Is your standard form release contrary to public policy? The British Columbia Court of Appeal provides guidance

Clauses that exclude, or “release”, liability are widespread and critical to risk management for many businesses. Typically, such clauses stipulate that the signee waives the right to sue if they are injured while participating in certain activities. Inevitably, in the event that the signee is injured, a variety of arguments are put forward as to why the particular exclusion clause is unenforceable in the particular circumstances.

Recently, in 2010, the Supreme Court set out a new approach to the analysis of whether an exclusion clause is unenforceable in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4. Although Tercon set out a new approach, since it was issued, there has been little to no change in the circumstances in which a clause will be held to be unenforceable. In other words, Tercon changed the approach but not the result. However, that is no longer true thanks to the British Columbia Court of Appeal’s recent decision in Niedermeyer v. Charlton, 2014 BCCA 165, wherein it expands the types of clauses which will be found to be contrary to public policy.

Factual Background

The Plaintiff, Karen Niedermeyer, was an Australian ex-pat, resident in Singapore, who was visiting British Columbia for a conference when she was unfortunately injured in a bus accident. At the time of the accident, the bus was taking Ms. Niedermeyer back to Whistler Village from a “zip line experience” operated by the Defendant, Ziptrek Ecotours Incorporated.

At summary trial, Ziptrek argued that a document titled “Release of Liability, Waiver of Claims Assumption of Risk and Indemnity Agreement” signed by Ms. Niedermeyer, was a complete defence. The trial judge agreed and Ms. Nidermeyer’s claims were dismissed. Ms. Nidermeyer appealed.

The Decision

Ms. Nidermeyer advanced four grounds of appeal. The first three concerned whether the release covered injuries of the nature Ms. Nidermeyer suffered, whether the release was unenforceable because the contents were not brought to her attention, and whether the release was unconscionable. The Court of Appeal unanimously dismissed all of these grounds.

The court split on the final ground of appeal, whether the release was contrary to public policy.

The majority held that the release was unenforceable as it was contrary to public policy in British Columbia for an owner or operator of a “motor vehicle to contract out of liability for damages suffered in a motor vehicle accident in British Columbia.”

The majority began its analysis with an interpretation of the public policy test set out in Tercon. In the majority’s view, the “heads” of public policy are not closed to the ones previously recognized, i.e. Tercon broadened the scope of the public policy branch of the test for exclusionary clauses. On that basis, the majority concluded that the appropriate approach to the public policy test is:

… that a plaintiff seeking to avoid the effect of an exclusion clause identifies the public interest that he or she says outweighs enforcement of the contract freely entered into. (para 80)

The majority went on to consider the particular statutory scheme at issue, namely the universal motor vehicle insurance scheme in British Columbia. On the basis of a thorough examination of the relevant provisions, the majority held that:

Reading the words of this legislative scheme in its entire context, harmoniously with the whole of the scheme and purpose of it, supports the appellant’s view that the legislature could not have intended vehicle owners and operators to have the ability to exclude the operation of the otherwise universal compulsory insurance. (para 93)

The majority found support for this interpretation in the legislative history of the insurance scheme. The majority also found support for its position in cases concerning the inability to contract out of human rights legislation, cases which it held were analogous.

Justice Hinkson dissented on the fourth ground on the basis that Tercon has not expanded the definition of public policy. In other words, when Justice Binnie referred to “public policy” he was referring to statutory illegality, common law illegality and to the five traditional “categories” in the doctrine of public policy (set out at paragraph 44). Therefore, to hold that an exclusionary clause is unenforceable for “public policy” reasons, a court must find that it fits under one of those headings.

In the case before him, Justice Hinkson noted that the legislature had provided a statutory right, universal compulsory vehicle insurance, but had not included a prohibition against contracting out of that right, an option that was available to them. In light of that, the clause was not statutorily illegal. Therefore, as none of the other headings could possibly apply, the exclusionary clause was not contrary to public policy.

Potential Significance

The majority’s reasons inarguably represent an expansion of the definition of public policy. The clause in question was not statutorily illegal, indeed the majority did not hold that it was, nor did the clause fit within any of the five traditional categories of the doctrine of public policy. Instead, the majority found that the exclusionary clause was contrary to public policy because the applicable legislation “strongly expressed” a public policy of universal insurance to which the clause was contrary.

Ziptrek may appeal and, in light of the strong dissent and the underlying facts, the case presents a great opportunity for the Supreme Court to clarify it's earlier judgment in Tercon. If the decision stands, it adds uncertainty to the enforceability of exclusion clauses. This impact should be limited, to some extent, by the particular statutory scheme which formed the basis for the decision.

In any event, the case should be a starting point for any consideration of the enforceability of a clause excluding liability. Justice Hinkson, who was writing for the majority on the first three issues, wrote comprehensive reasons and the majority’s reasons represent the most fulsome appellate consideration of Tercon and the public policy exception to date.

Case Information

Niedermeyer v. Charlton, 2014 BCCA 165

Docket: CA040431

Date of Decision: April 30, 2014

British Columbia Court of Appeal exclusion clause release of liability



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