D.M. et al. v. Alberta Lawyers Insurance Association, (2006) 398 A.R. 315 (QB)

• Judge: Brooker, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: December 14, 2005
• Citations: (2006), 398 A.R. 315 (QB);2006 ABQB 598

D.M. v. Lawyers Insurance Assoc. (2006), 398 A.R. 315 (QB)

MLB headnote and full text

Temp. Cite: [2006] A.R. TBEd. AU.037

D.M. and R.S. (plaintiffs) v. The Alberta Lawyers Insurance Association (defendant)

(0501 05832; 2006 ABQB 598)

Indexed As: D.M. et al. v. Alberta Lawyers Insurance Association

Alberta Court of Queen's Bench

Judicial District of Calgary

Brooker, J.

August 1, 2006.

Summary:

The plaintiffs retained the law firm of Parlee McLaws for the purposes of commencing claims for abuses that they allegedly suffered at institutions as children (original claims). A partner discovered that the firm had neglected to commence the action prior to the last date required by the Limitations Act. The firm notified the Alberta Lawyers Insurance Association (ALIA) that there were potential claims by the plaintiffs against it, arising from its failure to file the action on time. ALIA instructed the firm to continue to act for the plaintiffs. The plaintiffs were never advised of the firm's failures or their possible claims against the firm. The plaintiffs eventually retained new counsel who negotiated settlements whereby the original claims were discontinued on a without costs basis. The plaintiffs sued ALIA, alleging, inter alia,  negligence, breach of the duty of good faith, intentional torts and vicarious liability. ALIA applied to strike the statement of claim on the basis that it disclosed no cause of action. The plaintiffs applied to strike paragraphs 3 and 4 of the statement of defence on the basis that they disclosed no defence.

The Alberta Court of Queen's Bench allowed ALIA's application and struck the statement of claim. The court dismissed the plaintiffs' application.

Barristers and Solicitors - Topic 1541

Relationship with client - Duty to client - General - [See fifth Barristers and Solicitors - Topic 6604 ].

Barristers and Solicitors - Topic 6604

Compensation fund - Payments to client - General - Liability to third parties - The plaintiffs retained the law firm of Parlee McLaws for the purposes of commencing claims for abuses that they allegedly suffered at institutions as children (original claims) - A partner discovered that the firm had neglected to commence the action prior to the last date required by the Limitations Act - The firm notified the Alberta Lawyers Insurance Association (ALIA) that there were potential claims by the plaintiffs against it, arising from its failure to file the action on time - ALIA instructed the firm to continue to act for the plaintiffs - The plaintiffs were never advised of the firm's failures or their possible claims against the firm - The plaintiffs eventually retained new counsel who negotiated settlements whereby the original claims were discontinued on a without costs basis - The plaintiffs sued ALIA, alleging, inter alia,  negligence - The Alberta Court of Queen's Bench struck the statement of claim - The role of ALIA was to ensure that lawyers who became the subject of a claim for professional negligence were capable of satisfying that claim - Assuming that foreseeability existed, there were no factors giving rise to proximity between ALIA and third party claimants in the Legal Profession Act - Rather, the Act illustrated that the indemnity required was to members of the Law Society - There was no "close and direct" relationship created between third party claimants and ALIA making it just to impose a duty of care - See paragraphs 47 to 54.

Barristers and Solicitors - Topic 6604

Compensation fund - Payments to client - General - Liability to third parties - The plaintiffs retained the law firm of Parlee McLaws for the purposes of commencing claims for abuses that they allegedly suffered at institutions as children (original claims) - A partner discovered that the firm had neglected to commence the action prior to the last date required by the Limitations Act - The firm notified the Alberta Lawyers Insurance Association (ALIA) that there were potential claims by the plaintiffs against it, arising from its failure to file the action on time - ALIA instructed the firm to continue to act for the plaintiffs - The plaintiffs were never advised of the firm's failures or their possible claims against the firm - The plaintiffs eventually retained new counsel who negotiated settlements whereby the original claims were discontinued on a without costs basis - The plaintiffs sued ALIA, alleging, inter alia,  negligence - The Alberta Court of Queen's Bench struck the statement of claim - The role of ALIA was to ensure that lawyers who became the subject of a claim for professional negligence were capable of satisfying that claim - There were sound policy considerations which dictated against recognizing a duty of care owed by ALIA to third party claimants - Imposing a duty of this nature would be completely unworkable in the context of the adversarial relationship that existed between the parties - It would create irreconcilable conflicts of interest - To impose a duty of care to the party making an indemnity claim, would almost by definition obligate ALIA to breach its other duties - Placing indemnity providers in such an impossible situation would not advance the law or the public interest - See paragraphs 55 to 61.

Barristers and Solicitors - Topic 6604

Compensation fund - Payments to client - General - Liability to third parties - The plaintiffs retained the law firm of Parlee McLaws for the purposes of commencing claims for abuses that they allegedly suffered at institutions as children (original claims) - A partner discovered that the firm had neglected to commence the action prior to the last date required by the Limitations Act - The firm notified the Alberta Lawyers Insurance Association (ALIA) that there were potential claims by the plaintiffs against it, arising from its failure to file the action on time - ALIA instructed the firm to continue to act for the plaintiffs - The plaintiffs were never advised of the firm's failures or their possible claims against the firm - The plaintiffs eventually retained new counsel who negotiated settlements whereby the original claims were discontinued on a without costs basis - The plaintiffs sued ALIA, alleging, inter alia, breach of duty of good faith - The Alberta Court of Queen's Bench struck the statement of claim - The court rejected the plaintiffs' argument that the statutory interpretation of Part 5 of the Legal Professions Act created a duty of good faith - Even if one acknowledged that the Law Society's function and the purpose of the Act was to protect the public, there was no language in the statute that suggested the imposition of a duty of good faith owing by ALIA to clients - Section 115 immunized the Law Society and its subsidiary corporations from liability against actions undertaken in good faith - However, this did not create an independent duty of good faith on ALIA arising in favour of third party claimants - See paragraphs 63 to 67.

Barristers and Solicitors - Topic 6604

Compensation fund - Payments to client - General - Liability to third parties - The plaintiffs retained the law firm of Parlee McLaws for the purposes of commencing claims for abuses that they allegedly suffered at institutions as children (original claims) - A partner discovered that the firm had neglected to commence the action prior to the last date required by the Limitations Act - The firm notified the Alberta Lawyers Insurance Association (ALIA) that there were potential claims by the plaintiffs against it, arising from its failure to file the action on time - ALIA instructed the firm to continue to act for the plaintiffs - The plaintiffs were never advised of the firm's failures or their possible claims against the firm - The plaintiffs eventually retained new counsel who negotiated settlements whereby the original claims were discontinued on a without costs basis - The plaintiffs sued ALIA, alleging, inter alia, intentional torts - The Alberta Court of Queen's Bench struck the statement of claim - In the absence of a specific prohibition, there was no legal impediment to insurers acting in their own self interest and against that of others - None of the conduct complained of was actionable against ALIA - See paragraphs 68 to 72.

Barristers and Solicitors - Topic 6604

Compensation fund - Payments to client - General - Liability to third parties - The plaintiffs retained the law firm of Parlee McLaws for the purposes of commencing claims for abuses that they allegedly suffered at institutions as children (original claims) - A partner discovered that the firm had neglected to commence the action prior to the last date required by the Limitations Act - The firm notified the Alberta Lawyers Insurance Association (ALIA) that there were potential claims by the plaintiffs against it, arising from its failure to file the action on time - ALIA instructed the firm to continue to act for the plaintiffs - The plaintiffs were never advised of the firm's failures or their possible claims against the firm - The plaintiffs eventually retained new counsel who negotiated settlements whereby the original claims were discontinued on a without costs basis - The plaintiffs sued ALIA, alleging, inter alia, vicarious liability - They argued that actions taken by ALIA's counsel were actionable against ALIA - The Alberta Court of Queen's Bench struck the statement of claim - A duty of care did not arise to a third party on the part of a lawyer in circumstances where the third party was opposed in interest to that of the lawyer's client - In fact, it was a somewhat startling proposition that lawyers might be held liable for not admitting their client's liability or disclosing causes of action against their client, to parties adverse in interest - This was the very antithesis of the role a lawyer was expected to play and invariably would run afoul of the ethical obligations owed by members of the Law Society to their clients - As ALIA's counsel could not be held liable for the conduct pleaded, it followed that ALIA could not be held vicariously liable for those actions - See paragraphs 73 and 74.

Barristers and Solicitors - Topic 7663

Regulation - Liability of governing bodies - Immunity for acts done in good faith - [See third Barristers and Solicitors - Topic 6604 ].

Practice - Topic 2230

Pleadings - Striking out pleadings - Grounds - Failure to disclose a cause of action or defence - [See all Barristers and Solicitors - Topic 6604 ].

Torts - Topic 76

Negligence - Duty of care - General principles - [See second Barristers and Solicitors - Topic 6604 ].

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - [See first Barristers and Solicitors - Topic 6604 ].

Cases Noticed:

McCullock-Finney v. Barreau du Québec, [2004] 2 S.C.R. 17; 321 N.R. 361; 2004 SCC 36, consd. [para. 23].

Finney v. Barreau du Québec - see McCullock-Finney v. Barreau du Québec.

Swain v. Law Society, [1982] 2 All E.R. 827 (H.L.), refd to. [para. 23].

Hunt v. T & N plc et al., [1990] 2 S.C.R. 959; 117 N.R. 321, refd to. [para. 32].

Hunt v. Carey Canada Inc. - see Hunt v. T & N plc et al.

Peterson et al. v. Highwood Distillers Ltd. et al. (1998), 216 A.R. 83; 175 W.A.C. 83; 158 D.L.R.(4th) 569; 1998 ABCA 105, refd to. [para. 32].

Tottrup v. Lund et al. (2000), 255 A.R. 204; 220 W.A.C. 204; 2000 ABCA 121, refd to. [para. 34].

Tottrup v. Alberta (Minister of Environment) - see Tottrup v. Lund et al.

Edwards et al. v. Law Society of Upper Canada et al., [2001] 3 S.C.R. 562; 277 N.R. 145; 153 O.A.C. 388; 2001 SCC 80, refd to. [para. 36].

Cooper v. Registrar of Mortgage Brokers (B.C.) et al., [2001] 3 S.C.R. 537; 277 N.R. 113; 160 B.C.A.C. 268; 261 W.A.C. 268; 2001 SCC 79, refd to. [para. 36].

Cooper v. Hobart - see Cooper v. Registrar of Mortgage Brokers (B.C.) et al.

How Estate v. Robinson et al., [1994] B.C.T.C. Uned. 407; 23 C.C.L.I.(2d) 196 (S.C. Master), affd. [1994] B.C.T.C. Uned. 576; 23 C.C.L.I.(2d) 203 (S.C.), refd to. [para. 40].

Joe v. Insurance Corp. of British Columbia (1984), 55 B.C.L.R. 118 (C.A.), refd to. [para. 40].

Overload Tractor Services Ltd. v. Insurance Corp. of British Columbia (1988), 23 B.C.L.R.(2d) 182 (S.C.), refd to. [para. 40].

Karamanolis v. Prudential Insurance Co. (1983), 42 O.R.(2d) 752 (H.C.), refd to. [para. 40].

Byrne v. Zurich Insurance Co. (2004), 17 C.C.L.I.(4th) 220 (Ont. Sup. Ct.), refd to. [para. 40].

French v. Law Society of Upper Canada (1975), 61 D.L.R.(3d) 28 (Ont. C.A.), leave to appeal refused [1975] 1 S.C.R. ix; 5 N.R. 372, refd to. [para. 41].

Canada Cement LaFarge Ltd. et al. v. British Columbia Lightweight Aggregate Ltd. et al., [1983] 1 S.C.R. 452; 47 N.R. 191, refd to. [para. 70].

Filipovic et al. v. Upshall et al. (2000), 133 O.A.C. 151 (C.A.), refd to. [para. 74].

Midland Mortgage Corp. v. Jawl & Bundon et al. (1999), 127 B.C.A.C. 56; 207 W.A.C. 56; 1999 BCCA 464, leave to appeal refused (2000), 260 N.R. 392; 146 B.C.A.C. 73; 239 W.A.C. 73 (S.C.C.), refd to. [para. 74].

White et al. v. Jones et al., [1995] 1 All E.R. 691; 179 N.R. 197 (H.L.), refd to. [para. 74].

Authors and Works Noticed:

Hurlburt, William H., The Self-Regulation of the Legal Profession in Canada and in England and Wales (2000), p. 182 [para. 43].

Counsel:

Jeffrey D. Poole (Poole Lawyer), for the plaintiffs;

Anthony J. Jordan, Q.C., and Maryke F. McGinn (Gowling Lafleur Henderson LLP), for the defendant.

These applications were heard on December 14, 2005, by Brooker, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following memorandum of decision on August 1, 2006.