LAW 469-003 Civil Procedure Week 9: Complex Litigation Part I

1. LAW 469-003 Civil Procedure Week 9: Complex Litigation Part I Gavin Cameron March 9, 2017

2. Introduction “The underlying purpose [of issue estoppel] is to balance the public interest in the finality of litigation with the public interest in ensuring that justice is done on the facts of a particular case. (There are corresponding private interests)”. Danyluk v. Ainsworth Technologies Inc. 2001 SCC 44 per Binnie J. The “true principle”: “the power to stop vexatious process” Connelly v. DPP, per Lord Devlin, cited in Hoque v. Montreal Trust (1997), 162 N.S.R. (2d) 321 (C.A.) per Cromwell J.A. (as he then was)

3. Takeaways • Considerations governing the joinder of claims and parties • Two branches of res judicata • Cause of action estoppel • Issue estoppel • Related doctrine of abuse of process

4. Takeaways (cont.) • Underlying policies and that res judicata is a common law rule which enforces compulsory joinder of claims (and sometimes, parties) • The erosion of the mutuality requirement for issue estoppel • Defensive non-mutual issue estoppel • Offensive non-mutual issue estoppel

5. Joinder • “Joinder” refers to rules governing which claims and parties may be included in a single proceeding • Governing rules • R. 3-1 and R. 6-1 (joinder of claims) • R. 3-4 and 3-5 (joinder by means of counterclaim and third party claims) • R. 6-2 (joinder of parties)

6. Joinder (cont.) • Joinder is fundamentally discretionary • Considerations are justice and convenience • Policy in favour of the broadest possible joinder • Law and Equity Act, s. 10 • Avoidance of multiplicity of proceedings • “[i]n matters of justice … the benefactor is he who makes one lawsuit grow where two grew before” • Chafee, “Bills of Peace with Multiple Parties”, 45 Harv. L. Rev. 1297 (1932)

7. Joinder of parties Discretionary power under R. 6-2 to add, remove or substitute parties Discretion to be exercised generously to allow effective determination of the issues without delay, inconvenience or separate trials

8. Joinder of parties (cont.)

9. Joinder of parties (cont.) • Factors relevant to justice and convenience of joinder • Delay • Potential prejudice • Degree of connection between the existing action and new parties and claims

10. Other joinder-related concepts • Aggregation • Consolidation of actions • Trial at the same time • Class proceedings • Common case management • Res judicata/issue estoppel is a means of compulsory joinder • Disaggregation • Severance/trial of an issue

11. Joinder cases • Stevens v. Sun Life Assurance Co. • Contract and bad faith claims ordered severed • Weighing of interests • Plaintiff’s interest in prompt, complete trial of all issues • Severance has potential for delay, added cost, duplication of evidence and inconsistent findings • Defendant’s interest in the fairness of the proceedings • Disclosure of privileged communications (which would include the insurer’s assessment of the contract claims) required to defend the bad faith claim: prejudicial

12. Representative Actions: Araya v. Nevsun Resources, 2016 BCSC 1856 Representative action commenced in November 2014. The plaintiffs are refugees from the State of Eritrea which is located in East Africa. They allege that a British Columbia mining company is legally responsible for the use of torture, slavery, and forced labour by the State of Eritrea and its contracting arms. None had ever been to British Columbia – so no resident plaintiff for the Class Proceedings Act. The Defendant brought an application pursuant to Rule 20-3(1), to prevent the case from proceeding as a representative action.

13. Representative Action (Continued) • Rule 20-3(1) provides: • (1)If numerous persons have the same interest in a proceeding, other than a proceeding referred to in subrule (10), the proceeding may be started and, unless the court otherwise orders, continued by or against one or more of them as representing all or as representing one or more of them. • Usually limited to a narrow class of cases, such as persons alleging a common statutory or collective right (aboriginal or language rights), or a common declaration or remedy (under a collective agreement, owners in a housing development).

14. Rep Action (Continued) The Plaintiffs in the Araya case sought to use a rep action as a “common law class action” because they could not use the Class Proceedings Act. The court concluded that common law class actions “are only available in the absence of comprehensive class action legislation”; while the court can develop the common law, it cannot interpret its rules in a manner “contrary to the historical development of the Rule. Only the Legislature, not this Court, can ascribe to Rule 20-3 the purpose and effect advanced by the plaintiffs in this case.” Currently before the Court of Appeal, along with 3 other issues in the case.

15. Rep Action – Res Judicata? If someone sues on your behalf, and loses, are you bound? Generally yes – res judicata. But not always. James v. British Columbia, 2007 BCCA 547. A representative action brought regarding a sawmill closure, by one employee on behalf of other unionized employees. Dismissed by consent, on the basis of counsel’s advice it could not succeed. Mr. James then brings his own action, which is certified as a class action. Both unionized and non-unionized claims. Whole point of a rep action is that success for one is success for all – BUT, because the non-unionized employees were not specifically included in the first action, the Court of Appeal allowed the second action to continue.

16. Res judicata • Common law (and policy based) rule of evidence • Means ‘the thing is decided’ • Stops (“estops”) parties to prior proceedings (or their privies) from re-litigating questions which were, or, in some circumstances, ought to have been decided in those prior proceedings • Two branches • Cause of action estoppel • Issue estoppel

17. Formal definition of res judicata Rule of evidence Applies to final decisions Of tribunals of competent jurisdiction Over the parties and the subject matter Prevents (or “precludes”) The parties or their privies From disputing or re-litigating matters Which were or could have been advanced in the proceeding And, in the case of issue estoppel, which were essential to the decision and not collateral Angle v. Minister of National Revenue

18. Underlying policies Finality Public interest that there should be finality to litigation Private interest in being protected from repeat (and therefore vexatious) litigation “One bite at the cherry” Consistency and certainty Concern over inconsistent results

19. Underlying policies (cont.) Judicial economy Avoids waste of judicial resources that would result in adjudicating the same questions more than once Promotes acceptance of one court’s final decision as sufficiently authoritative and correct, preserving the “moral force” of judgments (Hoque) Ensures parties bring forward their whole case at once and not serially

20. Underlying policies (cont.) • Not, however, concerned directly with correctness • Is sometimes applied at some cost to correctness and merits-based outcomes: McIlkenny • At same time, re-litigation is no guarantee of a better result and can be an affront to justice: Toronto v. CUPE; Demeter

21. Cause of action estoppel • Applies to claims or defences; referred to in the U.S. as “claim preclusion” • Prevents a party from raising in a subsequent proceeding claims or defences based on the same facts/cause of action/transaction • If plaintiff succeeds, her cause of action and all claims or causes which could have been advanced “merge” in the judgment • If defendant succeeds, the plaintiff’s cause of action and all claims or causes which could have been advanced are “barred” by the judgment

22. Cause of action estoppel (cont.) If it were otherwise, and parties could advance a new legal theory based on the same facts, there would be no end to litigation “except when legal ingenuity is exhausted” Las Vegas Strip Club per Sharpe J. (as he then was) Means of effecting compulsory joinder of claims Use it or lose it

23. Cause of action estoppel (cont.) • Key question: “Is there any satisfactory explanation why this claim was not presented in the prior action?” • Loisell and Hazard at p. 451 cited in Walker

24. Particular issues to note in connection with cause of action estoppel How do you determine what was properly the subject matter of the prior action? What is a “claim”? Who is a privy? When should cause of action estoppel apply? What are the exceptions to cause of action estoppel? Which kinds of former adjudication attract preclusion?

25. Determining the proper subject matter of the prior action • What is a cause of action? • “A cause of action is the group of operative facts giving rise to one or more bases for suing, or the factual situation that entitles one person to obtain a remedy from another” • Brittania Airways • The “transaction” which gives rise to claims recognised at law

26. Determining the proper subject matter of the prior action (cont.) • Focus is on the facts, not the legal label; cannot avoid cause of action estoppel by changing your legal theory • E.g. claiming first in contract, then in unjust enrichment in a subsequent action • Key reference points • Pleadings • Order

27. Privies • Who is a privy? • Person with a “sufficient degree of identification … to make it just to hold that the decision to which one was a party should be binding in proceedings to which the other is a party” • Gleeson v. J. Wippell & Co. per Megarry VC • Principals of companies, directors, employees and agents will usually be privies • Definition somewhat results-oriented • You are if justice requires it: circular

28. Application of cause of action estoppel • When should cause of action estoppel apply? • Put another way, what explanations for the failure to advance the claim in the prior proceeding are not satisfactory? • Collateral attack on earlier findings/result • Asserting a new legal conception of the same essential facts • Reliance on new evidence that was discoverable earlier by due diligence • In all of the circumstances, the second action is an abuse of process

29. Exceptions to cause of action estoppel/res judicata • “Special circumstances” • Where the rigid application of the rule would be unjust • Fraud • Decisive fresh evidence not available at the time of the prior action with due diligence

30. Other application issues • Which kinds of former adjudication attract preclusion? • Default judgments • Consent judgments • Foreign judgments • Decisions of administrative tribunals

31. Other application issues (cont.) • Which kinds of former adjudication do not attract preclusion? • Dismissal for want of prosecution • Dismissal for lack of jurisdiction • Interlocutory decisions (not strictly)

32. Cause of action estoppel cases Brittania Airways v. RBC Grandview v. Doehring

33. Issue estoppel • Precludes parties from re-litigating issues decided in a prior proceeding • Judge-made procedural rule, a creature of public policy • Application is discretionary • Depends on all of the relevant circumstances

34. Issue estoppel (cont.) • “The objective is to ensure that the operation of issue estoppel promotes the orderly administration of justice but not at the cost of real injustice in the particular case” • “The underlying purpose is to balance the public interest in the finality of litigation with the public interest in ensuring that justice is done on the facts of a particular case” • Danyluk v. Ainsworth per Binnie J.

35. Issue estoppel (cont.) • Test • Issue must be the same as the one decided in the prior proceeding • The prior decision must have been final • The parties to both proceedings must be the same or their privies • The determination of the issue must have been essential to the prior decision and not collateral • Toronto v. CUPE (Walker, p. 348) • Danyluk v. Ainsworth (Walker, p. 372)

36. Issue estoppel (cont.) • Test (cont.) • If requirements satisfied, court must still determine whether, as a matter of discretion, issue estoppel ought to be applied • Danyluk v. Ainsworth

37. Penner v. Niagara • According to an article on CanLII, the facts are as follows: • Mrs. Penner was on trial for the weighty offense of not properly displaying two valid license plates. Mr. Penner, her husband, sat in the very back of the courthouse, wearing sunglasses and chewing gum. Cst. Koscinski sat directly behind Mr. Penner, awaiting an unrelated matter. • Cst. Parker was testifying against Mrs. Penner when the court became aware of what the prosecutor termed a “chirping” noise from the back of the courtroom, a sort of “running commentary” on the proceedings: • “That’s your f***ing opinion”!! Mr. Penner audibly added to Cst. Parker’s testimony.

38. Penner • When Cst. Parker finished on the stand, he took the seat at the back next to Cst. Koscinski and warned Mr. Penner he would be arrested if there were any more disturbances. As Mrs. Penner rose to testify, Mr. Penner struck up his commentary again. The prosecutor finally asks the JP to intervene. • At this point, Mr. Penner pulls away from Cst. Parker who contemporaneously decides to arrest the man for causing a disturbance; Cst. Kosinski assists in this endeavor, and Mr. Penner resists. • The courtroom “dissolved into pandemonium” as the officers took the Appellant into the hallway and ultimately completed the arrest. The Justice of the Peace fled the courtroom and the court clerk followed, locking the door behind him and calling 911

39. Penner • Illustration of the doctrine of issue estoppel in the context of administrative tribunals. • Off topic: Hints at some of the mess that surrounds administrative law. • 4-3 majority holds that issue estoppel should not bar a civil action for police misconduct just because the officers had been cleared in disciplinary proceedings. • Decision turned on the discretionary nature of the doctrine; that even if all of the elements were established, it should not be applied if it would result in unfairness or an unjust result.

40. Penner (Majority) • The majority identified two main ways in which unfairness may arise and warrant the use of discretion. • First, the application of issue estoppel will be unfair if the prior proceedings were themselves unfair. • Second, even if a prior proceeding was conducted fairly and properly, it may nonetheless be unfair to use the results for the purposes of barring a civil claim. The unfairness in this second sense may occur where the purposes, processes or stakes involved in the two proceedings are significantly different. • “Issue estoppel is about balancing judicial economy and finality and other considerations of fairness to the parties. It is a flexible doctrine that permits the court to respond to the equities of a particular case.”

41. Penner – The other 3 Justices • For the minority, fairness is linked to finality, not process or outcome. Differences in process, procedure or purpose should not override finality. • The “twin principles” which underlie the doctrine of issue estoppel – “that there should be an end to litigation and … that the same party shall not be harassed twice for the same cause” are core principles which focus on achieving fairness and preventing injustice by preserving the finality of litigation. This, as the majority said in Figliola, is the case whether we are dealing with courts or administrative tribunals. Our colleagues’ approach undermines these principles and risks transforming issue estoppel into a free-floating inquiry into “fairness” and “injustice” for administrative tribunals and revives an approach that our Court refused to apply in Figliola.”

42. The other 3 Justices (continued) “The Court’s residual discretion not to apply issue estoppel should be governed by the interests of fairness in preserving the finality of litigation. It should not be exercised in a manner that would impose a particular model of adjudication, undermine the integrity of administrative tribunals, and deny their decisions the deference owed to them under the jurisprudence of this Court…”

43. Penner v. Niagara - Discussion Were 4 right, or 3? Should the same rule apply in the cops’ favour? Tobacco case.

44. Examples of issue estoppel Bernhard v. Bank of America (1942, California Supreme Court) (ownership of funds in a bank account) Defensive non-mutual issue estoppel Blonder Tongue Laboratories v. University of Illinois Foundation (1971, U.S. Supreme Court) (validity of a patent claimed by plaintiff) Defensive non-mutual issue estoppel Parklane Hosiery v. Shore (1979, U.S. Supreme Court) (false and misleading statements in a proxy circular delivered in connection with a merger) Offensive non-mutual issue estoppel

45. Issue estoppel: mutuality Traditionally, the requirement of mutuality (criterion 3: The parties to both proceedings must be the same or their privies) has loomed large Mutuality evaluated by asking whether the party seeking to invoke the estoppel would have been bound if the question was decided the other way

46. Issue estoppel: mutuality (cont.) • Trend toward relaxing the mutuality requirement • Defensive non-mutual issue estoppel • Offensive non-mutual issue estoppel • Abuse of process

47. Issue estoppel: mutuality (cont.) Mutuality a contest between two different philosophies “One kick at the can” A party should only be entitled to one full and fair opportunity for a judicial resolution of the same issue: Parklane Hosiery per Justice Potter Stewart “Having it both ways” Prior determination is binding if unfavourable but not if favourable: Minnott per Laskin J.A. Linchpin question: Did the party against whom the estoppel is sought to be invoked have one full and fair opportunity to litigate the issue?

48. Issue estoppel cases Danyluk v. Ainsworth Technologies McIlkenny v. Chief Constable of the West Midlands Demeter v. British Pacific Life Insurance Toronto (City) v. CUPE Penner v. Niagara