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Abuse of Process: Analysis and Update
In the following analysis of the doctrines of res judicata, issue estoppel, and cause of action estoppel, it is asserted that different courts apply or discard these doctrines in an effort to reach a conclusion which in the exercise of the Court’s inherent jurisdiction, prevents a denial of justice or would tend to bring the administration of justice into disrepute. The vehicle is the overriding doctrine of abuse of process which has mutated into the more recent principle of finality.
It is further asserted from a review of four cases which are the subject matter of this article, that the primary consideration of the Courts was to analyze the estoppel doctrines and res judicata, and when necessary or expedient, apply or not apply them depending on whether their application gave rise to a failure of justice or some other perceived abuse, or not.
It is submitted that in the “post-modern era” the doctrine of abuse of process relieves the Courts of the artificial constraints of the estoppel doctrines or res judicata, leading to decisions wherein an issue that could have or should have been litigated in the first proceeding, may or may not be allowed to proceed in a subsequent action. Where the application of the estoppel doctrines or res judicata, if strictly applied, might preclude further litigation, the doctrine of abuse of process has been utilized by the Court to permit an old issue to proceed to trial in a subsequent action. Conversely, the doctrine of abuse of process may be equally applied by the Courts to prevent the re-litigation of issues which were deemed resolved in the first proceeding, but do not fall within the confines of the estoppel doctrines or res judicata.
As suggested, the emerging rationale for the application of the doctrine of abuse of process in the cases discussed is that of finality to proceedings.
Therefore, it is concluded that the principle of finality is a more important consideration to the Courts than the constraints imposed by the application of the estoppel doctrines or res judicata.
Even if none of the above doctrines are applicable, considerations of finality are utilized to apply the logic of abuse of process to prevent an injustice.
To the extent that consideration of abuse of process may have been used to apply or reject the other doctrines, it now appears that considerations of finality are preferred by the Courts to render a final result where the other doctrines do not easily apply, or where their application hinders a just result.
In the case of Canam v. Coleset al, [2000] 51 O.R. (3d) 481 (CA) the facts were as follows.
Financial Trust sold property to Canam who had retained realtors who misrepresented the property as being zoned commercially. Canam purchased the property and gave back a mortgage to National Trust. When Canam learned it couldn’t build a commercial building because of the misrepresented zoning it sued National Trust on the take-back mortgage as being void due to misrepresentation by the realtors regarding the zoning. The mortgage document was upheld at trial so Canam thereafter sued its solicitor, who in turn sued the realtors, who in turn sued National Trust.
All of these subsequent proceedings were dismissed by the Ontario Court of Appeal as being an abuse of process even though the subsequent litigation involved different parties and issues. The reason for the dismissal of the subsequent action was that the issue of the misrepresentation by the realtor was central to the determination of the first law suit regarding the propriety of the mortgage, and as such that issue could not be re-litigated.
Mr. Justice Finlayson, for the majority, determined that neither issue estoppel nor res judicata applied as there were different parties in the subsequent litigation.
Although the Learned Justice referred to the doctrine of abuse of process, it would appear that his analysis was more representative of the doctrine of cause of action estoppel. The realtors could have properly been parties to the initial litigation but were not; since National Trust was a party to the initial litigation they could not in subsequent litigation add the realtors as a fourth party when such realtors could have been joined by National Trust in the initial proceedings.
Although Finlayson J. appears to adopt or rely upon the doctrine of abuse of process, and in the end he was anxious to bring finality to the proceedings under the guise of abuse of process where the application of doctrines of issue estoppel and res judicata were a hindrance to him, he appears to have applied cause of action estoppel logic, couched it in terms of abuse of process. In so doing however, he raised, as the pre-eminent rationale, the principle of finality.
At page 5, Finlayson J. states as follows:
[20] The key issue raised in this court is whether the appropriate parties were privy to the proceedings between Canam and National Trust so that the doctrine of issue estoppel applies to prevent the third party claim by Coles against the Realtors. I agree with the result arrived at by the motions judge, (i.e. there was estoppel) but for different reasons.
[21] The issues of identity of subject matter and identity of parties had to be resolved by the motions judge. The latter issue, also referred to as privity, is treated identically under the doctrine of res judicata whether the claim is cause of action estoppel or issue estoppel. Someone who is privy in interest to a party in an action is equally bound by the final judgment in those proceedings. Thus, where a party to the prior proceeding is clearly and sufficiently identified with a nonparty to the litigation, the doctrine of res judicata may be applied: Gleeson v. J. Wippell & Co. Ltd., [1977] 3 All E.R. 54 at p. 60, [1977] 1 W.L.R. 510 (Ch. D.).
At page 6, Finlayson J. goes on to say:
[26] The issue before the motions judge and this court became whether Coles was estopped, or barred by the doctrine of abuse of process, from raising as between Canam and the Realtors the issue of whether Canam was relieved of liability under the mortgage to National Trust because Canam relied on the zoning representations conveyed to it through National Trust's agents, the Realtors. If my assessment of the situation is correct, the issue is not whether Coles was a privy of Canam, but whether the Realtors were privies of National Trust. Instead of looking at the relationship between the solicitor Cole and his client, the plaintiff, Canam, we should look to the relationship between the third party Realtors and the defendant in the mortgage action, National Trust. The Realtors should take the position that Canam could have sued them in the Mortgage Action as agents of National Trust for the same misrepresentations that it alleged against National Trust and did not do so. Since the mortgage action involving these allegations of misrepresentation was resolved adversely to Canam, it follows that the issue of the validity of the real estate transaction is res judicata between Canam and National Trust, and issue estoppel applies as between Canam and the Realtors as privies to National Trust. [emphasis added]
It is submitted that, having found that the issue in the subsequent action should have or could have been determined in the initial action, Finlayson J. does not apply the doctrine of cause of action estoppel as he could have. Rather, he provides an abuse of process analysis. At page 7, Finlayson J. states as follows:
Abuse of process
[31] However, we are not limited in this case to the application of issue estoppel. The court can still utilize the broader doctrine of abuse of process. Abuse of process is a discretionary principle that is not limited by any set number of categories. It is an intangible principle that is used to bar proceedings that are inconsistent with the objectives of public policy. The doctrine can be relied upon by persons who were not parties to the previous litigation but who claim that if they were going to be sued they should have been sued in the previous litigation. This was the case in M.C.C. Proceeds Inc. v. Lehman Brothers International (Europe), [1998] 4 All E.R. 675 (C.A.), where the second claim was against a wholly owned subsidiary of the defendant in the first claim. Similarly, in Solomon v. Smith (1987), [1988] 1 W.W.R. 410 at pp. 41920, 45 D.L.R. (4th) 266 (Man. C.A.), the purchaser unsuccessfully sued the vendor and was seeking to sue the vendor's agent. The court found that allowing the second action to proceed would amount to an abuse of process. [emphasis added]
...
[33] Unless there is new evidence, special circumstances or equitable reasons, then Coles should not be entitled to raise a second cause of action, identical in merit, against an agent who was a privy to the initial proceeding. The Realtors could have been properly included in the initial proceeding. There could be any number of reasons why Canam did not do so, but it hardly lies in the mouth of a stranger to those proceedings to insist constructively that there now be a trial as to the liability of the Realtors to Canam. [emphasis added]
[34] Maintaining open and ready access to the courts by all legitimate suitors is fundamental to our system of justice. However, to achieve this worthy purpose, the courts must be vigilant to ensure that our system does not become clogged with unnecessary, repetitious litigation. To allow the defendant to retry the issue of misrepresentation would be a classic example of abuse of process and a waste of the time and resources of the litigants and the court. The retrying of the issues in this case would also erode the principle of finality that is crucial to the proper administration of justice. Thus, where agents as third parties must raise a defence to issues that are identical to those in a prior proceeding against their principal, the court is entitled to exercise its discretion and terminate the third party proceedings (and in this case the fourth party) as an abuse of process. [emphasis added]
Therefore, although the analysis confuses or merges abuse of process with cause of action estoppel language, the overriding consideration as set out in paragraph 34 was the principle of finality, and that consideration prevailed.
Conversely, in the Nova Scotia Court of Appeal case of Hoque v. Montreal Trust, [1997] N.S.J. No. 430, Cromwell, J. tackled the thorny question of what issues had been determined in the prior proceeding, and ruled, for the most part, that the subsequent proceeding was a re-litigation of the prior proceeding.
Cromwell, J. in Hoque case, although commenting in passing on abuse of process, concentrated on the doctrine of cause of action estoppel and determined that it applied, and because its object was finality, then, for the most part, the Plaintiff, Hoque in a subsequent proceeding could not re-litigate a previous claim.
Cromwell J.’s analysis of cause of action estoppel leads me to believe that the current tendency of Courts to utilize the doctrine of abuse of process is an outgrowth or expansion of the old doctrine of cause of action estoppel, and restores the rationale of the older doctrine to its rightful place of prominence ahead of issue estoppel or even res judicata, both of which depend so heavily on the similarity or privity of parties.
Neither the old doctrine of cause of action estoppel, first expressed in the 1843 case of Henderson v. Henderson, nor the modern day abuse of process doctrine, are constrained by similarities of parties in prior and subsequent proceedings; rather these doctrines look to what properly could have or should have been considered previously, and determine that in the interests of finality such matters cannot be re-litigated.
In the Hoque case the facts were as follows. Mr. Hoque and various companies through which he operated entered into several mortgage transactions with Montreal Trust. Hoque subsequently experienced financial difficulties. A subsequent amending agreement was entered into whereby the outstanding arrears were capitalized, the interest rate was reduced, and various modifications to the payment schedules were made. Hoque defaulted. Montreal Trust then brought an action to enforce its remedies under the agreement, including foreclosure actions on the various mortgages. Hoque made a voluntary assignment into bankruptcy. The foreclosure judgments were obtained on default since the trustee did not defend the actions. Hoque then obtained leave to bring his own subsequent action. Hoque, inter alia, alleged that Montreal Trust and its employee acted in a malicious manner designed to destroy the plaintiff’s businesses, that the re-financing arrangements were unconscionable, and that it acted in a manner which intentionally interfered with his economic and business relations. ... The issue was what allegations in the subsequent action ought to have been raised by way of defence to the previous foreclosure action.
At page 7, the Court, on appeal, articulated the issue as follows.
IV. Issue:
18 There is one fundamental issue on this appeal: whether the Chambers judge erred in law in refusing to dismiss Dr. Hoque’s action as res judicata.
V. Analysis:
19 This appeal involves the interplay between two fundamental legal principles: first, that the courts should be reluctant to deprive a litigant of the opportunity to have his or her case adjudicated on the merits; and, second, that a party should not, to use the language of some of the older authorities, be twice vexed for the same cause. Distilled to its simplest form, the issue in this appeal is how these two important principles should be applied to the particular facts of this case.
21Res judicata is mainly concerned with two principles. First, there is a principle that “...prevents the contradiction of that which was determined in the previous litigation, by prohibiting the re-litigation of issues already actually addressed.” : see Sopinka, Lederman and Bryant, The Law of Evidence in Canada (1991) at p. 997. The second principle is that parties must bring forward all of the claims and defences with respect to the cause of action at issue in the first proceeding and that, if they fail to do so, they will be barred from asserting them in a subsequent action. This “...prevents fragmentation of litigation by prohibiting the litigation of matters that were never actually addressed in the previous litigation, but which properly belonged to it.”: ibid at 998. Cause of action estoppel is usually concerned with the application of this second principle because its operation bars all of the issues properly belonging to the earlier litigation.
24There are some very wide statements about the scope of cause of action estoppel. For example, in the seminal case of Henderson v. Henderson (1843 - 60) All E.R. 373, Vice-Chancellor Wigram stated that the plea of res judicata ... “applies...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 litigation and which the parties exercising reasonable diligence might have brought forward at that time.” (at 381-2), (emphasis added). Similarly in Fenerty v. Halifax (1920), 50 D.L.R. 435 (N.S.S.C. en banco) Ritchie, J. for the Court said that the plea applies “...not only as to the matter dealt with, but also as to questions which the parties had an opportunity of raising.” (At 437), (emphasis added) There are several similarly broad statements in 420093 B.C. Ltd. v. Bank of Montreal (1995), 128 D.L.R. (4th) 488 (Alta C.A.) especially at 499-502.
25The appellants submit, relying on these and similar statements, that cause of action estoppel is broad in scope and inflexible in application. With respect, I think this overstates the true position. In my view, this very broad language which suggests an inflexible application of cause of action estoppel to all matters that “could” have been raised does not fully reflect the present law.
Cromwell, J. provides an exhaustive analysis of cause of action estoppel and in the process determines as a matter of Canadian law, that whereas cause of action estoppel may have been applicable to cases where an issue could have been brought in prior proceedings, in Canada its application is circumscribed by the question of whether the action or issue should have been raised in the prior proceeding. Mr. Justice Cromwell states that the test of whether the issue could have been raised in the prior proceeding is too wide a proposition to be applied in the application of the doctrine of the cause of action estoppel.
Cromwell J. states as follows at page 10 of the aforesaid case:
Although many of these authorities cite with approval of the broad language of Henderson v. Henderson, supra, to the effect that any matter which the parties had the opportunity to raise will be barred, (i.e.could have) I think, however, that this language is somewhat too wide. The better principle is that those issues which the parties had the opportunity to raise and, in all of the circumstances, should have raised, will be barred. In determining whether the matter should have been raised, a court will consider whether the proceeding constitutes a collateral attack on the earlier findings, whether it simply asserts a new legal conception of facts previously litigated, whether it relies on “new” evidence that could have been discovered in the earlier proceeding with reasonable diligence, whether the two proceedings relate to separate and distinct causes of action and whether, in all of the circumstances, the second proceeding constitutes an abuse of process. (parentheses added)