2004 BCCA 621 Swamy v. London Life Insurance Co.

Before:	The Honourable Madam Justice Newbury
	The Honourable Madam Justice Saunders
	The Honourable Mr. Justice Smith

E.B. Lyall and D.A. Crerar	Counsel for the Appellants
G.K. Steele, Q.C.	Counsel for the Respondent
Place and Date of Hearing:	Vancouver, British Columbia
June 25, 2004
Place and Date of Judgment:	Vancouver, British Columbia
December 7, 2004

Written Reasons by:

The Honourable Madam Justice Saunders

Concurred in by:

The Honourable Mr. Justice Smith

Dissenting Reasons by:

The Honourable Madam Justice Newbury (Page 13, Paragraph 26)

Reasons for Judgment of the Honourable Madam Justice Saunders:

[1] The question is whether a stay of proceedings should issue on the basis that the parties entered into a contract by which the claim and counterclaim in this action were settled. The learned chambers judge concluded it should not, and dismissed an application under s. 8(3) of the Law and Equity Act, R.S.B.C. 1996, c. 253. He made no overt reference to an alternative application under Rule 18A of the Rules of Court, but dismissed the application in general terms. His reasons for judgment may be found at 2002 BCSC 815.

[2] The question addressed by the chambers judge was whether a communication to the solicitor of record for the plaintiff on November 20, 2000 had the effect of being a communication of acceptance of a counter-offer, so as to create a settlement agreement. He concluded it did not.

[3] The two defendants to the action, London Life Insurance Company and Davy H. Lam, appeal the dismissal of the application.

[4] In my view, the reasoning of the learned chambers judge on the question of whether the appellants adequately communicated their acceptance by advising the solicitor of their agreement after they knew he had ceased to act for Mrs. Swamy is correct.

[5] The action was commenced by Mr. Stander as counsel for Mrs. Swamy, against the appellant London Life Insurance Company on policies of life insurance alleged to have been placed on the life of her husband, and against the appellant Davy H. Lam, life insurance agent, in the alternative for negligent misrepresentation that the policies were in force.

[6] When Mrs. Swamy first advanced her claim London Life acted as if there were coverage on Mr. Swamy’s life to the extent of $500,000, and paid this sum to Mrs. Swamy.

[7] Whether a policy or policies were in force is in issue in the action; London Life’s statement of defence alleges misrepresentation and non-disclosure, and it counterclaims for reimbursement of the $500,000 paid to Mrs. Swamy. Mr. Lam’s statement of defence, filed by separate counsel, denies any misrepresentation or negligence.

[8] On November 10, 2000, with the authorization of Mr. Lam’s counsel, London Life’s then counsel offered to settle the action on the basis of consent dismissals of the claim and counterclaim. That offer contemplated a release by Mrs. Swamy in favour of the defendants but made no mention of a release in her favour.

[9] On November 17, 2000 Mr. Stander telephoned then counsel for London Life and advised that Mrs. Swamy was agreeable to the terms except that Mrs. Swamy required a mutual release. Counsel for London Life replied that she would “seek instructions on the matter”, thus confirming Mr. Stander’s response as a counter-offer. Counsel for London Life sought instructions as she indicated she would and by some time on November 20, 2000 had received instructions from both Mr. Lam’s counsel and London Life to accept the requirement of mutual releases.

[10] In the meantime, Mrs. Swamy had expressed concerns to Mr. Stander about abandoning her claim and told him that she intended to obtain a second opinion. Mr. Stander advised Mrs. Swamy that he would no longer act in the matter on her behalf and on November 20, 2000 left a telephone message at the office of London Life’s counsel to the effect that he was no longer acting on behalf of Mrs. Swamy. That message did not withdraw the counter-offer communicated November 17, 2000, and was not accompanied by a Notice of Change of Solicitor or Notice of Intention to Act in Person as contemplated by Rule 16 of the Rules of Court.

[11] Having received the telephone message, counsel for London Life sent a letter on November 20, 2000 to Mr. Stander, delivered both by fax and by courier, agreeing on behalf of both defendants to mutual releases and saying:

I understand from your telephone message of today that you are no longer counsel for Mrs. Swamy and trust that you will pass along this acceptance of her counter proposal to her.

In the telephone message which you left with me on November 20, 2000, you did not indicate that the offer was withdrawn so I'm assuming that it is not.

[12] Mr. Stander did not reply to the letter of November 20, 2000. On December 5, 2000, counsel for Mr. Lam sent Mr. Stander a letter confirming that the defendants would sign mutual releases, asserting that a settlement was concluded and enclosing settlement documents that he asked Mr. Stander to arrange Mrs. Swamy to sign and return. On December 7, 2000 Mr. Stander suggested to counsel for Mr. Lam that he might want to send his December 5 letter directly to Mrs. Swamy. Counsel for Mr. Lam did so by letter to Mrs. Swamy dated December 8, 2000 to be delivered December 11, 2000.

[13] Also on December 8, 2000 Mrs. Swamy became active in the matter. On that day she sent a fax message to counsel for London Life, to whom the counter-offer had been made, advising “there has been no settlement” and that she was seeking a second opinion. That communication appears to have been treated as a withdrawal of the counter-offer for purposes of the motion.

[14] London Life applied for a stay of proceedings or alternatively an order under Rule 18A dismissing the action on the basis that the action was settled. The chambers judge treated the motion as an application for a stay, found that the appellant had not communicated acceptance of the counter-offer by writing Mr. Stander on November 20, 2000 and dismissed the application. He reasoned:

[15] Therefore, whether a settlement was concluded depends on whether the acceptance by London Life was communicated to Mrs. Swamy.

[16] At the time counsel for London Life wrote her letter of 20th November 2000, she had actual knowledge that Mr. Stander no longer acted for the plaintiff. But London Life contends:

Delivery to Mr. Stander constituted communication of acceptance to the plaintiff. [Counsel for London Life] was entitled to proceed on this basis, and in fact could only proceed on this basis. Absent a Notice of Change of Solicitor or Notice of Intention to Act in Person, any communication by [counsel for London Life] to anyone other than Mr. Stander would have been improper.

[17] The reference here is to Rule 16(1), which provides that until a party of record has received a Notice of Change of Solicitor or a Notice of Intention to Act in Person, he or she is "entitled to proceed on the basis that there has been no change of representation."

[18] The implications of Rule 16(1) are trickier than it might appear. It seems doubtful, for example, that if a counsel whose retainer had been terminated did something afterwards such as filing a Notice of Discontinuance, counsel on the other side, having actual knowledge that the retainer had been terminated, would be entitled to treat that step as binding simply because the change of solicitor documentation had not been perfected. Yet, on its face, the subrule seems to say that. I have concluded, however, that it is unnecessary for me to deal with that question.

[19] This is because I consider that Mr. Steele, present counsel for Mrs. Swamy, is correct in his submission that Rule 16 applies only to proceedings in Court and does not govern private communications, even though they may be related to proceedings in Court.

[20] Section 1 of the Court Rules Act [R.S.B.C. 1996, c. 80, s. 1(1)] provides that the Lieutenant Governor in Council may make rules "governing the conduct of proceedings in ... the Supreme Court ....". Rule 1(4) of the Rules of Court provides that:

(4) These rules govern every proceeding in the Supreme Court except where an enactment otherwise provides.

[21] The offer by London Life to settle, the counter proposal and the purported acceptance of the counter proposal were all made outside the ambit of the Rules of Court. Thus, Rule 16 is of no assistance to London Life.

[15] Authority to issue a stay of proceedings is found in s. 8(3) of the Law and Equity Act:

(3) Any person, whether or not a party to a cause or matter pending before the court, who would have been entitled, but for this Act, to apply to the court to restrain the prosecution of it, or who may be entitled to enforce, by attachment or otherwise, any judgment, decree, rule or order, contrary to which all or any part of the proceedings in the cause or matter may have been taken, may apply to the court, by motion in a summary way, for a stay of proceedings in the cause or matter, either generally or so far as may be necessary for the purposes of justice and the court must make any order that is just.

[16] Cases such as McKenzie v. McKenzie (1975), 55 D.L.R. (3d) 373 (B.C.S.C.), aff’d (1976), 69 D.L.R. (3d) 765 (B.C.C.A.) and Hawitt v. Campbell (1983), 46 B.C.L.R. 260 (C.A.) affirm the application of s. 8(3) to situations in which the parties have agreed to settle the action, and address the criteria that will be applied by a court in deciding whether to exercise its discretion to order a stay. The first question, however, on any application for a stay of proceedings based on settlement of the action is whether a contract of settlement has been made. That question, where communications are between counsel, engage the basic principles of the law of contracts and the law of agency. As observed by Mr. Justice Lambert in Robertson v. Walwyn Stodgell Cochrane Murray Ltd. (1988), 24 B.C.L.R. (2d) 385 (C.A.), at p. 386:

. . . The effectiveness and the enforcement of settlement agreements does not constitute a separate field of law to which the ordinary principles of contract law, agency, and equity, and the ordinary rules of procedure, do not apply.

And at p. 387:

. . . If the contract is valid and enforceable by ordinary principles of contract law, and if it is put in issue in appropriate proceedings, then the court, in the end, must give effect to it. That was the point that governed the decision of this court in Moric v. Handspiker (1985), 65 B.C.L.R. 74.

[17] In my view the conclusion of the chambers judge on the issue of communications with the solicitor is correct. Mr. Justice McIntyre affirmed the general requirement that acceptance be communicated to the offeror in Schiller v. Fisher, [1981] 1 S.C.R. 593 at 598:

. . . Generally, the fact of acceptance of an offer must be communicated to the offeror before acceptance is complete and a binding contract is created. There are exceptions to this rule but none which apply here. . . .

[18] Where a party has an agent with ostensible authority to receive that communication on behalf of the offeror, communication of acceptance to the agent, by itself, will be sufficient to create a contract. But here Mr. Stander, to the knowledge of the accepting party, was no longer acting for the offeror, Mrs. Swamy. There is no basis in the law of agency or the law of contract to fix Mrs. Swamy with notice of the acceptance solely because Mr. Stander was sent the letter of November 20, 2000, and there is no evidence that Mr. Stander forwarded that letter as he was requested to do. There was, therefore, no basis on which the chambers judge could find that the fact of the November 20, 2000 letter sent to Mr. Stander created a contract.

[19] The appellants contend, however, that Rule 16 of the Rules of Court, and professional ethics, required their counsel to communicate only with the solicitor of record, with the result that these considerations modified the requirement in this area.

[20] Rule 16(1) provides:

16 (1) A party to a proceeding

(a) may change solicitors,

(b) having been acting on his or her own behalf, may engage a solicitor to act, or

(d) Repealed. [B.C. Reg. 165/97, s. 6.]

but until copies of notice of the change in Form 10 or 11 have been filed and delivered to the other parties of record the other parties are entitled to proceed on the basis that there has been no change of representation or address for delivery.

[21] The chambers judge dismissed the submission on the application of Rule 16, in the reasons quoted above. I agree with his conclusions. Rule 16 addresses delivery of court documents; for example, had the appellants desired to make an offer under the Rules of Court, Rule 16 would require that offer to be delivered to the solicitor of record. These settlement negotiations were not such communications and did not attract the features of an offer under the Rules of Court: Acadia Hotels Ltd. (c.o.b. Dominion Hotel) v. Smith (1983), 43 B.C.L.R. 202.

[22] I do not consider that Rule 16 reaches into informal dealings between the parties conducted outside of court processes in the manner advocated by the plaintiff. Such a result would create a contract where none would otherwise exist, and extend an agency relationship beyond that required by the Rules where no agency relationship is intended by either the principal or agent, to the knowledge of the other party. This result, in my view, is contrary to the sentiment that in all but exceptional cases the Rules do not create substantive law: Brotherhood of Railway, Airline and Steamship Clerks v. Canadian Pacific Air Lines Ltd. (1984), 55 B.C.L.R. 18.

[23] Nor do I consider that professional standards operate to make the November 20, 2000 communication to Mr. Stander, a communication to Mrs. Swamy. Once Mr. Stander had advised he was no longer acting for Mrs. Swamy, the professional restriction on London Life’s or Mr. Lam’s counsel contacting her evaporated.

[24] For these reasons, I conclude that the chambers judge correctly concluded that the communication of acceptance of the counter-offer to Mr. Stander did not itself create a contract.

[25] It follows I would dismiss the appeal.

“The Honourable Madam Justice Saunders”

I AGREE

“The Honourable Mr. Justice Smith”

Reasons for Judgment of the Honourable Madam Justice Newbury:

[26] I regret that I am unable to agree with the reasons for judgment of my colleague Madam Justice Saunders. In my view, this case falls to be decided on the clear wording of R. 16(1) of the Rules of Court. It states that a party to a proceeding is entitled to "proceed on the basis that there has been no change of representation" until copies of a Form 10 or 11 have been filed and served by the other party. The Rule is not confined to "court documents" or to formal communications, and on its face applies to the situation at bar.

[27] Nor do I agree that this interpretation has the effect of 'creating a contract'. It simply prescribes the procedure by which a solicitor's agency is to be terminated by parties to a proceeding. No case was located that is of assistance on this point and it is to be hoped that the Rules Committee will clarify its intentions in light of this case.

[28] I would allow the appeal and issue a stay of proceedings on the basis of a concluded settlement.

“The Honourable Madam Justice Newbury”

Citation:	*Swamy v. London Life Insurance Co.,*
	2004 BCCA 621