a claimant as a result of dealings with an insurance adjuster, can be found in The Law of Releases in Canada, at pages 237-38. The more prominent cases to be found there include Cougle v. Maricevic, 1983 CanLII 3670 (BC CA), Smyth v. Szep, 1992 CanLII 4031 (BC CA), and Gindis v. Brisbourne, 2000 BCCA 73 (CanLII).

If nothing else, the presentation of these insurance adjuster cases in a separate section tends to shine a light on just how often the unconscionability doctrine is invoked in situations where a release has ensued from interactions between an adjuster and a claimant.

Beach v. Eames, 1976 CanLII 650 (ON SC) (County Court, appeal to ONCA dismissed)

In defence of the plaintiff’s action arising from a motor vehicle accident, the defendant relied on a settlement of the claim by the plaintiff and an insurance adjuster for the defendant’s insurer and on a release signed by the plaintiff. The court disagreed with the indication in Towers v. Affleck that an experienced insurance adjuster plays the same role as a practising solicitor. However, the court held that the adjuster in this case had a duty to make certain that the plaintiff understood that he was giving a full release and that the payment made to him was in full settlement of all claims. This duty was not fulfilled. The settlement was not fair and equitable, the parties did not meet on equal terms, the plaintiff did not understand the nature and extent of the document he executed and nothing was done to make certain he understood. The release was set aside.

Doan v. I.C.B.C., 1987 CanLII 2448 (BC SC)

The plaintiff Mr. Doan suffered a brain injury when he was struck down in a crosswalk. He and his wife reached a settlement with an insurance adjuster and signed a release. The release was set aside by the court. Among other things, the court said that the adjuster was in a position of conflict of interest. On the one hand his interest – if not his duty – was to see that as little as possible was paid to the plaintiffs for the claim against his insured and his employers. But on the other hand, the plaintiffs were relying entirely on him and he knew they were relying entirely on him, for his advice as to their rights and as to what was properly due to them. The result, the court said, was predictable: the bargain arrived at was clearly improvident and seriously so. The court concluded that “by any of the three tests” set out in Towers v. Affleck and Harry v. Kreutziger , the test of unconscionable bargain was met and the release must be set aside.

Keewatincappo v. Clearsky, 1992 CanLII 12964 (MB QB)

No tribunal should readily ignore settlement agreements. Nonetheless a court should, indeed must, set aside contracts, including releases, when they are improvident and when they are made by people impeded by such factors as poverty, ignorance or confusion who act without independent advice, unless the party seeking enforcement is able to show that the transaction is fair and reasonable. There is nothing startling about the concept just enunciated. If authority is required, it can be found in English decisions such as Lloyd’s Bank v. Bundy, [1974] 2 All E.R. 757, older Canadian cases such as Waters v. Donnelly (1884), 9 O.R. 391, and other Canadian decisions: Towers v. Affleck , Beach v. Eames, above, and Doan v. Insurance Corp. of British Columbia, above. This action arose out of a motor vehicle accident in which the plaintiff suffered significant injuries. The third party insurer relied on a release signed by the plaintiff at a meeting with an insurance adjuster. The court found that the adjuster knew that the plaintiff had no lawyer and was relying on the adjuster’s recommendations, but, instead of resolving the difficulty, the adjuster took advantage of it. The amount paid to the plaintiff in settlement of the claim, based solely on the information available to the adjuster at the time and having consideration for all of the circumstances, was most unreasonable. In light of the information available at the time of the court’s decision, it was grossly out of line. The court had no hesitation in finding that the release must be set aside.

Dicus v. Halovich, 1997 CanLII 4233 (BC SC)

The plaintiff Matson was a passenger in a motor vehicle that was involved in a collision. She engaged in ongoing discussions with insurance adjusters about her claims arising from the accident. The defendants alleged that, in a release signed by her, the plaintiff settled her claims, while the plaintiff alleged that she gave only a partial release. The court said that, although the plaintiff made numerous allegations, her arguments essentially came down to a claim that the settlement was unconscionable and/or a plea of non est factum. In respect of the first of these two arguments, the court referred to the rule applicable to unconscionable bargains enunciated in Morrison v. Coast Finance . The court found that at all times the adjuster who reached the settlement with the plaintiff conducted herself in a professional caring manner toward the plaintiff and took all reasonable steps to properly evaluate the claim. The court also found that the amount paid to the plaintiff was fair and reasonable, given the claims advanced by the plaintiff against the information then available to the adjuster(s).

Chavarria v. Antoniuk, 1998 CanLII 6828 (BC SC)

The court concluded that a release signed by the plaintiff in respect of claims relating to injuries suffered in a motor vehicle accident should be set aside. The release was signed after discussions between an insurance adjuster and the plaintiff and his family. The court referred to the law on unconscionable transactions as set out in cases including McCullough v. Hilton , Morrison v. Coast Finance and Smyth v. Szep . The court found that the adjuster arrived at his own opinion as to the severity of the plaintiff’s soft tissue injuries and disregarded or down-played the only medical opinion available. The plaintiff accepted the adjuster’s view as to the appropriate settlement and as to the severity of his injuries. The parties were not on an equal footing. The ignorance of the plaintiff was apparent and as a result he was in the power of the adjuster. The court found the settlement to have been substantially unfair and, in reference to comments made in Morrison v. Coast Finance, said that “a presumption of fraud” arose.

Sandstrom v. Hornsby, 2002 BCSC 680 (CanLII)

After suffering injuries in a motor vehicle accident, the plaintiff settled her claim with an adjuster for the defendants’ insurer and she signed a release. The defendants relied on the release in support of an application for dismissal of the plaintiff’s action arising out of the accident. Citing Harry v. Kreutziger , the court concluded that the bargain reached by the plaintiff and the adjuster was substantially unfair. The unfairness in the bargain was the knowledge of the adjuster that there were ongoing problems, which, if they materialized, could, and would, make the proposed settlement unfair. The adjuster knew that she was being relied on, that the plaintiff’s injuries had not yet settled and that she had the plaintiff to her economic advantage. The court concluded that, in assessing the fairness of the settlement, it could look at all the surrounding circumstances as to how the settlement was entered into and that it could look only at the future developments reasonably foreseeable when settlement was made. Looking objectively at the surrounding circumstances and the reasonably foreseeable developments, the court found that the settlement was not only unfair but also sufficiently divergent from community standards of commercial morality that it should be rescinded.

Sarchuk v. Alto Construction Ltd., 2003 SKQB 237 (CanLII)

The plaintiff was injured while working at a construction site. He reached a settlement with an insurance company under a policy obtained by his employer and he signed a release. The court concluded that the release should be rescinded on the ground of unconscionability, applying the three-part test set out in Woods v. Hubley . Citing Gindis v. Brisbourne , the court said that the relevant time for an analysis of unconscionability is the time when the release was actually signed and the court must be careful to look only at what the defendant knew or should have reasonably known at the time that he or she negotiated with the plaintiff to sign the release. Thus, the court cannot consider post-settlement events that could not have been reasonably foreseen at the time of signing the release. On the evidence in this case, the amount paid to the plaintiff by the insurance company for his execution of a release was a substantially unfair bargain, misleading statements were made by the insurer’s examiner unconscientiously for the purpose of getting the plaintiff to settle his claims under the insurance policy, the termination of weekly benefits by the insurer for the purpose of putting undue pressure on the plaintiff to settle his claims was an unconscientious act, and due to the plaintiff’s ignorance about his rights under the policy – caused by the refusal of the examiner to furnish a copy of the policy – there was an inequality of bargain positions.

Fountain v. Katona, 2007 BCSC 441 (CanLII)

The plaintiff argued that a release given by him of his claims arising from a motor vehicle accident was void as an unconscionable bargain. The court referred to the elements of an unconscionable bargain as set out in Morrison v. Coast Finance . The court said that the insurance adjuster with whom the plaintiff settled his claim was a very experienced and knowledgeable adjuster who had the resources of a large insurance corporation at her disposal, while the plaintiff had no knowledge of insurance claims and had no understanding of the kinds of damages he could claim. Although the disparity of bargaining positions was not as obvious as in cases such as Smith v. Szep , there was a disparity in terms of available resources, knowledge, experience, and information. The court went on to find, though, that there was nothing unfair about the settlement agreed to by the plaintiff based upon the available medical and other evidence. This was not a case where the plaintiff was rushed into an unfair settlement by an overbearing adjuster, nor was it a case where the adjuster misled the plaintiff about his injuries or his right to claim compensation for pain and suffering. It was the plaintiff’s lack of attention to the matter of his injuries and the treatment of those injuries that led to his decision to accept the settlement offer.

Williams v. Condon, 2007 CanLII 14925 (ON SC)

After suffering an injury when he was struck by a motor vehicle, the plaintiff signed two releases at the office of the defendant’s insurer which reflected a full settlement of his claims. The plaintiff sought to set aside one of the releases on grounds including unconscionability. The court said that the relevant legal test for setting aside an unconscionable bargain was set out in Morrison v. Coast Finance . The foundation of unconscionability is inequality of bargaining power, better described as a marked discrepancy in bargaining power between the parties. Proof is also required that the bargain reached is improvident or substantially disadvantageous to the weaker party. The authorities stress that a bargain is not unconscionable merely because it is more favourable to one of the parties (citing Mundinger v. Mundinger ). It is not in every case of a settlement between an insurance adjuster and an unrepresented claimant that inequality of bargaining power will be found. It will depend on the circumstances of the particular case. On the facts of this case, the settlement of the plaintiff’s tort claim was found to be unconscionable and the release of that claim was set aside. There was a marked inequality of bargaining power: the insurer’s representatives had considerably more knowledge in relation to the assessment of damages and the appropriate time for settling claims, while the plaintiff was in precarious financial circumstances and entirely dependent on funds he was receiving from the insurer. The bargain that was struck was clearly improvident: at the time of the release, a great deal was unknown about the plaintiff’s condition and there was no reason to believe that he had recovered from his injuries. As to whether the insurer was scrupulously considerate of the plaintiff’s interests, the insurer acted precipitously in settling the tort claim and the court was not satisfied that the plaintiff’s rights were adequately communicated to him.

Richmond v. Matar, 2009 NSSC 113 (CanLII)

As to “the principles relating to setting aside a release”, the court referred to the basis upon which a transaction may be set aside as unconscionable, as discussed in Stephenson v. Hilti (Canada) and Woods v. Hubley . The position of the plaintiff in this case was that she was pressured into signing a release of her claims arising from a motor vehicle accident because the claims’ adjuster told her that her injury was only minor and would resolve fairly quickly. The court said it had no doubt that the plaintiff entered into a settlement with eyes wide open, understanding completely the finality of the settlement. The release was held to be valid and enforceable and the plaintiff’s claim was dismissed.

Grixti v. Kingston (City), 2010 ONSC 5161 (CanLII)

The plaintiff suffered injuries at a building owned by the defendant City. After writing to the City, she was contacted by an insurance adjuster. A series of conversations between the plaintiff and the adjuster ensued; eventually the plaintiff accepted a payment in respect of her claim and she signed a release. Later, she sought to set aside a release on the ground of unconscionability. She relied on Williams v. Condon, above, which set out a two-part test for unconscionability based on Morrison v. Coast Finance . The court said that the two-part test articulated in the Morrison decision had been superseded by the test set out in Cain v. Clarica Life and adopted in Titus v. William F. Cooke. The court found that the plaintiff understood that she had to sign the release in order to receive the funds and, in any event, “the quid pro quo involved” did not constitute knowingly taking advantage of the plaintiff. The court said that effectively the matter ended there because the plaintiff needed to meet all four of the criteria set out in Cain. Nevertheless, the court went on to find that there was nothing in the plaintiff’s conduct of negotiations to suggest an overwhelming imbalance in bargaining power, that the plaintiff had obtained some suitable advice and that, based on information available at the time, the plaintiff received a generous settlement for her injuries.

Jones v. Jenkins, 2011 ONSC 1426 (CanLII)

The defendant brought a motion for judgment to enforce a release signed by the plaintiff in respect of claims arising from a collision between the plaintiff’s motorcycle and a motor vehicle driven by the defendant. The release came about after discussions between the plaintiff and an adjuster for the defendant’s insurer. The court referred to the general test to determine whether or not a release should be set aside as unconscionable from Stephenson v. Hilti . The court also referred to the three part test set out in Woods v. Hubley and Coleman v. Bishop . The court found that the three part test was satisfied and it dismissed the motion for judgment. The defendant had conceded that there was an inequality of bargaining power. Information was withheld from the plaintiff about the extent of his injuries, although the plaintiff was of the impression that the adjuster would be fair (as was known to the adjuster) and would look out for the plaintiff’s interests. The court found most troubling the fact that the adjuster reduced general damages and future economic loss by 75% purportedly on the basis of the plaintiff being 75% responsible for the accident when there was no evidence that this was the case.

Bourdoukis (Swiss Precision Wire Cutting and Tool and Die Company) v. Kanda, 2011 ONSC 4283 (CanLII)

The plaintiff suffered injuries in a motor vehicle accident. He retained a lawyer to assist him with his tort claim but terminated the services of the lawyer and dealt directly with an adjuster in talks to settle the tort claim. In exchange for settlement funds of $15,000, he signed a release. He subsequently issued a statement of claim in which he alleged that the settlement was invalid. The court said it was not entirely clear what the plaintiff was alleging apart from saying that the settlement funds represented only a partial payment. The court said there was no evidence to support the plaintiff’s position that the release was unfair, the plaintiff chose not to have legal representation and there was no evidence that the tort insurer took advantage of the plaintiff in obtaining the release. The court concluded that the plaintiff had not satisfied the factors set out in Grixti, above, and as such had failed to establish the basis for a finding that the release should be set aside.

Nery v. Nery, 2012 ABQB 484 (CanLII)

In this summary trial, the parties sought a determination of whether a release signed by the plaintiff provided a complete defence to the action. The parties were in agreement that the law to be applied was as stated in Cain v. Clarica Life Insurance Company, above, and the court referred to the four elements of unconscionability set out in that decision. The court said that a settlement which under-compensates calculable loss of earnings by half, ignores the medically recognized possibility of a very serious injury and is finalized despite significant uncertainty as to whether the injured party’s condition has stabilized and as to whether there has been a loss of future earning capacity, is grossly unfair and improvident. The plaintiff did not have independent legal advice or other suitable advice, there was clearly an imbalance in bargaining power caused in part by the plaintiff’s lack of facility in English, but primarily caused by her lack of experience in dealing with the resolution of a personal injury claim, and an adjuster for the defendant’s insurer knowingly took advantage of the plaintiff’s vulnerability.

Hanna v. Polanski et al, 2012 ONSC 3229 (CanLII)

The plaintiff suffered injuries as a result of a motor vehicle collision involving a vehicle in which he was a passenger. He settled his claim with an adjuster for the defendants’ insurer and signed a release. He alleged that he had recently been discharged from bankruptcy and had broken up with a long term companion and was therefore emotionally and financially vulnerable at the time of signing the release. The court referred to Titus v. William F. Cooke (summarized, section 9.12.1.2, below) for the proposition that a party relying on the doctrine of unconscionability to set aside a transaction faces a high hurdle and to Seguin v. Chaput, 2010 ONSC 1275 and Davis v. Cooper (summarized, section 9.12.1.2, below) for the four elements of the test that must be met in order to set aside a release on the basis that it is unconscionable. The court said that settlement negotiations between a self-represented claimant and an insurance adjuster are not prime facie evidence of an overwhelming power imbalance. Such a determination is fact specific, and should be made having regard to the claimant’s conduct throughout the negotiations. On the facts of this case, the court was not persuaded that there was any overwhelming imbalance in the negotiations. The plaintiff sought legal advice and was told by the lawyer that it was too early to give an opinion. The plaintiff elected to disregard that advice and negotiate a settlement, which he successfully did on his terms. There was no evidence to suggest that the adjuster knew of the plaintiff’s alleged vulnerability. The plaintiff failed to meet any of the required four criteria for an unconscionable bargain.

Marjadsingh v. Walia, 2012 ONSC 6659 (CanLII) , appeal dismissed (except on costs), 2013 ONCA 336 (CanLII)

A motor vehicle driven by one of the plaintiffs was damaged when struck by the defendant’s vehicle and the plaintiff was injured when he jumped out of the way. The parties agreed to a settlement and the plaintiff signed a release. The plaintiff argued that he should not be held to the terms of the release, on grounds including unconscionability. The motion judge said that the courts have set a very high threshold for parties seeking to set aside an agreement on the ground of unconscionability and she referred to the elements of unconscionability set out in Titus v. William F. Cook Enterprises Inc. The motion judge was not satisfied that any of the elements of unconscionability marked the circumstances of execution of the release. Among other things, there was no medical evidence that the plaintiff was badly injured and there was no basis on which to say that the settlement of his medical claim was grossly unfair or improvident. Also, the simple fact that the plaintiff did not have the same education level as the defendant did not alone indicate an overwhelming inequality in their positions. The plaintiff was a businessman who dealt with standard form contracts required to be signed by customers.

Kimball v Nikiforuk, 2019 BCSC 964 (CanLII)

The plaintiff suffered injuries in a motor vehicle accident. He negotiated his claim with an insurance adjuster and represented himself in litigation that he commenced to advance his claim. The plaintiff and the adjuster reached a settlement and the plaintiff signed a release. The plaintiff asserted that he felt compelled to accept the defendants’ settlement offer and that the settlement was unfair, unjust, and unreasonable. The court referred to the two-part test for unconscionability summarized by the B.C. Court of Appeal in Do v. Nichols, 2016 BCCA 128. According to that test, in order to set aside a bargain for unconscionability, a party must establish inequality in the position of the parties arising from the ignorance, need or distress of the weaker, which left him in the power of the stronger, and proof of substantial unfairness in the bargain. The court also referred to Manak (summarized, section 9.12.1.2, below) for the proposition that the hurdle is a high one. The court found that the plaintiff had not met either of the two parts of the test. As to the first part, there was no element of the plaintiff being overborne; rather, he decided to accept the settlement offer because he needed the money for reasons he did not share with the defendants. As to the second part of the test, having regard to the evidence and what a reasonable outcome after trial might have been, the court found that the plaintiff had failed to prove that the settlement was substantially unfair.

Veinotte v. Haugen, 2020 NSSC 167 (CanLII)

The plaintiff was involved in a motor vehicle collision. She received settlement funds from the defendants’ insurer and signed a release. However, she commenced an action against the defendants and sought a finding that the release be set aside as unconscionable. The parties agreed that the test for setting aside a release on the ground of unconscionability was as summarized in Stephenson v. Hilti . The court reviewed case law on inequality of bargaining power, including a number of cases involving settlements reached between claimants and insurance adjusters. The court said the circumstances of this case differed significantly from those in the cases where an inequality of bargaining power was found. The court found that the plaintiff had not established that, at the time she agreed to a settlement, nor at the time she signed a release, there was an inequality of bargaining position arising out of ignorance, need or distress. The plaintiff did not even establish that, in the circumstances, she was the weaker party, as she was the one who commanded the negotiations. The mere fact that an insurer controlled the purse strings, and could have chosen to reject a counteroffer made by the plaintiff, did not make her the weaker party. Also, the plaintiff was knowledgeable in legal matters generally and specifically regarding releases; she had previously signed releases in two cases that she settled. While the court considered it unnecessary to do, it went on to conclude that the other elements of unconscionability had not been established, finding, among other things, that the insurance adjuster and examiner did not unconscientiously use a position of power to achieve an advantage.

9.12.1.2 Other Decisions that Pre-Dated Uber v. Heller

The following are pre-Uber decisions – not involving settlements reached between unrepresented claimants and insurance adjusters – in which Canadian courts addressed the application of the unconscionability doctrine to releases.

Charles v. Blacquiere, 1999 ABQB 965 (CanLII)

The plaintiff sought to set aside an apparent settlement of her claim arising from a motor vehicle collision. She alleged that she was put under enormous pressure to settle and that she finally gave in and instructed her lawyers to settle. She argued, among other things, that the settlement was unconscionable. The court concluded that there was no agreement to settle but found that, if there had been a settlement agreement, the argument of unconscionability would not have prevailed because whatever transpired between the plaintiff and her lawyer cannot be a basis for a finding of unconscionable behaviour laid “at the doorstep” of the defendant.

Milstein v. Old Willoughby Realty Ltd., 2004 CanLII 17680 (ON SC)

The statement of defence in this case alleged unconscionability in a settlement which “generated” a mutual release. Assertions were made about the disparity of wealth of each of the parties, but there was no proof of inequality in the position of the parties arising out of ignorance, need or distress of the weaker which left him in the power of the stronger. There was no proof of the substantial unfairness of the bargain; rather the party alleging unconscionability benefitted from the bargain.

Juhary v. Richtree Markets Inc., 2004 CanLII 26236 (ON SCDC)

In this wrongful dismissal action, the plaintiff challenged the validity and legality of a mutual release signed by the parties. The plaintiff was twice urged to seek advice, once before he made a proposal for settlement and once after he made it. The defendant assumed that the plaintiff had sought and received advice. The release signed by the plaintiff contained his acknowledgment that he had received such advice. The trial judge found that the mutual release was a complete defence to the action and, in its reasons for dismissing an appeal from this decision, the Divisional Court said that, while it might be that the plaintiff did not make the most beneficial deal that was open to him, there was nothing unconscionable about the agreement reached by the parties.

Cain v. Clarica Life Insurance Company, 2005 ABCA 437 (CanLII)

The respondent was employed by the appellant, which sought to move the respondent to a new position. The respondent agreed to and received a settlement package, without signing a release, and he resigned. The Court of Appeal said that someone who voluntarily resigns ordinarily does not get damages for wrongful dismissal and, in this context, the resignation was tantamount to a release. The Court of Appeal considered whether the settlement agreement was unconscionable and said the authorities discuss four elements which appear to be necessary for unconscionability, namely: 1) a grossly unfair and improvident transaction; 2) the victim’s lack of independent legal advice or other suitable advice; 3) an overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and 4) the other party’s knowingly taking advantage of this vulnerability. The facts as found in the trial reasons did not satisfy the tests for any of the elements in the case law on upsetting contracts for unconscionability or undue imbalance of bargaining power.

C.E.W. v. G.D.W. et al, 2007 BCSC 550 (CanLII)

In considering whether a release was the product of an unconscionable transaction, the court answered two questions in the affirmative, namely, whether there was an inequality of position arising out of some ignorance, distress or incapacity and whether there was proof of the substantial unfairness of the benefit obtained by the releasee. The releasor was in distress: she was in need of replacement accommodation for herself and her two children and her health and employment position were “tentative”. The release was set aside.

Titus v. William F. Cooke Enterprises Inc., 2007 ONCA 573 (CanLII)

A party relying on the doctrine of unconscionability to set aside a transaction faces a high hurdle. A transaction may, in the eyes of one party, turn out to be foolhardy, burdensome, undesirable or improvident; however, this is not enough to cast the mantle of unconscionability over the shoulders of the other party – citing Fridman, The Law of Contract in Canada (5th Edition). The leading cases and academic commentary were reviewed in Cain v. Clarica Life, where the court concluded that the authorities discuss four elements which appear to be necessary for unconscionability. In this case, the appellants terminated the employment of the respondent and offered the respondent a settlement package, provided that he sign a release. The respondent accepted the offer and signed the release, but later he sued the appellants, claiming that the settlement and release were unconscionable. The Court of Appeal held that the respondent could not “bring himself within” any of the four elements of unconscionability. The appellants’ offer was not grossly unfair and neither was the linking of the settlement offer to the release. There is an inherent imbalance in bargaining power between an employer and an employee when the former terminates the employment of the latter. But the generalized vulnerability of all terminated employees was diminished in this case by the fact that the respondent was a senior, knowledgeable lawyer particularly wellversed in contract and employment law, including the law relating to wrongful dismissal.

Barr v. Pennzoil-Quaker State Canada Inc., 2007 CanLII 28526 (ON SC)

In this wrongful dismissal case, the plaintiff signed a release but challenged its validity on grounds including unconscionability. The court referred to the three “requisites” of unconscionability set out in Bartlett v. Canada Life Assurance Company . The court concluded that the plaintiff had raised a genuine issue for trial as to whether the defendant unconscientiously abused its position of power. However, the court found no genuine issue for trial in respect of whether the package received by the plaintiff was sufficiently divergent from community standards of commercial morality that it ought to be set aside, or that it required the intervention of the court. The package was “at the low end of the spectrum of notice periods”, but it was within the range of what was acceptable. The settlement, viewed in hindsight, was less than the plaintiff could have got, perhaps less than he should have got, but it was not so bad that it crossed the threshold into the unconscionable.

Isildar v. Rideau Diving Supply, 2008 CanLII 29598 (ON SC)

In considering whether a pre-emptive release given in connection with a scuba diving certification program was unconscionable, the court referred to Knowles v. Whistler Mountain where a two-stage analysis was applied, based on Harry v. Kreutzinger . Given the court’s factual findings as to the nature the release and the circumstances in which it was signed, enforcement of the release was not divergent from community standards of fairness and morality.

Bjelakovic v. Accenture Global Services GmbH, 2008 CanLII 32802 (ON SC)

A party relying on the doctrine of unconscionability to set aside a contract faces a high hurdle. The following four elements are necessary to set aside a release on the basis that it is unconscionable: (1) a grossly unfair and improvident transaction; (2) the victim’s lack of independent, or other suitable, advice; (3) an overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness , senility, or similar disability; and (4) the other party’s knowingly taking advantage of this vulnerability (citing Titus v. William F. Cooke). On a motion for summary judgment in this case, the court found that there was no genuine issue of material fact requiring a trial with respect to the plaintiff’s assertion that a settlement following the termination of her employment was unconscionable. There was no evidence that the settlement was grossly unfair or improvident, the plaintiff had independent legal advice, the inherent imbalance between an employer and employee was diminished in this case and, given that there was no evidence that the settlement was unfair, and the plaintiff had independent legal advice, it could not be said that the defendant took advantage of the plaintiff’s vulnerability.

Van Hooydonk v. Jonker, 2009 ABQB 8 (CanLII)

The question of unconscionability has been considered in a number of waiver cases involving dangerous activities. In each situation it has been held that a release of liability is reasonable in light of the inherent risks in the intended activities and the plaintiff’s knowledge that a precondition of engaging in such risky activity is bearing the risk of the defendants’ negligence. In this case, the plaintiff read and signed a clearly worded legal waiver of her right to sue in negligence. It is perfectly reasonable for those who provide access to risky activities to demand that those who participate bear the risk of any negligence. The waiver signed by the plaintiff could not be set aside as unconscionable.

A.M.B. v. M.A.T., 2009 BCSC 1281 (CanLII)

The plaintiff argued that a settlement agreement in which she released her claim for spousal support was an unconscionable bargain. The court said that, in order to establish an unconscionable transaction at common law, it must be proved: “…that there was inequality in the position of the parties due to the ignorance, need or distress of the weaker, which would leave him in the power of the stronger, coupled with proof of substantial unfairness in the bargain. When this has been shown a presumption of fraud is raised and the stronger must show, in order to preserve his bargain, that it was fair and reasonable.” (The quote is from Klassen v. Klassen, 2001 BCCA 445.) The court found that the plaintiff had failed to prove facts which would create a presumption of fraud.

Murray v. Marcoux, 2009 CanLII 60092 (ON SC)

As stated by the motion judge, the issue to be decided in this case was whether a settlement agreement, specifically a release signed by one of the plaintiffs with the benefit of independent legal advice, should be enforced on a motion for summary judgment where a serious complication, which was an identified risk at the time of settlement, occurred after the settlement. The plaintiff argued that the settlement should not be enforced on the grounds that it was improvident and unconscionable and based on negligent legal advice. The motion judge referred to Titus v. William F. Cooke and the four elements of unconscionability set out in Cain v. Clarica that were adopted in Titus. The motion judge said that the plaintiff did not meet three of the elements of the test: he obtained independent legal advice; there was no imbalance of bargaining power and none was alleged; and the defendants’ insurance adjuster was not alleged to have taken advantage of any vulnerability on the plaintiff’s part. As to the fourth element of unconscionability, the motion judge said that, whether or not the settlement was improvident at the time it was made given the medical evidence available – and whether or not the appropriate legal advice was given to the plaintiff by his lawyer – were issues to be addressed in an action alleging professional negligence against the lawyer. However, even assuming that the settlement was unwise and improvident, the plaintiff could not set aside the settlement agreement on the basis that it was unconscionable because he had not alleged that the other parts of the test for unconscionability were met. The court went on to say that, if every settlement agreement entered into with the benefit of independent legal advice, without any imbalance in bargaining power and without the opposing party taking advantage of any vulnerability, could be set aside when, with the benefit of hindsight, the settlement turned out to be improvident, then very few settlement agreements would be enforceable. Such a situation would lead to wasteful additional litigation, would prevent litigants from ever achieving any finality, and would make settlement agreements effectively unenforceable. This would discourage parties from resolving their disputes by entering into settlement agreements before trial, which is conduct that should be encouraged.

1483677 Ontario Limited v. Crain, 2009 CanLII 69791 (ON SC)

The court cited from The Law of Releases in Canada the three-part test for unconscionability set out in Woods v. Hubley , Stephenson v. Hilti and other cases. The plaintiffs were sophisticated and experienced in business matters, they had the benefit of legal advice and the transactions giving rise to this litigation were not unprofitable. There was no factual basis for finding that the parties were weaker or that there was an overwhelming imbalance of power in the relationship between the parties. Furthermore, there was no factual dispute that the plaintiffs received and continued to receive the benefit of the contracts made among certain of the parties. By their actions, the plaintiffs had affirmed the releases and could not claim that they were unconscionable.

Dennis v. Ontario Lottery and Gaming Corporation, 2010 ONSC 1332, appeal dismissed 2011 ONSC 7024, further appeal dismissed, 2013 ONCA 501 (CanLII), application for leave to appeal dismissed, Peter Aubrey Dennis, et al. v. Ontario Lottery and Gaming Corporation, 2014 CanLII 5980 (SCC)

The plaintiffs moved for certification of a class action on behalf of a class of people who signed “self-exclusion” forms provided by the Ontario Lottery and Gaming Corporation that included a release. In the self-exclusion form, OLGC undertook to use its “best efforts” to deny signatories entry to its facilities, but excluded liability if it failed to do so. The plaintiffs submitted that the failure of OLGC to exercise its best efforts would make it unconscionable for it to rely on the disclaimer and release. The court said that there was nothing unconscionable in OLGC stipulating that it would undertake to exercise its best efforts so as to assist the plaintiff and class members but only on the condition that in no circumstances would it be liable for any gambling losses incurred by them in the event that, for any reason, self-exclusion failed to achieve its intended effect. The plaintiff alleged, however, that OLGC knew its system for enforcing self-exclusion was inadequate and would be ineffective. The court said that, if this allegation were proven and the self-exclusion program were found to be mere “window-dressing”, it could be found to have been unconscionable to offer such a program and, a fortiori, to attempt to exclude OLGC’s liability when so doing. But the unconscionability analysis could not be satisfactorily performed solely on the basis of the pleadings in the case and, in consequence, the court concluded that it was not plain and obvious that OLGC was absolved from liability by the disclaimer and release in the form.

In support of her motion for an order setting aside a release signed by her, the plaintiff relied on a number of grounds. The substance of her complaint, according to the motion judge, seemed to be based on allegations that included unconscionability. The motion judge said that the courts have set a very high threshold for parties seeking to set aside an agreement on the ground of unconscionability. She referred to “the strict requirements to succeed on such a claim”, as set out in Bjelakovic, above, where the court drew on the four elements of unconscionability from Titus. On the evidence in this case, a letter from the plaintiff’s counsel confirmed his advice to the plaintiff that the likely outcome at trial would be a loss for the plaintiff. This was a clear indication that the plaintiff had advice on her chances of success and, in the circumstances, this made baseless the plaintiff’s claim that the settlement of her claim was unconscionable. Further, the plaintiff had independent legal advice when she entered into the settlement agreement, she was a paralegal, she had been actively involved in this litigation and many other legal proceedings and she had demonstrated a better than average knowledge of court procedure and the substance of her claims. The motion judge concluded that there was no basis to set aside the release due to unconscionability.

Turmel v. CBC (Dragon’s Den), 2010 ONSC 5318 (CanLII) , affirmed on appeal, 2011 ONCA 519 (CanLII) , leave to appeal refused, 2011 CanLII 79241 (SCC)

The plaintiff signed a consent and release before appearing on a television show to present a business proposal. He argued that the document was unconscionable because the edited version of his business proposal misrepresented his intent. The court said there was nothing unconscionable about the consent and release: its substantive terms were not unfair, it was not improvident for the plaintiff, there was no special relationship between the parties and there was no inequality of bargaining power when it was signed. The plaintiff signed the document without asking any questions or raising any concerns: he made a calculated decision to sign the document in order to participate in a taping.

Federation of Newfoundland Indians v. Canada, 2011 FC 683 (CanLII)

As to “[t]he law relating to setting aside an executed release”, the court referred to the decision in Richmond v. Matar, above, which in turn referred to the basis upon which a transaction may be set aside as unconscionable, as discussed in Stephenson v. Hilti and Woods v. Hubley . The court said that, in this case, there was no evidence of fraud or other exceptional circumstances that would tend in favour of vacating the release signed by one of the plaintiffs.

Deanna Loychuk et al v. Cougar Mountain Adventures Ltd., 2012 BCCA 122 (CanLII), application for leave to appeal dismissed 2012 CanLII 56135 (SCC)

It is not unconscionable for the operator of a recreational-sports facility to require a person who wishes to engage in activities to sign a release that bars all claims for negligence against the operator and its employees. If a person does not want to participate on that basis, then he or she is free not to engage in the activity. Whether one is considering unconscionability at common law or under the B.C. Business Practices and Consumer Protection Act, the essential elements are the same: as the facts of this case did not support a finding of unconscionability at common law, neither did they support such a finding under the BPCPA. While, under the BPCPA, the defendant bore the onus of proving a transaction was not unconscionable, it satisfied that burden by establishing that the appellants knowingly and voluntarily signed releases in order to participate in an inherently risky activity.

Rubin v. Home Depot Canada Inc., 2012 ONSC 3053 (CanLII)

The law pertaining to the enforceability of a release executed in the context of the dismissal of an employee was set out by the Ontario Court of Appeal in Titus v. William F. Cooke. The Court of Appeal referred to and relied on Cain v. Clarica in identifying the four elements necessary to demonstrate that a release is unconscionable. In this case, the plaintiff did not have any legal or other advice prior to signing a release. As for imbalance in bargaining power, such an imbalance is inherent in the relationship between an employer and employee and intrinsic to the termination of an employee. Mitigating factors as in the Titus case did not exist on the facts of this case and the power imbalance was “enhanced” by the way in which the representatives of the defendant dealt with the situation. As for taking advantage of vulnerability, the plaintiff was presented with a termination letter which presumed that the release would be signed. No other option was offered. This approach was arranged in the expectation that it would direct, if not compel, the plaintiff to sign the release. The plaintiff did not agree to anything; rather, he simply accepted what he was misled into thinking was his only option. The court concluded that the release should be struck and found to be unenforceable.

MHR Board Game Design Inc. v. Canadian Broadcasting Corporation, 2013 ONSC 4457 (CanLII), appeal dismissed, 2013 ONCA 728 (Can LII), leave to appeal refused, 2014 CanLII 25874 (SCC)

The appellant signed a comprehensive release before appearing on a television show to present a business proposal. He alleged that his proposal was edited in such a fashion as to misrepresent completely the merits of the business plan. His action was dismissed on a motion for summary judgment. The motion judge said that there were no material facts to distinguish this case from Turmel v. CBC, above, in which the Court of Appeal found that a similar consent and release, executed in similar circumstances, was not unconscionable.

Niedermeyer v. Charlton, 2014 BCCA 165 (CanLII) , application for leave to appeal dismissed, William Charlton, et al. v. Karen Niedermeyer, 2014 CanLII 68709 (SCC)

The appellant wished to participate in an activity that she accepted was high-risk (a zip-line experience) and she signed a pre-emptive release that expressly covered, among other things “travel to and from the tour areas”. She was injured when the bus in which she was travelling as she returned from the zip line went off the road. The trial judge said it is not unconscionable for the operator of a recreational sports facility to require persons to sign releases as preconditions to the use of that facility. And the dissenting judge in the Court of Appeal said it was not unconscionable for the respondents to require a person who wishes to engage in activities offered by the respondents to sign a release that bars all claims for negligence against them and their employees. The majority of the Court of Appeal agreed with the analysis and conclusions of the dissenting judge except on another issue (whether the release was contrary to public policy).

D.L.G. & Associates Ltd. v. Minto Properties Inc., 2014 ONSC 7287 (CanLII) , appeal on other grounds allowed in part, 2015 ONCA 705 (CanLII)

Chamberlin v. Canadian Physiotherapy Association, 2015 BCSC 1260 (CanLII)

The circumstances in which a court may find an exclusion clause to be unconscionable were addressed in obiter dictum in this case. The court referred to the Loychuk and Kreutziger cases and went on to say that the jurisprudence with respect to (pre-emptive) releases has most often involved sporting activities that carry inherent risks of injury. By reference to Loychuk, the court said that, in the context of recreational sports such as zip-lining, skiing, white-water rafting and snowmobiling, it is not unconscionable to require a person who engages in such activities to sign a release that bars all claims for negligence against the operator and its employees.

Wyllie v Larche, 2015 ONSC 4747 (CanLII)

The court said that the defendant in this wrongful dismissal case sought to negotiate a release of the plaintiff’s claims against it by offering the compensation to which the Canada Labour Code entitled him. The plaintiff was not represented by a lawyer who could advise him of the legal implications of signing the release that the defendant demanded. The court said that, had the plaintiff signed the release in these circumstances, it likely would have been unenforceable, because of the inequality of the parties’ bargaining positions.

Rebel v Stone Mills (Township), 2015 ONSC 5703 (CanLII)

The plaintiffs argued that a release given by them was not a bar to this action because of the unequal bargaining power of the parties, undue influence by the defendant Township and intimidation by the Township. Although counsel for the plaintiffs submitted that they were not asserting unconscionability, the court addressed unconscionability and found that the evidence did not meet the test as set out in authorities including Marjadsingh v. Walia, above, Seguin v. Chaput, 2010 ONSC 1275 and Taske v. Prairiefyre, above.

Saliken v. Alpine Aerotech Limited Partnership, 2016 BCSC 832 (CanLII)

Upon the termination of his employment, the plaintiff signed termination documents presented by the employer that consisted of two letters and a release. The court said that the atmosphere during the termination meeting was tense and awkward – the plaintiff was in shock he was being terminated – and to hold the plaintiff to the termination documents in the circumstances would be unconscionable. The termination documents were not explained to the plaintiff and the plaintiff received no legal or other suitable advice. It was a grossly unfair and improvident transaction. Ultimately, the circumstances and resulting stress of the termination resulted in an imbalance in bargaining power and the defendant knowingly took advantage of the plaintiff’s vulnerability to its advantage. The offer contained in the termination documents was presented in a way that was directed to getting the plaintiff to accept, and in a manner set to take advantage of the plaintiff’s vulnerability.

Arif v. Li, 2016 ONSC 4579 (CanLII)

A person seeking to set aside a contract on the ground that it is unconscionable must show that: 1) the person who claims the benefit of the contract abused his or her bargaining power and preyed upon the person who signed the contract; and 2) the bargain was improvident. In this case there was no inequality of bargaining power, nor was the plaintiff preyed upon by the defendants. It was entirely reasonable for the defendants to seek to limit their liability in circumstances where the plaintiff voluntarily participated in a dangerous activity.

Millerson Group Inc. v. Huntington Properties Ottawa Inc., 2016 ONSC 6106 (CanLII)

The steps to determine the enforceability of exclusionary clauses set out in Tercon Contractors v. British Columbia (Transportation and Highways) 2010 SCC 4 (CanLII), above, are applicable in respect of release clauses. The steps are: first, determine whether the clause applies to the particular circumstances; second, consider whether the clause was unconscionable at the time when the contract was made; and, third, consider whether to refuse to enforce the clause by reason of an overriding public policy. The three elements of unconscionability are pronounced inequality of bargaining power, substantially improvident or unfair bargaining and the defendant knowingly taking advantage of the vulnerable plaintiff. None of these elements were present in this case.

Buterman v. St. Albert Roman Catholic Separate School District No. 734, 2017 ABCA 196 (CanLII)

In this case, the Alberta Human Rights Commission Tribunal found that the appellant had relinquished a human rights claim when he entered into a settlement agreement. Before the Court of Appeal, the appellant argued that the settlement should be disregarded on the grounds of public policy and he relied upon unconscionability. The court said that, while indicia of unconscionability are context-specific, case law suggests several useful factors such as inequality of bargaining power, a substantially unfair bargain, the relative sophistication of the parties, the existence of bona fide negotiations, the nature of the relationship between the parties, the gravity of the breach, and the conduct of the parties (citing Redstone Enterprises Ltd v Simple Technology Inc, 2017 ONCA 282 and Cain v Clarica Life). The court said that none of these indicia were apparent on the record of this case. The appellant contended that the documents proposed to complete the settlement contained an unenforceable term – that he relinquish potential future human rights complaints – and that the “myriad of entities” against whom he was required to release his claims was too broad. The court said that this was not a sufficient basis to find that the settlement agreement was unconscionable. The appellant’s counsel never suggested that the draft settlement documents should be modified to reflect the concerns that formed the basis of the appellant’s argument. The court acknowledged that the time at which to assess whether a bargain is unconscionable is at the time of the bargain, but it could not ignore the entire context of this dispute. An inference which could be reasonably drawn from the record was that the appellant regretted his decision to settle the complaint. Unconscionability is an equitable doctrine and the remedy is discretionary. In the circumstances of this appeal, the court was not persuaded that this was an appropriate case to exercise that discretion.

Downer v. Pitcher, 2017 NLCA 13 (CanLII)

Following a collision between her taxicab and the appellant’s vehicle, the respondent accepted amounts paid by the appellant that were arrived at by reference to the damage to her cab and her lost income and she signed a release of all claims. Although she said she felt fine when she signed the release, she later developed symptoms of soft tissue injury. This appeal addressed whether the trial judge erred in setting aside the release on the ground of unconscionability. The Court of Appeal began its discussion of the tests for determining unconscionability with the comment that eschewing attention to rigid linguistic formulae is especially important when dealing with equitable concepts and principles. Debating, in a particular case, whether there was an “overwhelming imbalance” or merely an “inequality” of bargaining power or whether the transaction was “grossly” or merely “substantially” unfair is a sterile and artificial exercise. Indeed, the descriptors used in setting out the applicable principles are not uniform in case law or in academic discussion. At most, the adjectives chosen – all of which emphasize that something out of the ordinary should be present – should be regarded simply as shorthand ways of emphasizing that something substantially more than bargaining imbalance simpliciter and a precise measuring of the benefits of the transaction in a meticulous search for any slight difference in relative advantage and disadvantage, is required. A level of unequal bargaining power that distorts a transaction to the point that the presumption of rational autonomy in self-interested contract-making is displaced is a better way of describing the point at which equity should intervene than by simply using a single adjective that is malleable in its meaning. In this case, there was no degree of vulnerability present that could have been exploited by the appellant. Furthermore, it could not be said that the appellant unfairly or unconscionably took advantage of any “inequality” if that was what it was. While it was true that he clearly wanted to obtain a release from all future liability, he did not know that the respondent believed the release only covered property damage and income loss. He suggested to the respondent that she read the document before signing and he did not represent to her that it was anything else than what the words clearly conveyed. It could not be said that he knew of any vulnerability, in the sense of any special and significant disadvantage that the respondent was suffering from. In these circumstances the ordinary common law policies of promoting sanctity of contract and permitting self-interested bargaining were not displaced by any equity based on unconscionability.

Manak v. Workers’ Compensation Board of British Columbia, 2018 BCSC 182 (CanLII)

In considering whether a release signed by the plaintiff should be set aside as unconscionable, the court referred to Cain v. Clarica Life, above, for the applicable test and said that it would adopt the structure of the four elements identified in Cain to analyze the evidence in the case before it. The court also referred to the expression of the test in Saliken v. Alpine Aerotech, above, where the B.C. Court of Appeal’s decisions in Morrison v. Coast Finance Ltd. and Harry v. Kreutziger were summarized. The court said there is no material difference between these expressions of the test: the ‘power imbalance’ factor of the Harry/Morrison test generally equates to factors 2 and 3 of the Cain/Titus test – lack of legal or other advice and an imbalance of bargaining power- and the ‘taking unfair advantage’ factor generally equates to factors 1 and 4 – grossly unfair or improvident transaction and taking advantage by one party. The court found that the plaintiff had not met the burden of establishing that the release was unconscionable. Two of the elements from Cain were not satisfied (grossly unfair and improvident transaction and knowingly taking advantage). While the other two elements were met (lack of independent legal advice and overwhelming imbalance in bargaining power), they were counterweighed with substantial mitigating factors. And, using the broader language from the Harry decision, viewing the weight of the evidence as a whole, the court was unable to conclude that the release was sufficiently divergent from community standards of commercial morality that it should be rescinded.

New Vision Renaissance MX Ltd. v. The Symposium Café Inc., 2020 ONSC 1119 (CanLII)

In this case a release was given by the plaintiffs in the context of settlement of a potential dispute over their inability to close the purchase of a franchise due to their lack of the funds needed to close. The plaintiffs attempted to draw an analogy to the situation in Douez v. Facebook Inc., 2017 SCC 33 (CanLII), where a contract of adhesion gave Facebook the unilateral ability to dictate that all grievances be adjudicated in California. The court did not see the circumstances of this case to be analogous to Douez. The arrangement was not unilaterally imposed on the plaintiffs through a contract of adhesion. They agreed to the release as part of a franchise amending agreement that enabled them to open their franchise location on the date that they had selected despite their funding shortfall. The defendants did not have to accommodate the plaintiffs and it was not unfair or unconscionable for the defendants to ask that they not be later faced with the prospect of a rescission claim. The court did not find the release to be unconscionable.

9.13 Undue Influence

Undue influence has been generally described as the unconscientious use by one person of power over another in order to induce the other to do something: Kinsella v. Mills, 2020 ONSC 4785 (CanLII), at paragraph 53, quoting from Berdette v. Berdette, 1991 CanLII 7061 (ON CA), where the Ontario Court of Appeal quoted from Brooks v. Alker, 1975 CanLII 23 (ON SC). While the principle of unconscionability focuses broadly on fundamental defects in the negotiation and formation of an agreement, coupled with an improvident bargain, the doctrine of undue influence is concerned with the sufficiency of a party’s consent: Kinsella, paragraph 452 citing Morrison v. Coast Finance Ltd., 1965 CanLII 493 (BC CA), at paragraph 4, and Nadeau v. Clement, 2008 SKQB 1 (CanLII), at paragraph 53, appeal dismissed 2009 SKCA 40 (CanLII). The court has the equitable jurisdiction to set aside a transaction on the basis of undue influence where one party has induced the other party to enter into the arrangement through the exertion of influence which prevents the other party from exercising a free and independent judgment in the matter: Kinsella, paragraph 452, citing Goodman Estate v. Geffen, 1991 CanLII 69 (SCC), [1991] 2 SCR 353, Freake v. Freake, 2004 NLCA 39 (CanLII) at paragraph 40, and other authorities.

There are two types of undue influence – actual and presumed: Thorsteinson Estate v Olson, 2016 SKCA 134 (CanLII), at paragraph 35, Royal Bank of Canada v Biddell et al, 2015 ONSC 6535 (CanLII), at paragraph 53, Lewis v. Central Credit Union Limited, 2012 PECA 9 (CanLII), at paragraph 55, and Bank of Montreal v. Duguid, 2000 CanLII 5710 (ON CA), at paragraph 6. The distinction is one founded on the burden of proof: Biddell, paragraph 53, and Lewis, paragraph 55.

With actual undue influence, the person claiming undue influence has the obligation to prove it: Biddell, paragraph 53, and Lewis, paragraph 55. Actual undue influence is established where one party induces the other to enter into the transaction by dominating their will through the exercise of a pervasive and unconscientious influence on them, whether through manipulation, coercion, fraud or outright or subtle abuse of power: Kinsella, paragraph 453, citing Goodman Estate, Kavanagh v. Lajoie, 2014 ONCA 187 (CanLII), at paragraphs 18-19, and other authorities. In Eftimovski v. Faris, 2004 CanLII 22696 (ON SC), at paragraph 80, actual undue influence was referred to as “unfair advantage in a relationship where one person has the ability to dominate the will of another”.

Where the potential for domination inheres in the relationship between the transferor and transferee, the presumption of undue influence applies: Foley (Re), 2015 ONCA 382 (CanLII) at paragraph 28, citing Goodman Estate, at page 378. The presumption of undue influence is a rebuttable evidential presumption. It arises if the nature of the relationship between the parties coupled with the nature of the transaction between them justifies, without any other evidence, an inference that the transaction was the result of the undue influence of one party over the other: JGB Collateral v. Rochon, 2020 ONCA 464 (CanLII), citing Goodman Estate, at page 378 and CIBC Mortgage Corp. v. Rowatt, 2002 CanLII 45110 (ON CA), at paragraph 20.

If the presumption exists, the burden then shifts to the other party to rebut the presumption: Biddell, at paragraph 53, Lewis at paragraph 55. The party seeing to rebut the presumption must establish on a balance of probabilities that the gift was the result of the transferor’s “full, free and informed thought”: Foley, at paragraph 28, citing Goodman Estate, at page 379.

In the Kavanaugh case below, the court said that, if the releasor felt pressure to settle from her legal representative, a paralegal, when she signed a release, this information was not passed on to the defendant insurer. The court also said that the plaintiff’s reliance on the paralegal was a matter between her and the paralegal. As can be seen from the decision in McClaughry v Pollock, 2021 BCSC 1913 (CanLII) allegations about pressure to settle being exerted by a party’s own legal counsel are not uncommon.

The primary ground on which the plaintiff in McClaughry sought to set aside a settlement was the alleged undue influence of her own lawyer. The court said (at paragraph 27) that “[s]imilar arguments of feeling pressured to settle by one’s own counsel” have been made in other cases, referring to Gaida v. McLeod, 2013 BCSC 1168 and Roumanis v. Hill, 2013 BCSC 1047. The court went on to say (at paragraph 29) that: “Notably, claims of undue influence from one’s own counsel are not grounds to set aside a binding settlement. While such conduct, if made out, may be grounds for claims against one’s own counsel, they are not grounds for setting aside the agreement itself.” See also Kirsch et al. v. Insurance Corporation of British Columbia et al., (1987), 31 C.C.L.I. 148, application for leave to appeal to the Supreme Court of Canada refused, 31 C.C.L.I. 148n , discussed below in section 9.14.1.1, “Pressure on Releasor Not Exerted by Releasee”.

Kempfert v. Continental Casualty Company, 1932 CanLII 240 (SK QB), appeal allowed on other grounds, Kempfert v. Continental Casualty Company, 1932 CanLII 250 (SK CA)

Leger v. Arsenault, 1992 CanLII 7163 (NB QB)

The applicant sought an order declaring void a release he had signed which stated that he irrevocably waived his right to apply for a taxation of his lawyer’s account. The court said that, where a client “is looking for his proceeds”, a lawyer should not be seen to deduct his account from the proceeds and concurrently obtain a waiver from the client that the lawyer’s account will not be taxed. To take the release concurrently with providing the client his proceeds, less the lawyer’s account, is to do so in circumstances where the suggestion of undue influence or the potential for undue influence on the client is present.

Kavanaugh v. ING Insurance Company of Canada, 2005 CanLII 45971 (ON SC)

The plaintiff was involved in a motor vehicle accident and she retained a paralegal, the defendant Calise, to assist her in her claim for accident benefits under an automobile insurance policy issued by the defendant insurer, ING. ING and the plaintiff, through her representative Calise, agreed to settle the plaintiff’s entire accident benefits claim and the plaintiff executed a release. On a motion for summary judgment by the defendant ING, the court considered whether the release was binding on the plaintiff or should be set aside. The defendant Calise alleged that the plaintiff’s claim was settled a mere four months after the accident when her medical condition had not stabilized. The court said there was no evidence that ING attempted to pressure or influence the plaintiff into settling the claim and that an insurer is not required to resist settlement until such time as further and better information is available. If the plaintiff felt pressure by her agent Calise to reach a settlement, this information was never passed on to ING. There was no evidence that the plaintiff did not enter into the settlement willingly, that she was pressured or “unduly influenced”. That she relied on Calise is an issue between her and Calise but does not mean ING acted in bad faith. An order was granted dismissing all claims against ING.

Fountain v. Katona, 2007 BCSC 441 (CanLII)

The plaintiff argued that he was induced into signing a release of his claims arising from a motor vehicle accident by an insurance adjuster who took advantage and assumed dominion over him through his vulnerability and diminished capacity with respect to his financial and residential insecurity, his ignorance as to his rights, his ignorance of his medical condition, his groggy and unclear mental state, and his desperation for therapy to assist with his recovery from injuries suffered in the accident. The plaintiff clearly admitted that he understood the agreement he was signing was full and final and there was no evidence capable of attacking the sufficiency of his consent to the settlement. Further, the court said that a claim of undue influence requires some form of oppression, coercion or abuse of power or authority, citing Geffen v. Goodman Estate . If the plaintiff was aware of superior knowledge and power on the part of the adjuster, there was no evidence that the adjuster abused this power by overbearing his will and thereby compelling him to accept the settlement. As for the plaintiff’s groggy state resulting from a concussion, there was no evidence that the adjuster knew he was suffering from a concussion or groggy. The court said that “[it] is not possible to exert undue influence if one is ignorant of the advantages presented by the weaker party”.

A.M.B. v. M.A.T., 2009 BCSC 1281 (CanLII)

The plaintiff argued that she had agreed to release her claim for spousal support as a result of undue influence exerted upon her by the defendant, “in the form of economic duress”. The court said the leading authority on the law of undue influence is Geffen v. Goodman Estate@ and, in order to establish undue influence, the plaintiff must prove on the balance of probabilities that she was influenced by the defendant to such a degree that she was coerced into doing what the defendant wanted, against her will. Later in its decision, the court said undue influence requires proof of coercion for an improper purpose which caused the plaintiff to submit to the defendant’s demands. The court found that the plaintiff had failed to prove facts which would create a presumption of undue influence.

Thandi Group Holdings Inc. v. Royal Bank of Canada, 2011 BCSC 147 (CanLII)

The plaintiffs in this case alleged that they were stressfully pressured and manipulated into signing a release. The Thandi Group was advised by counsel throughout the course of settlement and there were extensive negotiations in which the Thandi Group raised concerns about the activity and actions of the Bank and representations alleged to have been made by a bank lending officer. These allegations were directly addressed in the release “and were specifically targeted at the claims raised by the plaintiffs in this litigation”. There was no evidence of any duress or undue influence committed by the Bank or the lending officer in relation to the release executed by the Thandi Group. The Bank was anxious to collect an outstanding loan and there appeared to have been substantial negotiations, but there was no evidence of duress or undue influence by the defendants during those negotiations.

Cuffe v. Desjardins, 2013 ONSC 4044 (CanLII)

The court concluded that it was appropriate to set aside releases and waivers of spousal support in a marriage contract and a separation agreement, while upholding the balance of the agreements. The court’s reasoning on the issue of unconscionability led it to a finding that the provisions in the marriage contract and the separation agreement relating to spousal support were only agreed to by the wife because of the undue influence applied to her by the husband in securing their inclusion in each contract. With respect to the marriage contract, the court found that the husband pressured the wife into accepting the full spousal release by threatening that their recent marriage was off unless she left that clause unchanged. In this way, he “preyed” upon her and pressured her into signing the agreement with the “improvident” clause in it. With respect to the separation agreement, the court found that the wife was influenced by her husband’s representation to her that he was in a position to seek child and spousal support from her, although in reality he had no chance of obtaining either. This misrepresentation combined with her knowledge of the terms of the marriage contract, induced the wife to accept the full waiver of spousal support.

D.L.G. & Associates Ltd. v. Minto Properties Inc., 2014 ONSC 7287 (CanLII) , appeal on other grounds allowed in part, 2015 ONCA 705 (CanLII)

On a motion by the defendant for an order striking out the plaintiff’s amended statement of claim, the court said it was plain and obvious that a release relied on by the defendant would not be rescinded on the grounds of unconscionability or undue influence. The first element of a plea of undue influence is a relationship of dependency such as solicitor and client, parent and child and guardian and ward. The second element is that the contract is unfair in the sense that a party was unduly burdened or disadvantaged. The third element is that the party claiming undue influence must show that the other party exercised a pervasive influence through manipulation, coercion, or abuse of power. In this case, the plaintiff was a commercial actor and not in a relationship of dependency with the defendant. The release did not seem unfair and there was no apparent abuse of power. It was plain and obvious that the plaintiff could not make out a claim of undue influence.

Caponero v Alberta Human Rights Commission (Office of the Chief of the Commission and Tribunals) and Kaizen Auto Group Ltd., 2024 ABKB 2 (CanLII)

9.14 Duress and Pressure

Duress is the coercion of a person’s will through illegitimate pressure, with one party dominating the will of another at the time when a contract is executed: Ramdial v. Davis, 2015 ONCA 726 (CanLII), at paragraph 42, citing Gordon v. Roebuck, 1992 CanLII 7443 (ON CA) and Stott v. Merit Investment Corp., 1988 CanLII 192 (ON CA), leave to appeal refused, [1988] S.C.C.A. No. 185 . See also Arisoft Inc. v. Ali, 2015 ONSC 7540 (CanLII), at paragraph 23. Vulnerability cannot be equated to duress: Ramdial, paragraph 42. The party seeking to establish duress must show they were subject to pressure by the other party which rendered them unable to freely decide and left them with no realistic alternative but to agree: Chee-A-Tow v. Chee-A-Tow, 2021 ONSC 2080 (CanLII), at paragraph 112, citing Stott v. Merit, at paragraphs 37-38.

In Kawartha Capital Corp. v. 1723766 Ontario Limited, 2020 ONCA 763 (CanLII) , the Ontario Court of Appeal considered the appellant’s argument that the motion judge had erred in finding that there was no genuine issue requiring a trial as to whether minutes of settlement (including the release and guarantee they contemplated) were unenforceable on the grounds of economic duress. The court summarized the analytical framework for cases of economic duress in the following passage from its decision:

For a party to establish economic duress, it must show two things: first, that it was subjected to pressure applied to such an extent that there was no choice but to submit, and second, that the pressure applied was illegitimate. On the first prong of the test, the court considers four factors:

(a) Did the party protest at the time the contract was entered into?

(b) Was there an effective alternative course open to the party alleging coercion?

(d) After entering into the contract, did the party take steps to avoid it?

If the party alleging duress satisfies those four factors, it must go on to satisfy the second prong, by showing that the pressure exerted was illegitimate: Techform Products Ltd. v. Wolda (2001), 2001 CanLII 8604 (ON CA), 56 O.R. (3d) 1 (C.A.), at paras. 31-34, leave to appeal refused, [2001] S.C.C.A. No. 603

See also, for example, Lumsden et al v. The Toronto Police Services Board et al, 2019 ONSC 5052, at paragraph 26, Arisoft, above, at paragraph 22, and Gordon v. Roebuck, above. The four factors set out by the Ontario Court of Appeal in Kawartha Capital originated from the decision of Lord Scarman in Pao On v. Lau Yiu Long, [1979] 3 All E.R. 65 (P.C.), [1980] A.C. 614 .

In Greater Fredericton Airport Authority Inc. v. NAV Canada, 2008 NBCA 28, at paragraph 37, the New Brunswick Court of Appeal observed that, due to a paucity of Supreme Court of Canada decisions in this area of the law, Canadian courts have traditionally turned to the English jurisprudence. The court went on to note that under English law, and prior to 1975, duress as a ground for holding a contract unenforceable was limited to the categories of duress to the person (actual or threatened violence) and duress of goods. The court referred (paragraph 38) to Pao On v. Lau Yiu Long as a leading case in which the Privy Council extended the duress doctrine to include economic duress.

Pao On was also referred to by the majority of the British Columbia Court of Appeal in Bell v. Levy, 2011 BCCA 417 (CanLII). The Bell case was pleaded and argued on the basis that the proper approach to a claim of duress was set out in the judgment of Lord Scarman in Pao On, as adopted by the B.C. Court of Appeal in Byle v. Byle (1990), CanLII 313 (BC CA): see Bell v. Levy, at paragraph 70.

The majority decision in Bell v. Levy identifies three elements that must be proved by a party alleging duress. These three elements are that a threat was made, that it was wrongful, and that it overrode the free will of the contracting party to whom it was made: see Grosz v Guo, 2020 BCSC 1073 (CanLII), at paragraph 99, Sunshine Coast Coffee Traders Ltd. v Price, 2019 BCSC 2250 (CanLII), at paragraph 22, Langford v. Carson Air Ltd., 2015 BCSC 1458 (CanLII), at paragraphs 93-94, and Bell v. Levy, at paragraphs 70-72. In this context, the majority of the B.C. appellate court (at paragraph 71) drew on Pao On and other English authority which indicates that the party claiming duress must show “that some illegitimate means of persuasion was used” and must also establish a causal relationship “between the illegitimate means used and the action taken”. But in Greater Fredericton Airport Authority, at paragraph 47, the New Brunswick Court of Appeal said that the criterion of illegitimate pressure adds unnecessary complexity to the law of economic duress, and lacks a compelling juridical justification, at least with respect to its application in the context of the enforcement of contractual variations: the law does not provide a workable template for distinguishing between legitimate and illegitimate pressure.

Canadian case law on releases reveals some convergence of, or at least common ground shared by, the doctrines of unconscionability and economic duress. In Uber Technologies Inc. v. Heller, 2020 SCC 16 (CanLII), the majority of the Supreme Court of Canada discussed the two core elements of unconscionability, namely, inequality of bargaining power and an improvident bargain. As to the first of these two elements, the majority said (at paragraph 69) that one common example of inequality of bargaining power comes in the “necessity” cases, where the weaker party is so dependent on the stronger that serious consequences would flow from not agreeing to a contract. The majority indicated (at paragraph 70) that the situations of dependence which fit this mould include those where a party is vulnerable due to financial desperation. The majority went on to say that unequal bargaining power can be established in these scenarios even if duress (or undue influence) has not been demonstrated.

In Caponero v Alberta Human Rights Commission (Office of the Chief of the Commission and Tribunals) and Kaizen Auto Group Ltd., 2024 ABKB 2 (CanLII) , the applicant argued, among other things, that a release signed by him at the time of termination of his employment was unconscionable because he was under economic duress when he accepted the terms presented by his employer. Citing Uber Technologies, the court said that, certainly, the doctrine of unconscionability may operate to release a contracting party from an improvident contract if that party was particularly vulnerable due to “financial desperation”. All the same, though, as can be seen from the summary of the Caponero decision below in this section, the Alberta Court of King’s Bench considered the application of the established “legal test” for economic duress when it dealt with this particular argument by the applicant.

Wallace v. J. Rivington Associates Inc., 2011 ONSC 4481 (CanLII)

The moving parties sought an order staying two actions on the basis of a release signed by the plaintiff in both actions. The plaintiff argued that there were two genuine issues for trial; namely: (1) whether the moving parties made a fraudulent misrepresentation that was relied on by the plaintiff when she agreed to the release and (2) whether the plaintiff was in a situation of economic duress such that she had no option but to sign the release. The court said it is well established under Ontario law that economic duress may render a contract voidable in circumstances where there is coercion of a party’s will which vitiates consent so that it cannot be said that the contract was entered voluntarily. The coercion exerted to get the party to enter the contract must not be legitimate. There are four factors to consider in determining whether a party’s will has been coerced: (1) did the party protest? (2) was there an alternative course open to the party? (3) was the party independently advised? and (4) after entering the contract, did the party take steps to avoid it? (citing Gordon v. Roebuck and Stott v. Merit Investment Corp. , above). The court concluded that the appropriate forum for a determination of the validity of the release was at trial. Credibility would play a role in the determination of the factors that led the plaintiff to sign the release – whether she was under duress when she did so and whether she relied on any fraudulent representations of the moving parties, or their agents, when she did so.

Sheriff v. Apps et al, 2012 ONSC 565 (CanLII)

The plaintiff alleged that he signed a release under economic duress. The court indicated that the plaintiff must establish that he was coerced and that the pressure exerted to “coerce” his will was not legitimate. The factors to be considered in determining whether a party’s will has been coerced are as follows: (i) whether the party protested at the time; (ii) whether there was an effective alternative course open to the party; (iii) whether the party was independently advised; and (iv) after entering into the contract, whether the party took steps to avoid it. The court found that the tests for economic duress were not met in this case. The plaintiff never protested that he was being forced into signing the settlement agreement that was the basis for the release, he took no steps to avoid the agreement after signing it – indeed he complied with the agreement for some time – and he signed the release with the benefit of representation by his own lawyer.

D.L.G. & Associates Ltd. v. Minto Properties Inc., 2014 ONSC 7287 (CanLII) , appeal on other grounds allowed in part, 2015 ONCA 705 (CanLII)

On a motion by the defendant for an order striking out the plaintiff’s amended statement of claim, the court said it was not plain and obvious that a release relied on by the defendant might not be set aside on the grounds of economic duress. A contract will be set aside for economic duress where: (1) one contracting party applies illegitimate pressure; and (2) the other party has no choice but to submit to the pressure. In determining whether there was a deprivation of choice, the court considers four factors; namely: (1) did the party protest at the time of signing the contract; (2) did the party have an effective alternative course; (3) did the party receive independent legal advice; and (4) did the party subsequently take steps to rescind the contract. These four factors do not end the analysis, and it is necessary to determine whether the coercion exerted on the party was legitimate: Techform Products Ltd. v. Wolda . Whether there is duress including economic duress is a fact-based determination and it will depend upon the particular circumstances of the case whether the pleading of duress succeeds. In this case, it remained to be seen whether the plaintiff had no bargaining power and was coerced into signing the release with no other choice but economic disaster.

Rebel v Stone Mills (Township), 2015 ONSC 5703 (CanLII)

The principal of the plaintiffs asserted that he signed a release because the defendant Township had most or all of the “legal and political power”, he was fearful that he would lose his home and face personal ruin and bankruptcy if he did not settle with the Township and he was in the weaker position, financially and otherwise. The court found that the evidence did not bear out duress capable of impugning the validity of the release. The plaintiffs were experienced in business and in retaining legal representation and the principal of the plaintiffs gave no evidence as to his assets, wealth or impecuniosity as at the date when he signed the release.

Saliken v. Alpine Aerotech Limited Partnership, 2016 BCSC 832 (CanLII)

Upon the termination of his employment, the plaintiff signed termination documents presented by the employer that consisted of two letters and a release. The court found that the atmosphere in the termination meeting was one of intimidation and pressure by silence. While the court concluded that the plaintiff should not be held to the termination documents he signed, the basis for this conclusion was unconscionability (not duress): the court said that to hold the plaintiff to the termination documents in the circumstances would be unconscionable. (See “Unconscionability”, section 9.12.1.2, above.)

Dairy Queen Canada, Inc. v. M.Y. Sundae Inc., 2017 BCSC 358 (CanLII) , appeal dismissed, 2017 BCCA 442 (CanLII) , application for leave to appeal dismissed, M.Y. Sundae Inc. operating as a DQ Grill and Chill, et al. v. Dairy Queen Canada, Inc., 2018 CanLII 108014 (SCC)

The mere fact that a cancellation and release agreement was entered into between a franchisor and a franchisee does not make it inherently suspicious, or presumptively cast doubt on the voluntariness of the franchisee’s signature.

Ekum-Sekum Inc. v Bel-Air Excavating & Grading Ltd., 2017 ONSC 540 (CanLII)

The defendant hired the plaintiff to do paving work. Because of construction delays, some of the paving work could not be done until early December. The plaintiff told the defendant that the paving should not be done in cold weather and asked the defendant to sign a release before the next stage of paving was completed. The defendant signed the release but, after the asphalt turned out to be of poor quality, the defendant argued that the release was signed under economic duress. The court said that, to succeed on the ground of economic duress, a party must prove that his or her will was coerced and that the pressure exerted was not legitimate. When determining whether a party’s will was coerced, the Ontario Court of Appeal has stated that four factors should be considered. The court found on the facts of this case that none of the four factors were met and, in addition, the pressure exerted by the plaintiff for a release was for a legitimate purpose and was justified.

Xerox Canada Ltd. v. GP Global Pacific Holdings Inc., 2019 BCSC 1997 (CanLII)

The plaintiff claimed amounts owing in respect of equipment leased to the defendants. The defendants did not raise an issue with the calculation of the amount owing, but alleged earlier contractual failings by the plaintiff and argued that release clauses in earlier agreements should not be enforced due to duress. The court said that duress is not an easy contractual defence to establish. The court cited Bell v. Levy and said that a plaintiff relying on duress must show: (1) a party threatened them; (2) the threat was wrongful; and (3) the wrongful threat overrode the plaintiff’s will to the point that the plaintiff had no other choice. Further, in addition to what the plaintiff must show according to the Bell case, the courts must examine four factors, namely: (1) did the party protest; (2) was an alternative course open to the party when it chose to enter into the contract; (3) did the party seek independent advice; and (4) after entering into the contract, did the party take legal steps to avoid it. The court concluded that the defendants in this case did not meet the burden of establishing duress.

Kawartha Capital Corp. v. 1723766 Ontario Limited, 2020 ONCA 763 (CanLII)

As stated above, the Ontario Court of Appeal considered the appellants’ argument that the motion judge erred in finding that there was no genuine issue requiring a trial as to whether minutes of settlement (including the release and guarantee they contemplated) were unenforceable on the grounds of economic duress. The motion judge found that the appellants satisfied none of the four factors relevant to the first prong of the test for economic duress. These findings had a substantial factual component and were entitled to deference on appeal. There was no evidence that the appellants, or their counsel, protested that they were being compelled to enter into the minutes. In assessing whether the appellants had satisfied their burden of showing an absence of an “effective alternative course”, the motion judge was entitled to consider potentially available legal remedies and to take into account that the appellants “led no evidence to suggest that they considered or pursued any of these alternatives”. The evidence was undisputed that the appellants were represented by counsel and thus had independent legal advice up to and through the execution of the minutes. Nor did the evidence disclose any timely steps by the appellants to avoid the minutes after they were signed. The appellants argued that the motion judge erred in not going on to specifically address the second prong of the test, but, having failed to show a genuine issue requiring a trial on the first prong, a specific ruling on the second prong could not change the outcome.

Bayes v. RBC, 2021 ONSC 6836 (CanLII)

The defendants sought to have the plaintiff’s action dismissed due to a contractual release the plaintiff signed when his employment with the defendant Bank was terminated without cause. The plaintiff argued that the release was not enforceable because, among other things, he executed it while he was under duress. The court said that Kawartha Capital, above, laid out the test for economic duress as a two-part test. The first part is whether the party was subjected to pressure, based on a consideration of four factors, and the second is a determination of whether that pressure was illegitimate. The court addressed the difficulties in the plaintiff’s position with respect to each of the four factors and went on to say that, even if any of the factors were present, it could not conclude that there was an illegitimate application of coercive pressure. The plaintiff was not asked to sign the release on the spot. At his request, he was granted a 13-day extension to consider his options. He had a total of 22 days to consider the options and he was strongly encouraged to seek legal advice. The defendant bank sought to accommodate the plaintiff by presenting him with an option of appealing the expiration of his disability benefits. The court said these factors suggested there was not an illegitimate application of coercive pressure referring to Techform, above.

Weaver v. Bryson, 2021 NSCA 14 (CanLII)

After the breakdown of a business relationship, the parties entered into an agreement and executed a mutual release for any future claims. The appellant relied on the release in defence of an action against him and he brought a motion for summary judgment. The respondents claimed that they executed the agreement and release under duress. They said they were unlawfully pressured, manipulated, and coerced by the appellant and they sought relief including the setting aside of the release. The appellant argued that there was no duress, but only legitimate commercial pressure between experienced business parties trying to resolve a dispute. The motion judge found there were genuine issues of material fact in dispute and he dismissed the motion. In its reasons for dismissing the appeal from the order of the motion judge, the Court of Appeal said that the motion judge was mindful that the alleged duress is a fact-based determination, requiring the consideration of these factors: (1) was there any protest; (2) was there an alternate course of action; (3) was there independent legal advice; and, (4) after conclusion of the contract, were there steps taken to avoid it? Each factor requires weight to be attributed to the evidence and a comprehensive assessment to be done.

Computron Systems International Inc. v. Ladhani et al., 2020 ONSC 3188 (CanLII)

The plaintiff agreed to purchase “Beats” headphones from the defendant Techlogics and paid a deposit of $200,000. It emerged that the headphones were not authentic “Beats” products (although the plaintiff and Techlogics gave conflicting evidence about whether the plaintiff was aware that the products were not authentic). Techlogics eventually agreed to refund most of the $200,000. A refund of $140,000 was made to the plaintiff and Technlogics agreed to refund the balance upon the principal of the plaintiff, Rhemtulla, signing a document in which he “waiv[ed] right to litigation” and stated that “no further balance owed by Techlogics toward me”. The plaintiff argued that Rhemtulla signed this document under economic duress. Rhemtulla and the principal of Techlogics, Rashid, agreed that Rhemtulla signed the release only because Rashid was otherwise refusing to return the balance of the plaintiff’s deposit. On the law of duress, the court quoted from Taber v. Paris Boutique & Bridal Inc. (Paris Boutique), 2010 ONCA 157 and Van Kruistum v. Dool, 1997 CanLII 122284 (ON SC). The court said the most significant consideration in this case was that Techlogics had no legitimate legal claim to keep the plaintiff’s money it was still withholding. By using its de facto possession of this money to induce the plaintiff to enter into a settlement that was favourable to Techlogics, Techlogics was applying “pressure that the law regards as illegitimate”. Rhemtulla’s will was coerced by the threat that, if he did not sign the waiver, Techlogics would otherwise not refund any of the outstanding funds, which would have exposed Rhemtulla and the plaintiff to financial embarrassment. Accordingly, the waiver signed by Rhemtulla did not bar the plaintiff from pursuing its claim against Techlogics.

Caron v. Bluteau, 2023 ONSC 419 (CanLII)

Caponero v Alberta Human Rights Commission (Office of the Chief of the Commission and Tribunals) and Kaizen Auto Group Ltd., 2024 ABKB 2 (CanLII)

9.14.1 Pressure Felt By Releasor Not Amounting to Duress

Economic duress can serve to make an agreement unenforceable against a party who was compelled by the duress to enter into it and that party can have the agreement declared void on this basis. However, not all pressure, economic or otherwise, will constitute duress sufficient to carry these legal consequences. It must have two elements: it must be pressure that the law regards as illegitimate; and it must be applied to such a degree as to amount to “a coercion of the will” of the party relying on duress: Taber v. Paris Boutique & Bridal Inc., 2010 ONCA 157, at paragraphs 8-9, citing Stott v. Merit Investment Corp., 1988 CanLII 192 (ON CA), at paragraph 89 (leave to appeal refused, [1988] S.C.C.A. No. 185).

Doubtless, it is often the case that a person who has signed a release of claims against another party will have experienced some form of stress or “pressure” at the time when the release was signed. As is apparent from the decisions below, however, there is a wide gulf between general allegations of pressure to sign a release, or other assertions of coercion or lack of voluntariness, and evidence that will actually make out a case that the release should not be enforced on the ground of duress.

Manko v. Ivonchuk, 1991 CanLII 11983 (MB QB)

The plaintiff asserted that he executed a release under duress and pressure due to, among other things, the defendants’ harassing and threatening telephone calls. On a motion to strike out the statement of claim, the master said that there was no way to make a finding on the presence or absence of duress prior to a trial. On appeal, the court referred to the lack of particulars of the general allegation of duress and the heavy onus on the plaintiff (a practising lawyer represented by counsel) of satisfying the court that the release ought to be set aside. The court said that putting the defendants to the expense of defending the action in order to have the validity of the release determined was manifestly unfair. The statement of claim was struck out.

National Bank of Canada v. Colucci, 2006 CanLII 30746 (ON SC)

The parties reached a settlement of issues between them and the defendant signed a release and settlement agreement. The defendant’s argument that he was induced into signing the settlement agreement by economic and psychological pressure arising from his dealings with the plaintiff did not support a claim to set aside the agreement.

Tesfamikael v. Porco, 2006 CanLII 34274 (ON SC)

The defendant asserted that the plaintiff’s action for damages allegedly suffered during her employment with the defendant was barred by a release executed by the plaintiff after the termination of her employment in consideration of receipt of a separation payment. The plaintiff alleged duress. She said that she felt pressured to sign documentation because she was concerned about a deadline imposed by the defendant and the risk that she would lose the separation payment if she requested an extension of the deadline. The court said that, even if established, such facts were insufficient to render the release unenforceable. The plaintiff also said that, at the time when she signed the release, she was in a particularly fragile physical and emotional state and that the defendant’s imposition of a deadline when she was in this emotional state constituted duress. The court said there was no evidence to establish that the plaintiff was unable to make a reasoned decision regarding the separation payment and release as a result of any physical or emotional conditions and, in summary, there was no evidence that the plaintiff did not voluntarily execute the documentation.

Barr v. Pennzoil-Quaker State Canada Inc., 2007 CanLII 28526 (ON SC)

In this wrongful dismissal case, the plaintiff signed a release but challenged its validity on grounds including duress. The court referred to a summary of the authorities on duress from Bartlett v. Canada Life Assurance Company . None of the principles summarized in Bartlett applied here. While the plaintiff was clearly subject to commercial pressure, he did not protest, he did have alternate courses open to him and he got financial advice, having made his own decision not to get independent legal advice. He did not take steps to avoid the contract.

Luxor Food & Beverage Inc. v. Country Style Food Service Inc., 2008 BCSC 1433 (CanLII)

The plaintiff signed a release in connection with the completion of a transaction that involved the termination of a franchise agreement and a sublease of the premises that had been occupied by the franchise business. The plaintiff argued that it was not bound by a release which it alleged was obtained by means of economic duress. Specifically, the plaintiff submitted that it signed the release because of threats made by the defendant that the deal would not proceed if the terms were altered in any way and that it was faced with the prospect of either losing such equity as it could recover through the sale or completing the transaction on the defendant’s terms. The court said that the plaintiff had wholly failed to meet the test of establishing economic duress. At the time the transaction was completed, no protest was registered. The plaintiff, given the circumstances, had alternatives readily available to it. The plaintiff obtained legal advice concerning the transaction before it was completed. The release was valid and it precluded the plaintiff recovering in the present action.

Bjelakovic v. Accenture Global Services GmbH, 2008 CanLII 32802 (ON SC)

Duress is a coercion of the will so as to vitiate consent. In a contractual situation, commercial pressure is not enough. Material inquiries are whether the person protested had an alternate course of action, such as recourse to an adequate legal remedy, was independently advised, and took steps to avoid the contract after making it (citing Bartlett and Barr, above). On a motion for summary judgment in this case, the court did not accept the plaintiff’s argument that she executed a release under duress. The only evidence of duress was the plaintiff’s affidavit in which she asserted that she felt under tremendous pressure, believed she had no effective course of action but to give in and was acting under duress. The court said that “self-serving affidavits that merely assert facts, without providing detailed facts and supporting evidence, are not sufficient to create a genuine issue for trial”. Further, the plaintiff had written a letter in which she said she had been advised that she should pursue the matter but she preferred to settle, she obtained independent legal advice and she took no steps to void the settlement until commencing an action almost six years later.

Richmond v. Matar, 2009 NSSC 113 (CanLII)

The position of the plaintiff in this case was that she was pressured into signing a release of her claims arising from a motor vehicle accident because the claim adjuster told her that her injury was only minor and would resolve fairly quickly. The court said it had no doubt that the plaintiff entered into a settlement with eyes wide open, understanding completely the finality of the settlement. The court rejected the plaintiff’s assertion that she was counselled or somehow coerced into settling.

1483677 Ontario Limited v. Crain, 2009 CanLII 69791 (ON SC)

The plaintiffs in this case alleged that they executed releases under “extreme economic duress” and, as well, that they completed certain real estate transactions under extreme duress. With respect to the allegation of duress in relation to the transactions, the court said that, to establish a claim of economic duress, the duress must be pressure which the law does not regard as legitimate and must be applied to such a degree as to amount to “a coercion of the will,” or it must place the party to whom the pressure is directed in a position where she or he has no “realistic alternative” but to submit to it (citing Stott v. Merit Investment ). The court referred to the four factors for determining whether pressure amounts to “a coercion of will which vitiates consent”, as set out in Pao On v. Lau Yiu . And the court said that, where agreements are negotiated between counsel, the issue of economic duress cannot succeed (citing Lister v. Dunlop ). As to the allegation that the releases were executed under duress, the court said the plaintiffs were sophisticated and experienced in business matters, they had the benefit of legal advice and the transactions giving rise to this litigation were not unprofitable. While the plaintiffs argued that they were told by their lawyer that they had no option but to close certain real estate deals, even if that was told to them, that was not evidence of illegitimate pressure or even legitimate pressure which could be described as coercive.

Taplin v Walsh, 2016 ONSC 2998 (CanLII)

The parties entered into a separation agreement and a release of claims including any claim for spousal support. The applicant commenced an application to set aside the separation agreement. In addressing the applicant’s allegation of duress, the court said that duress is present where there is coercion of the will of one party or where one party feels that they have no other realistic alternative but to sign the agreement. While one party might feel pressured and trapped by the circumstances into signing an agreement, this does not mean that the other party exerted undue pressure or subjected the party to duress. The circumstances that will constitute duress must be “quite extreme”; antagonism and stress do not qualify as duress or economic duress. The burden is on the party alleging duress to prove that duress existed. The applicant did not meet that burden in this case.

1250264 Ontario Inc. v. Pet Valu Canada Inc., 2011 ONSC 3871 (CanLII)

In this class proceeding, the court certified a set of common issues based on the allegation that the defendant franchisor had a duty to share rebates from suppliers with its franchisees. The defendant brought a motion for a declaration affirming the validity and enforceability of releases given in the context of transactions involving the defendant’s buyback of franchise businesses from franchisees. The court noted that the defendant’s agreement to buy back a franchise required the franchisee to release its right to share in the proceeds of the class action, should it be successful. The defendant had not, however, disclosed information that would enable class members to make an informed decision about what they would be giving up by releasing their rights. Assuming that it had jurisdiction to grant the relief sought by the defendant, the court was not prepared to do so on the record before it. The court’s reasons for dismissing the motion included the fact that none of the franchisees affected by buyback transactions were before the court. The court noted also that there was at least some support for the concept that a franchisor’s duty of fair dealing in the performance of the franchise agreement includes a duty to make full disclosure of all material facts at the time when the agreement is consensually terminated. In this case, one of the issues that the court might wish to consider on a future motion to extend the opt-out period was whether the franchisee had full knowledge of its rights, including what it was giving up by signing the release. The court said this was considered a relevant factor in other cases involving individual settlements with class members.

Dairy Queen Canada, Inc. v. M.Y. Sundae Inc., 2017 BCCA 442 (CanLII) , application for leave to appeal dismissed, M.Y. Sundae Inc. operating as a DQ Grill and Chill, et al. v. Dairy Queen Canada, Inc., 2018 CanLII 108014 (SCC)

After the franchisor had issued a series of notices of default, a franchisee and its principals signed a document called a Mutual Cancellation and Release. They argued that they did so under “legal and economic duress”. The Court of Appeal said that economic duress is now recognized as a form of duress that may constitute a defence to the enforceability of a contract. For the essential elements of the defence, the trial judge relied upon the following passage in Lei v. Crawford, 2011 ONSC 349: “Duress involves coercion of the consent or free will of the party entering into a contract. To establish duress, it is not enough to show that a contracting party took advantage of a superior bargaining position; for duress, there must be coercion of the will of the contracting party and the pressure must be exercised in an unfair, excessive or coercive manner.” This passage was endorsed by the Court of Appeal in Jestadt v. Performing Arts Lodge Vancouver, 2013 BCCA 183. The application of this test requires a largely factual inquiry. There must be a degree of pressure such that it vitiates the consent of the party seeking to avoid the agreement. As well, there must be an improper element to the pressure. In Lei, this element was described as “unfair, excessive or coercive”. The English cases refer to it as pressure of a kind that the law does not regard as legitimate. In Byle v. Byle, above, the Court of Appeal adopted an excerpt from Lord Scarman’s judgment in Pao On v. Lau Yiu Long , above, as helpful in addressing the first element. While the presence or absence of the Pao On evidentiary factors is not determinative of the issue of duress (citing Bell v. Levy, above), the factors are useful in illustrating the kind of considerations that go into the analysis. The Court of Appeal saw no error in the trial judge’s conclusion that the Mutual Cancellation and Release was not signed under duress.

Milne v. Milne, 2019 ONSC 459 (CanLII)

The applicant brought an application for spousal support against her former common law partner. Spousal support had been finally settled by the parties in a separation agreement which contained full spousal support and property releases. The applicant argued that the agreement was signed by her as a result of duress. The court said that duress is an issue concerning negotiation of the contract and is defined as “a threat of wrongful and immediate force in the formation of a contract”. The court also said that duress has been described as “intimidation or illegitimate pressure to sign the agreement”, citing Verkaik v. Verkaik (2009), 68 R.F.L. (6th) 293 (Ont. S.C.J.), affirmed 85 R.F.L. (6th) 233 (C.A.), or circumstances “sufficient to negative informed consent of the wife”, citing Melnyk v. Melnyk, 2010 MBQB 121. Other than the statements of the applicant in her affidavits, which lacked specificity, there was no evidence of duress at the time the agreement was negotiated, nor was there evidence of any sort of “gun to the applicant’s head” which forced her to sign the agreement. The court found no genuine issue for trial regarding duress in the negotiation of the separation agreement.

Bayes v. RBC, 2021 ONSC 6836 (CanLII)

Campbell v. Gautreau et al., Kasmieh v. Hannora, 2022 ONSC 3416 (CanLII)

The defendants brought a motion for judgment on the terms of a settlement alleged to have been reached with the plaintiff. The defendants said that, at a mediation, the plaintiff agreed to accept $20,000 in return for a release of her claims and a consent dismissal of the action without costs. The plaintiff pointed out that she had no legal representation at the mediation and claimed that felt she had no choice but to accept the settlement offer, even though she thought it was outrageously low. The court said that, even if it accepted, in the absence of any evidence, that the plaintiff felt pressured to accept the $20,000 offer at mediation, the plaintiff had not explained why she did not get legal advice after the mediation, or why she did not seek to resile from the agreement in response to an email later that day in which she was specifically asked to confirm her understating of the settlement terms. With regard to the plaintiff’s claim that she agreed to settle under duress, the court said that there was no evidence of this, nor was there any evidence of any mistake, misunderstanding, or illegality in respect of the settlement. The plaintiff had simply decided, after agreeing to the settlement terms and signing a release, that she could have and should have done better. A party’s after-the-fact change of heart is not a justification to refuse to enforce the parties’ agreement.

9.14.1.1 Pressure on Releasor Not Exerted by Releasee

The decisions in this section reveal a variety of different circumstances in which courts have declined to make a finding of duress because stress or pressure said to have been experienced by a releasor at the time of giving a release was not exerted by or on behalf of another party to the release.

In certain of the cases below, the courts made clear that “duress” allegedly exerted by a party’s own lawyer is not a basis for setting aside a release or a settlement agreement. McClaughry v Pollock, 2021 BCSC 1913 (CanLII) is a case in which the plaintiff sought to set side a settlement agreement due to pressure exerted by her own counsel, although the plaintiff founded her argument on undue influence rather than duress. The court said (at paragraph 27) that “[s]imilar arguments of feeling pressured to settle by one’s own counsel” have been made in other cases, referring to Gaida v. McLeod, 2013 BCSC 1168 and Roumanis v. Hill, 2013 BCSC 1047. The court went on to indicate (at paragraph 29) that, while such conduct may be grounds for claims against one’s own counsel, it is not a ground for setting aside the agreement itself. See section 9.13, Undue Influence, above.

A similar point was made by the British Columbia Court of Appeal in Kirsch et al. v. Insurance Corporation of British Columbia et al., (1987), 31 C.C.L.I. 148, application for leave to appeal to the Supreme Court of Canada refused, 31 C.C.L.I. 148n . The plaintiffs in Kirsch brought an action in which they alleged that consent dismissal orders in two earlier actions “were obtained under duress amongst other things”. The dismissal orders were issued after a settlement was reached of the plaintiffs’ claims in the earlier actions, as reflected in a general release. The Court of Appeal said that, to succeed against the defendants, the plaintiffs must show that the defendants or their agents committed “the fraud, duress or undue influence” that the plaintiffs alleged had tainted the settlement agreement: it was not sufficient for the plaintiffs to show that they executed the general release “by reason of the fraud, duress or undue influence of their own agent”.

Charles v. Blacquiere, 1999 ABQB 965 (CanLII)

The plaintiff sought to set aside an apparent settlement of her claim arising from a motor vehicle collision. She alleged that she was put under enormous pressure to settle and that she finally gave in and instructed her lawyers to settle. She argued, among other things, that the settlement was obtained by duress. The court concluded that there was no agreement to settle but found that, if there had been a settlement agreement, the argument of duress would not have prevailed because whatever transpired between the plaintiff and her lawyer cannot be a basis for a finding of duress.

Ermineskin Cree Nation v. Foureyes, 2005 ABQB 522 (CanLII)

Following the termination of her employment, the respondent received a payment of $2,000 from her employer and signed a release. She said that she felt pressure to sign the release just prior to Christmas. The court quoted from a text on contract law that discussed the difficulty of drawing the line between improper pressure which will render a contract voidable and the “various inducements and predicaments which operate every day to induce people to enter into contracts which they would rather they did not have to make”. The court said that the fact that the respondent could use $2,000, or needed $2,000, or would find it convenient to have $2,000 to help celebrate Christmas is merely evidence of a situation in which the respondent presumably wished she did not find herself. This situation could not be characterized as duress in law.

The Court of Appeal held that a chambers judge was correct in rejecting the allegation of the appellant that he was coerced into executing a release: the respondents neither pressured the appellant nor caused him to enter into the agreement against his will and, in fact, he derived benefit from the settlement of the claim against him.

Valic v. Workers’ Compensation Board, 2010 NWTSC 97 (CanLII)

The plaintiff claimed he was pressured into signing a settlment agreement and release, although he offered no evidence as to who pressured him or why. The court did not doubt that the plaintiff was anxious and frustrated at the length of time it took to resolve his claims, but said that frustration is not the same as pressure. There was no evidence of pressure or undue influence being exerted on the plaintiff.

In support of her motion for an order setting aside a release signed by her, the plaintiff relied on a number of grounds, including duress. The plaintiff asserted that she was under duress from her lawyer to settle her claims arising from a motor vehicle accident and that her lawyer had advised her he would not continue to represent her to the completion of the trial of her claim. The motion judge referred to Dos Santos v. Waite as a similar case where, among other assertions, the respondent alleged that his lawyer advised he would not continue representing the respondent if the respondent did not accept a settlement. In Dos Santos, the court declined to set aside the settlement. Among other things, the court drew a distinction between “stress” and “duress” saying that stress is not a ground to decline to enforce a contract. Stress is a very common reaction during settlement negotiations which cannot alone be a sufficient basis to void an agreement.

Thandi Group Holdings Inc. v. Royal Bank of Canada, 2011 BCSC 147 (CanLII)

The plaintiffs in this case alleged that they were stressfully pressured and manipulated into signing a release. The court cited Kirsch v. Insurance Corp. of British Columbia for the proposition that, to succeed in setting aside a release on the basis of duress, the plaintiffs must show that the defendants or their agents committed the duress (or fraud or undue influence) that tainted the agreement. There was no evidence of any duress by the defendants Royal Bank and Horton in relation to the release. The Thandi Group was advised by counsel throughout the course of settlement and there were extensive negotiations in which the Thandi Group raised concerns about the activity and actions of the Bank and representations alleged to have been made by Horton. These allegations were directly addressed in the release and were “specifically targeted” at the claims raised by the plaintiffs in this litigation. The plaintiffs did not provide evidence of conduct by the Royal Bank to exert undue influence or duress on the signatories to the release. Further, to succeed on the ground of economic duress, the plaintiffs must show that the duress was unlawful, but there was no evidence of the Royal Bank or Horton exerting unlawful economic duress on Thandi Group to procure the impugned release.

Morant v. Sun Life Assurance Company of Canada, 2014 ONSC 2876 (CanLII)

The plaintiff agreed to settle her claims at a mediation and signed releases. In an affidavit, her lawyer said he had been advised by the plaintiff that, at the time she agreed to settle her claims, she was in physical and emotional pain, was extremely fatigued, and felt unduly stressed and pressured during the entire mediation process. The court commented on the weight to be attached to such evidence and also noted the acknowledgment of plaintiff’s counsel that “the record did not demonstrate that the plaintiff was subject to any form of duress”. The court said that, at its highest, the plaintiff had put forward evidence that she had a change of heart or what could be described as “buyer’s remorse”. This did not constitute proper grounds for the setting aside of a properly concluded settlement.

Taplin v Walsh, 2016 ONSC 2998 (CanLII)

In this case involving a separation agreement and a release of claims, the court said that, while one party might feel pressured and trapped by the circumstances into signing an agreement, this does not mean that the other party exerted undue pressure or subjected the party to duress.

Xerox Canada Ltd. v. GP Global Pacific Holdings Inc., 2019 BCSC 1997 (CanLII)

The defendants argued that release clauses in agreements between the parties should not be enforced due to duress, but the mere fact that the defendants may have been suffering their own internal economic pressure was not a sufficient basis for a finding of duress.

New Vision Renaissance MX Ltd. v. The Symposium Café Inc., 2020 ONSC 1119 (CanLII)

The plaintiffs gave a release in the context of settlement of a potential dispute over their inability to close the purchase of a franchise due to their lack of the funds needed to close. The plaintiffs argued that they were under duress because they believed they had no alternative but to sign what was presented to them, or they would lose their Canadian visas and face targeted actions by criminals in Mexico. They argued that this “external duress” was part of the “factual matrix”, although they conceded that the pressure they were under to close the transaction was not exerted by the defendants. The court was given no authority that would support a declaration of invalidity of the release due to the alleged “external duress”. Absent such authority, the court said it was not prepared to vitiate a release contained in a commercial document signed by parties who were all represented by counsel simply because the plaintiffs agreed to something they later came to regret and might have negotiated differently under different circumstances.

9.14.1.1.1 Releasee Not Aware of Duress or Pressure

In the decisions immediately above, Canadian courts discussed circumstances in which pressure felt by a releasor at the time of giving a release was not exerted by the releasee. One of those decisions, Davis v. Cooper, also addresses circumstances where there is no evidence that the releasee even knew about the duress said to have been experienced by the releasor.

Kavanaugh v. ING Insurance Company of Canada, 2005 CanLII 45971 (ON SC)

The plaintiff was involved in a motor vehicle accident and she retained a paralegal, the defendant Calise, to assist her in her claim for accident benefits under an automobile insurance policy issued by the defendant insurer, ING. ING and the plaintiff, through her representative Calise, agreed to settle the plaintiff’s entire accident benefits claim and the plaintiff executed a release. On a motion for summary judgment by the defendant ING, the court considered whether the release was binding on the plaintiff or should be set aside. The defendant Calise alleged that the plaintiff’s claim was settled a mere four months after the accident when her medical condition had not stabilized. The court said there was no evidence that ING attempted to pressure or influence the plaintiff into settling the claim and that an insurer is not required to resist settlement until such time as further and better information is available. If the plaintiff felt pressure by her agent Calise to reach a settlement, this information was never passed on to ING. There was no evidence that the plaintiff did not enter into the settlement willingly, that she was pressured or unduly influenced. That she relied on Calise is an issue between her and Calise but does not mean ING acted in bad faith. An order was granted dismissing all claims against ING.

In support of her motion for an order setting aside a release signed by her, the plaintiff relied on a number of grounds, including duress. The plaintiff asserted that she was under duress from her lawyer to settle her claims arising from a motor vehicle accident and that her lawyer had advised her he would not continue to represent her to the completion of the trial of her claims. The motion judge referred to Dos Santos v. Waite as a similar case where, among other assertions, the respondent alleged that his lawyer advised he would not continue representing the respondent if the respondent did not accept a settlement. In Dos Santos, the court declined to set aside the settlement. Among other things, the court held that a settlement will not be set aside unless it is shown that the other parties to the agreement had knowledge of the duress. In this case, there was no evidence that the other parties had any knowledge of duress experienced by the plaintiff in her interactions with her counsel and the motion judge was satisfied that they did not have such knowledge.

Dart v. St. Jules, 2017 ONSC 2709 (CanLII)

After a dispute arose about the amount to be paid to a contractor for renovations done on a house, one of the homeowners told the contractor that he had a certified cheque for $14,950 which he would hand over on condition that the contractor sign a document containing a release. The contractor read the document, signed it and handed it back to the homeowner and the homeowner gave the contractor the certified cheque. On a motion for summary judgment, the contractor said that he was coerced into signing the agreement and release because he needed the money. The court said that a contract may be set aside for economic duress where one contracting party applies illegitimate pressure and the other party has no choice but to submit to the pressure. There was nothing in the evidence that amounted to unfair, illegitimate or undue pressure applied to the contractor. He was offered a settlement and accepted it. There was no evidence that he had limited time to accept and he did not ask for time to think about the offer. The only actual pressure was the contractor’s own concern about his financial situation and needs. The circumstances under which the settlement was concluded did not amount to duress in any legal sense that would relieve the contractor of the impact of the bargain and settlement he made. Further, the contractor affirmed the settlement by keeping the $14,950 paid to him.

9.14.2 Contractual Provision Acknowledging No Duress

The decision below brings attention to a fundamental problem with the efficacy of a provision of a release stating that parties to the release were not under any form of duress: if indeed the facts of the particular case support a conclusion that a party was compelled by duress to agree to the terms of the release, then the “no-duress” provision is part of the very contract that resulted from a coercion of the party’s will.

Xerox Canada Ltd. v. GP Global Pacific Holdings Inc., 2019 BCSC 1997 (CanLII)

The defendants argued that release clauses in agreements between the parties should not be enforced due to duress. This argument did not succeed, but the court placed little weight on an acknowledgment clause stating that there was no duress. Such a clause cannot grant “immunity” from a duress defence given that it is embedded in the precise contract “under attack”.

9.14.3 Efforts to Seek Payment of Amounts Claimed to be Owing

Efforts to recover money believed to be owing by another, sometimes described as “dunning”, may include demands, threats of litigation and similar communications. In the circumstances of the case below, the court decided that “allegedly problematic communications” of this nature did not support an argument that release provisions of agreements should not be enforced due to duress.

Xerox Canada Ltd. v. GP Global Pacific Holdings Inc., 2019 BCSC 1997 (CanLII)

The defendants argued that release clauses in agreements between the parties should not be enforced due to duress. This argument did not succeed. The court said that allegedly problematic communications sent by the plaintiff to the defendants regarding amounts owing were simply reflective of the plaintiff’s legitimate business purpose. Any threats of litigation, final demands, or the potential involvement of legal counsel, were natural by-products of the defendants’ failure to pay their bills on time.

9.15 Authenticity and Legitimacy of a Release

Although these cases are relatively rare, from time to time Canadian courts consider a challenge to a release on the ground that the release lacks authenticity or is not genuine.

Isailovic v. Gertner, 2008 CanLII 1537 (ON SC) , appeal dismissed, 2008 ONCA 895 (CanLII)

The plaintiff argued that his action should not be barred by a release signed by the parties for a number of reasons, including an allegation that the defendants may have back-dated their signatures on the release. One of the defendants stated in an affidavit that he and the other defendant signed the release prior to the date of signature appearing on a version of it and he was not cross-examined on this issue. The court said that nothing turned on this issue: it was not in dispute that all of the parties signed the release.

Status Construction & Management Ltd. v. Granite Mountain Properties Ltd., 2008 BCSC 1525 (CanLII)

At issue in this action were releases that had been executed on behalf of the parties. The release executed on behalf of the defendants acknowledged as consideration the receipt of $45,000.00 from the plaintiffs. The court said that this release simply did not reflect what was agreed upon or what occurred. The consideration – the benefit that passed from the plaintiffs to the defendants – was the plaintiffs’ agreement to accept a significantly reduced amount of money in settlement of a claim. In exchange for that benefit, the defendants agreed to release the plaintiffs from any claims. Errors were made in the preparation of the documents and the errors went undetected. The court held that the releases were of no force or effect. The documents were drawn incorrectly in that they did not reflect the reality of the agreement that the parties had made. Furthermore, they were patently illogical. The court said that to ascribe any force to them would be wrong.

Torgo Construction Corp. v. Lambrinos and Canada Trustco Mortgage Company, 2010 ONSC 3556 (CanLII)

The plaintiff contested the authenticity of a release relied on by the defendant, arguing that the signature on the document purporting to be the signature of the principal of the plaintiff was not his signature. Other than the evidence of the principal of the plaintiff, no other evidence was called to refute that of the defendant and others and the Master rejected the challenge to the authenticity of the release.

Jameson House Properties Ltd. (Re), 2011 BCSC 965 (CanLII)

Companies referred to as the Jameson House Companies sought protection from their creditors in proceedings under the Companies’ Creditors Arrangement Act. As required under a claims process order, EllisDon Corporation delivered a proof of claim to the court-appointed monitor in respect of amounts that had been certified for payment under a construction contract between EllisDon and the Jameson House Companies, as well as what EllisDon claimed were pre-filing demobilization costs, which had not been certified. The Jameson House Companies argued that a reduction of EllisDon’s proof of claim was justified because it included amounts in respect of three subcontractors and those amounts were never in fact paid by EllisDon. The Jameson House Companies alleged that EllisDon would never have to pay these subcontractors, since the subcontractors had released EllisDon from liability. Although the release documents used the term “agreement,” they were unilateral, and signed only by the releasor. EllisDon, purportedly the beneficiary, had no involvement whatsoever in the creation of the documents. The court did not find the evidence concerning the release documents to be either convincing or credible. The release documents were said to be “dated for reference” on specified dates that matched the dates on corresponding subcontracts with Axiom, a new head contractor that was selected to replace EllisDon. Other evidence disclosed that in fact they had been executed at a later time. The consideration for each release document was stated to include the payment of one dollar by Axiom. EllisDon submitted that releases were obtained for the sole purpose of attempting to undermine it on its application in this proceeding. Given a number of considerations, including the timing of appearance of the releases, the backdating and the lack of meaningful correspondence with the subcontracts, the court found it very difficult to avoid that conclusion. The court said it could not treat the releases as genuine and it gave them no weight.

Baywood Homes v. Alex Haditaghi, 2013 ONSC 2145 (CanLII), appeal allowed, Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 (CanLII)

On a motion for summary judgment, “both sides” agreed that some documents and agreements executed by the two protagonists over the course of their business relationship “did not accurately reflect what was really going on”. The motion judge referred to the existence of “fake documents” because the plaintiffs argued that a release relied on by the defendants could be tainted by these same concerns, providing a reason why the entire matter should go to trial. The motion judge acknowledged that, “standing alone”, the authenticity or intended purpose of the release could well be doubted given the apparent use and prevalence of “fake documentation”. However, the motion judge was prepared to adjudicate the release issue summarily, and in favour of the defendants, mainly because of admissions made by one of the plaintiffs during cross-examination on his affidavit. The Court of Appeal set aside the summary judgment granted on the basis of the release and determined that the action should proceed to trial together with a counterclaim that the motion judge had referred to trial.

M.Y. Sundae Inc. v International Dairy Queen, Inc., 2018 BCSC 744 (CanLII) , appeal dismissed, 2018 BCCA 427 (CanLII)

Fresh evidence was proffered in support of an assertion that the signature on a mutual cancellation and release agreement was forged. This proposed evidence was not admitted. The allegation that the signature on the document was a forgery contradicted the pleadings, the submissions at a summary trial, and previous affidavits filed by the party making the allegation, as well as other evidence. The proposed evidence “[was] not reasonably capable of belief”.

Khan v. Krylov & Company, 2019 ONSC 1666 (CanLII) , appeal dismissed, 2020 ONCA 13 (CanLII)

The plaintiff commenced an action against two law firms, alleging that the true amount of a settlement of his personal injury claim arising from a motor vehicle accident had been concealed from him and that settlement funds had been misappropriated. On the defendants’ motion for summary judgment, the court considered the plaintiff’s assertion that his signature had been forged on a release. The court said that, in the end, the plaintiff’s claim that the final releases were not genuine depended entirely on his evidence, standing alone, that he never signed these documents. Ultimately, the plaintiff’s evidence was incapable of displacing the weight of the evidence on the motion, which was far more directly linked to the substance of his allegations of fraud and conspiracy in relation to the settlement. The court granted summary judgment dismissing the action.

Campbell v. Gautreau et al., Kasmieh v. Hannora, 2022 ONSC 3416 (CanLII)

The defendants brought a motion for judgment on the terms of a settlement alleged to have been reached with the plaintiff and provided evidence of a release signed by the plaintiff and a witness. At the motion hearing, the plaintiff denied that she signed the release. The court said that the plaintiff’s statements at the motion were not supported by any evidence. She did not file an affidavit. There was no basis to question the genuineness of the signed and witnessed release filed by the defendants.

Kasmieh v. Hannora, 2023 ONSC 303 (CanLII)

The court found that a separation agreement that included release provisions was a sham agreement. The parties were not separated at the time when they signed the agreement and they did not intend to separate, nor did they intend to be governed by the terms of the agreement. Nothing changed in their day-to-day life, but for their tax filing status which permitted the respondent as a separated spouse to continue to be eligible for significant tax credits and benefits despite her husband’s dramatic increase in income after he qualified as a family physician. The court was satisfied that the respondent never intended to release her entitlement to spousal support or her claim for equalization should the parties actually separate.

9.16 Misrepresentation and Fraud

This section is concerned with fraud and misrepresentation – whether fraudulent or non-fraudulent – as a ground for challenging the validity or enforceability of a release. Decisions addressing whether the scope of a particular release is sufficiently broad to encompass fraud or fraudulent misrepresentation can be found above in Chapter 6: Scope and Application of Releases, section 6.12.

Dhami v. Bath, 2014 BCSC 751 (CanLII)

The court found that the plaintiff signed a release fully understanding he was settling a claim arising from misrepresentations made by the defendant at the time when the plaintiff made an investment in a property development project and purchased shares in a company that owned certain of the properties to be developed. The court concluded that the defendant and the company were released from any claim by the plaintiff arising out of the purchase of the shares of the company.

9.16.1 Fraud and Fraudulent Misrepresentation

In Paulus v. Fleury, 2018 ONCA 1072 (CanLII), at paragraph 8, the Ontario Court of Appeal said that the courts have used the same test for civil fraud as they have for the torts of deceit and fraudulent misrepresentation, referring to Deposit Insurance Corp. of Ontario v. Malette, 2014 ONSC 2845, at paragraph 19, Amertek Inc. (Executor and Trustee) v. Canadian Commercial Corp., (2005) CanLII 23220 (ON CA), at paragraph 63, leave to appeal refused, [2005] S.C.C.A. No. 439 and Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, at paragraph 162, [2017] S.C.C.A. No. 246. The court went on to adopt the articulation of the test in Midland Resources Holding, at paragraph 162, where Brown J.A. indicated that the five elements of fraudulent misrepresentation are as follows: (1) the defendant made a false representation of fact to the plaintiff; (2) the defendant knew that the representation was false, had no belief in its truth, or was reckless as to its truth; (3) the defendant intended that the plaintiff act in reliance on the representation; (4) the plaintiff did act on the representation; and (5) the plaintiff suffered a loss by doing so.

The five elements of fraudulent misrepresentation identified by Brown J.A. are generally aligned with the Supreme Court of Canada’s discussion of civil fraud in Bruno Appliance and Furniture Inc v Hryniak, 2014 SCC 8 (CanLII). The Supreme Court (at paragraph 18) referred to the decision of the House of Lords in Derry v. Peek (1889), 14 App. Cas. 337 for the classic statement of the elements of civil fraud. The Supreme Court went on to discuss requirements for proof of civil fraud emerging from other authorities and, “[f]rom this jurisprudential history”, it summarized (at paragraph 21) the following four elements of the tort of civil fraud: (1) a false representation made by the defendant; (2) some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness); (3) the false representation caused the plaintiff to act; and (4) the plaintiff’s actions resulted in a loss. See also Hryniak v. Mauldin, 2014 SCC 7 (CanLII), at paragraph 87.

K.R.M. Construction Ltd. v. British Columbia Railway Company, 1982 CanLII 488 (BC CA)

The renegotiation of a major contract by the appellant railway company and the respondent contractors resulted in an amending agreement and a release. The trial judge found the appellant liable in fraud for inducing the contractors to enter into, first, the contract and, later, the amending agreement. The appellant argued that, while the settlement agreement and release referred to each other, they were two separate and distinct contracts. The appellant’s position was that the agreement was prospective in nature, intended to govern the relationship between the parties in the future, while the release was retrospective in nature and contained a settlement of all past disputes. The Court of Appeal held that the release could not be viewed apart from the agreement; the two documents were part of one transaction and it was not open to the appellant to treat the release as isolated from the agreement and to contend that the release was not affected by the appellant’s fraudulent misrepresentation. Also, the agreement and release was an attempt to mitigate the effect of the appellant’s original fraudulent misrepresentation, but the agreement and release did not eliminate the effect of that original fraudulent misrepresentation

Maiklem v. Springbank Oil & Gas Ltd., 1994 CanLII 9089 (AB QB)

The plaintiff (defendant by counterclaim) had been a director of the defendant corporation and owed a fiduciary duty to the company. At the time when a release in favour of the plaintiff was signed, the company did not have full knowledge of matters later raised in the company’s counterclaim, because of the plaintiff’s failure to provide full and complete disclosure and his misleading representations. The release was obtained as a result of deliberate non-disclosure and misrepresentation and the counterclaim should be permitted to proceed to trial.

561895 Ontario Inc. v. Metropolitan Trust Co. of Canada, 2004 CanLII 46650 (ON CA)

The Court of Appeal agreed with the trial judge that a release relied on by the respondents could not stand, but not for the reason given by the trial judge. The release was properly set aside on the basis of the fraudulent misrepresentation of the respondents, given the breach of a fiduciary obligation to make disclosure and failure to correct a previous representation that was no longer true. The first element of the test for fraudulent misrepresentation – a false representation of fact – is met where there is a positive misrepresentation of fact or a failure to disclose a material fact that the non-disclosing party has a legal obligation to disclose. A fiduciary relationship may give rise to such an obligation, as it did in this case.

Operation 1 Inc. v. Phillips, 2004 CanLII 48689 (ON SC)

The court hearing motions for summary judgment requesting dismissal of an action on the basis of a release said that whether the release was obtained by fraudulent representations could be determined only at a trial. In addition to “competing inferences” on the question of whether the releasors relied on information provided by the releasees, the issue for trial would extend to the correctness, or otherwise, of the financial information provided prior to the release.

A release was not vitiated by fraud as it was executed at a time when the appellant had suspicions of what he supposed to be fraudulent conduct and the fact that the appellant thought he had been able to gather evidence to prove his suspicions did not entitle him to undo the release.

Wallace v. J. Rivington Associates Inc., 2011 ONSC 4481 (CanLII)

The moving parties sought an order staying two actions on the basis of a release signed by the plaintiff in both actions. The plaintiff argued that there were two genuine issues for trial, namely: (1) whether the moving parties made a fraudulent misrepresentation that was relied on by the plaintiff when she agreed to the release and (2) whether the plaintiff was in a situation of economic duress such that she had no option but to sign the release. The court said a release obtained by a fraudulent misrepresentation is not a valid release and will be set aside, citing Francis v. Dingman . A misrepresentation is fraudulent when it can be said that its maker has an absence of an honest belief in its truth. Put another way, a fraudulent misrepresentation is one (1) which is untrue in fact, (2) which the defendant knows to be untrue or is indifferent as to its truth; (3) which was intended or calculated to induce the plaintiff to act upon it; and (4) which the plaintiff acts upon and suffers damage. The court concluded that the appropriate forum for a determination of the validity of the release was at trial. Credibility would play a role in the determination of the factors that led the plaintiff to sign the release – whether she was under duress when she did so and whether she relied on any fraudulent representations of the moving parties, or their agents, when she did so.

Cannon v. Funds for Canada Foundation, 2012 ONSC 399 (CanLII), application for leave to appeal dismissed, 2012 ONSC 6101 (CanLII)

The plaintiff sought certification of a class proceeding on behalf of a class composed of Canadian taxpayers who participated in a Donations for Canada Gift Program which was supposed to provide participants with very generous charitable tax credits. Certain of the defendants brought a motion for summary judgment on the basis of a release clause in a donor declaration signed by the plaintiff. In his reasons for dismissing the summary judgment motion, the motion judge said that, if it were to be determined at trial that the gift program was a fraud, then the contracts signed by the plaintiff, including the release clause in the donor declaration, could be considered part of the means used to perpetrate the fraud and therefore unenforceable. The same result would follow in the event of a finding of liability for fraudulent misrepresentation. The motion judge said there is ample authority for the proposition that “fraud vitiates every contract and every clause in it”. He referred at length to authorities including Francis v. Dingman and said that the following propositions are demonstrated in the authorities: (a) a fraudulent misrepresentation is one that is made with knowledge that it is untrue, or recklessly, without caring whether it is false; (b) determining whether a fraudulent misrepresentation has been made requires a factual inquiry into the knowledge and state of mind of the representor to determine, among other things, whether the representor had an honest belief in the truth of the statement; (c) a contract procured by fraudulent misrepresentation may be voided by the innocent party; (d) if the contract is voided, any release or limitation of liability contained in the contract will also fall; and (e) the innocent party will be entitled to rescission or damages for fraudulent misrepresentation. In her reasons for dismissing an application for leave to appeal from the motion judge’s decision, the Divisional Court judge said there was no good reason to doubt the correctness of the observation that “fraud vitiates every contract and every clause in it”.

Shoppers Drug Mart v. 6470360 Canada Inc. et al., 2012 ONSC 5167 (CanLII) , cross-appeal on this ground dismissed, Shoppers Drug Mart Inc. v. 6470360 Canada Inc. (Energyshop Consulting Inc./Powerhouse Energy Management Inc.), 2014 ONCA 85 (CanLII) , application for leave to appeal dismissed, 6470360 Canada Inc. c.o.b. Energyshop Consulting Inc./Powerhouse Energy Management Inc., et al. v. Shoppers Drug Mart Inc., 2014 CanLII 34278 (SCC)

The plaintiff entered into an agreement with the defendant 6470360 Canada Inc. which contained a mutual release and a final reconciliation of the plaintiff’s overpayment to the numbered company defendant. The motion judge found that the plaintiff entered into the agreement in ignorance of a misappropriation of funds by the numbered company: unknown to the plaintiff, but well known to the company, the agreement would give the latter a “massive windfall”. The company took the position that the agreement was agreed to by the plaintiff under a unilateral mistake which “in the absence of some misrepresentation, deceit, or fraud on the part of the other party” was not enough to excuse the plaintiff from the contract. The motion judge found that the silence of the numbered company as to the massive error represented by the final reconciliation figure amounted to a blatant, intentional misrepresentation. The company either knew the figure to be false or it entered into the mutual release not caring whether it was true or false. The motion judge said the Court of Appeal had specifically held that a release entered into pursuant to such a misrepresentation will be set aside, referring to Francis v. Dingman . In view of this misrepresentation by silence in the face of a “million-dollar-plus” misappropriation of funds, the mutual release clause could not be relied upon by the numbered company. When the company remained silent regarding the funds that it had misappropriated from the plaintiff, this “misinformation” rendered the release unenforceable insofar as it purported to bar the plaintiff’s claim for the return of all misappropriated funds. The Court of Appeal said that in this case silence amounted to a misrepresentation. The failure of the numbered company to disclose the misappropriation of funds impacted on the parties’ agreement as to the reconciliation amount, “rendering the statement untrue”. The court held that the motions judge was correct in deciding that the defendants should not be able to avail themselves of the benefit of the release.

Holley v. Northern Trust Company, Canada, 2014 ONSC 889 (CanLII), appeal dismissed on other grounds, 2014 ONCA 719 (CanLII)

In the context of considering the scope of a release approved in proceedings under the Companies’ Creditors Arrangement Act (see Re Nortel, 2010 ONSC 1708, below), the court addressed the nature and elements of common law fraud and constructive or equitable fraud. As a matter of common law, fraud is associated with the tort of deceit, which is also called the tort of fraudulent misrepresentation; common law fraud involves dishonest and moral turpitude. The court said that constructive fraud does not necessarily involve dishonesty or moral fraud in the ordinary sense, but a breach of a sort that would be enforced by a court of conscience. (See Chapter 11: Releases in Particular Situations, Bankruptcy and Insolvency, section 11.3, below.)

LeRoy v. TimberWest Forest Corp., 2015 BCSC 2005, affirmed on appeal, 2016 BCCA 448 (CanLII)

A compromise agreement containing a release was approved in an order made in Companies’ Creditors Arrangement Act proceedings. On an application for summary disposition of a subsequent action, the defendants argued that the action was an impermissible collateral attack on the court order. The court was unable to conclude that the plaintiff was bound to lose on the basis of this collateral attack argument. If the release would otherwise be vitiated by an alleged conspiracy or fraud, the fact that there was a court order in place might not avail the defendants in circumstances where the conspiracy or fraud was not disclosed to the court.

Dunkin’ Brands Canada Ltd. c. Bertico inc., 2015 QCCA 624 (CanLII), application for leave to appeal dismissed, Dunkin’ Brands Canada Ltd. (formerly Allied Domecq Retailing International (Canada) Ltd.) v. Bertico Inc., et al., 2016 CanLII 13728 (SCC)

The trial judge found that releases given by franchisees to a franchisor were signed in reliance on a representation that a critical mass of 75 stores would be or had been secured for a proposed renovation program. The trial judge found that this representation was not true. He decided that in the circumstances, the signatures of the franchisees were obtained by misrepresentation which vitiated consent and that the releases given on this basis were null. The Court of Appeal said that the question as to whether a party provided valid consent to a contract is a finding of fact and the franchisor had shown no palpable and overriding error that would allow the appellate court to intervene on this point. In these circumstances, misrepresentations can be grounds for nullity of contract pursuant to article 1401 of the Civil Code of Quebec.

Tayar v. Croll, 2015 QCCA 1062 (CanLII)

A release was not effective to release the appellant from his fraud of which the respondent was unaware because of the appellant’s fault.

Lay v Lay, 2017 ABQB 29 (CanLII), appeal dismissed on other grounds, 2019 ABCA 21 (CanLII), application for leave to appeal dismissed, Melanie Anne Lay, et al. v. Bradley Lay, et al., 2019 CanLII 55713 (SCC)

The parties agreed that a mutual release executed by them, if valid, would extinguish the plaintiffs’ claim. The plaintiffs submitted, however, that a series of fraudulent misrepresentations made by the defendants rendered the mutual release voidable. The court said that a mutual release is a contract and a contract induced by fraud is voidable at the election of the defrauded party. Fraudulent misrepresentations can arise directly through express statements or indirectly through complete or partial omissions; the decision in Opron Construction Co v Alberta (1994), CanLII 18362 (AB QB) addressed how fraudulent misrepresentations can arise from omissions and partial omissions. The court proceeded to “unpack” the allegations of fraud made by the plaintiffs and it concluded that alleged misleading disclosures did not amount to fraudulent misrepresentations.

Valayati v Cheema, 2018 ABQB 1014 (CanLII)

One of the issues on an application for summary dismissal in this case was whether a release of liability was vitiated by fraudulent misrepresentation. The court referred to the decision of the Supreme Court of Canada on the tort of civil fraud, or fraudulent misrepresentation, in Bruno Appliance and Furniture Inc v Hryniak, and the four elements of the tort of civil fraud summarized by the Supreme Court in that decision, as set out above. The court concluded that the record with respect to this issue revealed significant questions of credibility and disputed material facts. Whether the release could be relied on remained a live issue for trial.

Rolin Resources Inc. v CB Supplies Ltd., 2018 BCSC 2018 (CanLII)

The plaintiffs sought to recover the costs of environmental cleanup of a contaminated property and the defendant made a claim against a third party, alleging, among other things, negligence, fraudulent misrepresentations and concealment of the contamination. The third party relied upon a release that had been given in connection with a share purchase transaction pursuant to the “shotgun” provisions of a shareholders agreement. The release was general and very broad, but the defendant argued that the release was void and of no effect, in that it was obtained by fraud. Relying on Fotini’s Restaurant Corp. v. White Spot Ltd. , the defendant argued that the third party procured the release by knowingly misrepresenting the contamination. The court reviewed the circumstances of the release and found no evidence that the third party had procured the release by fraud.

York University v. Markicevic, 2018 ONCA 893 (CanLII) , application for leave to appeal dismissed, Michael Markicevic v. York University, 2019 CanLII 64819 (SCC)

As stated by the Court of Appeal, the appellant misappropriated nearly a million dollars from his employer, York University. Before York was aware of the extent of the appellant’s dishonesty, it terminated the appellant’s employment without cause and finalized a severance agreement with him that contained mutual releases. The trial judge rescinded the severance agreement including the releases. She held that, as a fiduciary, the appellant had a positive obligation to disclose his fraudulent activity before he entered into the severance agreement. She also found that the releases and the severance agreement were obtained by fraudulent misrepresentation. The appellant had materially misrepresented his innocence to York and if York had known of the fraud, they would not have terminated him without cause, paid him, and given him a release. The Court of Appeal said that a contracting party who is induced to enter into a contract as a result of a fraudulent misrepresentation is entitled to rescission, and restoration of the benefits conferred on the other party to the contract. The question of whether a contracting party did in fact rely on the misrepresentation, at least in part, to enter into the contract is “a question of fact to be inferred from all the circumstances of the case and evidence at the trial”. The trial judge’s finding that York was induced to enter into the severance agreement by the appellant’s fraudulent misrepresentation that he was innocent of any financial dishonesty was supported by the evidence and no palpable or overriding error had been shown. The appellant also argued that the language of the release was broad enough to release the appellant from responsibility for the misappropriations. Even if the release was broad enough to bar any claim by York for recovery of the money misappropriated, the release was an integral part of the agreement induced by the misrepresentations as to his honesty. Once that agreement and release were rescinded, York was no longer barred from recovery.

Ntakos Estate v. Ntakos, 2021 ONSC 2492 (CanLII)

Fraud cannot be in the air. There must be a causal connection between the fraud and the acts sought to be unraveled. In this case, the plaintiffs had previously sued over what they were calling fraudulent conduct and they chose to settle and provide releases. They had led no evidence that fraud occurred in litigating an earlier action or in reaching the settlements which might justify unraveling them.

Jonathan Agg et al. v. John Watson et al., 2021 ONSC 3068 (CanLII)

Litigation between the shareholders of a landscaping business arose because one shareholder, Agg, believed that the other shareholder, Watson, was misappropriating funds. The litigation was settled and the parties signed a release. In this action, Agg alleged that Watson had overstated the revenue of the business and Watson brought a motion for an order dismissing the action on the basis of the settlement and release in the earlier litigation. Agg relied on Isailovic, above, and Bittman, above, in arguing that a court will not set aside a release for failure to disclose information if the information relates to an issue about which the innocent party was already suspicious. The court said that the Bittman line of cases was distinguishable. Agg said he knew Watson was improperly taking money, but never suspected that Watson was fraudulently inflating revenue. In addition, both parties agreed that a fraud that causes parties to enter into a settlement vitiates the agreement. There was at least an issue about the extent to which Agg was induced to enter into the settlement based on fraudulent misrepresentations by Watson.

9.16.2 Non-Fraudulent Misrepresentation

In the cases below, Canadian courts dealt with arguments about negligent misrepresentation put forward as a basis for a challenge to a release or settlement, but ultimately left open any determination of the circumstances in which a release may be set aside due to a non-fraudulent, negligent misrepresentation.

White v. Colliers Macaulay Nicholls Inc., 2009 ONCA 444 (CanLII)

In this decision, the Ontario Court of Appeal reviewed the state of the law, as at the time of the decision, regarding the circumstances in which a release could be set aside on the basis of a non-fraudulent misrepresentation. The Court of Appeal referred to Kingu v. Walmar Ventures Ltd., 1986 CanLII 142 (BC CA), where McLachlin J.A. set out a series of eight criteria on the basis of which a contract could be rescinded for non-fraudulent misrepresentation. Kingu had been referred to in at least two authorities in the Court of Appeal, but not in the context of an attempt to set aside a release and a settlement agreement. Indeed, Francis v. Dingman, [1981] O.J. No. 817 (H.C.J.), which preceded Kingu, was the only Ontario authority that appeared to have dealt with the release issue directly. In Francis, the trial judge refused to set aside a release notwithstanding his finding that there had been a negligent misrepresentation. This decision was overturned on appeal, but on the basis that the Court of Appeal found the misrepresentation to have been fraudulent rather than negligent: (1983) CanLII 1985 (ON CA) . On the appeal, no issue was taken with the trial judge’s refusal to set aside the release on the basis of a negligent misrepresentation. There might be circumstances in which a release could be set aside on the basis of a non-fraudulent misrepresentation, but it was not necessary to resolve that issue here because this was not such a case.

Hanna v. Polanski et al, 2012 ONSC 3229 (CanLII)

The plaintiff suffered injuries as a result of a motor vehicle collision involving a vehicle in which he was a passenger. After he settled his claim with an adjuster for the defendants’ insurer and signed a release, he argued that the settlement should be set aside on the basis that the adjuster “engaged in the tort of negligent misrepresentation”. The court referred to the five elements of the tort set out by the Ontario Court of Appeal in Carom v. Bre-X Minerals Ltd., 2000 CanLll 16886 (ONCA). As to the first of the five elements of the tort, the court found that the plaintiff had been unable to show that the adjuster owed any duty of care on the facts of this case. It was not necessary for the court to address whether the plaintiff had fulfilled the remaining four elements of the tort of negligent misrepresentation.

9.16.2.1 Innocent Misrepresentation

In Brideau et al v. Gravel, 1969 CanLII 174 (NB CA) , the New Brunswick Court of Appeal said that, where a settlement is reached as a consequence of fraud or of a misrepresentation, even innocently made, a release obtained thereby cannot be relied upon to bar the releasor’s remedy. The release in Brideau was executed in reliance on a statement that another insurance company would pay the balance of a claim for out-of-pocket costs. The court said that this statement constituted a misrepresentation and that a release so obtained is voidable.

Cormier v. Henwood, Martin and Leger, 1979 CanLII 3227 (NB QB)

The plaintiff Albert Cormier, was a passenger in a motor vehicle owned by the defendant Adelard Leger and operated by the defendant Emery Martin when it was in collision with a motor vehicle owned and operated by the defendant Mark Phillip Henwood. The court found that a release signed by Cormier, despite the broad nature of its terms, was given and taken solely for accident benefits, commonly referred to as Section B Coverage, which was provided for under Leger’s motor vehicle liability policy. The court also said that Cormier had only a grade 6 education and had not obtained legal advice regarding his right to claim general damages and was given the impression initially that his sole claim was for lost wages and out-of-pocket medical expenses. But the adjuster for the Leger insurer was aware Cormier was confined to hospital following the accident and had obtained medical reports from two orthopedic specialists, both of whom testified at trial to Cormier’s injuries. It was this adjuster who handed the printed release form to Cormier knowing he had a limited education, knowing he needed glasses to read and was without them and knowing too that Cormier was living on social assistance and had urgent need of funds. Yet the adjuster neither read the release to Cormier nor did he explain its contents to him; he was not even sure that Cormier attempted to read the release before signing it; Cormier said he did not. Additionally, the release did not include any reference to Martin and it was the latter whom Mr. Cormier believed to be responsible. In these circumstances the court held that the release was voidable and the defendants Martin and Leger could not rely upon it, citing Brideau v. Gravel , above.

Stein v. Exec-U-Fit Personal Fitness, 2007 CanLII 16447 (ON SC)

The plaintiff suffered injuries while rock climbing and claimed damages from a number of defendants, including a participant in the activity who was the plaintiff’s “belay partner” when she was injured. The plaintiff alleged that this defendant had misrepresented his level of expertise in rock climbing. The defendant moved for summary judgment, relying on a release and waiver signed by the plaintiff (as well as voluntary assumption of risk). The motion for summary judgment was dismissed on a number of grounds. With respect to the defendant’s level of expertise, the motion judge said if the statement alleged by the plaintiff was shown to have been made and if it was untrue, it might be argued that the misrepresentation induced the plaintiff to enter into the agreement and that the agreement was vitiated by the misrepresentation. Even though the release was signed before the alleged misrepresentation, the motion judge said that the plaintiff did not agree to have the defendant act as her belayer until she had questioned him about his level of expertise.

Millerson Group Inc. v. Huntington Properties Ottawa Inc., 2016 ONSC 6106 (CanLII)

While there was no evidence of innocent misrepresentation in this case, the court said such evidence would not in any event operate to invalidate the release clause of an agreement. In making this statement, the court relied on an earlier decision in the same litigation, where, apparently in relation to the scope of the release, it was said that the full and final release of all claims, whether known or unknown, would appear to bar a cause of action in innocent misrepresentation, but not necessarily one in fraudulent misrepresentation. (See Chapter 6: Scope and Application of Releases, section 6.12, Fraud, above.)

The respondent settled an action and signed a release. The Court of Appeal held that any interest in the finality of settlements could not “trump” the need to rescind the settlement agreement which, based on the evidence, was induced by an innocent misrepresentation. The equitable remedy of rescission is available for a false or misleading representation that induces a contract. Rescission requires proof that the misrepresentation was material and was relied on by the party seeking to rescind the contract. The remedy of rescission is available even if the misrepresentation was made innocently, that is, by a party who believed it was true. Rescission based on innocent misrepresentation does not require a finding that the party making the representation had actual or constructive knowledge that the representation was false at the time it was made. An innocent misrepresentation is one that is made without knowledge that it is wrong.

9.16.3 Deceptive Advertising

One of a number of arguments made by the appellant in the case below was that a pre-emptive release was invalidated by the British Columbia Business Practices and Consumer Protection Act because of deceptive and/or unconscionable acts on the part of the defendant.

Deanna Loychuk et al v. Cougar Mountain Adventures Ltd., 2012 BCCA 122 (CanLII), application for leave to appeal dismissed 2012 CanLII 56135 (SCC)

The appellants signed pre-emptive releases before participating in zip-lining on the defendant’s premises, but argued that the defendant’s website contained information that was deceptive and designed to mislead consumers regarding the safety of zip-lining. They contended that the release was invalidated under the B.C. Business Practices and Consumer Protection Act. However, the Court of Appeal said that there was nothing to indicate that either of the appellants were aware of, or relied on, the allegedly deceptive information on the website. Deceptive statements cannot be pleaded in the abstract: a consumer cannot allege that a statement was deceptive without establishing that he or she relied on that statement in entering into the particular transaction. Further, the defendant met its burden under the statute of showing it did not commit the alleged deceptive act because the appellants’ allegation rested on giving the website statement a broader meaning than it was capable of bearing.

9.17 Breach or Non-Performance of Contract by Releasee

At issue in the cases below was whether a release will or should be enforced if it is, or forms part of, a contract between the parties that the releasee has breached or has not fulfilled. Decisions gathered in section 6.5 above address a related issue, namely, whether the wording of a particular release can be read or applied as a bar to claims for failure to comply with the agreement which contains the release: see Chapter 6: Scope and Application of Releases, section 6.5, Claim For Non-Compliance with Agreement Containing Release.

A number of the decisions in this section refer to the doctrine of fundamental breach. As noted by Wilson J. in Hunter Engineering Co. v. Syncrude Canada Ltd., 1989 CanLII 129 (SCC), [1989] 1 SCR 426 , the fundamental breach doctrine held that the effect of a fundamental breach of a contract was to bring the contract to an end, thereby preventing the contract breaker from relying on any clause exempting liability. Many efforts have been made to give definition to the concept of a fundamental breach. It has been said that a fundamental breach is a breach “going to the root of the contract” (Suisse Atlantique Société d’Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale, [1967] 1 A.C. 361 (H.L.), at page 399). Another formulation is that a fundamental breach occurs where “the event resulting from the failure by one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain from the contract” (Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.), at page 849).

The “generalized application” of the fundamental breach doctrine has been “laid to rest” by the Supreme Court of Canada. This was explained by the Supreme Court in a case from Quebec that involved a contractual non-liability clause, 6362222 Canada Inc. v. Prelco Inc., 2021 SCC 39 (CanLII), at paragraphs 55-56.

In Prelco, the Supreme Court of Canada discussed its earlier decisions in Hunter Engineering and Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4. The Court said that, as long ago as 1989, Dickson C.J. had, in Hunter Engineering, referred to the principle drawn from the academic commentary that not all exclusion clauses are unreasonable, and stressed that the common law doctrine of fundamental breach must take this reality into account. The Court also said that, in Tercon, it had laid “to rest” the generalized application of this common law doctrine of fundamental breach. The Court went on to say that:

… at common law, as in civil law, there is a concern with specific situations of abuse and contractual imbalance as well as with other cases that are contrary to public order, or are matters of “public policy”, but at the same time an acceptance that a nonliability clause in a freely negotiated contract can be a fair solution having regard to the context of the negotiations. It can therefore be said that neither of the two legal traditions has a rule of general application that totally prohibits nonliability clauses relating to fundamental obligations in contracts between sophisticated parties (see S. Grammond, “La règle sur les clauses abusives sous l’éclairage du droit comparé” (2010), 51 C. de D. 83, at page 109).

Cudmore Estate v. Deep Three Enterprises Ltd., [1991] O.J. No. 1453

The court said that neglect on the part of the defendant National Association of Scuba Diving Schools Inc. to inform itself adequately as to the expertise of a diving instructor “whether a fundamental breach of contract” was such as to make enforcement of a pre-emptive release unconscionable and in any event rendered the pre-emptive release unenforceable (referring to Hunter Engineering and Crocker v. Sundance ).

Sibley v. British Columbia Custom Car Association et al, 2005 BCSC 509 (CanLII)

The plaintiff was injured prior to his intended participation in a motorcycle race as a result of a collision between a snowmobile and his motorcycle. The raceway park was a member track of the National Hot Rod Association and the plaintiff had signed an NHRA release that was reproduced in the NHRA Rulebook. The plaintiff argued that there were three breaches of the rules, while the court concluded that there was one breach (installation of a reverse throttle on the snowmobile). The court found that the rules were not incorporated into the release and did not constitute a collateral warranty. As to the plaintiff’s argument based on the doctrine of fundamental breach, the court said that, presuming that the rules did form part of the release and the breach was fundamental, it must look to the contract as a whole. Having regard to the “true construction of the contact”, the court said that, even if the installation of the reverse throttle constituted fundamental breach, the release would still operate to exempt the defendants from liability.

Isildar v. Rideau Diving Supply, 2008 CanLII 29598 (ON SC)

The trial judge’s finding in Cudmore v. Deep Three, above, that the waiver was unenforceable due to fundamental breach or unconscionability is inconsistent with the weight of authority concerning liability releases. (See Dyck , Ochoa , and Knowles .) Moreover, the short reasons with respect to fundamental breach and unconscionability do not provide a sufficient basis for assessing the trial judge’s legal analysis. Finally, the trial judge’s entire reasoning appears to be influenced by the view that ice diving is, as the trial judge said, “probably one of the most hazardous offshoots of scuba diving that one could imagine.”

Van Hooydonk v. Jonker, 2009 ABQB 8 (CanLII)

The plaintiff relied on the doctrine of fundamental breach in support of her argument that a pre-emptive release/waiver should not be enforced. The court referred to the decision in Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co., 1997 CanLII 4453 (ON CA), for the proposition that, whether a breach is fundamental or not, an exclusionary clause should be enforced according to its true meaning and relief should only be granted if the clause, seen in the light of the entire agreement, can be said to be “unconscionable” or “unfair or unreasonable”. The court said that the release clearly applied to the negligence said by the plaintiff to constitute a fundamental breach, that it would not consider the alleged negligence of the defendants to amount to a fundamental breach and that the waiver could not be set aside as unconscionable.

Stein v. Exec-U-Fit Personal Fitness, 2007 CanLII 16447 (ON SC)

The plaintiff suffered injuries while rock climbing and claimed damages from a number of defendants, including a participant in the activity who was the plaintiff’s “belay partner” when she was injured. This defendant moved for summary judgment, relying on, among other things, a release and waiver signed by him and by the plaintiff. The motion for summary judgment was dismissed on a number of grounds. The release said that a party to it would act as a belayer only if knowledgeable and experienced at belaying. The court said that, whether the defendant breached that term of his agreement was an issue for trial; the defendant’s breach of the contract might be argued to preclude him from relying on the protection of the release.

Dennis v. Ontario Lottery and Gaming Corporation, 2010 ONSC 1332 (CanLII), appeal dismissed 2011 ONSC 7024 (CanLII), further appeal dismissed, 2013 ONCA 501 (CanLII), application for leave to appeal dismissed, Peter Aubrey Dennis, et al. v. Ontario Lottery and Gaming Corporation, 2014 CanLII 5980 (SCC)

MHR Board Game Design Inc. v. Canadian Broadcasting Corporation, 2013 ONSC 4457 (CanLII), appeal dismissed, 2013 ONCA 728 (Can LII), leave to appeal refused, 2014 CanLII 25874 (SCC)

The appellant signed a comprehensive release before appearing on a television show to present a business proposal. He alleged that his proposal was edited in such a fashion as to misrepresent completely the merits of the business plan. His action was dismissed on a motion for summary judgment. The motion judge said that the consent and release was a complete bar to the claims and the action should only proceed if it would be unconscionable or contrary to public policy or the defendant itself breached the contract. The motion judge said that the evidence failed to establish any breach of the contract by the defendant.

Spartek Systems Inc v. Brown, 2014 ABQB 526 (CanLII)

The plaintiff argued that one of the defendants was not protected from liability by a release and settlement agreement because the defendant had breached his obligations under the agreement and was no longer entitled to the benefit of it. The court said that as a general rule, only a fundamental breach by one party to an agreement would justify another party being relieved of its obligations under the agreement. It is not sufficient to show only a minor or technical breach; the plaintiff must show a refusal or neglect by the defendant of his obligations that would substantially deprive the plaintiff of its benefit under the agreement. The plaintiff did not meet its onus of showing such a non-performance of obligations.

Grand River Enterprises v. Attorney General of Canada, 2015 ONSC 5256 (CanLII)

On its face, the release in this case appeared to be binding and a bar to the action. However, the releasors had pleaded that the release was null and void because the releasee had breached its agreement and it would be premature and inappropriate to make a determination regarding the release on a motion.

IAP Claimant H-15019 v. P. James Wallbridge, 2019 ONSC 1617 (CanLII) , affirmed on other grounds, IAP Claimant H-15019 v. Wallbridge, 2020 ONCA 270 (CanLII) , application for leave to appeal dismissed, P. James Wallbridge, et al. v. IAP Claimant H-15019, 2020 CanLII 94499 (SCC)

The respondent was a class member of an Indian Residential Schools Survivors’ Class Action that was settled by the Indian Residential Schools Settlement Agreement. The IRSSA, which established an Independent Assessment Process for claims and compensation, was approved by court order. The Settlement Approval Order contained a release and cause of action bar in favour of class action defendants and other released organizations. The respondent commenced this action against Canada and lawyers, referred to as the Wallbridge defendants, whom he had retained to bring an IAP claim. He brought the action not because of his mistreatment at a residential school, but because of issues relating to the initial dismissal of his IAP claim. On this motion for dismissal of the action as an abuse of process, the Wallbridge defendants relied on release provisions of the approval order. The motion judge said that, on a plain reading of the approval order, the release of causes of action was restricted to factual situations which had already come to pass when the approval order was signed. This decision was upheld by the Court of Appeal on other grounds. The Court of Appeal quoted, with added emphasis, the following statement made in a companion decision of the motion judge in the same litigation, which is summarized immediately below: “…the release of all claims relating to compliance by Canada of its obligations under the IRSSA could not reasonably have been in the contemplation of the parties. Surely, claimants cannot, by the same agreement that imposes obligations on Canada, be taken to have released it from those very obligations.” The Court of Appeal said that it agreed with the motions judge that compliance by Canada of its obligations under the IRSSA would not be encompassed by the release and it said that this conclusion was dispositive of the appeal.

IAP Claimant H-15019 v. P. James Wallbridge, 2019 ONSC 1627 (CanLII)

In the Wallbridge litigation described immediately above, Canada also argued that the action was an abuse of process because, among other things, the plaintiff had released Canada from claims related to his attendance at a residential school. The court did not agree that the cause of action asserted by the plaintiff was released by virtue of the provisions of the approval order relied on by Canada. One of the grounds for the court’s decision was that the approval order could not and did not release causes of action or claims arising out of factual situations that had not yet occurred, even if in some way related to a residential school. Further, even if it was incorrect in this interpretation of the release provisions, the court’s view was that the release of all claims relating to compliance by Canada of its obligations under the IRSSA could not reasonably have been in the contemplation of the parties. Surely, the court said, claimants could not, by the same agreement that imposed obligations on Canada, be taken to have released it from those very obligations.

Treaty Land Entitlement Committee Inc. v. Canada (Indigenous and Northern Affairs), 2021 FC 329 (CanLII)

To settle longstanding disputes concerning the implementation of a promise to set aside reserves, Canada, Manitoba and the applicants entered into the Manitoba Framework Agreement. The agreement contained releases in favour of Canada: the First Nations agreed not to sue Canada for failure to comply with the provisions of treaties regarding the creation of reserves. In the event of a default by Canada that continued for a period of 180 days, the agreement provided for a request for a declaration before a court of competent jurisdiction that the release was void or ineffective in whole or in part and that Canada was barred from relying on the release. The applicants sought such relief in this proceeding and Canada acknowledged that they were entitled to make such a request. Canada argued, among other things, that there had been significant implementation of the agreement and that voiding the releases would be a disproportionate sanction depriving it of the totality of the consideration it obtained in the agreement. The court said it could possibly be disproportionate and unjust to void the releases for a technical or insignificant breach of the MFA. However, the dispute resolution process provided for in the agreement already contained robust safeguards against such a possibility. Not just any breach would constitute an event of default. The breach must pertain to a fundamental term, the failure to comply must be material, and it must be repeated and “in a manner which clearly establishe[d] a pattern.” An adjudicator had made findings with respect to each of these conditions. The court saw nothing disproportionate or unjust in failing to rescue Canada from the consequence it agreed to in the MFA.

9.17.1 Repudiation of Release

In the decision below, the court found that a settlement agreement embodied in a release had been breached by a party to the agreement, but the court did not accept an argument that the agreement had been repudiated.

Federation Insurance Co. of Canada v. Markel Insurance Co. of Canada, 2012 ONSC 1875 (CanLII)

Two insurance companies agreed to settle a dispute over a loss transfer claim and “memorialized” the settlement in a partial full and final release. The release set out a settlement of the loss transfer claim up to a specific date, but anticipated further claims. The respondent took the position that the applicant breached a fundamental term of the agreement and it refused to pay further claims, arguing that the applicant had repudiated the agreement. The court found that the applicant had breached the agreement, but at no time was the applicant’s conduct “repudiatory”. The court said that repudiation is conduct that demonstrates that a contracting party has absolutely renounced its contractual obligations.

9.17.2 Breach of Collateral Agreement

The issue in many of the cases summarized earlier in this section was whether a release should be enforced at the instance of a party who breached the release itself or breached the very agreement which contains the release. The argument in the decision summarized in this section was that a release should not be enforced at the instance of a party who breached an agreement that was collateral to the release – but the court found that the evidence of the alleged collateral agreement was in contradiction with the clear words of the release.

Ermineskin Cree Nation v. Foureyes, 2005 ABQB 522 (CanLII)

The evidence of the respondent was that, at the time when she signed a release following the termination of her employment, she had been promised that she would get her job back. She argued that the applicant did not deliver on this promise. The court said that parol evidence – that is, testimony from an individual like the respondent – should not be used to contradict the clear terms of a written contract. In the circumstances of this case, the clear terms of the release precluded the existence of any collateral contract with regard to the re-hiring of the respondent.

9.18 Relief from Forfeiture

The power to grant relief against forfeiture is an equitable remedy and is purely discretionary. The factors to be considered by a court in the exercise of its discretion are the conduct of the applicant, the gravity of the breaches, and the disparity between the value of the property forfeited and the damage caused by the breach: Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 SCR 490, citing Shiloh Spinners Ltd. v. Harding, [1973] A.C. 691 (H.L.) and Snell’s Equity (29th Edition, 1990), at pages 541-42. In Saskatchewan River Bungalows, the Supreme Court of Canada said that the governing principles were summarized in the following passage from Liscumb v. Provenzano 1985 CanLII 2051 (ON SC), affirmed, 1986 CanLII 2595 (ON CA):

…the following are the appropriate questions to consider in determining whether there should be relief from forfeiture in this case: first, was the conduct of the plaintiff reasonable in the circumstances; second, was the object of the right of forfeiture essentially to secure the payment of money, and third, was there a substantial disparity between the value of the property forfeited and the damage caused the vendor by the breach?

In Ontario (Attorney General) v. 8477 Darlington Crescent , 2011 ONCA 363 (CanLII), the Ontario Court of Appeal discussed the civil remedy of relief from forfeiture in the context of an application seeking forfeiture of properties pursuant to the Civil Remedies Act, 2001, S.O. 2001, c. 28. The Court of Appeal said (paragraph 86) that courts of equity have always had the power to relieve against the forfeiture of property consequent upon a breach of contract, citing McBride v. Comfort Living Housing Co-Op, 1992 CanLII 7474 (ON CA). That power, the court said, is now expressed in various statutes dealing with specific kinds of contracts (such as contracts of insurance and leases) and has been given more general expression in the Ontario Courts of Justice Act, R.S.O. 1990, c. C. 43.

The Ontario Court of Appeal went on to say (paragraph 87) that the power to relieve from forfeiture is discretionary and fact-specific, citing Saskatchewan River Bungalows. The power is predicated on the existence of circumstances in which enforcing a contractual right of forfeiture, although consistent with the terms of the contract, visits an inequitable consequence on the party that breached the contract. Relief from forfeiture is particularly appropriate where the interests of the party seeking enforcement by forfeiture can be fully vindicated without resort to forfeiture. Relief from forfeiture is granted sparingly and the party seeking that relief bears the onus of making the case for it, citing 1497777 Ontario Inc. v. Leon’s Furniture Ltd., 2003 CanLII 50106 (ON CA), at paragraphs 67-69, leave to appeal refused, [2003] S.C.C.A. No. 506, at paragraph 72. See also Alberta (Minister of Justice and Attorney General) v. Sykes, 2011 ABCA 191 (CanLII), at paragraphs 40-43 and Mihalyko (Re), 2012 SKCA 44 (CanLII), at paragraphs 31-34.

Wong v. Luong et al, 2005 BCSC 617 (CanLII)

A plaintiff who, on the advice of his lawyer, has for consideration chosen to release the Insurance Company of British Columbia from any claim to benefits under Part 7 of the B.C. Insurance (Vehicle) Regulation has no claim for relief from forfeiture. The case is not one of forfeiture in the first place, but a contractual release of rights.

Kilislian v Copper Creek GP Inc., 2015 ONSC 7072 (CanLII)

The plaintiffs signed a catering agreement for a wedding reception at a golf club, which provided that all claims for alleged defects in the performance of the club were deemed to be waived and released unless made in writing within 48 hours of the event. The plaintiffs commenced this action claiming damages in relation to events that transpired at the wedding reception, but the court found, among other things, that the plaintiffs had not complied with the notice provision in the agreement. The plaintiffs argued that they should be granted relief from forfeiture. The court referred to the relief from forfeiture provisions of the Courts of Justice Act and, regarding its authority to grant relief from forfeiture for breach of contract, to Ontario v. 8477 Darlington, above. The court concluded that, while relief from forfeiture is typically sought in relation to a breach of an insurance contract or a lease, there is no reason why relief from forfeiture should not be generally available in relation to the breach of any type of contract. The court came to the view that relief from forfeiture was available in respect of the “breach” of the notice condition in the catering contract. However, the court found that the plaintiff had not made out grounds for relief from forfeiture to be granted in the circumstances of this case.

Trez Capital Limited v. Morrison, 2019 ONSC 7115 (CanLII)

The defendants borrowed money from the plaintiffs. Disputes which arose after the loans came due were settled and the parties entered into a mutual release to be held in escrow pending completion of the settlement. The release provided, among other things, that should the defendants breach any term of the settlement agreement, the release by the plaintiffs would be void and the plaintiffs would be free to pursue any and all claims in respect of the loans. The plaintiffs took the position that the defendants breached the settlement and that, due to the breach, the defendants were not entitled to the benefits of the settlement or the release. The plaintiffs sued and moved for summary judgment on their full claim for all arrears. The court granted the defendants’ request for relief from forfeiture, based on the three factors set out in Saskatchewan River Bungalows, namely: (1) the conduct of the applicant; (2) the gravity of the breach; and (3) the disparity between the value of the property forfeited and the damage caused by the breach.

9.1 Introduction

9.1.1 Legal Advice

9.1.1.1 Failure of Releasor’s Lawyer to Explain a Release

9.2 Injuries or Damages Greater or Different Than Expected

9.3 New Evidence

9.4 Improvidence or Inadequacy of Consideration

9.5 Disability and Incapacity

9.7.1 Minors

9.7.1.1 Release Signed by Parent on Behalf of Minor

9.7.2 Intoxication or Other Temporary Impairment Affecting Capacity

9.8 Failure to Understand, Mistake and Non Est Factum

9.8.1 Mistake

9.8.1.1 Unilateral Mistake

9.8.1.2 Common Mistake

9.8.2 Non Est Factum

9.9 No Consensus Ad Idem

9.10 No Negotiation of Release Terms/Consent Not Freely Given

9.11 Non-Disclosure of Material Information

9.12 Unconscionability

9.12.1 Canadian Case Law Pre-Dating Uber v. Heller

9.12.1.1 Decisions Involving Insurance Adjusters that Pre-Dated Uber v. Heller

9.12.1.2 Other Decisions that Pre-Dated Uber v. Heller

9.13 Undue Influence

9.14 Duress and Pressure

9.14.1 Pressure Felt By Releasor Not Amounting to Duress

9.14.1.1 Pressure on Releasor Not Exerted by Releasee

9.14.1.1.1 Releasee Not Aware of Duress or Pressure

9.14.2 Contractual Provision Acknowledging No Duress

9.14.3 Efforts to Seek Payment of Amounts Claimed to be Owing

9.15 Authenticity and Legitimacy of a Release

9.16 Misrepresentation and Fraud

9.16.1 Fraud and Fraudulent Misrepresentation

9.16.2 Non-Fraudulent Misrepresentation

9.16.2.1 Innocent Misrepresentation

9.16.3 Deceptive Advertising

9.17 Breach or Non-Performance of Contract by Releasee

9.17.1 Repudiation of Release

9.17.2 Breach of Collateral Agreement

9.18 Relief from Forfeiture

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