The plaintiff applied to file a 4th amended Notice of Civil Claim. Her claim involved a Wills Variation Action relating to her deceased husband’s estate. The proposed amendments would add an additional ground for relief – that the marriage agreement that she and her husband had entered in 1983 was unfair having regard to the considerations found in the Family Relations Act.
The plaintiff had previously applied to amend her NoCC and also had her claims for fraudulent conveyance and unjust enrichment struck. The court dismissed her application to amend a 4th time for a number of reasons:
- the fairness of the marriage agreement was necessarily bound up with and formed part of the latent structure for the issues that were directly determined in the prior proceeding;
- issue estoppel bars litigation of the fairness of the marriage agreement as this issue was one of obvious import in the prior proceeding and should have been raised and resolved in that context;
- in the alternative, if issue estoppel does not apply, cause of action estoppel applies to bar the amendments sought by the plaintiff;
- the fairness of the marriage agreement and its importance to the resolution of the issues should have been raised by the plaintiff in the prior proceeding;
In dismissing the plaintiff's application, the judge detailed the law on amendment of pleadings, the doctrine of res judicata, and abuse of process.
D. Application to the Case at Bar
(a) Application of General Principles Respecting the Amendment of Pleadings
60 The delay in raising the fairness of the marriage agreement can only be characterized as extraordinary. Further, I consider the delay to be unexplained. I do not accept the plaintiff's contention that the "bifurcation" of the proceedings resulted in the issue essentially being "parked" or "put on hold" until after resolution of the fraudulent conveyance portion of the claim.
61 The marriage agreement was pleaded in the Statement of Defence filed February 26, 2010 as a complete defence and estoppel to the plaintiff's WVA claim. The fairness of the marriage agreement was not raised by the plaintiff in the prior proceeding even though it arose in the context of that litigation. It was not raised until more than four months after the conclusion of appellate proceedings in the previous case and it is evident to me that the prospect of litigation concerning the fairness of the marriage agreement came as a complete and unwelcome surprise to the defendants, who have now been embroiled for more than 4 1/2 years in this emotionally-charged litigation.
62 There can be little doubt that if the fairness of the marriage agreement became a part of this litigation, the defendants would be substantially prejudiced. Further documentary disclosure would have to be made, the plaintiff would have to be examined for discovery a second time, and the time required to accommodate the trial would be significantly increased.
63 On the other hand, the proposed amendments are closely connected to the issues engaged by the WVA action and the prejudice suffered by the defendants could, in some measure, be offset by a substantial award of costs.
64 In addition to these competing considerations, resolution of the amendment application is complicated by virtue of the fact that res judicata and the doctrine of abuse of process are in play.
65 In light of the conclusions I have come to, a balancing of competing interests will be required as an important component of determining whether to give effect to issue and/or cause of action estoppel. In my view, it is preferable to resolve the issue of whether the amendments should be granted in that more specific context. Doing so has the advantage of engaging an analytical framework in which considerations generally applicable on an application to amend pleadings, as well as considerations underlying the doctrines of res judicata and abuse of process, can be fully considered.
(b) Application of the Doctrine of Res Judicata
66 Even assuming that a distinction can be drawn between the "validity" and "fairness" of a marriage agreement, it is my view that both issues were fundamental to and necessarily bound up with the issues decided in the prior proceeding.
67 In determining whether Kay had standing as a "creditor or other" within the meaning of the FCA, Dillon J. was obliged to determine whether she had some legal or equitable claim that arose during Reg's lifetime. As Kay did not contest the validity of the marriage agreement or show that it was unfair (see para. 57 of the Reasons for Judgment of Dillon J.), the case proceeded on the footing that Kay had no potential cause of action pursuant to s. 65 of the FRA. Further, and perhaps more clearly, Kay's contention that her standing as a "creditor or other" was rooted in her unjust enrichment claim was dismissed, in part on grounds that the marriage agreement provided a juristic reason for any benefit and corresponding detriment she may have incurred (at para. 56).
68 In these circumstances, the fairness of the marriage agreement was "necessarily bound up with" and "fundamental to" the determination of the fraudulent conveyance claim. To borrow the language of Donald J. Lange in Res Judicata in Canada, 3rd ed. (Markham: LexisNexis Canada Inc. 2010) at 47 [adopted in Cliffs Over Maple Bay at para. 36] the fairness of the marriage agreement, a point assumed or at least unchallenged by the plaintiff, became part of the "latent structure" supporting the express question of whether the transfer of Reg's assets to the trust constituted a fraudulent conveyance.
69 I am not convinced that this analysis is inapplicable because the reasons of Dillon J. on this point may be characterized as obiter. In my view, the policy interests underlying the doctrine of res judicata have application regardless of whether the issue is characterized as part of the ratio of the decision given in the prior proceedings or obiter dicta.
70 But even if I am wrong in coming to this conclusion (either because the fairness of the marriage agreement was not an issue "necessarily bound up with" resolution of the fraudulent conveyance claim, or because decisions properly characterized as obiter are not "final" and cannot, therefore, satisfy an essential precondition to the application of issue estoppel) I am satisfied that, whether as an aspect of the doctrine of issue estoppel or cause of action estoppel, the fairness of the marriage agreement was an issue front and central to the determination of the issues that arose in the prior proceeding and should have been raised at that time. There is simply no explanation before me as to why it was not.
71 In my view, both issue and cause of action estoppel apply because the fairness of the marriage agreement properly belonged to the subject matter of the litigation before Dillon J. and should have been raised at that time.
72 Having come to this conclusion, it is still necessary to consider whether, as a matter of discretion, the doctrine of res judicata should be applied on this application. As Binnie J. noted in Danyluk at para. 33, the rules governing the doctrine should not be mechanically applied. The public policy interests underlying the rule must be balanced with the particular context in which the rule is sought to be engaged to ensure, at the end of the day, that justice is done on the facts of a particular case. Issue and cause of action estoppel should be applied flexibly where an unyielding application of them would create rather than alleviate unfairness: Minot v. O'Shanter Development Co. (1999), 168 D.L.R. (4th) 270 (Ont.C.A.) at para. 50.
73 In the case at bar, there are no considerations (sometimes categorized as "special circumstances") suggesting as a matter of fundamental fairness that issue and cause of action estoppel should not be applied. For example, there has been no unanticipated legal or factual development that would make it unfair not to permit litigation of the fairness of the marriage agreement at this stage.
74 The plaintiff's central argument on this point is that determination of the fairness of the marriage agreement is necessary "to paint the circumstances of her WVA claim."
75 On balance, I do not think that the circumstances warrant exercise by the court of its residual discretion not to give effect to issue and cause of action estoppel. The public policy interests that underlie the doctrine of res judicata apply with considerable force in the case at bar. While the goal of judicial finality would certainly be undermined by an exercise of discretion that relieves against the operation of the rule, this will inevitably be the case. The more direct question is whether that overarching goal must give way in the face of what is equitable and just in the particular action.
76 In this case, re-opening the fairness of the marriage agreement risks undermining the repute of the administration of justice by courting inconsistent judicial appraisals of the same issue. It would countenance litigation by installment. It would expose the defendants to further, prolonged and emotionally-charged litigation that has been ongoing now for 4 1/2 years. It would require the defendants to address issues that should have been raised earlier. No explanation has been provided as to why the fairness of marriage agreement was not raised when it was identified as a fundamental aspect of the summary trial application heard by Dillon J.. No explanation has been provided as to why the fairness of the marriage agreement was not raised until more than four months after the conclusion of the appellate proceedings initiated in respect of the prior proceeding.
77 Balancing these competing considerations as best I can, I decline to exercise my discretion to relieve against the operation of the rule. In my view, doing so in this case would cause more unfairness than it would prevent.
(c) Abuse of Process
78 Were it necessary to do so, I would dismiss the application to amend on abuse of process grounds. As noted above, the doctrine of abuse of process has been extended beyond the strict parameters of (and is unencumbered by) the specific requirements of res judicata: Toronto (City) v. C.U.P.E. at para. 42. It does, however, borrow much of its underlying rationale from the doctrine of res judicata.
79 The abuse of process doctrine focuses, in this context, on the integrity of the administration of justice. It prohibits the re-litigation of issues or causes where permitting it to proceed would offend vital systemic values such as a judicial economy, consistency, finality in litigation, and the integrity of the decision-making process: Tylon Steepe Homes, at para. 79. It is not, however, a doctrine to be engaged lightly.
80 In the case at bar, the plaintiff essentially seeks the opportunity to argue her case on an incremental basis. No explanation has been given for why the fairness of the marriage agreement was not raised at an earlier time, including when it arose in the context of the prior proceeding. Permitting this issue to go forward at this late stage would undermine the systemic values the abuse of process doctrine seeks to protect. In all the circumstances of this case, I would refuse leave to amend on this ground as well.
81 The plaintiff's application for leave to file its Fourth Amended Notice of Civil Claim is dismissed insofar as it proposes to expand the litigation to encompass issues going to the fairness of the marriage agreement.