



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



Reliable Mortgages Investment Corp. v. Chan,









2014 BCCA 14




Date: 20140110

Docket:
CA040765

Between:

Reliable Mortgages
Investment Corp.

Respondent

(Plaintiff)

And

Sylvia Chan and
Alice Lee

Appellants

(Defendants)




Before:



The Honourable Mr. Justice Low

The Honourable Madam Justice Stromberg-Stein

The Honourable Mr. Justice Willcock




On appeal from:  An
order of the Supreme Court of British Columbia, dated
March 5, 2013 (
Reliable Mortgages Investment Corp. v. Chan
,
2013 BCSC 301, Vancouver Docket S115440).

Oral Reasons for Judgment




Counsel for the Appellants:



G.J. Niemela





Counsel for the Respondent:



R.J. Ellis





Place and Date of Hearing:



Vancouver, British
  Columbia

January 10, 2014





Place and Date of Judgment:



Vancouver, British
  Columbia

January 10, 2014








Summary:

On this appeal from a decision dismissing an application
to strike the respondents action, the appellants argued the action brought
against them by the plaintiff mortgage corporation ought to be barred as the
cause of action and fundamental issues had been, or ought to have been, decided
in a previous foreclosure action.

Held: appeal dismissed. The trial judge was correct in
finding that neither cause of action estoppel nor issue estoppel applied. While
the
foreclosure
proceedings were a bar to claims on the mortgage or arising out of the mortgage
contract, they were not a bar to claims arising out of the failure of the
contract to protect the respondents interests.
The respondent mortgage corporation
was not required to argue a case in conversion at the foreclosure trial. The
previous trial judge had left the question of negligence or wilful blindness in
relation to such a claim open for litigation.

[1]

WILLCOCK J.A.
: This is an appeal from the judgment of
Mr. Justice Burnyeat dismissing an application brought by the defendants
to dismiss the plaintiffs claim on the grounds that it is barred by the
doctrine of
res judicata
or amounts to an abuse of process by relitigation.

Background

[2]

On May 26, 2009, Reliable Mortgages Investment Corporation (Reliable)
issued a Petition, naming Sylvia Chan and Jason Lee as respondents, by which it
sought: a declaration that a mortgage registered in the New Westminster Land
Title Office on March 12, 2009, charged certain lands; a declaration of
default; a six-month redemption period; an order for sale; and judgment against
the respondents in the amount of $265,257.24, as at May 21, 2009, and per
diem interest thereafter.

[3]

By order granted by Master Baker on June 24, 2009, the petition was
held to act as a writ of summons and statement of claim, and the claim
described in the petition was moved to the trial list.

[4]

The claim came on for trial in May 2011 and resulted in the
August 9, 2011 judgment of Mr. Justice Smith indexed at 2011 BCSC
1080. The reasons begin with a succinct description of the background:

[1]        The respondent Sylvia Chans nephew used a forged
power of attorney to mortgage her house without her knowledge. The petitioner
Reliable Mortgages Investment Corp. (Reliable) now seeks to foreclose on that
mortgage.

[2]        The mortgage proceeds of almost $250,000 were
deposited into Ms. Chans bank account, but she says her nephew, Jason
Lee, told her it was his money and persuaded her to transfer the funds to him.
She says she trusted him and did not press for a clear explanation of where the
money had come from or why it had gone into her account.

[3]        A mortgage obtained by
fraud without the knowledge of the property owner would normally be
unenforceable, but Reliable says it is entitled to an
order nisi
of
foreclosure in this case because Ms. Chan actively, if unwittingly,
assisted in the fraud by transferring the money when she could have discovered
the truth by making reasonable inquiries.

[5]

The effect of Ms. Chans knowledge of the fraud perpetrated upon
Reliable on the validity of the mortgage was addressed in the judgment, in the
context of the discussion of the nature of the protection afforded to a party
affected by the fraudulent execution of a document later registered by the
Land
Title Act,
R.S.B.C. 1996, c. 250.

[6]

The trial judge was referred to the judgment of this court in
Gill v.
Bucholtz
, 2009 BCCA 137, and particularly the passage of the judgment at
para. 27 that reads as follows:

[27]      ... On its plain meaning, the exception in s.
23(2)(i) to the indefeasibility of title applies and the phrase void
instrument in s. 25.1(1) includes a mortgage taken from a person who obtained
her title by fraud or forgery, as occurred in this case. The Act preserves the
nemo
dat
rule with respect to charges  even where the holder has relied on the
register and dealt
bona fide
with a non-fictitious registered owner. The
mortgagees in this case did not acquire any estate or interest in Lot 4 on
registration of their instruments because having been granted by a person who
had no interest to give, those instruments were void, both at common law and
under s. 25.1(1). ...

[28]      The Legislature of
British Columbia would appear to have adopted the policy that the cost of
frauds perpetrated against mortgagees and other chargeholders should be borne
not by the public (as the funders of the Assurance Fund) but by lenders and
other chargeholders themselves. Whether this policy choice is a good one or not
is not for us to decide. We must give effect to the language of the statute in
its ordinary and grammatical meaning.

[7]

Mr. Justice Smith addressed that argument at para. 32:

[32]      Reliable argues that
Gill
is distinguishable because the mortgage proceeds in this case went into Ms. Chans
bank account and she knowingly signed the money over to the fraudster. Reliable
says she was in the best position to discover the fraud, but instead actively
assisted in it by transferring the funds to Jason Lee without asking obvious
questions.

[8]

In support of the proposition that this courts decision in
Gill
was distinguishable, Reliable cited the decision in
Isaacs v. Royal Bank of
Canada
, 2010 ONSC 3527, affd 2011 ONCA 88. The trial judge found:

[36]

In
my view,
Isaacs
is of no assistance to Reliable. First of all, whatever
the state of the law may be in Ontario, I am bound by the British Columbia
Court of Appeals clear interpretation of the applicable British Columbia
statute in
Gill
.

[37]      I also note that neither the chambers judge nor the
Court of Appeal in
Isaacs
referred to provisions in Ontario legislation
that are broadly similar to ss. 25.1 and 26 of the British Columbia [Act]. It
was presumably not necessary to refer to them because Ms. Isaacs had in
fact signed the mortgage documents and the bank had already exercised its
rights under the mortgage by selling the property.

[38]      The Ontario Statute was
considered in
Lawrence v. Maple Trust Company
, 2007 ONCA 74, where a
property owners signature was forged on a transfer of the property and the
fraudulent transferee then obtained a mortgage. The Ontario Court of Appeal
found for the property owner and set aside the mortgage, thus arriving at the
same result, although through a somewhat different analytical approach, as that
reached by the British Columbia Court of Appeal in
Gill
. The Ontario
Courts subsequent decision in
Isaacs
would therefore not apply on these
facts, even in Ontario, and it does not distinguish
Gill
, which is
binding upon me.

[9]

Because Ms. Chan had not signed the mortgage it did not create a
valid charge on Ms. Chans property. The foreclosure petition was
dismissed.

[10]

In dismissing the claim the trial judge expressly noted:

[40]      I stress that in
dismissing Reliables claim, I am only finding that it is not entitled to
execute on the mortgage security, which was the only claim advanced in this
proceeding. I make no comment on any other cause of action that Reliable may
have against Ms. Chan or anyone else.

[11]

Reliable then issued a notice of civil claim on August 15, 2011,
against Ms. Chan and Ms. Lee. (BC Supreme Court action, Vancouver
registry No. S115440). In that action Reliable says the mortgage in
question was fraudulently executed by Jason Lee purporting to act on behalf of Ms. Chan.
It says the proceeds of the mortgage were deposited into Ms. Chans bank
account on March 13, 2009, and she authorized the transfer of the sum of
$200,000 to Jason Lee by way of bank draft and further authorized the transfer
of the sum of $46,182 to a bank account owned or controlled jointly by Jason
Lee and the appellant Ms. Lee. Reliable seeks damages against Ms. Chan
and Ms. Lee for fraud and conversion. It says Ms. Chan and Ms. Lee
knew or ought to have known: Jason Lee was perpetrating a fraud on Reliable;
that Ms. Chan paid out the proceeds of the mortgage without making any
adequate inquiry as to the source of the money, and; they knew or ought to have
known they were not legally entitled to possess or deal with the net mortgage
proceeds.

[12]

Ms. Chan and Ms. Lee deny they participated in or knew that
Jason Lee was perpetrating a fraud on Reliable and claim to have made an
adequate inquiry as to the source of the money and obtained a satisfactory
response. They further say there was a finding by the judge in the foreclosure
proceedings that there was no evidence they had any specific knowledge of
Reliable, the mortgage, or the forged power of attorney when Ms. Chan
signed the documents transferring funds to Jason Lee on March 13, 2009. Ms. Chan
and Ms. Lee say Reliable is precluded from relitigating issues determined
at the foreclosure trial.

[13]

On May 28, 2012, Ms. Chan and Ms. Lee filed an application for
an order striking the claims against her as an abuse of process.

[14]

In support of their application Ms. Lee and Ms. Chan say that
on the day before the foreclosure trial, counsel for Reliable advised Ms. Chans
lawyer it would be relying on conversion as a cause of action at the trial. Ms. Chans
counsel objected to late notice of this cause of action that had not been pled.

[15]

The issue of the addition of conversion as a new cause of action was
discussed on May 10, 2011, at the opening of the trial. This appeal turns,
in part, on the manner in which the trial judge addressed the submissions made
at the opening.

[16]

In his opening statement counsel for Reliable indicated that what was
being sought was an
order nisi
of foreclosure, a declaration of the
amount due under the mortgage, and a declaration that the mortgage charged the
property. This was referred to as the usual
order nisi
relief. Counsel
expressed the view that it was his intention to reserve the right to argue the
conversion issue. Counsel for Ms. Chan advised the court of his position:
Reliable had an opportunity to advance any claim it wished to bring to trial and
an opportunity to adjourn the trial to do so. He did not object to an
adjournment to permit Reliable to advance a conversion claim but did object to
a conversion claim being brought up at a later date. The court was advised
that if the trial proceeded Ms. Chan would rely upon
res judicata
to defeat later claims, to the extent she could do so.

[17]

The trial judge addressed those submissions by saying:

Well, I think that is how we have to deal with it, in the
sense that this  this has been pled as a foreclosure action. I have no idea at
this point whether I will be able to decide that off the top of my head or Im
going to have to reserve on it. Then the chips will have to fall where they may
as to whether there is  there can further proceedings on a conversion matter,
right?



So, but Im not certain I  I
think Mr. Niemela is correct, that conversion is a different cause of
action and he should not be expected to  and it may require different or
additional evidence and he shouldnt be expected to deal with it in this
proceeding, all right? Okay.

[18]

The trial proceeded on those terms. The appellants say that in his
judgment, at its conclusion, the judge made two significant findings of fact in
relation to the
res judicata
argument now advanced:

a)

that after being told the money belonged to Jason Lees company Ms. Chan
asked no further questions about the source of the money deposited in her
account in March 2009; and

b)

that there was
no evidence Ms. Chan had specific knowledge of Reliable, the mortgage, or
the forged power of attorney when she signed the document transferring funds on
March 13, 2009.

[19]

Reliable says the May 2011 trial addressed only its claim to enforce a
mortgage and the current action is based on a distinct and separate cause of
action, namely: fraud and conversion.

Judgment appealed from

[20]

The appellants application came on for hearing before Mr. Justice
Burnyeat in chambers on January 18, 2013. Judgment was reserved to March 5,
2013. It is indexed at 2013 BCSC 301.

[21]

The application was dismissed. The chambers judge held:

[17]      I am satisfied that issue estoppel does not apply.
The issue that was before N. Smith J. was the enforceability of the
Mortgage and not what happened with the funds after they were advanced by
Reliable. There was no decision relating to conversion and, in fact, N. Smith J.
specifically stated that the only issue that he was deciding was the issue of
the enforceability of the Mortgage and that he would be making no comments on
any other causes of action that might be available to Reliable. When originally
commenced, it would not have been possible to include a claim for conversion
under the Petition as causes of action which can be claimed in a Petition could
not include such an action.

[18]      Once the Petition was converted for Trial purposes,
it would have been possible to apply to amend the pleadings to claim conversion
and, at the same time, to add Ms. Lee as a party. While it would have been
preferable to add Ms. Lee, to amend the pleadings and to adjourn the
Trial, that was not done. However, not having proceeded in that manner, the
ability to later deal with the issue of conversion was specifically reserved in
the decision of N. Smith J.

[19]      Regarding cause of action estoppel, it is clear
that no decision on conversion was decided at the Trial before N. Smith J.
The issue of a conversion claim against Ms. Chan and Ms. Lee was
specifically raised before N. Smith J. While the conversion claim was
not to be raised during the currency of the Trial, the possibility of later
raising a conversion claim was left open when N. Smith J. commented
that: there can be further proceedings on a conversion matter, and that
conversion is a different cause of action ... it may require different or
additional evidence .... While it would have been preferable for the Trial to
be adjourned in order that there could also be a hearing of the conversion
issue, that was not done. However, I am satisfied that that step was not
necessary in order to preserve the right of Reliable to proceed as it did.

[20]      I cannot find that there has been abuse of process
as I cannot find that what is proposed in the Action is a relitigation of the
Trial before N. Smith J. The integrity of the judicial
decision-making process in the first proceeding will not undermined. Nothing in
this Action will deal with the decision relating to the enforceability of the
Mortgage. At the same time, I cannot find that Reliable seeks to avoid
compliance with the Order made by N. Smith J. There is no challenge
of that Order either directly or indirectly.

[21]      In view of what was
stated before N. Smith J. and in view of what was stated by N. Smith J.,
I am satisfied that the integrity of the judicial decision-making process would
be undermined if Reliable is not in a position to claim against Ms. Chan
and Ms. Lee. Accordingly, the application of Ms. Chan and Ms. Lee
is dismissed.

The Appellants Position on Appeal

[22]

The appellants rely upon the doctrines of cause of action estoppel and
issue estoppel and say this action is an abuse of process by relitigation.

[23]

The appellants rely upon the first five of the estoppel doctrines
described in Donald Langes text,
The Doctrine of Res Judicata in Canada:
Third Edition
(Markham: LexisNexis Canada Inc. 2010) at p.11:

There are six essential doctrines developed by the courts of
Canada. Each one of these doctrines may be applied with rigour based on its
precise meaning. In their most concise definitions, the six essential estoppel
doctrines are:

(1)  Issue estoppel bars an issue which has actually been
decided in the first proceeding.

(2)  Issue estoppel under the rule in
Henderson
bars
an issue which could have been brought in the first proceeding.

(3)  Cause of action estoppel, the trust
res judicata
,
bars a cause which has actually been decided in the first proceeding.

(4)  Cause of action estoppel under the rule in
Henderson
bars a cause which could have been brought in the first proceeding.

(5)  Abuse of process by relitigation bars a second
proceeding when the integrity of the judicial decision-making process in the
first proceeding will be undermined.

(6)  Collateral attack bars a second proceeding when a party,
bound by an order, seeks to avoid compliance with that order by challenging the
order itself and its enforceability, not directly but indirectly in a separate
forum.

With respect to the policy
grounds, a consideration of issue estoppel or cause of action estoppel focuses
upon the interests of the litigants. A consideration of abuse of process by
relitigation or collateral attack focuses upon the justice system.

[24]

The appellants do not rely upon an argument that these proceedings are a
collateral attack on the judgment of the trial judge.

Issue Estoppel

[25]

The appellants say the allegation in the conversion action that Ms. Chan
and Ms. Lee knew or ought to have known that Jason Lee was perpetrating a
fraud on the plaintiff, directly challenges the findings of fact made in the
reasons for judgment at trial. There is an allegation that Ms. Chan knew
or ought to have known the proceeds of the mortgage deposited to their accounts
were suspicious and yet did not make any inquiry as to the source of the money.
The appellants note that at para. 16 of his judgment the trial judge held:

Ms. Chan signed a transfer
slip that authorized a $200,000 draft to Jason Lee and a transfer of $46,182.50
to an account belonging to Alice Lee, on which Jason Lee also had signing
authority. Ms. Chan says she trusted Jason Lee and signed the documents as
requested, without paying much attention to the transaction. She did not ask
how much had been deposited into her account and, after being told the money
belonged to Jason Lees company, asked no further questions about the source of
the money.

[26]

They say, further that at para. 21 the trial judge held:

There is no evidence that Ms. Chan
had any specific knowledge of Reliable, the mortgage or the forged power of
attorney when she signed the document transferring funds on March 13,
2009.

[27]

They do not cite the balance of that paragraph of the judgment:

I agree that, in signing the
transfer at Jason Lees request without further inquiry, she was at best
negligent and perhaps wilfully blind. The question is whether that negligence
or wilful blindness is relevant to this action, as it has been pleaded.

[28]

The appellants say the chambers judge erred in not finding the issues of
Ms. Chans knowledge raised in the pleadings in the conversion action were
addressed and determined at paras. 16 and 21 by the trial judge.

Cause of Action Estoppel

[29]

The appellants say the chambers judge erred in equating the phrase
cause of action with the name or classification given to a wrong or remedy
rather than the factual situation entitling one to a remedy. The appellants say
Reliable did not place all legal theories before the court and the chambers
judge erred in not adopting the approach described in
Henderson v. Henderson
(1843), 3 Hare 100, 67 ER 313 (Ch), requiring the parties to litigation to
bring forward their whole case.

[30]

The appellants say the trial judge did not reserve to Reliable the right
to bring further action but simply reserved the question whether such action
might be barred by cause of action estoppel.

Abuse of Process by Relitigation

[31]

The appellants say the chambers judge erred in finding there was not an abuse
of process. They say the conversion action is relitigation of the facts and
issues that were before Mr. Justice Smith. The same witnesses will be
called and the same facts will be addressed.


The
Conversion Action Against Ms. Lee

[32]

The appellants argue Ms. Lee, by acting as a witness in the first
trial, is a privy to Ms. Chan, and any estoppel that arises in favour of Ms. Chan
would similarly arise in favour of Ms. Lee. They say there is evidence
that the respondent had in its contemplation, before the beginning of the trial
in the first action that Ms. Lee would become a defendant in a later cause
of action. The appellants argue the respondent could have and ought to have
amended its pleadings to include Ms. Lee in the first action.

The Respondents Position on Appeal

[33]

The respondent says the chambers judge exercised his discretion in
accordance with correct principles and that neither cause of action estoppel
nor issue estoppel apply to bar the cause of action (although counsel for the
respondent concedes that at the trial there may be certain issues it is barred
from addressing or findings it cannot challenge - such specific issue estoppel
being a matter for consideration by the trial judge). It says cause of action
estoppel does not apply because the conversion claim was neither advanced nor
determined in the foreclosure proceedings. The cause of action in the case
under appeal is said to be distinct, is founded upon different evidence and
requires new and different findings of fact. In fact there is no issue in this
regard, as all counsel describe the claim in conversion as a distinct cause of
action.

[34]

The respondent relies, in particular, on para. 40 of the reasons
for judgment at trial, cited above, reserving issues for later determination.

Discussion

Res
Judicata

[35]

The principle of
res judicata
is founded upon two broad
principles of public policy: (1) the state has an interest that there
should be an end to litigation; and (2) no individual should be tried more
than once for the same cause, often stated as no one should be twice vexed:
Angle
v. M.N.R
., [1975] 2 S.C.R. 248. As the Supreme Court notes in
Penner v.
Niagara (Regional Police Services Board),

2013
SCC 19 at 28:

[
28
]

Relitigation of an issue wastes
resources, makes it risky for parties to rely on the results of their prior
litigation, unfairly exposes parties to additional costs, raises the spectre of
inconsistent adjudicative determinations and, where the initial decision maker
is in the administrative law field, may undermine the legislatures intent in
setting up the administrative scheme. For these reasons, the law has adopted a
number of doctrines to limit relitigation.

[36]

Two types of estoppel fall under the rubric of
res judicata
:
cause of action estoppel and issue estoppel. The first operates in respect of
the whole cause of action, whereas the second applies with respect to
particular issues.

Standard
of Review

[37]

Whether litigation of a cause or issue is barred by the application of
the doctrine of
res judicata
is a question of law and is reviewable on a
standard of correctness:
Cliffs Over Maple Bay (Re),
2011 BCCA 180.

[38]

In this case the trial judge found that neither cause of action estoppel
nor issue estoppel applied and the standard of review of that decision is
correctness.

Issue Estoppel

[39]

Issue estoppel is applied to prevent relitigation of a particular
factual issue, even where the cause of action is not the same. In
Danyluk v.
Ainsworth Technologies Inc.,
2001 SCC 44 at para. 25, the necessary
preconditions to the operation of issue estoppel were described by the Supreme
Court of Canada. Issue estoppel may be invoked where:

1. the same
question as that before the court has been previously decided;

2. the judicial
decision said to create the estoppel was final; and

3. 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.

[40]

It is important that the issues in consecutive proceedings be clearly
characterized in order to properly address a claim that proceedings are barred
by issue estoppel:
Clayton v. Garrett (Guardian ad litem of)
(1995), 6
B.C.L.R. (3d) 268 (B.C.C.A).

[41]

In my view the issue in the case at trial involved the characterization
of the validity of the mortgage as between Reliable and Ms. Chan. In the
case at bar, the issue involves the question whether Ms. Chan, in
transferring the funds at Jason Lees request without further inquiry, was
negligent or willfully blind.

[42]

While the trial judge made findings with respect to what was known by Ms. Chan
at the time the mortgage proceeds were deposited in her account and paid out to
Mr. and Ms. Lee, it cannot, in my view, be said that he made any
finding with respect to the adequacy of the inquiry made by Ms. Chan when
she received those funds and dealt with them.

[43]

In paras. 15 through 20 of the reasons for judgment, the trial
judge described Ms. Chans evidence. There is no indication that evidence
was accepted wholly or in part by the trial judge, save and except the express
finding in para. 21 of the reasons for judgment where he found there was no
evidence before him that Ms. Chan had any specific knowledge of Reliable,
the mortgage or the forged power of attorney when she transferred the funds.
The balance of the reasons for judgment addresses the question whether
negligence or willful blindness was relevant to the action as it has been
pleaded. Ultimately, as is clear from the reasons for judgment, the adequacy
of Ms. Chans inquiry was found to be irrelevant to the case before the
trial judge. The chambers judge, in my opinion, was correct in finding that
there was no issue estoppel in relation to that specific question.

Cause of Action Estoppel

[44]

Cause of action estoppel is concerned with ensuring that parties bring
forward all claims and defences with respect to the cause of action in a
proceeding, such that, if they fail to do so, they will be prevented from
claiming these in a subsequent proceeding. In
Henderson
, Wigram V.C.
said:

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.

[45]

More recently, in
Hoque v. Montreal Trust Co.
(1997), 162 N.S.R.
(2d) 321, [1997] N.S.J. No. 430 (N.S.C.A.), Cromwell J.A. (as he then
was), reviewed this basic principle of cause of action estoppel:

My review of these authorities shows
that while there are some very broad statements that all matters which
could
have been raised are barred under the principle of cause of action estoppel,
none of the cases actually demonstrates this broad principle. In each case, the
issue was whether the party
should
have raised the point now asserted in
the second action.

[Emphasis in original.]

[46]

I cannot accede to the appellants argument that the chambers judge
erred in failing to find Reliable was barred from advancing the conversion
action because of its failure to advance its whole case in the foreclosure
proceedings. It cannot be said that Reliable ought to have brought forward the
conversion claim in the foreclosure action. Unlike the claims made by the
plaintiff in
Ba-Oose Inc. v. HSBC Bank Canada
, 2011 BCCA 511, a recent
decision of this court addressing the issues that ought properly to be
addressed in an
in rem
action on a mortgage, the allegations made by the
respondent do not go to the root of the mortgage claim. They are distinct from
the claims addressed on the foreclosure. The chambers judge was clearly of the
view that the rule in
Henderson
should not apply in circumstances where,
as here, an
in rem
action is commenced by petition by a party seeking
relief to which it is entitled under the mortgage. The proceedings commenced by
the petitioner were not intended to resolve all claims that might arise in the
event it could not obtain relief pursuant to the terms of the mortgage. In my
view the chambers judge could properly regard the foreclosure proceedings as a
bar to other claims on the contract or arising out of the contract but not a
bar to claims arising out of the failure of the contract to protect Reliables
interests.

[47]

That being said, even if it could be argued that Reliable ought to have
advanced all claims against Ms. Chan and Ms. Lee in the foreclosure
proceedings after they were moved to the trial list, it should not be barred
from bringing in the action in conversion in the special circumstances of this
case. The trial judge was alive to Reliables intention to seek other relief other
than that to which it claimed to be entitled under the mortgage. His judgment
reflects the intention to reserve to Reliable any claim that Reliable might
have arising out of Ms. Chans negligence or willful blindness. In such
circumstances it would, in my view, be inequitable to bar Reliable from
bringing such a claim on the basis that it ought to have sought all relief and
addressed all issues in the foreclosure action.

Abuse of Process by Relitigation

[48]

In
Toronto (City) v. C.U.P.E., Local 79
, 2003 SCC 63, Arbour J.
described the circumstances in which the Court should recognize abuse of
process by relitigation. The court found that the inherent jurisdiction of
courts to prevent such an abuse could be used to preclude the relitigation of
an issue, even where issue estoppel cannot be said to have arisen. In
Petrelli
v. Lindell Beach Holiday Resort Ltd.,
2011 BCCA 367, Groberman J.A.
explained the development of this area of
res judicata
:

[71]      Allowing a party to relitigate an issue that has
been finally determined in previous proceedings, then, challenges the integrity
of the adjudicative function of the courts in two respects. First, the
duplication of efforts results in inefficient use of judicial resources. This
inefficiency directly impacts the ability of the courts to function. It also
tends to diminish public respect for the judicial process. Second, in opening
up the possibility of inconsistent findings of fact, relitigation of an issue
diminishes the credibility authority of judgments.

[72]      These challenges to the
integrity of the adjudicative functions of the court occur when a court is
asked, in litigation, to come to a different finding of fact on an issue than
was reached in previous litigation. There are situations in which overriding
concerns of fairness to the parties require such challenges to be tolerated.
The Supreme Court of Canada in
Toronto v. C.U.P.E.
recognized, however,
that a robust doctrine of abuse of process by relitigation means that such
challenges may be avoided where there are no such fairness concerns.

[49]

In my view, there is nothing in the conduct of the respondent in this
case that challenges the integrity of the adjudicative functions of the court.
The respondent alerted the trial judge in the foreclosure action to its
intention to seek further or other relief in the event the mortgage was
unenforceable. It now does so. As I have noted above there is in my view
nothing in the judgment in the foreclosure action that finally determines any
question that precludes the respondents action from continuing.

[50]

It should be noted, however, that the respondent concedes that the
judgment finally determines all questions relating to the validity of the
mortgage and the respondent acknowledges that it will be precluded from
relitigating those issues. In finding that the chambers judge was correct to
dismiss the motion to strike the pleadings and dismiss the action, I would not
wish to be thought to have precluded the parties from seeking further
directions or orders from the trial judge in relation to the extent that the
issues, either of fact or law, that have been finally determined.

Conversion Action Against Ms. Lee

[51]

As I have found that there is no application of
res judicata
that
would bar the claim or justify its dismissal, it is unnecessary to consider
whether such estoppel would apply to Ms. Lee.

[52]

For those reasons I would dismiss the appeal.

[53]

LOW J.A.
: I agree.

[54]

STROMBERG-STEIN J.A.
: I agree

[55]

LOW J.A.
: The appeal is dismissed.

The Honourable Mr. Justice Willcock


