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Issue Estoppel

Prevents Repeated Litigation and Involves the Res Judicata Principle

Page last modified : December 06 2023

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What prevents someone from returning to court over and again?

When a legal case is heard by a trial judge or another adjudicative decision maker and a ‘Final Order’ is issued as a result, it becomes conclusive and ends the case. As a result, unless appealed, the dispute is resolved, and resolving the same issue among the same people is prohibited.

Understanding When Going to Court Is Going Back to Court Is Going Back to Court Is Going Back to Court Is Going Back to Court Is Going Back to Court Is Going Back to Court Is Going Back to

For a better understanding of limited liability protection, a corporate veil has been revealed. Scott McEachern wrote this.

When assessing whether an issue is banned from being addressed by the court, laypeople and lawyers alike may be perplexed by the res judicata principle, often known as issue estoppel. The judicial process demands and expects finality for a variety of reasons.

One rationale for concluding judicial procedures is that the administration of justice, i.e. the justice system itself, may be tarnished in the public eye if parties to proceedings are permitted to relitigate topics repeatedly. Furthermore, repeating legal actions would be a waste of taxpayer-funded judicial resources.

The Law

The question of whether a legal matter is subject to the res judicata principle is so frequently asked that the Supreme Court precedent judgment Danyluk v. Ainsworth Technologies Inc., [2001] 2 S.C.R. 460, which discusses the topic, is mentioned more than 1,800 times on the CanLII.org website. As for the legal test of what constitutes a legal case banned by the res judicata principle, the Supreme Court stated in Danyluk:

24 Issue estoppel was more particularly defined by Middleton J.A. of the Ontario Court of Appeal in McIntosh v. Parent, 1924 CanLII 401 (ON CA), [1924] 4 D.L.R. 420, at p. 422:
When a question is litigated, the judgment of the Court is a final determination as between the parties and their privies. Any right, question, or fact distinctly put in issue and directly determined by a Court of competent jurisdiction as a ground of recovery, or as an answer to a claim set up, cannot be re-tried in a subsequent suit between the same parties or their privies, though for a different cause of action. The right, question, or fact, once determined, must, as between them, be taken to be conclusively established so long as the judgment remains. [Emphasis added.]
This statement was adopted by Laskin J. (later C.J.), dissenting in Angle, supra, at pp. 267-68. This description of the issues subject to estoppel (“[a]ny right, question or fact distinctly put in issue and directly determined”) is more stringent than the formulation in some of the older cases for cause of action estoppel (e.g., “all matters which were, or might properly have been, brought into litigation”, Farwell, supra, at p. 558). Dickson J. (later C.J.), speaking for the majority in Angle, supra, at p. 255, subscribed to the more stringent definition for the purpose of issue estoppel. “It will not suffice” he said, “if the question arose collaterally or incidentally in the earlier proceedings or is one which must be inferred by argument from the judgment.” The question out of which the estoppel is said to arise must have been “fundamental to the decision arrived at” in the earlier proceeding. In other words, as discussed below, the estoppel extends to the material facts and the conclusions of law or of mixed fact and law (“the questions”) that were necessarily (even if not explicitly) determined in the earlier proceedings. 25 The preconditions to the operation of issue estoppel were set out by Dickson J. in Angle, supra, at p. 254:
(1) that the same question has been decided;
(2) that the judicial decision which is said to create the estoppel was final; and,
(3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

Ji Zhou et al. v. Azadeh Hashem Nia et al., 2023 ONSC 5466, Dosen v. Meloche Monnex Financial Services Inc. (Security National Insurance Company), 2021 ONCA 141, and Roumanes v. Dalron et al., 2010 ONSC 2891 each stated:

[25] I do not find there to be any issue as regards the defendants’ argument of res judicata. There is a two-step test for determining whether issue estoppel arises:

1. Three preconditions must be established, namely that
i) the same question has been decided;
ii) the relevant judicial decision was final — i.e., the issue said to be barred was a fundamental issue in the substantive decision, with no appeal available on that particular issue; and
iii) the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.
See Danyluck v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at paras. 25 and 33.
(2) Res Judicata

[30] The law recognizes a number of doctrines to prevent the abuse of the decision-making process. One of the doctrines is res judicata. In Danyluk, Binnie J. described the doctrine, at para. 18, as follows:
The law rightly seeks a finality to litigation. To advance that objective, it requires litigants to put their best foot forward to establish the truth of their allegations when first called upon to do so. A litigant, to use the vernacular, is only entitled to one bite at the cherry…. An issue, once decided, should not generally be re-litigated to the benefit of the losing party and the harassment of the winner. A person should only be vexed once in the same cause. Duplicative litigation, potential inconsistent results, undue costs, and inconclusive proceedings are to be avoided.
[31] Res judicata has two main branches: cause of action estoppel and issue estoppel. Cause of action estoppel prohibits a litigant from bringing an action against another party when that same cause of action has been determined in earlier proceedings by a court of competent jurisdiction. Cause of action estoppel also prevents a party from re-litigating a claim that could have been raised in an earlier proceeding.

[32] Issue estoppel is narrower. It applies to prohibit the re-litigation of an issue that has already been decided in an earlier proceeding, even where the cause of action is different in the two proceedings.

[33] The overall goal of the doctrine of res judicata, and therefore of both cause of action estoppel and issue estoppel, is judicial finality: Minott v. O’Shanter Development Co. (1999), 1999 CanLII 3686 (ON CA), 42 O.R. (3d) 321 (C.A.), at paras. 16-17; Hoque v. Montreal Trust Co. of Canada, 1997 NSCA 153, 162 N.S.R. (2d) 321, leave to appeal refused, [1997] S.C.C.A. No. 656.

(3) Abuse of Process

[34] The re-litigation of issues that have been before the courts in a previous proceeding may create an abuse of process. That is because re-litigation carries serious detrimental effects and should be avoided unless the circumstances dictate that re-litigation is in fact necessary to enhance the credibility and the effectiveness of the adjudicative process as a whole: Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 52.

[35] The law seeks to avoid re-litigation primarily for two reasons: first, to prevent overlap and wasting judicial resources; and second, to avoid the risk of inconsistent findings: C.U.P.E., at para. 51; Donald J. Lange, The Doctrine of Res Judicata in Canada, 4th ed. (Markham: LexisNexis Canada Inc., 2015), at pp. 217-18.

(4) Residual Discretion

[36] A court may decline to apply res judicata or abuse of process where its application would work an injustice. This might occur where the first proceeding denied a party a full and fair hearing, even though that party exercised reasonable diligence. Additionally, even if the first proceeding was conducted with scrupulous fairness, it might still be unfair to use the results of the first proceeding to preclude re-litigation of an issue.

[37] It may be appropriate to exercise discretion to decline to apply the abuse of process doctrine when (1) the first proceeding is tainted by fraud or dishonesty, (2) fresh, new evidence, previously unavailable, conclusively impeaches the original results, or (3) fairness dictates that the original result should not be binding in the new context: Catalyst, at para. 68. The list of relevant factors to this discretion is not closed. The discretionary factors for whether to decline to apply the abuse of process doctrine may also apply in the context of deciding whether to apply the doctrine of res judicata.
[10] In the case of Danyluk v. Ainsworth Technologies Inc. [2001] 2 S.C.R. No. 460, the Supreme Court of Canada determined that the application of issue estoppel requires a balancing of 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. Its application involves a two step process: firstly, the determination of whether the three preconditions of issue estoppel have been met, and secondly, if they have been met, the determination of whether it ought to apply in the particulars circumstances of the case.

[11] The three preconditions of issue estoppel were stated as follows: (1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised.

As a result, the test for whether issue estoppel exists and whether a case should be heard boils down to three simple requirements, all of which must be met:

The same legal subject had previously been decided; the judicial decision was final; and the parties to that decision were the same as in the new process.

Interestingly, in order for the principle of issue estoppel, or res judicata, to apply, a judicial ruling on the merits of the matter must be made. This argument is frequently overlooked by legal practitioners and even judges who fail to properly comprehend and recognize the element of preceding “judicial decision.” As a result, when disputing parties agree to compromise,

[9] The defendants argue that the dismissal of the plaintiffs’ claim represented a with prejudice disposition of the plaintiffs’ claims and that the legal doctrine of res judicata precludes them from being re-litigated in this action. Mr. Drummond asserts that he was led to understand that the dismissal of the Small Claims Court proceeding would put an end to legal proceedings arising from use of the OWB once and for all. The defendants rely on the decision of Ground J. in Reddy v. Oshawa Flying Club (1992), 11 C.P.C. (3d) 154 (Ont. Gen. Div.), at para. 9:

The case law seems to be clear that a consent order which ends an action is of the same effect for purposes of the res judicata doctrine as a judgment issued by the court on completion of a trial or hearing.
[10] The plaintiffs point out that the co-defendant in this action, Ms. Capello, was not a party to the Small Claims Court proceeding. But that aside, it was clearly the plaintiffs’ intention to discontinue their action so that they could start a new one in the right court.

[11] In my view the application of a bar based or res judicata would not be appropriate in this case. A discontinued proceeding would not operate as a bar. And even if the operative termination of the Small Claims Court action was by a consent dismissal order signed by the Registrar, it was clearly not the intention of the plaintiffs to foreclose their ability to bring an action in this court.

[12] Furthermore, there cannot be said to have been an adjudicative aspect to the consent order. In Lawyers’ Professional Indemnity Co. v. Geto Investments Ltd. (2001), 2001 CanLII 27980 (ON SC), 54 O.R. (3d) 795 (S.C.J.), commenting on the above quoted passage from Reddy, Nordheimer J. wrote, at paras. 11 and 12:

[11] With respect, I do not believe that the authorities support the breadth of that statement. Where the consent order has an adjudicative aspect to it, as it did in Maiocco v. Lefneski, [1995] O.J. No. 4014 (Ont. Gen. Div.)] and in Staff Builders [International Inc. v. Cohen, [1983] O.J. No. 401 (Ont. H.C.)], then the principle of res judicata may apply. But where, as here, the order does nothing more than dismiss the action pursuant to a settlement and therefore clearly does not purport to have made any adjudication of the action on the merits, then I do not see how the doctrine of res judicata can flow from it. The classic statement in Henderson v. Henderson (1843), 3 Hare 100, (Eng. V.-C), which is relied upon both in Reddy v. Oshawa Flying Club, supra, and in Staff Builders International Inc. v. Cohen, supra, says, at p. 115:

The plea of res judicata applies, except in special cases, 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 of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time. (emphasis added)

[12] As I have already indicated, the consent order here does not involve a pronouncement of judgment on any of the matters raised in the former action nor could it given that the order itself was granted by the Registrar. In my view, therefore, the doctrine of res judicata is not invoked by such an order and no estoppel can arise as a consequence of it.

Simply said, unless a prior proceeding was adjudicated upon at Trial or some type of judicial decision at a Motion where the decision was based upon substantive merits rather than a mere procedural concern, the issue estoppel doctrine fails to attach and is unavailable to bar a subsequent proceeding.

Summary Comment

Accordingly, if the previous decision addressed a different question of fact or law, if the previous decision was without finality, or if the previous decision involved different parties to the proceeding, the fresh proceeding is other than subject to the res judicata doctrine and should proceed as a separate matter, even if stemming from – and perhaps especially as stemming from, the previous matter.

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