Res Judicata, Cause of Action Estopppel and Merger in Judgement

Res Judicata, Cause of Action Estopppel and Merger in Judgement

Wolverton Securities Ltd v Schemel 2009 BCSC 1048 discusses the concepts of res judicata, cause of action estoppel and merger in judgement and states that the concepts are often used interchangeably in various judgments.

The concepts essentially bar a litigant from suing a second time based on the same facts- a “second kick at the can” so to speak, even though the claim may be framed under a different cause of action.

Madam Justice Brown at para. 39 ruled that Wolverton’s second cause of action was:

… precluded by the principles of res judicata, cause of action estoppel or merger in the judgment, as these terms are used interchangeably in various judgments or texts.

56      Brown J. then referred at para. 40 to the decision of Rice J. in Royal Bank v. United Used Auto & Truck Parts Ltd., 2006 BCSC 1192 (B.C. S.C.). She quoted para. 38 from Justice Rice’s decision as follows:

Cause of action estoppel applies to bar proceedings that allege the same cause of action between the same parties if that cause has already been determined by the courts. However, despite its name, it is not so strictly limited. Cause of action estoppel also applies to bar subsequent proceedings covering the same subject matter and arising out of the same relationship between the parties, even though the second litigation may be based on a different legal description or conception of the cause: Lehndorff Management Ltd. v. L.R.S. Development Enterprises Ltd. (1980), 1980 CanLII 393 (BC CA), 19 B.C.L.R. 59 at pp. 64-65, 109 D.L.R. (3d) 729 (C.A.), cited with approval in Chapman v. Canada (2003) 21 B.C.L.R. (4th) 272, 2003 BCCA 665 (CanLII) at para. 17.

57      At para. 42 Madam Justice Brown said:

A cause of action is “the combination of facts which give rise to the right of action by a party against another in the first action. Because a party frames a first action in contract and a second action in tort does not change the determinative issues which the first court decided and which the second court would be asked to decide again, but with different remedies as the objective. That is, [for example] restitution rather than damages. A new legal theory in a second action such as tort rather than contract, marshalling the combination of facts from the first action in a different way, will not create a separate and distinct cause of action”: Donald J. Lange, The Doctrine of Res Judicata in Canada, 2d ed. (Markham, Ont.: Lexis Nexis 2004) at 140, citing Comeau v. Breau (1994), 1994 CanLII 4469 (NB CA), 145 N.B.R. (2d) 329 (C.A.) at 339, 343.

58      Thus, as Wolverton illustrates, varying the legal theory attached to a particular set of facts does not give rise to a distinct cause of action based on those same facts.

59      In Morgan Power Apparatus Ltd. v. Flanders Installations Ltd. (1972), 27 D.L.R. (3d) 249 (B.C. C.A.), a claim was originally brought for breach of contract and then settled with an order dismissing the action by consent. The plaintiff then brought an action on the same facts but framed the claim as one for fiduciary duty. The Court of Appeal found that the claim was barred by the doctrine of cause of action estoppel.

60      The doctrine of merger addresses a similar mischief. As explained by the Court in Hislop v. Canada (Attorney General), [2007] 1 S.C.R. 429 (S.C.C.) at para. 75: “When a judgment is obtained, the cause of action upon which the judgment is based is merged in the judgment.”

61      The doctrine also applies when a plaintiff who obtains judgment pursuant to one legal theory might have been entitled to a better remedy under an alternate legal theory that did not form the basis for the judgment.

62      The Court of Appeal makes the same point in Ladner Estate, Re, 2004 BCCA 366 (B.C. C.A.). The Court observed that it is no answer (quoting K.R. Handley, The Doctrine of Res Judicata, 3d ed. (London: Butterworths, 1996):

… to a former recovery to show that, by suing in one of two possible causes of action, the plaintiff recovered less than he would have had he sued in the other.

63      In McIntosh v. Parent, [1924] 4 D.L.R. 420 (Ont. C.A.), the Ontario Court of Appeal described the doctrine of merger of judgment as requiring:

…a plaintiff asserting a cause of action to claim all his relief in respect thereto, and prevents any second attempt to invoke the aid of the courts for the same cause, for on his first recovery his entire cause of action has become merged in his judgment and is gone for ever.

64      In addition to addressing the doctrine of merger, the Court in McIntosh v. Parent observed that:

It has been well said that the law prevents the parties from taking inconsistent attitudes before the Courts.

65      In McIntosh, the Court held that the litigant could not take the position in his present action that he might have recovered damages in his former action, when he had argued in the former action that damages could not be recovered because they arose after the date the writ was filed.

66      In this case the summary trial application of Mr. Dhillon appears to be inconsistent with the position he took before the Court of Appeal in the appeal of his damages award and on his application for leave to the Supreme Court of Canada. In both instances Mr. Dhillon argued that unless he was able to advance his claim of breach of fiduciary duty in the context of the assessment of damages his day in court would otherwise be denied.

67      As noted earlier, in Mr. Dhillon’s application for leave to appeal to the Supreme Court of Canada, he argued that unless the Court allowed his appeal, he would be denied his day in court on his pleaded fiduciary duty claim. As argued by counsel for Mr. Jaffer, now that the Court has rejected those arguments, Mr. Dhillon is attempting to proceed in his summary trial application as though his day in court on the fiduciary duty claim was always a given.

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