Can-Euro Investments Ltd. v. Industrial Alliance Insurance and Financial Services Inc., 2011 NSSC 381

SUPREME COURT OF NOVA SCOTIA Citation: Can-Euro Investments Ltd. v. Industrial Alliance Insurance and Financial Services Inc., 2011 NSSC 381 Date: 20111019 Docket: Hfx. No. 336961 Registry: Halifax Between: Can-Euro Investments Limited Plaintiff v. Industrial Alliance Insurance and Financial Services Inc. Defendants Judge: The Honourable Justice Arthur W.D. Pickup Heard: September 6, 2011, in Halifax, Nova Scotia Counsel: Ronald E. Pizzo and Micheal Tweel, for the plaintiff Ian Dunbar and Alexander S.

Beveridge, Q.C., for the defendants Agustus Richardson, Q.C., for the interveners David Coles/Boyne Clarke By the Court : [ 1 ] The defendant, Industrial Alliance Insurance and Financial Services Inc., brings this motion seeking an order striking the pleadings of Can-Euro Investments Limited as an abuse of process by relitigation pursuant to Rule 88.02 of the Civil Procedure Rules . [ 2 ] Industrial Alliance asserts that the bringing of this action is an abuse of process, in that the dispute had been previously adjudicated in Hfx. No. 298970.

They say issue estoppel prevents the issues decided in the previous proceeding from being relitigated in this proceeding. Moreover, they say the new claims raised by Can-Euro in this action arise from the same transaction that gave rise to the initial application. They say cause of action estoppel prevents Can-Euro from splitting its case and making new claims against Industrial Alliance arising from that transaction. [ 3 ] Can-Euro, in opposing this motion, says that the new action deals with matters that are:

a) separate and distinct from the matter adjudicated in the previous proceeding and/or,

b) not dealt with in the previous proceeding by agreement of the parties and, therefore, the action is not barred by res judicata. [ 4 ] Can-Euro says that the only issue adjudicated in the previous proceeding was whether Industrial Alliance had breached its obligation to provide mortgage funding at the rate of 4.08%. David Coles and Boyne Clarke have been granted intervener status, and it is their position that the Industrial Alliance motion ought to be restricted in its ambit on the grounds that:

a) there was no final determination of the claim by Can-Euro for the return of fees paid to Industrial Alliance to secure the mortgage transaction and, accordingly, the necessary foundation for res judicata or issue estoppel (or abuse of process) cannot be established in respect of that issue;

b) Can-Euro and Industrial Alliance expressly agreed to set to one side Can-Euro’s claim for the return of its fees regardless of the outcome of the application;

c) that this matter ought to go to trial to be determined. [ 5 ] At the beginning of the hearing all parties agreed that Can-Euro’s claim for the return of its fees had not been dealt with in the previous proceeding and, therefore, Can-Euro is at liberty to bring an action for the return of these fees. The parties disagreed, however, as to whether Can-Euro could claim breach of contract as a basis for the return of fees. Industrial Alliance argued that such a basis for claiming the return of fees would be res judicata . [ 6 ] The issues to be determined on this motion are:

a) Is the present action an abuse of process by Can-Euro?

b) If so, what remedy should issue?

c) Is Can-Euro’s claim for the return of its fees restricted to grounds other than breach of contract by Industrial Alliance? [ 7 ] The motion is brought pursuant to Civil Procedure Rule 88.02(1): 88.02(1) A judge who is satisfied that a process of the court is abused may provide a remedy that is likely to control the abuse, including any of the following: (

a) an order for dismissal or judgment; (

b) a permanent stay of a proceeding, or of the prosecution of a claim in a proceeding; (

c) a conditional stay of a proceeding, or of the prosecution of a claim in a proceeding; (

d) an order to indemnify each other party for losses resulting from the abuse; (

e) an order striking or amending a pleading;

(

f) an order expunging an affidavit or other court document or requiring it to be sealed; (

g) an injunction preventing a party from taking a step in a proceeding, such as making a motion for a stated kind of order, withoutpermission of a judge; (

h) any other injunction that tends to prevent further abuse. [8] This court has inherent jurisdiction to control its own process. In the Supreme Court of Canada decision in Toronto v. CUPELocal 79, 2003 NSSC 63, [2003] 3 S.C.R. 77, Arbour J. stated, for the majority, at paras. 36 - 38: 36 The doctrine of abuse of process is used in a variety of legal contexts. The unfair or oppressive treatment of an accused maydisentitle the Crown to carry on with the prosecution of a charge: [R. v. Conway, (SCC), [1989] 1 S.C.R. 1659] at p.1667. In Blencoe v.

British Columbia (Human Rights Commission), [2000] 2 S.C.R. 307, 2000 SCC 44, this Court held that unreasonabledelay causing serious prejudice could amount to an abuse of process. When the Canadian Charter of Rights and Freedoms applies, thecommon law doctrine of abuse of process is subsumed into the principles of the Charter such that there is often overlap between abuse ofprocess and constitutional remedies (R. v. O'Connor, (SCC), [1995] 4 S.C.R. 411). The doctrine nonetheless continues tohave application as a non-Charter remedy: United States of America v.

Shulman, [2001] 1 S.C.R. 616, 2001 SCC 21, at para. 33. 37 In the context that interests us here, the doctrine of abuse of process engages "the inherent power of the court to prevent themisuse of its procedure, in a way that would ... bring the administration of justice into disrepute" (Canam Enterprises Inc. v. Coles(2000), (ON CA), 51 O.R. (3d) 481 (C.A.), at para. 55, per Goudge J.A., dissenting (approved [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 bemanifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute. It is aflexible 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 attemptto relitigate a claim which the court has already determined. [Emphasis added by Arbour J.] As Goudge J.A.'s comments indicate, Canadian courts have applied the doctrine of abuse of process to preclude relitigation incircumstances where the strict requirements of issue estoppel (typically the privity/mutuality requirements) are not met, but whereallowing the litigation to proceed would nonetheless violate such principles as judicial economy, consistency, finality and the integrity ofthe administration of justice...This has resulted in some criticism, on the ground that the doctrine of abuse of process by relitigation is ineffect non-mutual issue estoppel by another name without the important qualifications recognized by the American courts as part andparcel of the general doctrine of non-mutual issue estoppel ... 38 It is true that the doctrine of abuse of process has been extended beyond the strict parameters of res judicata while borrowingmuch of its rationales and some of its constraints.

It is said to be more of an adjunct doctrine, defined in reaction to the settled rules ofissue estoppel and cause of action estoppel, than an independent one [Lange, Donald J. The Doctrine of Res Judicata in Canada.Markham, Ont: Butterworths, 2000]. The policy grounds supporting abuse of process by relitigation are the same as the essential policygrounds supporting issue estoppel (Lange, supra, at pp. 347-48): The two policy grounds, namely, that there be an end to litigation and that no one should be twice vexed by the same cause, have beencited as policies in the application of abuse of process by relitigation.

Other policy grounds have also been cited, namely, to preserve thecourts' and the litigants' resources, to uphold the integrity of the legal system in order to avoid inconsistent results, and to protect theprinciple of finality so crucial to the proper administration of justice.

[ 9 ] I note that, while Industrial Alliance has cited law respecting abuse of process by relitigation, in substance both parties argued the motion as one of issue estoppel and cause of action estoppel. The doctrine of issue estoppel operates to prevent a litigant from relitigating an issue that has already been decided by a court of competent jurisdiction. Cause of action estoppel is related to the principle that a party should not be subjected twice to the same cause of action nor is a litigant permitted to split its case.

Background Facts : [ 10 ] The dispute between the parties arises from a $12,500,000.00 mortgage transaction. [ 11 ] An application was heard by Beveridge J. (as he then was) of this court, seeking a determination whether Industrial Alliance breached its contract in refusing to advance funds to Can-Euro. Justice Beveridge dismissed the application by Can-Euro. The Nova Scotia Court of Appeal dismissed Can- Euro’s appeal in a decision reported at 2009 NSCA 114 .

The Court of Appeal set out a succinct synopsis of the facts at para. 2: [2] The parties entered into a contract whereby, provided certain terms were satisfied, Industrial Alliance Insurance and Financial Services Inc. (“Industrial Alliance”) would provide Can-Euro Investments (“Can-Euro”) with mortgage financing of approximately $12,500,000. The transaction did not close on the disbursement date selected by Can-Euro. Unsuccessful attempts were made to close in the days following.

Industrial Alliance then refused to close at the interest rate fixed for the original disbursement date, and Can-Euro refused to close at a higher rate. [ 12 ] The claim made by Can-Euro, in the initial application, is set out in the originating notice (application inter partes ) filed in this matter and is as follows: An Order in the nature of specific performance requiring the Defendant to advance the mortgage funds, at the interest rate agreed, as described in the Commitment Letter executed on April 8, 2008, and the written confirmation letter of the lender dated May 1 st , 2008, together with the costs of this application, and general and special damages in favour of the Plaintiff including damages relating to the loss of the CMHC certificate of insurance, to be assessed; In the alternative, an Order that the Defendant is liable to return the commitment fee, processing fee, and deposit fee for fixing the interest rate and such further general and special damages, including damages relating to the loss of the CMHC certificate of insurance, as are to be assessed representing the additional costs to the Plaintiff to compensate for it’s loss/put the Plaintiff in the position it would have been had the Defendant fulfilled its obligations and/or acted in good faith, together with prejudgment interest and costs. [ 13 ] The application was heard on October 9, 2008.

The parties agreed to sever liability from remedy in advance of the hearing. The parties disagree as to whether Justice Beveridge was to deal with all of the liability issues. The parties both refer to the comments of David Cole, Q.C., former counsel for Can-Euro, at p. 4 of the transcript of the hearing before Justice Beveridge (Tab 8, Appeal Book Volume II): MR. COLES: What the...the originating notice application that set this down in first instance effectively called for a determination of liability with us arguing the availability of specific performance contemporaneous with today.

And then set up in the alternative should specific performance not be granted, a subsequent date which would be the quantum of damage hearing because that, obviously, involves a whole series of different evidence in terms of availability and loans and so on. Through discussions with my friend we were agreed that, look, we’re going to take remedy right off the table today and simply deal with liability... [ 14 ] Peter Bryson, Q.C. (now Bryson J.A.), who was the counsel for Industrial Alliance, confirmed the agreement to sever liability

from remedy at p. 6 of the transcript: MR. BRYSON: My Lord, when I was retained and looked at what I’ll describe as quite ambitious notice, I had contacted my friend and said, Look, you know, I don’t want to unduly delay the determination of these matters, but it seems to me that you are looking for things which normally would require a trial forum to resolve. And a couple of things that’s coming to mind were, I think, a request for specific performance which is an equitable remedy and, of course, there were allegations of bad faith.

And I think we did reach, at least I feel we did reach an accommodation whereby we would address today the issue of liability. But I would be a little narrower than my friend and say that my understanding was what we were going to do today was get the Court’s

interpretation of the contract... [ 15 ] Industrial Alliance say that they originally wanted the application confined to whether there was a breach of contract but ultimately agreed that the application would extend to liability generally. [ 16 ] The following comments of Mr. Bryson at pps. 16 - 17 of the transcript are relevant: MR. BRYSON: I still don’t have a problem dealing with the contract, what it says, you know, what happened on the 19 th of May. That’s fine.

But when you get into saying to me, well you can’t rely on the contract because of something someone said or did outside the contract and we’re going to argue estoppel against you, then that’s where I’m having some difficulty. THE COURT: Would you be satisfied with Mr. Coles’ offer that you can supplement the materials that flow from the ... today’s hearing? MR. BRYSON: I mean, I certainly can do that from a legal point of view, My Lord. I don’t know that I could do it from an evidentiary point of view because I didn’t, as I say, come here to meet an estoppel case. THE COURT: Mr.

Coles said that if you ... if it turned out you had additional information that’s not disclosed so far that he wouldn’t object to you supplementing the record. MR. BRYSON: I’m certainly prepared to ... if the Court is inclined to go that way, I’m certainly prepared to take that up, because I wouldn’t want to argue just this remedy, I’d want to supplement it with another affidavit. THE COURT: Mr. Coles? MR. COLES: Sure, I think ... I mean, I think to assist the parties and not to waste time I suggest we proceed on the basis that everyone certainly knows what we’re arguing and knows the materials that’s beforehand.

Then if subsequent to today’s hearing my friend, in discussions with his client, wants to put in some more evidence and talk about something else, I guess we’ll need another date... [ 17 ] Justice Beveridge decided liability in favour of Industrial Alliance and made the following comments at paras. 150-152 of his decision of January 23, 2009: [150] Industrial Alliance committed no breach of its contractual obligations in refusing to advance funds at the interest rate of 4.08%.

To be in breach of its contractual obligations, there must have been a legally enforceable obligation to close at 4.08% beyond May 23, 2008. In my opinion, there was not. [151] The requirements of promissory estoppel are not made out, nor is there any basis to suggest a lack of good faith on behalf of Industrial Alliance.

[152] The application by Can-Euro is dismissed with costs to the defendant... [ 18 ] An order was issued on February 18, 2009 following the decision dismissing the application which contained the following recital: AND WHEREAS IT WAS AGREED THAT the Justice hearing the application would make a determination as to liability only with any consideration of remedy/ damages, including any return of fees paid, to be determined at a separate hearing. [ 19 ] Both counsel consented to the form of this order. [ 20 ] Can-Euro filed a new notice of action to commence the present proceeding on September 30, 2010 pleading additional breaches of contract that allegedly were not decided by the learned Chambers judge.

It also pleads additional breaches of good faith at paras. 20 and 21 and breach of contract and unjust enrichment at para. 23. [ 21 ] Can-Euro says it attempted to borrow $12,500,000.00 from Industrial Alliance at two separate times:

a) the first borrowing relates to the closing which Can-Euro attempted to

schedule on May 19, 2008 at the fixed interest rate of 4.08%;

b) the second was an attempt at borrowing during the week of May 26, 2008. [ 22 ] Can-Euro says that these are two separate and distinct events and that each borrowing failed for different reasons unconnected to the other. In other words, Can-Euro argues that these are mutually exclusive claims. They say that the first claim was an action for specific performance and equitable remedy. They say the second attempt at borrowing during the week of May 26, 2008 also failed, but for different reasons.

They say that the problem with the second borrowing was that Industrial Alliance would not set an interest rate even after Can-Euro was ready, willing and able to close as of May 26, 2008. [ 23 ] Can-Euro submits that the present notice of action deals only with the second borrowing attempt which is a separate and distinct cause of action. They say that as a result this action is not res judicata . [ 24 ] With respect, I am not satisfied that there are two separate and distinct events as argued by Can-Euro.

There was one commitment letter and all of these issues flowed from that initial agreement to fund Can-Euro. [ 25 ] As I have already set out, Mr. Coles said the following at p. 4 of the transcript of the hearing before Justice Beveridge: What the ... the originating notice application that set this down in first instance effectively called for a determination of liability with us arguing the availability of specific performance contemporaneous with today.

And then set up in the alternative should specific performance not be granted, a subsequent date which would be the quantum of damage hearing because that, obviously, involves a whole series of different evidence in terms of availability and loans and so on. Through discussions with my friend we were agreed that, look, we’re going to take remedy right off the table today and simply deal with liability... [ 26 ] At p. 13 of the transcript, Justice Beveridge made the following comments at lines 16 through 21:

... Mr. Bryson, I guess it’s back to you. Mr. Coles is saying that the only issue he wants the Court to determine either today or following briefs is the liability. Was there a contract, and everyone is in agreement there was a contract, is whether or not there was a breach of that contract. [ 27 ] A number of exhibits were attached to the affidavit of David Coles sworn August 9, 2011 and filed in this proceeding. At p. 35, a letter dated September 11, 2008 from Mr. Bryson to Mr. Coles, states the following: If we can agree that the only issue before the Court on the 9 th of October is liability, based on a legal

interpretation of the contract, then I think that we are of one mind. My client could then file an Affidavit or Affidavits in response to yours and assuming that your client and mine do not have serious disputes of fact to resolve, then the Court could decide what the Contract meant and whether our clients complied with same... [ 28 ] The response from Mr. Coles to Mr. Bryson in a letter dated September 23, 2008 is at p. 38 of the affidavit of Mr.

Coles and states as follows: Further to our recent exchange of voice mail messages and our telephone discussion of today’s date, I write to confirm that as matters stand, in accord with the Originating Notice, we will be arguing liability on October 9 th and the Plaintiff will be arguing for specific performance by your client on that application. Should liability be found as against your client such that damages may be awarded, but the Court declines to offer specific performance, then a subsequent hearing date will be obtained to argue damages. [ 29 ] At p. 39 of Exhibit A, in the same letter, Mr.

Coles indicates: Therefore, I understand the parties will proceed to argue liability and the availability of specific performance on October 9 th . Should a damage hearing be necessary following upon the decision of the Court on the matters before it on October 9 th a subsequent date with new Affidavits will be set. [ 30 ] Mr. Coles responds to Mr. Bryson by letter of September 30, 2008 which is at p. 42 of Mr. Coles affidavit and states the following: I write to confirm our telephone discussion of today’s date that is agreed that on October 9 th the Court will hear argument on liability.

Questions of relief - specific performance and/or damages - will be addressed on a future date subsequent to the Court’s decision on liability. Analysis: Does res judicata Bar the Action? [ 31 ] Industrial Alliance filed an amended defence on or about December 21, 2010 alleging an abuse of process and giving rise to the present motion. As I have noted, the parties have treated this motion as one for dismissal by virtue of res judicata (issue estoppel or cause of action estoppel), rather than from the related doctrine of abuse of process by relitigation.

For the following reasons I am satisfied that the litigation is res judicata . [ 32 ] The doctrine of issue estoppel operates to prevent litigants from relitigating an issue that has already been decided by a court of competent jurisdiction. In Williams v. Kameka, 2009 NSCA 107 , the Court of Appeal reviewed the applicable test for issue estoppel as

follows at para. 13: 13 Detailed statements can be found of the constituent elements necessary to establish that the doctrine of res judicata is applicable(see for example George Spencer Bower and Sir Alexander Turner, The Doctrine of Res Judicata, 2nd ed. (London: Butterworths, 1969)at para. 19). These were compressed by the Alberta Court of Appeal in 420093 B.C. Ltd. v. Bank of Montreal, (ABCA), [1995] A.J. No. 862 where O'Leary J.A. wrote: [18] A prior judicial decision will not raise an estoppel by res judicata, either issue estoppel or cause of action estoppel, unless (

i) itwas a final decision pronounced by a court of competent jurisdiction over the parties and the subject-matter; (ii) the decision was, orinvolved, a determination of the same issue or cause of action as that sought to be controverted or advanced in the present litigation; and(iii) the parties to the prior judicial proceeding or their privies are the same persons as the parties to the present action or their privies. [33] I am satisfied that the application was decided by a court of competent jurisdiction and the parties to the two proceedings arethe same.

As recited earlier Justice Beveridge found that Industrial Alliance was not liable to Can-Euro and dismissed the application. A consent order then issued noting that the parties agreed to have liability determined before damages and expressly dismissed in theapplication. I am satisfied that this determined the issue of liability between the parties. In other words, I am satisfied that all of theliability issues raised in the originating notice in the original matter were resolved in favour of Industrial Alliance.

The main causes ofaction in the original originating notice dealt with breach of contract and bad faith, all of which were dealt with by Justice Beveridge. There is no suggestion in either the order or the decision arising out of the hearing before Justice Beveridge that any liability issuesbetween the parties remain outstanding. Moreover, in comments recited earlier from Mr. Coles who represented Can-Euro, it is clearthat Justice Beveridge was dealing with liability and remedy was for another day. In submissions to Justice Beveridge by Mr. Coles andin correspondence between Mr. Coles and Mr.

Bryson, it is clear that the hearing before Justice Beveridge was to deal with liability andremedy would be determined subsequently.

Comments of counsel, Justice Beveridge’s decision and the issued order, are all consistentin that regard and lead to no other logical conclusion. [34] I am satisfied that issue estoppel prevents Can-Euro from relitigating whether Industrial Alliance is liable to it in respect of thefailed mortgage transaction. [35] As to cause of action estoppel I am also satisfied that the claims made by Can-Euro, in the present proceeding, all arise out ofits failed mortgage with Industrial Alliance.

I agree with counsel for Industrial Alliance that the present proceeding, at best, is nothingmore than a new legal conception of facts previously litigated. Having been unsuccessful, Can-Euro seems to be conducting a secondinstallment of its litigation arising out of the same cause and fact situation. As a result I am satisfied that the present claim has alreadybeen adjudicated and that even if a claim raised in this action was not before Justice Beveridge, cause of action estoppel operates toprevent Can-Euro from raising any such claim at this stage. [36] Counsel for Can-Euro relies upon Hoque v.

Montreal Trust Co. of Canada, 1997 NSCA 153 , [1997] N.S.J. No. 430(C.A.) to support its position. In particular, counsel refers to the comments of Cromwell J.A. (as he then was) at paras. 63 and 64: 63 The appellants in this appeal rely principally on the broad formulation of cause of action estoppel. There is, of course, nosuggestion that the issues of breach of fiduciary duty, breach of collateral contract, tortious interference with business relations ortrespass and conversion were actually raised and adjudicated in the final orders of foreclosure which were issued by default.

Theappellants' submission is that all of these matters could have been raised by the trustee in bankruptcy and were not. Therefore, accordingto the appellants, Dr. Hoque is foreclosed from raising them in this action. 64 My review of these authorities shows that while there are some very broad statements that all matters which could have been raisedare barred under the principle of cause of action estoppel, none of the cases actually demonstrates this broad principle. In each case, theissue was whether the party should have raised the point now asserted in the second action.

That turns on a number of considerations,including whether the new allegations are inconsistent with matters actually decided in the earlier case, whether it relates to the same ora distinct cause of action, whether there is an attempt to rely on new facts which could have been discovered with reasonable diligence inthe earlier case, whether the second action is simply an attempt to impose a new legal conception on the same facts or whether thepresent action constitutes an abuse of process.

[ 37 ] Counsel for Can-Euro argues that this new action concerns the attempt at borrowing during the week of May 26, 2008. [ 38 ] I am satisfied that unlike the situation in Hoque , supra, it is evident from a review of the new notice of action that it arises out of the precise fact situation dealt with by Justice Beveridge in his decision on liability. It all flows from the commitment letter and the agreement to fund Can-Euro.

These new claims being made by Can-Euro all arise out of its failed mortgage transaction with Industrial Alliance and should have been raised at the time of the initial application. [ 39 ] I add that, putting aside the technical requirements of the two forms of estoppel, I am also satisfied that to allow the claim to proceed would amount to an abuse of process by relitigation. [ 40 ] This conclusion is without prejudice to Can-Euro’s right to bring action for the return of fees paid.

It is clear from the order issued, as a result of the initial hearing before Justice Beveridge and counsel’s agreement at the beginning of this hearing, that such should be the case. [ 41 ] I see no basis to restrict Can-Euro’s ability to attempt to recover these fees on the basis of breach of contract as it alleges, as well as any other legal basis it may bring forward. [ 42 ] Can-Euro has the right to bring action for the return of fees paid. Remedy : [ 43 ] I am satisfied that the appropriate remedy is to strike the pleadings filed by Can-Euro and I so order.

Industrial Alliance will have its costs in the amount of $1,000. As this motion determines the matter, costs shall be payable forthwith. Pickup, J.

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