Nette v. Stiles, 2012 ABQB 290

Court of Queen ’ s Bench of Alberta Citation: Nette v. Stiles, 2012 ABQB 290 Date: 20120504 Docket: 0803 08204, 1203 02626 Registry: Edmonton Between: Sandra Gay Nette, David Nette and Her Majesty the Queen in Right of Alberta Plaintiffs - and - Gregory John Stiles Defendant And Between: Gregory John Stiles Applicant - and - Ackroyd LLP Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice R. Paul Belzil _______________________________________________________ The Applications

[ 1 ] Gregory John Stiles by way of an Originating Application seeks a declaration that he is entitled to production of a file from Ackroyd LLP (Ackroyd) and an Order directing production of it to him. [ 2 ] The Canadian Chiropractic Protective Association (CCPA) has filed two applications.

The first seeks an Order adding CCPA as a party to an action commenced against Stiles and an Order setting aside judgments obtained against him. [ 3 ] The second application seeks an Order that the Ackroyd file is held jointly by the CCPA and Stiles and an Order restraining the disclosure of any part of the file to any third party without the consent of both CCPA and Stiles. [ 4 ] Ackroyd LLP has filed an Interpleader Application seeking an Order setting a procedure for determining the rights of the adverse claimants to the Ackroyd file.

Factual Background [ 5 ] On June 12, 2008 Sandra and David Nette issued a Statement of Claim against a number of parties, including Stiles.

Stiles was a chiropractor who had provided treatment to Sandra Nette who alleged that she suffered catastrophic injuries resulting from his treatment. [ 6 ] The action was discontinued against a number of parties voluntarily and on July 9, 2009, I issued a Judgment, reported at 2009 ABQB 422 , striking out the action against Her Majesty the Queen in Right of Alberta. [ 7 ] Ultimately an Amended Amended Statement of Claim was filed naming as Defendants, Stiles and the Alberta College and Association of Chiropractors. [ 8 ] The Plaintiffs sought to certify the action under the Class Proceedings Act S.A. 2003, c.

C-16.5. [ 9 ] In a judgment, reported at 2010 ABQB 14 , I dismissed the Certification Application and thereafter the action proceeded against Stiles only. [ 10 ] At the time he provided chiropractic treatment to Sandra Nette, Stiles was a member of the CCPA which provides assistance to members facing liability claims. [ 11 ] CCPA retained Richard Secord of Ackroyd to defend the Nette action and advised Stiles that it would pay the costs of defending the Nette action and has done so. [ 12 ] On February 7, 2012, Stiles delivered a Notice of Change of Representation discharging Secord and Ackroyd as Lawyer of Record and appointing Stephen J.

Livingstone of McLennan Ross LLP as Lawyer of Record for Stiles. [ 13 ] On the same date, the Plaintiffs presented Consent Judgments to Gill J. in morning Chambers who granted them. No notice of these Consent Judgment applications was given to Ackroyd. [ 14 ] The Notice of Change of Representation was sent by fax to Ackroyd at 9:12 am that morning. The Affidavit of Service of the Notice of Change of Representation was not filed until after the Consent Judgments had been granted.

[ 15 ] On February 9, 2012, counsel for the Plaintiffs, Fraser Milner Casgrain (FMC), forwarded by fax, an Authorization and a Direction for Release of Lawyers’ files dated February 8, 2012 signed by Stiles. [ 16 ] The key portions of this document read as follows: AUTHORIZATION AND DIRECTION FOR RELEASE OF LAWYERS’ FILES TO: Ackroyd LLP, 1500 First Edmonton Place, 10665 Jasper Avenue, Edmonton, Alberta T5J 3S9 I, GREGORY JOHN STILES, authorize Fraser Milner Casgrain LLP, Barristers and Solicitors, 2900 Manulife Place, 10180 - 101 Street, Edmonton, Alberta, T5J 3V5, (hereinafter, “FMC Law”) to take all steps FMC Law deems necessary to obtain, see and copy any and all information or records relating in any way to Ackroyd LLP’s lawyer / client relationship with me as a member of the Canadian Chiropractic Protective Association (the “CCPA”) and Ackroyd LLP’s representation of me in Court of Queen’s Bench of Alberta Action no. 0803 08204, Sandra Gay Nette et al. v.

Gregory John Stiles et al .. I authorize and direct Ackroyd LLP to provide to FMC Law a complete and entire copy of all of Ackroyd LLP’s files, information, including Confidential information, and records, relating in any way to Ackroyd LLP’s lawyers / client relationship with me as a member of the CCPA and Ackroyd LLP’s representation of me in Court of Queen’s Bench of Alberta Action no. 0803 08204, Sandra Gay Nette et al. v. Gregory John Stiles et al. and I waive any solicitor / client privilege or confidentiality in this regard. . . .

DATED at Edmonton, Alberta, on the 8 day of February, 2012. [ 17 ] On February 13, 2012 CCPA received correspondence from FMC enclosing copies of two Judgments, the first in favour of Sandra Nette for approximately $3.9 million and the second in favour of David Nette for approximately $1.17 million. [ 18 ] The correspondence demanded payment of the two Judgments which were consented to by Stiles. [ 19 ] The correspondence also enclosed a Notice of Assignment which reads as follows: NOTICE OF ASSIGNMENT TO: Canadian Chiropractic Protective Association Gregory John Stiles hereby gives notice to Canadian Chiropractic Protective Association (“CCPA”) that effective as of February 7, 2012, any and all rights of action or actions, whether at law or in equity or otherwise, he possesses against CCPA in connection with his defence of Sandra Gay Nette’s and David Nette’s lawsuit against him, and all remedies to the said action(s), titles, interest and advantages to be derived therefrom, have been absolutely and irrevocably assigned by Gregory John Stiles to Sandra Gay Nette and David Nette.

Gregory John Stiles appoints Sandra Gay Nette and David Nette his attorneys with full power to sue for, recover and to receive the

proceeds of the action(

s) he has assigned to them. This notice has been executed by Gregory John Stiles as of the 8 day of February, 2012. ______________________________ GREGORY JOHN STILES Discussion

a) Should CCPA be added as a Party to the Action? [20] Rule 3.74(2)(

b) governs the application to add CCPA as a party and reads as follows:

(2) On application, the Court may order that a person be added, removed or substituted as a party to an action if (

b) in the case of an application to add or substitute any other party, or to remove or to correct the name of a party, the application ismade by a party and the Court of satisfied the order should be made. [21] On a plain reading, the application can only be made by an existing party to the action. As CCPA is not a party, it is unable toinvoke this rule and bring an application to add itself as a party to the action. [22] Aside from its inability to invoke Rule 374(2)(

b) the application cannot succeed for another reason. [23] CCPA takes the position that it is not an insurer for members of the Association but rather may gratuitously provide amember with counsel to defend an action and may gratuitously indemnify a member who is successfully sued up to a monetary limit of$2 million. [24] For the purposes of these applications, it is not necessary or appropriate for me to decide the issue of whether or not CCPA isan insurer. [25] In factual situations wherein there is an insurance policy in existence, the insurer must make an election to respond to theclaim on behalf of an insured or not. [26] In Ward Estate v.

Olds Aviation Ltd., (AB KB), [1996] 10 W.W.R. 666, I dealt with this issue in thecontext of aviation insurance. [27] In Ward Estate, the insurer denied the claim alleging that the owner had breached the policy of insurance. The insurer tookno

part in the action but monitored the progress of it. The owner refused to execute a Non-Waiver Agreement. The owner was noted indefault and a judgment granted against it in the amount of $9 million. [28] With the owner’s consent, while continuing to maintain its policy denial, the insurer applied to set aside the judgment and

noting in default of the owner. [29] In my Reasons for Judgment wherein the application was rejected, the following paragraphs summarize the applicable law: 22 I accept that the insurer in this case made an election and that election is irrevocable. As noted in Insurance Law in Canada byBrown and Menezes, at p. 291, the election, once made, is indeed irrevocable: 14:4:1. As we have seen, estoppel by representation deals with the situation where there is prior default while promissory estoppeloperates with respect to future non-compliance.

It is helpful, in discussing the remaining theories that protect an insured notwithstandinghis default, to retain this distinction between prior and future conduct. 14:4:2.

In the law of contract, one party can effectively excuse a prior breach by the other party under the election of remedies doctrine.Where there has been a breach of contract the party not in breach may choose to enforce his rights that arise as a consequence - mostnotably in insurance cases to avoid the contract - or to treat the contract as continuing in force and call for performance (such as thecontinued payment of premiums) from the party in breach. Thus an insurer may choose, in effect, to excuse a default of its insured,expect compliance in the future, and continue to assume liability under the contract.

This is different from estoppel by representation inthat (

a) the insured need not show reliance to his detriment upon the conduct of the insurer, and (

b) the insurer is deemed to haveintended to affirm the contract despite the default. 14:4:3 But how is such an election made? In Scarfe v. Jardine, Lord Blackburn set out the following definition which has been widelyaccepted: “Where a party in his own mind has thought that he would choose one of two remedies ... that alone will not bind him; but so soon as hehas not only determined to follow one of his remedies but has ... [1cd] the opposite party to believe that he has made that choice, he hascompleted his election and can go no further; and whether he intended it or not, if he has done an unequivocal act - I mean

an act whichwould be justifiable if he had elected one way and would not be justifiable if he had elected the other way - the fact of his having donethat unequivocal act to the knowledge of the persons concerned is an election.” “Once the insurer’s conduct has constituted an election in accordance with this definition, it is irrevocable, but until then the insurerretains the right to make its choice either way.

The lapse of time does not of itself prejudice the insurer unless ‘in some way the rights ofthird parties intervened or if the delay was so long that the court felt able to say that the delay in and of itself was of such a length as to beevidence that they had in truth decided to accept liability.’” 23 The Appellate Division of the Supreme Court of Alberta dealt with the issue of an election by an insurer in the case of HomeInsurance Co. of New York v. Lindal, (sub nom. Beattie v.

United States Fidelity & Guaranty Co.) (AB CA), [1933] 1W.W.R. 334, at p. 348: Under the policy in question the insurer is not given the right to defend an action brought against the insured as it was in NorthLethbridge Garage Ltd. v. Continental Casualty Co., (AB CA), 24 Alta. L.R. 390, [1930] 1 W.W.R. 491. It has,however, imposed on it the duty of doing so. The only right it has therefore is such right as arises out of that duty. The duty exists only ifthere is a liability under the policy.

To maintain therefore that they were not liable and at the same time insist on their right to defend theaction was taking two positions absolutely antagonistic to and inconsistent with each other. It is pointed out by both of the Judges above quoted that the insurers as soon as they had knowledge of a choice were bound to electwhich position they would take; in other words, that they could not take both as the present defendants maintain they could do. As Mr.Justice Mignault definitely says, whether or not the insured was prejudiced, or what he relied on, would not be material.

In 20 Corpus Juris, p. 3, it is said:

“The doctrine of election of remedies is based upon the rule that a party cannot, within the course of litigation or in dealings in pais , occupy inconsistent positions; in other words, a man should not be allowed to approbate and reprobate.” 24 It is well established that an insurer which elects to deny coverage will profoundly alter its relationship with its insured and its ability to participate in the litigation.

As noted in Gordon Hilliker’s text Liability Insurance Law in Canada at p. 82: Serious consequences flow from an insurer’s refusal to defend its insured in circumstances where the policy stipulates that a defence is required. In addition to being in breach of contract, the insurer will have lost certain of its rights under the policy. (

a) Loss of Policy Rights By taking the position that the policy does not respond to the claim, the insurer forgoes both its right to defend the action and its exclusive right to settle the action on behalf of its insured. With the exception of automobile liability policies, a liability insurer has no right to add itself as a third party for the purpose of contesting the plaintiff’s claim against the insured. 32 However one views the situation, the result is the same.

The policy denial will ultimately be upheld or not upheld, and if the Court ultimately determines that policy coverage is in place, B.A.I.G. will be called upon to satisfy the judgment but in the interim has made an election not to participate in the proceedings. 33 In my view, it is not necessary for me to decide whether or not any of the alleged irregularities raised by Mr.

Chomicki would justify setting aside the noting in default and the judgment in the ordinary course due to the fact that it is clear that even if Olds could raise these procedural issues, B.A.I.G., having denied coverage, lacks the status to raise these issues, and furthermore, there is no evidence whatsoever that had B.A.I.G. been aware of the amendment to the Statement of Claim or the difficulties with Notice of Assessment under Rule 152, it would have acted any differently. 34 It is clear that at all times B.A.I.G. made a conscious decision to not participate in the proceedings having made an irrevocable election to deny coverage.

Having made such a decision, B.A.I.G. must now live with the consequences of its actions. [ 30 ] LoVecchio J. adopted the reasoning in Ward Estate in West Coast Developments

(1977) Ltd. v. Dawn Management and Realty Ltd. et al. , 2004 ABQB 738 . [ 31 ] It is irrelevant whether it is ultimately determined that CCPA is an insurer or merely an association which may gratuitously make payments to members because, in any event, it is legally obligated to make an irrevocable election to respond to a claim against a member or not. [ 32 ] In this factual situation, CCPA is a stranger to the action because it has made an irrevocable election not to participate in it. [ 33 ] No liability is imposed on CCPA by the Consent Judgments.

Leaving aside the impact of Rule 374(2)(b), CCPA’s interest in the action can be described as a contingent commercial interest which in Alberta is not sufficient to provide a foundation for adding it as a party to the action. Amoco Canada Petroleum Co. v. Alberta and Southern Gas Co. , [1993] A.J. No. 317 .

b) Should the Consent Judgments be set aside? [ 34 ] Given that I have concluded that CCPA cannot be added as a party to the action it necessarily follows that it lacks standing, as a stranger to it, to apply to set aside the Consent Judgments which as noted above, impose no liability on CCPA.

c) Should Dr. Stiles be enjoined from releasing the file of Ackroyd LLP without the consent of CCPA? [35] It is conceded by all counsel that Dr. Stiles was in a solicitor-client relationship with Ackroyd and as such entitled tocomplete access to its file. [36] The Nettes take the position that because Stiles has assigned his rights as Defendant to them they are entitled to access thecomplete Ackroyd file. [37] CCPA argues that it too is in a solicitor-client relationship with Ackroyd such that a joint retainer existed and that Stiles is notentitled to release the Ackroyd file to any party without its consent.

It further argues that the assignment Stiles has executed in favour ofthe Plaintiffs does not and cannot change the factual reality that a joint retainer existed. [38] In Jeffers v. Calico Compression Systems, 2002 ABQB 72 , 2002 ABQB 0072, Hawco J. dealt with the issue ofdefining when a solicitor-client relationship existed. [39] Paragraph 8 is instructive: [8] It is not necessary that a person formally retain a lawyer by way of letter or other document before a solicitor / client relationshipcan be found.

Nor is it necessary that there be an account rendered by the lawyer to the complaining party or that an account be paid bythe complaining party to the lawyer. While I have not seen any case which sets out all of the indicia of a solicitor / client relationship, anumber of cases, including UCB Sidac International Ltd. v. Lancaster Packing Inc. (1993), (ON SC), 51 C.P.R. (3d)449 (Ont.Gen.Div), Guardian Insurance Co. of Canada v. 379227 Alberta Ltd. (1999), 1999 ABQB 637 , 251 A.R. 334 (Q.B.)and Filipovic v.

Upshall (2000), (ON CA), 133 O.A.C. 151 (C.A.), do discuss certain indicia which may or may notdetermine that such a relationship does exist.

These indicia include: a contract or retainer; a file opened by the lawyer; meetings betweenthe lawyer and the party; correspondence between the lawyer and the party; a bill rendered by the lawyer to the party; a bill paid by theparty; instructions given by the party to the lawyer; the lawyer acting on the instructions given; statements made by the lawyer that thelawyer is acting for the party; a reasonable expectation by the party about the lawyer's role; legal advice given; and legal documentscreated for the party. Not all indicia need to be present.

As Madam Justice Romaine stated in Guardian Insurance, supra, the questionappears to be whether a reasonable person in the position of a party with knowledge of all the facts would reasonably form the belief thatthe lawyer was acting for a particular party. [40] The only evidence before me on this application was the affidavit of Gregory Dunn, Chief Operating Officer of CCPA.Paragraphs 4 and 13 of his affidavit read as follows: 4. Following Stiles’ report of the incident to CCPA, CCPA retained Mr. Richard Secord of Ackroyd LLP to act in the defense of theaction. Mr.

Secord is a senior experienced litigator with substantial experience in the defense of professional liability claims, includingpast claims against members of the CCPA in Alberta. CCPA directed and recommended Mr. Secord to Stiles, in accordance with theterms of the CCPA member agreement, and advised Stiles that CCPA would pay for the costs of the defense incurred by Mr. Secord andAckroyd LLP. Stiles accepted that direction and recommendation and never to the date of this Affidavit, made any complaint to CCPAor indicated any dissatisfaction or concern with the services provided by Mr. Secord or Ackroyd LLP. 13.

As set out above, CCPA retained Ackroyd LLP, and Mr. Secord in particular, to act in the defense of the Nette action and CCPApaid all of the costs of the defense up to February 7, 2012. The Ackroyd File, which Plantiffs’ counsel demands be provided to him,includes communications with me and other representatives of CCPA which CCPA and those representatives believed throughout theretainer were:

a) privileged and confidential communications made to counsel retained by CCPA solely for the purposes of the defense of the Netteaction; and

b) that in no circumstances would those communications or other non-public content of the Ackroyd File be disclosed to Plaintiffs’

b) that in no circumstances would those communications or other non-public content of the Ackroyd File be disclosed to Plaintiffs’counsel. [41] It is uncontroverted that initially CCPA retained Ackroyd and that it has paid all of its accounts in connection with thislitigation. [42] Up to February 7, 2012, Ackroyd continued the defence of the action at the request of CCPA and on February 9, 2012,counsel for the Plaintiffs forwarded a letter to Secord enclosing an authorization and requesting that he forward a copy of his file. [43] In his affidavit Dunn deposed that upon being advised by Secord that he had received a request to provide a copy of his file tocounsel for the Plaintiffs he requested that he not do so. [44] The combination of the initial retainer by CCPA, the fact that it paid all Ackroyd accounts, the continued defence of theaction as instructed by CCPA coupled with its direction to Secord as to how he was to respond to the demand from Plaintiff’s counsel,overwhelmingly establishes that CCPA was and continues to be in a solicitor-client relationship with Ackroyd. [45] Given that it is agreed that Stiles was in a solicitor-client relationship as well, the result is a joint retainer. [46] In Pritchard v.

Ontario (Human Rights Commission), 2004 SCC 31, the Supreme Court of Canada held, at para. 23, thatwhen two or more persons jointly consult a solicitor a common interest privilege arises and that their confidential communications withthe solicitor are privileged against the outside world. [47] In Almecon Industries Ltd. v.

Anchortek Ltd., (FC), [1999] 1 F.C. 507, at para. 10, it was held that allparties to a common interest privilege must consent to waiving it. [48] If the execution of an assignment by one party having a common interest with others could undermine the sanctity ofsolicitor-client privilege its importance would be seriously eroded. [49] No authority has been cited wherein any court has accepted the proposition that a party in CCPA’s position could have itsright to solicitor-client privilege unilaterally removed by the actions of another party.

Conclusion and Order [50] The application by CCPA to be added as a party to the action is dismissed as is its application to set aside the ConsentJudgments. [51] CCPA is entitled to a declaration that the Ackroyd file is a confidential and privileged file held by CCPA and Stiles jointly. [52] In furtherance of this declaration, there will be an Order restraining the disclosure of any part of the Ackroyd file to any thirdparty without the consent of both CCPA and Stiles. [53] Stiles is entitled to recover costs from CCPA for the applications to be added as a party and to set aside the ConsentJudgments.

[ 54 ] CCPA is entitled to recover costs from Stiles respecting the application to enjoin release of the Ackroyd file which costs will be set off against the costs recoverable by Stiles. [ 55 ] Ackroyd is not liable to pay costs and is not entitled to recovery of same. Heard on the 27 th day of April, 2012. Dated at the City of Edmonton, Alberta this 3 rd day of May, 2012. R. Paul Belzil J.C.Q.B.A. Appearances: Daniel W. Hagg, Q.C. Timothy M.

Lowman for the Canadian Chiropractic Protective Association Philip Tinkler Fraser Milner Casgrain LLP for the Plaintiffs Sandra Gay Nette, David Nette and Her Majesty the Queen in Right of Alberta and Gregory John Stiles as Applicant Stephen J. Livingstone McLennan Ross LLP for Gregory John Stiles as Respondent/Defendant Richard C. Secord Ackroyd LLP