Court of Appeal Rules on Res Judicata, Abuse of Process and Estoppel

Bronson v. Tompkins Ranching Ltd., 2013 BCCA 477

The Beneficiaries of a trust obtained a judgment against the trustee for a breach of trust in relation to the sale of shares by the trust. They then commenced a second action, against the recipient of the shares, seeking the return of property to the trust.

On an application in the second action, the defendant purchaser of the trust’s shares sought confirmation that the plaintiff could not rely on findings of fact made by the trial judge in the first action.

The chambers judge held that the purchaser was not bound by those findings of fact.

On appeal the beneficiaries argued the purchaser was seeking to re-litigate the first action and ought to be barred from doing so, relying on the principles of res judicata and abuse of process. Before the hearing of the appeal the judgment in the first action had been overturned on appeal.

Held: appeal dismissed. The chambers judge appropriately considered whether the issues in question were res judicata and there is no basis upon which to interfere with this conclusion.

(i) Jurisprudence

[31] This Court has recently canvassed the circumstances in which a plea may be barred by the application of the doctrine of res judicata or as an abuse of process of the court, in Cliffs Over Maple Bay (Re), 2011 BCCA 180 (CanLII), 2011 BCCA 180; and again in Erschbamer v. Wallster, 2013 BCCA 76 (CanLII), 2013 BCCA 76.

[32] In the latter case, the principles were summarized as follows:

[12] The general principles of the doctrine of res judicata were reviewed by this Court relatively recently in Cliffs Over Maple Bay. The doctrine has two aspects, issue estoppel and cause of action estoppel. In brief terms, issue estoppel prevents a litigant from raising an issue that has already been decided in a previous proceeding. Cause of action estoppel prevents a litigant from pursuing a matter that was or should have been the subject of a previous proceeding. If the technical requirements of issue estoppel or cause of action estoppel are not met, it may be possible to invoke the doctrine of abuse of process to prevent relitigation of matters.

[13] In Cliffs Over Maple Bay, Madam Justice Newbury set out the requirements of issue estoppel at para. 31 (from Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No. 2), [1967] 1 A.C. 853 at 935, as quoted with approval in Angle v. Minister of National Revenue, 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248 at 254):

(1) that the same question has been decided;

(2) that the judicial decision which is said to create the estoppel was final; and,

(3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised, or their privies. …

[14] With respect to cause of action estoppel, Newbury J.A. quoted, at para. 13, from the seminal case of Henderson v. Henderson (1843), 3 Hare 100, 67 E.R. 313 at 319 (Ch.):

In trying this question, I believe I state the rule of the Court correctly when I say that, where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.

She noted, at para. 14, that this language has been somewhat narrowed by the decision in Hoque v. Montreal Trust Co. of Canada, 1997 NSCA 153, 162 N.S.R. (2d) 321, where Mr. Justice Cromwell stated that the doctrine should apply to “issues which the parties had the opportunity to raise and, in all the circumstances, should have raised” (para. 37).

[15] Madam Justice Newbury set out the requirements of cause of action estoppel at para. 28 (from Grandview v. Doering, 1975 CanLII 16 (SCC), [1976] 2 S.C.R. 621, as summarized in Bjarnarson v. Manitoba reflex, (1987), 38 D.L.R. (4th) 32 (Man. Q.B.) at 34, aff’d reflex, (1987), 45 D.L.R. (4th) 766 (Man. C.A.)):

1. There must be a final decision of a court of competent jurisdiction in the prior action [the requirement of “finality”];

2. The parties to the subsequent litigation must have been parties to or in privy with the parties to the prior action [the requirement of “mutuality”];

3. The cause of action in the prior action must not be separate and distinct; and

4. The basis of the cause of action and the subsequent action was argued or could have been argued in the prior action if the parties had exercised reasonable diligence.

[16] Although it is referred to as cause of action estoppel, the principle applies to defences as well as claims. This is explained in Donald J. Lange, The Doctrine of Res Judicata in Canada, 3d ed. (Markham, Ontario: LexisNexis, 2010) at 137-38:

While the plaintiff may not split a cause of action or pursue litigation by instalments, the defendant may not split the defence by turning around and, as the plaintiff in a subsequent action, sue on an issue which, if successful, would challenge the integrity of the previous judgment. This is what was attempted in Henderson.

* * *

In other words, a cause of action in a second action which could have been a defence in the first action, but was not raised, is barred … The cloak of cause of action estoppel is woven the same for both the plaintiff and the defendant in subsequent proceedings.

[Footnotes omitted.]

[33] Although the Court in Erschbamer found the issue in question was res judicata, it also addressed the abuse of process argument:

[29] Even if cause of action estoppel is not technically available in the circumstances of this situation, it was nevertheless open to the chambers judge to strike para. 3 of Part 1, Division 2, of the amended response as being an abuse of process. In his reasons, the judge referred to Toronto v. C.U.P.E., the decision of the Supreme Court of Canada which held that the doctrine of abuse of process is available to prevent the relitigation of an issue in circumstances where the technical requirements of issue estoppel had not been met because the parties to the two proceedings were different.

[30] Lange refers to the doctrine in this context as “abuse of process by relitigation”. He confirms that, in addition to issue estoppel, it may be employed when the technical requirements of cause of action estoppel have not been met (at 215-16):

Abuse of process by relitigation applies to proceedings which would normally be governed by cause of action estoppel and to proceedings which do not meet the technicalities of that doctrine. As with cause of action estoppel, abuse of process by relitigation has sometimes been described as a rule against litigation by instalment, or the rule in Henderson. To breach the rule in Henderson, even though the parties are not the same, is an abuse of process. In applying abuse of process by relitigation, the courts have taken a stern view of raising in new proceedings issues that ought reasonably to have been raised in earlier proceedings.

[Footnotes omitted.]

(ii) Res Judicata

[34] The appellants rely primarily upon the doctrine of abuse of process, recognizing that it is difficult to bring the respondents (as non-parties to the First Action) within the strict technical confines in which the doctrine of res judicata is applicable. That doctrine would only have an application to the case if the appellants could establish privity between the beneficiaries and trustee, defendants in the First Action, and the purchaser of the trust shares, TRL, the defendant in the Second Action.

[35] Such privity, the appellants argue, may arise from active participation in the previous proceedings or actual benefit from them.

[36] The appellants say TRL was aware of the first proceedings, was aware of the issues being litigated, had an interest in those issues, could have applied to be joined in the action, and chose not to do so. The chambers judge considered and rejected these arguments. There is ample basis, in my view, upon which she could reasonably conclude that the respondents had not become so identified with the defendants in the First Action as to be bound by findings fact in that case. The plaintiffs could not establish the requisite “mutuality” between the beneficiary defendants in the First Action and TRL. The lengthy argument in the appellants’ factum and before us, to the effect that TRL stood by and watched the First Action being fought out and gave evidence and documents in support of the trustee, amounts to nothing more than a restatement of the case before the chambers judge.

[37] There is, in my view, no basis upon which it can be found that the chambers judge applied an inappropriate test or gave no weight, or no sufficient weight, to relevant considerations in relation to the argument that the issues in question are res judicata. In my view, there is no basis upon which we can, or should, interfere with that assessment of the case by the chambers judge.

(iii) Abuse of Process

[38] The more substantial argument advanced by the appellants is that it would amount to an abuse of process to permit the defendants in the Second Action to argue that the trustee had the power to sell the shares or the shares were not sold at an undervalue. In addressing these questions, the appellants say the chambers judge failed to consider whether the doctrine of abuse of process, as described in Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63 (CanLII), 2003 SCC 63, “was or could be engaged.”

[39] The appellants say whenever a litigant seeks to have a court make findings directly contrary to findings of a trial judge in prior litigation, the integrity of the judicial process is challenged and the court must consider whether the litigation amounts to an abuse of process. In such circumstances, the court must determine whether permitting issues to be twice-litigated would violate the principles of judicial economy, consistency, finality, and the integrity of the administration of justice. The appellants say permitting re-litigation of the two identified issues in this case would diminish public respect for the judicial process.

[40] In exercising its discretion to permit issues to be re-litigated, the appellants say, the Court must consider whether the First Action is tainted by fraud or dishonesty, whether there is new, previously unavailable evidence that conclusively impeaches the original results, and whether fairness dictates the original results should be binding in the new context. The appellants say the chambers judge failed to engage in that analysis. Further, the appellants say the trial judge failed to consider that the primary focus of the doctrine of abuse of process is the integrity of the adjudicative functions of the court and not principally the interests of the parties.

[41] The chambers judge expressly considered the C.U.P.E. decision and cited the following passage from it at para. 24 of the reasons:

[37] In the context that interests us here, the doctrine of abuse of process engages “the inherent power of the court to prevent the misuse of its procedure, in a way that would . . . bring the administration of justice into disrepute” (Canam Enterprises Inc. v. Coles 2000 CanLII 8514 (ON CA), (2000), 51 O.R. (3d) 481 (C.A.), at para. 55, per Goudge J.A., dissenting (approved 2002 SCC 63 (CanLII), [2002] 3 S.C.R. 307, 2002 SCC 63)). Goudge J.A. expanded on that concept in the following terms at paras. 55-56:

The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute. It is a flexible doctrine unencumbered by the specific requirements of concepts such as issue estoppel. See House of Spring Gardens Ltd. v. Waite, [1990] 3 W.L.R. 347 at p. 358, [1990] 2 All E.R. 990 (C.A.).

One circumstance in which abuse of process has been applied is where the litigation before the court is found to be in essence an attempt to relitigate a claim which the court has already determined.


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