Haider v Rizvi: Implications of Failing to Prescribe Form and Content of a Release

In Haider v Rizvi, 2023 ONCA 354, the Court of Appeal for Ontario found that where the terms and content of a full and final mutual release are not prescribed, the court will imply the terms by interpreting the settlement. Without an agreement to the contrary, a court will only imply what the case law suggests are “standard” or “usual” terms. Below, we review the case and consider the implications of failing to prescribe the form and content of a release in a settlement.

Background

On December 11, 2017, the appellant, Zulfiqur Al Tanveer Haider (“Haider”), the respondent, Syed Aftab Hussain Rizvi (“Rizvi”), and Rizvi’s wife signed Minutes of Settlement (the “Minutes”) which settled all claims arising out of the subject matter of Actions CV-13-480703 and CV-16-547391 (the “Actions”). The Minutes provided that the parties had to enter into a full and final mutual release; however, the form and content of the release were not prescribed. The Minutes also attached an undertaking which provided that specific indemnities would survive the settlement (the “Undertaking”).

In January 2019, when a draft full and final mutual release was provided by Rizvi’s counsel to Haider, Haider’s counsel objected to “the release of unknown claims, and a clause prohibiting the parties from taking proceedings against any other person who could claim over for contribution or indemnity against a releasee” (a “no claims over clause”). The terms of the release were never finalized.

In November 2021, Rizvi brought a motion seeking: (1) a declaration that the parties had reached a settlement of the Actions; (2) an order requiring Haider to enter into a Full and Final Mutual Release as contemplated by the Minutes of Settlement; and (3) an order and declaration that the form of release sent to Haider’s counsel on January 25, 2019 met the requirements of a full and final mutual release contemplated by the Minutes of Settlement.

Haider opposed the motion and argued that r. 49 of the Rules of Civil Procedure – which was relied upon in Rizvi’s notice of motion – was not applicable, that Rizvi was statute-barred because the limitation period had expired, and that if the parties were required to sign a full and final mutual release, then it should not include the release of unknown claims or a no claims over clause.

The Motion Judge’s Decision

The motion judge agreed that Rizvi was entitled to enforce the settlement under r. 49 since “the action in which the settlement was reached had not yet been dismissed”, and rejected Haider’s argument that the limitation period had expired. The parties were required to provide a full and final mutual release, and because the parties had not provided for the content of the release in the Minutes, the motion judge concluded that “they should be required to sign a ‘standard form’ release releasing all claims arising out of the subject matter of the Actions and containing a provision barring claims over”, as a no claims over clause is “‘part of and parcel’ of a standard full and final release”. As such, the motion judge ordered that Haider sign a standard form release, with a no claims over clause.

The Court of Appeal’s Decision

On appeal, Haider submitted that the motion judge erred as follows:

1. in determining the issues on a r. 49 motion, rather than requiring Rizvi to bring a motion for summary judgment after commencing a new proceeding;
2. in failing to find that Rizvi’s claim for delivery of a full and final mutual release was statute-barred under the Limitations Act; and
3. in requiring the delivery of a full and final mutual release in a “standard form” and including a ‘no claims over’ provision.

There was no Procedural Defect in the Manner in Which the Case was Brought to Court

Although the Court found that r. 49 was in fact not applicable, it held that it was still appropriate for Rizvi to bring this matter to court by way of motion and that therefore, there was “no [demonstrated] reversible error in the motion judge’s conclusion that the issue could be determined on the motion before her.”

While r. 49 does not apply to non-compliance with a settlement agreement, a motion was still the appropriate way for Rizvi to bring the matter before court as the “commencement of a fresh proceeding to enforce the settlement was unnecessary and would have been inappropriate”. The Court stated that when the issue is not whether the parties concluded a settlement, but some step in its execution, subsequent disputes should be resolved by application, or by common sense within the framework of the settlement to which the parties have agreed. As the motion judge had the jurisdiction to determine the motion, she did not err in hearing and deciding it.

No Limitation Defence to the Delivery of a Release

Regarding the limitations defence, the Court made two key findings. First, the Court found that Haider had not identified an error with the motion judge’s conclusion that Rizvi’s claim arose only at the time that Haider refused to deliver any release at all. On that factual basis, it was clear that the limitation period had not expired.

Further, the Court held that there was no basis for Haider to rely on the expiry of a limitation period. As the delivery of the release was properly sought in the context of a motion in an ongoing action, Rizvi was “not required to start a new action or to amend his pleadings to seek an order for an exchange of releases as part of the completion of the settlement.” Even if no release had been delivered, Rizvi was released by the terms of the Minutes, subject only to the Undertaking.

The Motion Judge ought to have Prescribed the Specific Form of the Release

First, relying on the Superior Court’s decision in Terranata Winston Churchill Inc. v. Teti Transport Ltd., et al., 2020 ONSC 7577 (“Terranata”), the Court found that when the form of release is not prescribed in a settlement, the “content and scope of the release depend on an interpretation of the settlement.”

In Terranata, the Superior Court found that when an offer to settle is silent on the terms of the release, the court’s task is to imply the terms of the release that are consistent with the settlement made by the parties. In this context, a court will imply that the parties agreed to sign a “standard form general release consistent with the settlement”, and would imply only those terms that are ‘standard’ or ‘usual’ as those terms have been interpreted in the case law.

In this case, Haider argued that the scope of the release was overbroad, as it would apply to claims he might have in the future against Rizvi arising out of anything that was raised or could have been raised in the Actions. Haider also objected to the inclusion of the no claims over clause on the basis that he had contemplated and subsequently commenced a new action against unrelated parties in which Rizvi was third-partied.

The Court found that the motion judge ought to have considered Haider’s arguments in the context of the specific terms of the settlement the parties had reached, including the Actions that had been settled and the Undertaking that would survive the settlement.

In addition, the Court observed that it would have been helpful for the motion judge to have reviewed and approved a particular version of a release, with modifications as appropriate to reflect the motion judge’s interpretation of the Minutes and its surrounding circumstances. In this regard, the parties provided two draft releases to the Court, which the Court reviewed. The parties agreed on all the terms except for the inclusion of a no claims over clause and whether that clause should include an indemnity.

The Court held that the full and final mutual release should include a no claims over clause, because the parties intended that – in consideration of the payment of the settlement funds and the survival of Rizvi’s indemnities – the matters raised in the Actions could not be raised again. In that regard, the inclusion of a no claims over clause was “consistent with the parties’ goal of providing a full and final release.” However, by contrast, the Court found that there was no basis for an indemnity in the no claims over clause, as the parties had already bargained for certain indemnities to survive the settlement (which were those included specifically in the Undertaking).

The Court therefore approved the version of the full and final mutual release that contained a no claims over clause, in the form submitted by Haider, and directed Haider to sign and deliver to Rizvi a copy of that release.

Analysis

Given that settlements are one of the most common forms – if not the most common form – of dispute resolution in the construction industry and in commercial disputes more generally, and given that releases are standard in settlements, it goes without saying that an agreed-upon form of release is critical to achieving a settlement that fully and finally disposes of a given matter.

On that point, Haider v Rizvi offers an important reminder to parties and their counsel to be mindful of arriving at an agreed-upon form and content of the release as part of a settlement. Executing minutes of settlement in the absence of a finalized release runs the risk of a release being ordered that defies one or both parties’ best interests, insofar as the Court of Appeal’s decision indicates that “standard” or “usual” terms as interpreted in the jurisprudence will be implied. In the context of a highly specialized area of practice and/or an especially idiosyncratic dispute that requires complex or unusual terms, the introduction of the “usual” terms into a release might be to both parties’ detriment. Put simply, parties may end up with standard language that does not reflect the deal that one or both parties may have believed it was making.

As the release is an essential part of a settlement, agreeing to finalize the form and content at a later date may expose the parties to risks that neither anticipated at the time of settlement. This is particularly relevant in the construction context, where disputes are often large and complex, and may overlap with subsequent disputes. For example, if the parties have only valued damages up to a certain point in time and the potential future harm to a project is unknown, the parties may agree to settle the dispute at that point in time and leave open the possibility of future liability if additional harm results from certain prescribed circumstances. As a full and final mutual release would usually release the parties from all claims arising from the subject matter of a dispute, parties must be cautious to include specifically what will be released by the settlement.

This case is therefore an important reminder that counsel should be mindful of the “standard” terms of a release, and should specify the form and content of a release whenever a settlement is contemplated. In addition, this case emphasizes the importance of certain types of clauses in a release, such as the no claims over clause and a release of unknown claims, when determining what the “standard” term language is. Finally, a clear understanding of what terms are generally expected to be included in such a release may assist counsel when negotiating release language.

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