Smith v. Gillis Date:, 2016 BCPC 324

Citation: Smith v. Gillis Date: 20161017 2016 BCPC 324 File No: 40928 Registry: Kamloops IN THE PROVINCIAL COURT OF BRITISH COLUMBIA (Small Claims Court) BETWEEN: MARC SMITH and JULIE SMITH CLAIMANT AND: ROSEMARY GILLIS DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE S.D. FRAME Counsel for the Claimant: Mr. Ryan Schubert Counsel for the Defendant: Ms. Kaitlyn Cumming Place of Hearing: Kamloops , B.C. Date of Hearing: June 27, 2016 Date of Judgment: October 17, 2016 [ 1 ] This is an application by Rosemary Gillis to strike the claim of Marc Smith and Julie Smith under Rule 16(16)(

o) on the basis

[ 1 ] This is an application by Rosemary Gillis to strike the claim of Marc Smith and Julie Smith under Rule 16(16)(

o) on the basis that it is an abuse of process and/or estopped by the doctrines of cause of action estoppel and/or issue estoppel. [ 2 ] Ms. Gillis filed a claim against the Smiths on January 21, 2014 with respect to an agreement to lease made May 1, 2012 between the parties. The lease covered farm lands owned by Ms. Gillis and leased by the Smiths. Due to the Smiths’ inability to pay the rents, the parties agreed to amend the lease on May 1, 2013 changing the date of required payment to September of each year.

I will refer to the lease as the Farm Lease and to the action commenced in January 2014 under File No. 39999 as the First Action. [ 3 ] Ms. Gillis argues that a counterclaim ought to have been brought in the First Action and therefore the proceedings now before me in File No. 40928 (the new action) are barred by issue or cause of action estoppel and abuse of process. The Smiths oppose this application arguing that while the Farm Lease is the core of each action, they are different causes of action. [ 4 ] Ms.

Gillis also argued that the new action is duplicative and contrary to s. 2(1) which mandates that small claim actions be concluded in a just, speedy, inexpensive and simple manner. The Smiths say that their claim could not be quantified at the time and therefore they had to bring this action in a separate suit. [ 5 ] In the First Action, the dispute arose not only by reason of a non-payment of rents but also - and more predominantly - because of Ms. Gillis’ concern over the farming practices engaged in by the Smiths. In the First Action, Ms.

Gillis claimed that the Smiths failed to pay the annual Farm Lease payment, failed to cultivate and seed the hay land before the end of the Farm Lease, and caused damages for which Ms. Gillis incurred costs for rock removal and site reparation. [ 6 ] Upon receiving the notice of claim, it is clear that the Smiths sought legal advice and understood their right to file a counterclaim. Their counsel sent a letter to Ms.

Gillis on February 12, 2014 requesting that she withdraw her claim and advising that if she did not do so, the Smiths would be filing a counterclaim for frustration and breach of contract for unduly restricting the Smiths’ use of the farm land. In correspondence sent subsequently on April 2, 2014, counsel again noted that the Smiths retained the right to commence a counterclaim for the reasons set out in his letter of February 12, 2014. It could be said that Ms.

Gillis was on notice at this point of the potential for such a claim by the Smiths. [ 7 ] A settlement conference was scheduled on May 6, 2014 resulting in the First Action being adjourned generally. This was because the parties had reached an accord which did not ultimately address the outstanding issues. [ 8 ] Ms. Gillis recommenced her action by way of letter dated November 3, 2014 which does not cite non-payment of rent and refers only to the unsatisfactory rock removal process.

However, she asked the registry to recommence the First Action which did seek relief by reason of non-payment of rent. [ 9 ] No counterclaim was filed at any time up to this point by the Smiths. On November 26, 2014, now acting on their own, the Smiths wrote to Ms. Gillis opining that it was she who was in breach of the Farm Lease. In that letter, they say: The land you are referring to has been left to fallow, and to this date is not well enough prepared to be reseeded. All farming duties can be completed, weather permitting.

We are suffering a significant loss of income from your farm land due to you not allowing us to perform accepted Canadian agricultural practices. If we had known these ‘after’ terms from the beginning we would never have signed the lease agreement that you presented to us. [ 10 ] It is Ms. Gillis’ claim for the costs of the rock removal and this correspondence which joins the issues between the Smith claim in this new action and the issues arising in the First Action. If there was any question about that, Ms.

Gillis sent a letter on March 18, 2015 terminating the Farm Lease citing specifically the failure to restore the field pursuant to the agreement reached at the settlement conference on May 6, 2014. [ 11 ] Still, the Smiths did not commence a counterclaim. They did this on the basis of legal advice they received and because they were not yet in a position to quantify any damages they may have suffered. [ 12 ] The Smiths allowed the appeal period for the judgment in the First Action to lapse on January 12, 2016. They commenced the new action eight days later.

The new action claims damages for breach of the Farm Lease. In that notice of claim, the Smiths cite my findings in the Reasons for Judgment in the First Action as a basis for the claim. [ 13 ] Mr. Schubert argued that the Smiths did not lead any evidence regarding their potential counterclaim for Ms. Gillis’ breach of the Farm Lease. As a consequence, no findings were made about the impact of Ms. Gillis’ breach on the Smiths. Mr. Schubert argued that the Smiths did not bring the counterclaim at the time of the First Action because it would not have been reasonable to do so at the time.

An application to a judge would have to be made to amend the reply to include a counterclaim. If they were successful on that application, they would likely have to adjourn the trial because the length of the trial itself would have to be extended to prove their claim. The Smiths were concerned that they could not fully prove their damages if they started a counterclaim at that time and were uncertain what damages they would even suffer as a result of Ms. Gillis’ termination of the Farm Lease.

The Smiths were told by their counsel that, in normal circumstances, they would have two years to bring a claim for damages arising from their discovery of any wrongdoing by Ms. Gillis. [ 14 ] Mr. Smith concludes in his affidavit that when they commenced this action, they were confident Ms. Gillis had breached the Farm Lease and had reached a point where they were more certain of the damages they suffered as a result of that breach. [ 15 ] Ms. Cumming argued that the counterclaim should have been raised in the First Action but the Smiths made a conscious decision not to do so.

They used the Reasons for Judgment from the First Action in their notice of claim in this action as a factual

underpinning for a duplicate cause of action. They did so after already raising the issues of interference with the Farm Lease and breachof the Farm Lease in the First Action. [16] She also argued that the new action creates a significant risk of inconsistent findings with respect to

interpretation of the FarmLease, their respective obligations under the Farm Lease, and interference with the Smiths’ rights by Ms. Gillis. [17] I have been provided with a number of cases from both counsel: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, 2001 S.C.C. 44; Angle v. M.N.R., [1975] S.C.R. 248; Sanofi-Aventis Canada Inc. v. Novopharm Ltd., 2007 FCA 163 ,2007 F.C.A. 163; Richter Gedeon Vegyeszeti Gyar Rt v. Apotex Inc., 2002 FCT 1284 , 2002 F.C.T. 1284; Re Heyl et al. and LacMinerals Ltd., (ON SC), [1985] 50 O.R. (2d) 535 (Ont.S.C.); 312630 British Columbia Ltd. v.

Alta Surety Co., (BC CA), [1995] 10 W.W.R. 100; Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 , 2013S.C.C. 37; Mayer v. Mayer Estate, (BC CA), [1993] 8 W.W.R. 735; Bellatrix Exploration Ltd. v. Penn WestPetroleum Ltd., 2011 ABQB 551 , 2011 A.B.Q.B. 551; Erschbamer v. Wallster, 2013 BCCA 76 , 2013 B.C.C.A. 76;Mohl v. UBC, 2006 BCCA 70 , 2006 B.C.C.A. 70; Ainsworth Lumber Co. Ltd. v. KMW Energy Inc., 2004 BCCA 415 ,2004 B.C.C.A. 415; Ezekiel v. Macaulay, 2009 BCPC 372 , 2009 B.C.P.C. 372; Chapman v. Canada, 2003 BCCA 665, 2003 B.C.C.A. 665; and Mary Enterprises Ltd. v.

Conway Richmond Ltd., 2001 BCPC 172 , 2001 B.C.P.C. 172. [18] The requirements for issue estoppel are:

a) the same question has been decided;

b) the judicial decision creating the estoppel was final; and

c) the parties to the judicial decision were the same persons as the parties to the proceeding in which the estoppel is raised. [19] The requirements for cause of action estoppel are:

a) a final decision of a court of competent jurisdiction in the prior action has been made;

b) the parties to the subsequent litigation must have been parties to the prior litigation;

c) the cause of action in the prior action is not separate and distinct from the subsequent action; and

d) the basis cause of the action and subsequent action were or could have been argued if the parties exercised reasonable diligence. [20] The requirements for cause of action estoppel apply regardless of whether the parties remain in the same position as plaintiffand defendant or whether they change around. In the Mohl, supra, decision, the court held that the cause of action is “simply a factualsituation the existence of which entitles one person to obtain from the court a remedy against another person.” [21] Mohl, supra has also set out the following considerations:

a) the parties to litigation are required to bring forward their whole case including issues the parties had the opportunity to raise andshould have raised in all the circumstances;

b) in the case of a breach of contract, the cause of action can arise through breach of warranty entitling the party to sue for damageswithout termination or breach of a condition allowing the party to terminate the contract and sue for damages;

c) it is irrelevant whether legal advice was received;

d) abuse of process encompasses the doctrine of res judicata so rules referencing abuse of process can be applied to the doctrine. [22] Further, Ms. Cumming argued that the difficulty in assessing damages is not a bar to an award. The court is to do its best toestimate the probable loss on the material available to the court. This assails the Smiths’ argument that they were unable to estimate thelosses they suffered by reason of Ms. Gillis’ actions, so they did not counterclaim at the time of her lawsuit against them. [23] Ms.

Cumming argued rightly that what the Smiths seek to resolve in this action has already been decided in the First Action. Ihave already found that both parties have breached the Farm Lease. This action could only sustain, therefore, an assessment of thedamages that flow from Ms. Gillis’ breach. [24] It is relevant to address my specific findings in the First Action that impact the outcome of this action:

a) Ms. Gillis did not reserve for herself the right to control when the Smiths seeded the lands, prepared the lands or otherwise whatthey grew on the lands except as provided by

Article 7 of the Lease.

b) While Ms. Gillis expressed concerns to the Smiths about the manner in which they were cultivating the land, she had no right torequest that they stop doing so.

c) Ms. Gillis expressed concern that the Smiths were growing canola crops but was unable under the lease to prevent them fromdoing so.

d) Ms. Gillis expressed her concern to the Smiths they were in default of their lease payments. This was a persisting issue.

e) Ms. Gillis put the Smiths on notice in January, 2010 that she required payment under the lease and believed them to be infundamental breach of the lease because of the manner of cultivation.

f) After commencing the action, the parties attended a Small Claims settlement conference at which point a settlement record created an obligation on the parties to await outcome of the 2014 growing season. The file was adjourned generally but the terms of any expectations for that growing season were not set out in the settlement conference record. These terms were addressed in the First Action by both parties and without significant disagreement regarding the terms.

g) Ms. Gillis wrote the Registry on November 3, 2014 requesting the claim be recommenced by reason of the breach by the Smiths of the settlement agreement. I note that while the terms of the settlement agreement were addressed in that proceeding, I made no findings of fact about them because Ms. Gillis chose to pursue the original cause of action rather than the settlement agreement. There is perhaps the one outstanding issue of whether the Smiths were in breach of that settlement agreement which could be addressed in this action. Undoubtedly, it would impact any award for damages the Smiths might pursue or receive.

h) The Smiths made it clear that they believed Ms. Gillis was the one in breach of the lease. They claimed that they believed they suffered income loss because of her interference and that they did not feel bound by the unilateral terms she attempted to impose after the lease was made.

i) The Smiths confirmed that there was an agreement at the settlement conference to restore the barn field by the end of the 2014 growing season. The Smiths agreed that they were in breach of that agreement because the weather made it impossible to work in those conditions. As I said above, this breach may well result in a counterclaim in this action which would re-open damages arising from the Smiths’ breach of that settlement agreement. This could potentially set off entirely any claim by the Smiths.

More importantly, it would result in an entirely different and inconsistent decision on the same set of facts, but approached from a different perspective. Hence the development of the law that parties must put their whole case forward.

j) The claim for the outstanding lease payments at the time of trial was $3,200. This was the balance for the term of the Farm Lease as the outstanding payments had then been paid.

k) There was no expert or fulsome evidence before me of best farming practices or whether or not the method the Smiths engaged in was an accepted agriculture practice. This would be re-opened with a potentially different result.

l) At the point that the Smiths left the farm because of Ms. Gillis’ interference, they were in default of payment of the lease. However, Ms. Gillis did not terminate the lease on the basis of non-payment.

m) The Smiths breached the lease by failing to make the lease payments in accordance with the Farm Lease.

n) Non-payment was a persistent situation regardless of interference by Ms. Gillis.

o) Ms. Gillis was in breach of the Farm Lease by terminating it over the method of cultivation.

p) Both parties were in breach of the Farm Lease on fundamental terms, which breaches were not linked to one another.

q) Ms. Gillis’ interference with the Farm Lease did not lead to the non-payment of it by the Smiths. [ 25 ] Mr. Schubert argued the Smiths were unable to quantify their damages at the time and so relied on the two year limitation that would permit them to bring a claim for breach of the Farm Lease. He referred to a number of decisions for the proposition that as the court had not addressed the damages flowing to the Smiths by reason of Ms. Gillis’ breach, there was no cause of action estoppel. It was not reasonable to bring the claim at the time of the First Action because damages were not quantifiable.

They are now. [ 26 ] Mr. Schubert also submitted that even if the tests for issue estoppel and/or cause of action estoppel had been met, the court had residual discretion to allow the cause of action to proceed in any event. The Smiths elected not to bring their counterclaim for strategic reasons rather than spite or any other improper purposes that might lead the court to conclude there is an abuse of process. I am satisfied there has been no abuse of process. [ 27 ] The difficulty is that the decisions Mr.

Schubert provided involved cases where the issues were not so completely bound up in the same facts, the same issues and the same parties. If I were to permit this litigation to proceed, there could be an inconsistent finding on a number of elements. In the First Action, Ms. Gillis failed to bring any expert evidence to show that the agricultural practices engaged in by the Smiths were a breach of the Farm Lease.

It would be open to her to lead that evidence in this proceeding in order to establish any necessary set-off against any evidence the Smiths might lead with respect to their damages. [ 28 ] Also, I have found that the Smiths were in fact in breach of the Farm Lease. Ms. Gillis had been in a position to either terminate the lease for non-payment of rent or to proceed with the breach of the settlement agreement. That is also an issue that has not been litigated and could be in these proceedings. [ 29 ] The Smiths may well find themselves, if the settlement agreement is pleaded, facing the very claim for damages Ms.

Smith claimed in the First Action, but on the basis of a breach of the settlement agreement.

Given that the Smiths acknowledged the terms of the settlement agreement and admitted the breach albeit because of weather, it would seem to be a significant set-off against any damages the Smiths may have, assuming their damages are not entirely speculative, given their persistent non-payment of the lease. [ 30 ] If the court does have a residual discretion to permit the cause of action of this nature to proceed where the issues could have and should have been dealt with in the First Action, these are not circumstances in which I would permit them.

The parties are the same; the claim arises from the same Farm Lease; the evidence to be led at trial is the same; and the risk of an entirely inconsistent judgment is significant given the issues that the parties chose not to litigate as I have set out above. [ 31 ] I allow Ms. Gillis’ application and dismiss the action. Ms. Gillis shall have her reasonable costs to be assessed by the Registrar.

_______________________________ S.D. Frame Provincial Court Judge