Canam Enterprises Inc. v. Coles; CB Commercial Real Estate Group Canada Inc., Leon and Senst, Third Parties; National Trust Company of Canada, Duncan and James Duncan Estate and Business Broker, Fourth Parties CB Commercial Real Estate Group Canada Inc. et al. v. Coles [Indexed as: Canam Enterprises Inc. v. Coles]

51 O.R. (3d) 481

[2000] O.J. No. 4607

Docket No. C33982

Court of Appeal for Ontario

Finlayson, Weiler and Goudge JJ.A.

December 8, 2000

• An appeal from the following judgment to the Supreme Court

of Canada (McLachlin C.J., Gonthier, Major, Binnie, Arbour,

LeBel and Deschamps JJ.) was allowed on October 8, 2002. The

full text of the appeal is available at 2002 SCC 63, [2002] S.C.J. No. 64 in

the S.C.J. database.

Actions -- Bars -- Abuse of process -- Purchaser bringing action against vendor alleging that mortgage back void because of misrepresentation made by vendor's real estate agent about zoning of property -- Purchaser's action dismissed based on doctrine of merger -- Purchaser then bringing action against own solicitor for negligence in failing to investigate zoning -- Solicitor denying negligence and bringing third party proceedings against real estate agent -- Solicitor relying on Negligence Act and claiming contribution from real estate agent -- Lawyer alleging that agent having liability to purchaser -- Real estate agent moving to dismiss third party claim based on issue estoppel -- Issue estoppel not established but third party claim dismissed based on doctrine of abuse of process -- Negligence Act, R.S.O. 1990, c. N.1.

In 1993, National Trust retained CB Inc. and L and S ("the Realtors") as its real estate agent to sell a property in Toronto. In marketing the property, the Realtors represented that the property was zoned C-1 Commercial. This representation was false because the property was subject to a site-specific zoning by-law that restricted its uses. Unaware that the representation about zoning was false, Canam Enterprises Inc. ("Canam") entered into an agreement to purchase it for a price of $1,420,000, to be paid, in part, by a mortgage back to National Trust for $1,130,000. Canam retained C as its lawyer, and the transaction closed without Canam being aware that the property was not zoned C-1 Commercial as represented. After the closing, Canam sued National Trust for a declaration that the mortgage was void because of the Realtors' misrepresentation about the zoning. National Trust counterclaimed to enforce its mortgage. In 1998, Day J. granted National Trust's motion for summary judgment dismissing Canam's claim and granting it judgment on the counterclaim. Although Day J. concluded that there had been a false representation, he held that the misrepresentation did not provide grounds to set aside the mortgage because of the doctrine of merger. Canam then sued C for professional negligence, which he denied, pleading that under his retainer Canam was responsible for investigating zoning matters. In addition to defending, C commenced third party proceedings against the Realtors. In the third party proceedings, C did not assert any claim of his own against the Realtors but relied on the provisions of the Negligence Act to plead that the Realtors were liable to Canam. The Realtors defended and also brought fourth party proceedings against National Trust alleging that if they provided false information, it had been obtained from National Trust. The Realtors then moved for a summary judgment dismissing C's third party claim based on the defences of res judicata, issue estoppel and abuse of process because of the judgment of Day J. National Trust also moved for a summary judgment dismissing both the third party claim against the Realtors and the fourth party claim against it on the same grounds. For the purpose of the motion, the parties agreed that the facts pleaded were true and that they gave rise to a cause of action. Nordheimer J. granted both motions and dismissed the third and fourth party claims on the basis that they were barred by issue estoppel or, alternatively, that they constituted an abuse of process. C appealed and sought an order setting aside the dismissal of his third party claim against the Realtors.

Held, the appeal should be dismissed with costs.

Per Finlayson J.A. (Weiler J.A. concurring): The result below was correct, and the appeal should be dismissed based on the doctrine of abuse of process but not based upon the principle of res judicata, of which issue estoppel is one aspect. The requirements of issue estoppel are: (1) that the same question has been previously 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. On this appeal, the key question about issue estoppel was whether the appropriate parties were privies to the proceedings between Canam and National Trust. Someone who is privy in interest to a party in an action is equally bound by the final judgment in those proceedings. Here C claimed contribution under the Negligence Act and sought to add the Realtors as joint tortfeasors for the misrepresentations they made to Canam. In the prior proceeding the parties were Canam and National Trust. The Realtors were privies of National Trust, but an issue estoppel did not arise in the immediate case because it was not necessary in the mortgage action for Day J. to deal with the present assertion that had the Realtors been parties then damages could have been awarded against them. The misrepresentation issue was not disposed of in a manner that was dispositive of a claim now being asserted against the Realtors. It could hardly be said that the parties to the mortgage action had an opportunity to raise the issue of the potential liability of an entity that was not a party to the action at all. However, the court could still utilize the broader doctrine of abuse of process, which is a discretionary principle 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 Realtors could have been properly included in the mortgage proceedings. It did not lie in the mouth of a stranger to those proceedings to insist that there now be a trial as to the liability of the Realtors to Canam. 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.

Per Goudge J.A. (dissenting): The third party proceeding ought not to have been dismissed on the basis of either issue estoppel or the doctrine of abuse of process. The same issue requirement of issue estoppel was not met. The issue in the third party proceeding was whether the Realtors owed a duty of care to Canam which was breached by the misrepresentation concerning zoning. That duty was not a part of the proceedings before Day J., which dealt with whether the contractual rights of National Trust were voided by the misrepresentation made on its behalf. Given this finding, it was unnecessary to deal with the same parties requirement of issue estoppel, but if one were to address this requirement, having due regard to the subject matter of the dispute before Day J., it would not appear that one could find the privity of interest between C or Canam or between the Realtors and National Trust. As for the doctrine of abuse of process, it engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or that would in some other way bring the administration of justice into disrepute. One circumstance where the doctrine is applied is where the litigation before the court is found in essence to be an attempt to relitigate a claim that the court has already determined. There was, however, no relitigation in the immediate case. The third party proceeding was the first time that the Realtors would have to respond to the assertion that they breached their duty to Canam. The third party claim raised an issue not previously litigated. It was not manifestly unfair to allow C to bring the claim or to require the Realtors to defend it. There was no abuse of process.

APPEAL from an order of Nordheimer J. (2000), 2000 ON SC 22340, 47 O.R. (3d) 446 (S.C.J.) dismissing a third party and a fourth party claim.

Cases referred to Angle v. Minister of National Revenue (1974), 1974 SCC 168, [1975] 2 S.C.R. 248, 47 D.L.R. (3d) 544, 74 D.T.C. 6278, 2 N.R. 397; Carl- Zeiss-Stiftung v. Rayner & Keeler Ltd. (No. 2), [1967] 1 A.C. 853, [1966] 2 All E.R. 536, [1966] 3 W.L.R. 125, 110 Sol. Jo. 425, [1967] R.P.C. 497 (H.L.); Fenerty v. Halifax (City) (1920), 1920 CanLII 389 (NS CA), 53 N.S.R. 457, 50 D.L.R. 435 (S.C.); Gleeson v. J. Wippell & Co. Ltd., [1977] All E.R. 54, [1977] 1 W.L.R. 510, 121 Sol. Jo. 157 (Ch. D.); Heynen v. Frito Lay Canada Ltd. (1999), 1999 CanLII 1386 (ON CA), 45 O.R. (3d) 776, 46 C.C.E.L. (2d) 1, 179 D.L.R. (4th) 317, [2000] C.L.L.C. 210-003 (C.A.); House of Spring Gardens Ltd. v. Waite, [1990] 3 W.L.R. 347, [1990] 2 All E.R. 990 (C.A.); M.C.C. Proceeds Inc. v. Lehman Brothers International (Europe), [1998] 4 All E.R. 675 (C.A.); Rasanen v. Rosemount Instruments Ltd. (1994), 1994 CanLII 608 (ON CA), 17 O.R. (3d) 267, 1 C.C.E.L. (2d) 161, 94 C.L.L.C. 14,024, 112 D.L.R. (4th) 683 (C.A.) [Leave to appeal to S.C.C. refused (1994), 19 O.R. (3d) xvi, 7 C.C.E.L. (2d) 40n, 178 N.R. 80n]; Solomon v. Smith (1987), 1987 CanLII 117 (MB CA), [1988] 1 W.W.R. 410, 45 D.L.R. (4th) 266, 49 Man. R. (2d) 252, 22 C.P.C. (2d) 12 (C.A.) Statutes referred to Negligence Act, R.S.O. 1990, c. N.1

Christine Innes, for respondent. V.A. Edwards and J. Sebastian Winny, for appellant. Jeffrey S. Klein, for third parties respondents. Mark Hartman, for fourth party respondent, National Trust Company of Canada.

[1] FINLAYSON J.A. (WEILER J. concurring): -- The defendant in the main action, Alan H. Coles ("Coles"), appeals from the summary judgment of The Honourable Mr. Justice Nordheimer dated March 2, 2000. The motions judge granted motions by the third parties, CB Commercial Real Estate Group Canada Inc., Kevin W. Leon and Peter D. Senst (the "Realtors") and the fourth party, National Trust Company of Canada ("National Trust"), and dismissed both the third and fourth party claims on the basis that they were barred by issue estoppel or, alternatively, that they constituted an abuse of process. Coles seeks an order setting aside the dismissal of his third party claim against the Realtors. There is no appeal from the dismissal of the fourth party claim by either Coles or the plaintiff Canam.

Facts

The original real estate transaction

[2] Pursuant to an agreement of purchase and sale dated March 5, 1993, Canam Enterprises Inc. ("Canam") agreed to purchase 200 Finch Avenue West in Toronto ("the property") from National Trust pursuant to a power of sale. The purchase price of the property was $1,420,000. Canam provided a down payment of $290,000, and National Trust agreed to take back a mortgage of $1,130,000 to secure the balance of the purchase price.

[3] The Realtors acted as listing agents for National Trust. They prepared and circulated advertising material which represented the zoning of the property as C-1 Commercial. The advertisement specifically detailed potential retail uses of the property.

[4] The agreement of purchase and sale also stipulated that the zoning of the property was C-1 Commercial. It contained a requisition period that gave Canam the right to make requisitions as to title and other matters. Canam's solicitor on the transaction, Coles, requisitioned evidence that C-1 Commercial use could be lawfully continued. National Trust's solicitors responded with what has been described as "the usual satisfy yourself reply".

[5] When the transaction closed on June 29, 1993, the property was subject to a site-specific zoning by-law which restricted it to "professional office" use. Canam alleges that as a result of these use restrictions, it has suffered significant financial losses, including losses arising from defaulting on the vendor take-back mortgage to National Trust.

The prior proceeding (the "Mortgage Action")

[6] Following Canam's default under the mortgage, National Trust issued a Notice of Sale dated January 14, 1997. On August 22, 1997, Canam commenced a separate action against National Trust seeking a declaration that the mortgage was void and unenforceable because of the false representations made by the Realtors about the zoning. National Trust counter-claimed for the balance owing on its mortgage and for payment on a guarantee. In its defence to Canam's claim, National Trust took the position that the representation concerning zoning merged with the conveyance.

[7] National Trust successfully moved for summary judgment on its counterclaim and for dismissal of Canam's claim before Day J. on April 20, 1998. Summary judgment was granted on that date, with oral reasons released December 23, 1998 [reported 22 R.P.R. (3d) 129]. In his reasons for judgment, Day J. concluded that false representations were made concerning zoning on behalf of National Trust. He then examined the doctrine of merger in the context of the requisition period contained in the agreement of purchase and sale. He concluded [at p. 135]: "From the broad considerations it appears that the defence of Canam as to misrepresentation will not apply so as to set aside the contract."

Nature of the present action

[8] Following receipt of the Notice of Sale, Canam commenced this action against its former solicitor, Coles, by statement of claim issued June 17, 1997. Canam claimed damages for alleged negligence in relation to the zoning restrictions on the property that it purchased. Canam pleaded that Coles failed to warn it of the site-specific by-law restricting the use of the property.

[9] Coles denied any negligence or breach of contract. He pleaded that his retainer with Canam was expressly limited to exclude zoning inquiries, and that Canam was responsible for investigating zoning matters.

[10] Coles commenced a third party claim for contribution or indemnity against the Realtors who listed the property and represented it as being zoned C-1 Commercial. Coles alleged that the Realtors knew or ought to have known of the true zoning of the property, failed to take steps to verify the correct zoning, and breached their professional duty to Canam, including a fiduciary duty to Canam, in failing to ascertain and disclose the restricted zoning by-law. Coles pleads and relies on the provisions of the Negligence Act, R.S.O. 1990, c. N.1.

[11] The Realtors have defended both the main action and the third party claim, in part with a defence of res judicata based on the disposition of the Mortgage Action. The Realtors also commenced a fourth party claim for contribution or indemnity against National Trust, for whom they acted as a selling agent and broker. The fourth party claim against National Trust pleads that if the Realtors provided false information to Canam, they obtained it from National Trust, who should accordingly be liable to the Realtors in negligence. The Realtors' allegations against National Trust are not framed as a joint tortfeasor claim.

[12] National Trust has defended the main action, the third party claim and the fourth party claim, and has raised the plea of res judicata and abuse of process based on the disposition of the Mortgage Action. The remaining fourth parties have not defended the proceeding.

Motions before Nordheimer J.

[13] National Trust moved for summary judgment dismissing both the third party claim against the Realtors and the fourth party claim against National Trust based on the defences of issue estoppel and abuse of process. The Realtors also brought a motion for summary judgment dismissing the third party claim based on the defences of issue estoppel and abuse of process.

[14] On the motions for summary judgment before Nordheimer J., the parties agreed that for the purpose of the motions, the facts set out in both the third party and fourth party claims were true and gave rise to a cause of action. The only issue to be determined on the motions was whether, by virtue of the judgment of Day J., the third and fourth party claims should be dismissed on the basis of issue estoppel, res judicata, or abuse of process.

Reasons of the motions judge

[15] Nordheimer J. granted the motions of the third and fourth parties in his reasons reported at 2000 ON SC 22340, 47 O.R. (3d) 446. He dismissed the third and fourth party claims, with costs of both claims payable by Coles.

[16] The motions judge referred to the relevant authorities on the issues of cause of action estoppel, issue estoppel and abuse of process. He found primarily that issue estoppel applied to the third party proceedings and in the alternative that they were an abuse of process.

[17] With respect to the false representations made about the zoning possibilities, the motions judge clarified that Coles was not asserting any independent liability claims. All of the liability alleged in the third and fourth party claims arising from the false representations involved liability to Canam alone. The motions judge went on to find that issue estoppel applied. He found that Day J.'s decision on the matter was final. He also found that the issue regarding the legal consequences of the false representations made to Canam was a fundamental part of Day J.'s decision. The motions judge then concluded at paras. 19 and 20 [p. 453 O.R.]:

The fundamental issue determined by Mr. Justice Day is whether, in all of the circumstances, the transaction could be rescinded, or liability on the mortgage avoided, by Canam based on the false representations. The source of those representations was not the issue. The fact of the representations being false, and the fact that they were made by others on behalf of National Trust, was accepted by Mr. Justice Day. He concluded, regardless of those facts, that the transaction could not be avoided by Canam. In my view, that is a complete answer to whether Canam could now claim any relief surrounding these representations -- it could not. Put another way, the decision of Mr. Justice Day clearly determined that there was no liability of National Trust to Canam arising from the false representations.

It follows from that conclusion that it is not open to Coles to indirectly advance such a claim on behalf of Canam because, in the end result, it would still involve a re- litigation of the same question -- a situation which the principle of res judicata is designed to prevent. . . .

[18] The motions judge proceeded to the privity of interest requirement for the application of issue estoppel. Here, the motions judge concluded that Coles, as a solicitor, was a privy of his client, Canam.

Analysis

Issue estoppel

[19] The principle of res judicata applies where a judgment rendered by a court of competent jurisdiction provides a conclusive disposition of the merits of the case and acts as an absolute bar to any subsequent proceedings involving the same claim, demand or cause of action. Issue estoppel is one aspect of res judicata. The oft-cited requirements of issue estoppel are attributed to Lord Guest in Carl-Zeiss-Stiftung v. Rayner & Keeler Ltd. (No. 2), [1967] 1 A.C. 853 at p. 935, [1966] 2 All E.R. 536 (H.L.): (1) that the same question has been previously 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.

[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, 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 non- party 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.).

Privity of interest

[22] Privity between an agent and a principal will be based on privity of interest. This matter was considered by Megarry V.-C. in Gleeson at p. 60: "it seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. . . . It is in that sense that I would regard the phrase 'privity of interest'."

[23] In Carl-Zeiss-Stiftung at p. 566, Lord Guest had this to say of privies: "There is a dearth of authority in England on the question of privies. . . . 'Privies' have been described as those who are 'privy to the party in estate or interest'. . . . Before a person can be privy to a party there must be community or privity of interest between them." Lord Reid made a similar comment in that decision at p. 550: "It has always been said that there must be privity of blood, title or interest: here it would have to be privity of interest. That can arise in many ways, but it seems to me to be essential that [there be] some kind of interest in the previous litigation or its subject- matter." Thus, in the case of an agent and principal, their mutual interest in the outcome of the lawsuit will make the agent a privy to the principal -- a necessary element for the application of issue estoppel.

[24] The motions judge found that Cole was a privy of Canam in the prior proceeding between Canam and National Trust because he was Canam's solicitor. This finding seems to me to illustrate a misconception of the interaction between the various proceedings. Canam responded to the Notice of Sale of National Trust by instituting an action against National Trust for a declaration that the mortgage that authorized the Notice was void and unenforceable by virtue of false representations as to the nature of the zoning emanating from National Trust and conveyed to Canam by the Realtors. Canam did not sue the Realtors, who had acted as the agents of National Trust in conveying these alleged misrepresentations to it, and does not propose to sue them now.

[25] In the present action, Canam is suing Coles for negligence for not advising it of the true nature of the zoning. Coles, for his part, does not say he relied on the representations of National Trust (or the Realtors) in not advising Canam of the state of the zoning. Rather, he states that his retainer did not require him to give such advice. He is not attempting to excuse his tort of negligence by stating that he relied upon the representations of the Realtors. He seeks to add the Realtors as joint tortfeasors for their misrepresentations to Canam and claims contribution under the Negligence Act.

[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 th ese 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.

[27] I am satisfied that the Realtors are privies of National Trust, but I am having some difficulty in applying issue estoppel in this case. The summary judgment judge in the Mortgage Action found that false representations had been made that were attributable to National Trust but that no remedy was available to Canam because the representations complained of had merged in the closing of the original real estate transaction. Because it was not required of him, he did not deal with the present assertion that had the Realtors been parties to the Mortgage Action, he could have awarded damages against them in favour of National Trust. Accordingly, I am concerned that the misrepresentation issue was disposed of in a manner that may not be dispositive if the action was against the Realtors as well as National Trust.

[28] In deciding the application of issue estoppel, it is necessary to consider the context and rationale behind the doctrine of res judicata. As was stated by Ritchie J. in Fenerty v. Halifax (City) (1920), 1920 CanLII 389 (NS CA), 53 N.S.R. 457 at p. 463, 50 D.L.R. 435 (S.C.):

The doctrine of res judicata is founded on public policy so that there may be an end of litigation, and also to prevent the hardship to the individual of being twice vexed for the same cause. The rule which I deduce from the authorities is that a judgment between the same parties is final and conclusive, not only as to the matters dealt with, but also as to questions which the parties had an opportunity of raising. . . .

[29] Additional clarification for the application of "issue estoppel" was provided by Dickson J. in Angle v. Minister of National Revenue (1974), 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248 at p. 255, 47 D.L.R. (3d) 544 at pp. 555-56: "It will not suffice 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 proceedings." (Emphasis added)

[30] It can hardly be said in this case that the parties to the Mortgage Action had an opportunity to raise the issue of the potential liability of an entity that was not a party to the action at all. Additionally, while the decision that the misrepresentation merged in the conveyance was fundamental to the decision that it could not affect the validity of the mortgage that was being enforced, I am not altogether sure that merger would be a defence to the agents of the National Trust in an action against them in damages. Certainly, the point was never raised because it was irrelevant to the proceedings as framed.

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), 1987 CanLII 117 (MB CA), [1988] 1 W.W.R. 410 at pp. 419-20, 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 a llowing the second action to proceed would amount to an abuse of process.

[32] Although there are no cases directly on point in this jurisdiction, the general principles of abuse of process dictate that the agent in this case should not be required to defend a cause of action previously litigated. The safest question to ask is whether the same evidence is needed to support the issues in both cases. It would seem that the evidence would be the same: the same evidence will be presented to show that a negligent representation was made and the same evidence will be used to show that the plaintiff relied upon the representations to his detriment.

[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.

[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.

Disposition

[35] Accordingly, for the reasons set out above, I would dismiss the appeal with costs payable by the appellant to the respondents on a party and party basis.

[36] GOUDGE J.A. (dissenting): -- I have had the benefit of reading the reasons for judgment of my colleague Finlayson J.A. I agree with him that Nordheimer J. ought not to have dismissed the third party claim on the basis of issue estoppel. However, I disagree that this conclusion was properly reached on the basis of the doctrine of abuse of process. For the reasons that follow I would allow the appeal and dismiss the motion for summary judgment seeking to dismiss the third party claim.

[37] The facts are well described in my colleague's reasons for judgment. For my purposes I need only highlight a few of them.

[38] The third party claim is brought by the defendant in the main action, Alan H. Coles ("Coles"). It seeks relief against CB Commercial Real Estate Group Canada Inc., Kevin W. Leon and Peter D. Senst (the "Realtors").

[39] Coles acted as the solicitor for the plaintiff Canam Enterprises Inc. ("Canam") when it purchased 200 Finch Avenue West in Toronto from National Trust Company of Canada ("National Trust"). The Realtors acted as real estate agents for National Trust on the transaction.

[40] In the main action, Canam sues Coles for professional negligence, pleading that Coles failed to warn it of the zoning restriction on the use of the property. Those restrictions, which prevented the property from being put to retail use, caused Canam significant harm.

[41] In the third party claim, Coles seeks contribution from the Realtors pursuant to the provisions of the Negligence Act, R.S.O. 1990, c. N.1. Coles pleads that the Realtors had a duty of care or even a fiduciary duty to Canam. The Realtors breached this duty by representing to Canam that the property could lawfully be put to retail use when they knew or ought to have known that this representation was false. Coles pleads that Canam relied on this representation in agreeing to purchase the property and that the Realtors are liable in damages to Canam for the harm caused by this misrepresentation.

[42] On the motion for summary judgment to dismiss the third party claim, the parties agreed that for the purposes of the motion the facts pleaded were true and gave rise to a cause of action.

Issue Estoppel

[43] The doctrine of issue estoppel prevents a party from relitigating an issue already decided in an earlier proceeding. The three requirements of the doctrine are well settled. They are (a) that the prior proceeding must have decided the same question as is in issue in the subsequent proceeding; (b) that the decision said to create the estoppel be judicial and final; and (c) that the parties to the earlier decision be either the same as, or the privies of, the parties in the subsequent proceeding.

[44] The question is whether the prior decision of Day J. triggers the application of this doctrine to the third party claim. In the prior proceeding Canam sought a declaration that the mortgage taken back by National Trust when it sold the property to Canam was void because the purchaser was induced to enter the contract by the misrepresentation of the vendor as to the use of the property allowed by its zoning. National Trust counterclaimed for the balance owing on the mortgage.

[45] In his reasons for judgment, Day J. dismissed Canam's claim and allowed National Trust's counterclaim. He found that the representation about zoning was made on behalf of National Trust by the Realtors and that the representation was false. However, he concluded that the misrepresentation did not entitle Canam to set aside the mortgage contract because of the doctrine of merger.

[46] In these circumstances, there is no doubt that the decision of Day J. was judicial and final.

[47] However, like Finlayson J.A., I do not think that the "same issue" requirement of issue estoppel is met. As this court said in Heynen & Frito Lay Canada Ltd. (1999), 1999 CanLII 1386 (ON CA), 45 O.R. (3d) 776, 179 D.L.R. (4th) 317, this determination depends on a careful analysis of both the factual context and the legal question addressed in the earlier proceeding. This allows the specific issue determined in the earlier proceeding to be identified and compared to the issue to be resolved in the subsequent proceeding. This reflects "the fastidious approach" that the courts have taken to the "same question" test that was described by Morden A.C.J.O. in Rasanen v. Rosemount Instruments Ltd. (1994), 1994 CanLII 608 (ON CA), 17 O.R. (3d) 267 at p. 294, 112 D.L.R. (4th) 683 (C.A.).

[48] The issue in the third party claim is whether the Realtors owed a duty of care to Canam which was breached by the misrepresentation concerning zoning. This duty is separate from and not derived from the contractual relationship between Canam and National Trust. It depends on the nature of the direct relationship between Canam and the Realtors. This duty was not part of the proceedings before Day J., which dealt with whether the contractual rights of National Trust were voided by the misrepresentation made on its behalf.

[49] As Finlayson J.A. writes, it can hardly be said that the parties before Day J. had the opportunity to raise the issue of the potential liability of the Realtors, who were not a party to that action at all. While the legal consequence for National Trust of the false representation made to Canam was fundamental to the decision of Day J., the legal consequence for the Realtors of making that false representation was not before him. In the language of Angle v. Minister of National Revenue (1974), 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248, 47 D.L.R. (3d) 544, quoted by my colleague, the question of whether the Realtors had an independent duty of care to Canam was not "fundamental to the decision arrived at" by Day J. The "same issue" requirement of issue estoppel is therefore not met.

[50] Given this finding, it is unnecessary to deal with "the same parties" requirement of issue estoppel. Indeed where, as here, the question is whether they are "privies", this inquiry may be impossible to answer if the two proceedings do not raise the same question. The measure of whether the parties are the privies of those in the earlier proceeding would seem to require that the same question be involved in both proceedings, that is, that the subject matter of both disputes be the same. This is implicit in Gleeson v. J. Wippell & Co. Ltd., [1977] 3 All E.R. 54 at p. 60, [1977] 1 W.L.R. 510 (Ch. D.), where Vice- Chancellor Megarry said:

I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject- matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase 'privity of interest.'

(Emphasis added)

[51] Even if one were to address the "same parties" requirement having due regard only to the subject matter of the dispute before Day J., I do not think one could find the privity of interest between Coles and Canam or between the Realtors and National Trust.

[52] The subject matter of the dispute before Day J. was the contractual right of National Trust and the corresponding contractual obligation of Canam under the mortgage. Coles has no identification of interest with Canam having regard to this subject matter. He was simply its lawyer. Canam's contract with National Trust does not reach him.

[53] In the same way, having regard to this subject matter, the Realtors have no identification of interest with National Trust. The contract between Canam and National Trust does not affect them at all. In Solomon v. Smith (1987), 1987 CanLII 117 (MB CA), 45 D.L.R. (4th) 266, [1988] 1 W.W.R. 410, the Manitoba Court of Appeal reached just such a conclusion. It found that where a purchaser had unsuccessfully sued a vendor seeking to avoid the transaction because of a misrepresentation, the purchaser's subsequent action in tort against the vendor's agent based on the same misrepresentation was not against the same party or its privy.

[54] In summary, therefore, it is my view that the first requirement of issue estoppel is not met in this case, and the third requirement is probably not met as well. I agree with my colleague that the third party claim ought not to have been dismissed on the basis of issue estoppel.

Abuse of Process

[55] The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute. It is a flexible doctrine unencumbered by the specific requirements of concepts such as issue estoppel. See House of Spring Gardens Ltd. v. Waite, [1990] 3 W.L.R. 347 at p. 358, [1990] 2 All E.R. 990 (C.A.).

[56] One circumstance in which abuse of process has been applied is where the litigation before the court is found to be in essence an attempt to relitigate a claim which the court has already determined. See Solomon v. Smith, supra. It is on that basis that Nordheimer J. found that this third party claim ought to be terminated as an abuse of process.

[57] I would disagree. As I have attempted to indicate, the issue in the third party claim is different from the issue already determined by Day J. The duty of care owed by the Realtors to Canam was simply not before Day J. This is not the relitigation of an issue already decided by the court. Hence, in my view, Nordheimer J. built his conclusion of an abuse of process on an erroneous foundation.

[58] This issue can be addressed by looking not just at the claim but also at the party bringing it. Here it cannot be said that the third party claim is an attempt by Coles to relitigate a claim which he has previously raised but lost. Coles has not raised this issue before in any legal proceeding. Nor could Coles have forced Canam to raise this issue and sue the Realtors in the action in contrast against National Trust before Day J. Coles has not had his day in court on this issue.

[59] Equally this issue can be examined from the perspective of the party required to defend the claim. Here, it cannot be said that the third party claim forces the Realtors to relitigate a claim which [they have] already successfully resisted. The Realtors have not previously been required to defend this or any other claim by either Canam or Coles.

[60] Although this is the first time that the Realtors have had to respond to the assertion that they breached their duty to Canam by making the negligent misrepresentation, they say it is manifestly unfair to require them to do so because of a prior proceeding in which it was found that on behalf of National Trust they knowingly made this false representation. I do not find this persuasive. The prior proceeding did not vindicate their conduct in the slightest, but rather found that the Realtors had made the false representation. This prior finding hardly makes it unfair that they now must defend the third party claim.

[61] In summary, the third party claim raises an issue not previously litigated. It is not manifestly unfair to allow Coles to bring the claim or to require the Realtors to defend it. In my view, it is not an abuse of process.

[62] I would therefore allow the appeal with costs payable by the third party. I would set aside the order below and order that the motion for summary judgment in the third party claim be dismissed with costs payable by the third party.

Appeal dismissed with costs.