DATE: 20060530
DOCKET: C44165
COURT OF APPEAL FOR ONTARIO
O’CONNOR A.C.J.O., DOHERTY and MACFARLAND JJ.A.
IN THE MATTER OF THE BANKRUPTCY OF PAUL ALEXANDER ROBSON, OF THE CITY OF TORONTO, IN THE PROVINCE OF ONTARIO, LAWYER
B E T W E E N :
Richard D. Howell
TESSIS & PARTNERS RECEIVERS AND TRUSTEES INC. AS TRUSTEE OF THE ESTATE OF PAUL ALEXANDER ROBSON, A BANKRUPT
for the appellant
Plaintiff (Appellant)
Paul Robson
- and -
for the respondent
PAUL ALEXANDER ROBSON
Defendant (Respondent)
Heard: May 9, 2006
On appeal from the order of Justice Colin L. Campbell of the Superior Court of Justice dated September 2, 2005.
DOHERTY J.A.:
I
[1] This is an appeal from an order dismissing the appellant’s motion for an order annulling the respondent’s (“Robson”) discharge from bankruptcy. The appellant, who had been Robson’s trustee in bankruptcy, alleged that Robson’s discharge was obtained by fraud and should be rescinded pursuant to s. 180(2) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3. In support of the motion, the appellant relied on the reasons of Lax J. in an earlier proceeding involving the appellant and Robson. The appellant contended that, in those proceedings, Lax J. had made a finding that Robson and another had engaged in an dishonest scheme to conceal assets from the respondent while Robson was an undischarged bankrupt.
[2] The motion judge was not satisfied that the findings of Lax J. necessarily amounted to a finding of fraud against Robson. He dismissed the appellant’s motion without prejudice to the appellant taking any other proceeding it deemed appropriate.
[3] I agree with the conclusion of the motion judge, although I reach that result in a somewhat different way.
II
[4] Robson, a lawyer, filed an assignment in bankruptcy in July 1992. The respondent was appointed trustee in the bankruptcy. Robson received an absolute discharge from bankruptcy in May 1996.
[5] In June 2000, the appellant commenced an action against Robson and others. The appellant alleged that Robson had acquired rights in certain shares while he was an undischarged bankrupt and that the shares, and any income from those shares, vested in the appellant as trustee in bankruptcy as after acquired property. Farley J. directed a trial of an issue. The trial proceeded before Lax J.
[6] The appellant was successful before Lax J. She held that the appellant, as trustee, was the legal owner of the contested shares and that Robson and the other defendants were required to account to the appellant for all dividends and other payments, including interest received relating to the shares. She directed a reference to determine the amount. It was ultimately determined that Robson and others owed the appellant well in excess of $1,000,000. Robson’s appeal from the order of Lax J. to this court was dismissed in October 2004.
[7] In her reasons, Lax J. said:
[T]he evidence demonstrates that McLellan and Robson collaborated to attempt to conceal assets from the Trustee. There is no other explanation for the manner in which they have conducted themselves, or to account for the stories they have told, which in my opinion, were told to conceal the truth [emphasis added].
[8] In the course of awarding costs on a substantial indemnity basis against Robson, Lax J. observed:
Robson and McLellan collaborated in a dishonest scheme to conceal Robson’s ownership in the shares, both before and during the litigation.
[9] On the motion to rescind Robson’s discharge, the appellant alleged that the respondent had obtained his discharge from bankruptcy by fraudulently concealing his ownership of the shares that had been the subject matter of the trial before Lax J. The appellant relied exclusively on the reasons of Lax J. to support the allegation of fraud and did not place any evidence independent of those reasons before the motion judge to support the fraud allegations.
[10] In dismissing the motion to rescind Robson’s discharge, the motion judge said:
Fraud was not specifically in issue before Lax J. and while her findings are capable of that conclusion they are also capable of a conclusion that is short of fraud.
[11] Before I address the appellant’s submissions, I will dispose of one argument put forward by Robson. He indicated that he intended to move to set aside the judgment of Lax J. on the basis that it had been obtained by fraud. No such motion has been launched as of yet. Robson’s intentions, whatever they may be, are irrelevant to the current validity of the order of Lax J. It is a final and binding order.
[12] Counsel for the appellant submits that the reasons of Lax J., read in their entirety, provide a clear and unequivocal finding of fraud upon the appellant as trustee by Robson while Robson was an undischarged bankrupt. Although Robson does not accept the finding of Lax J., when pressed by this court, he could not offer any reasonable interpretation of her judgment other than that it constituted a finding of fraud. With respect to the motion judge, I cannot interpret the finding of Lax J. as anything “short of fraud”. I agree with the appellant’s contention that Lax J. made a finding that Robson had acted fraudulently when he failed to disclose his ownership of the shares to the trustee.
III
[13] While Lax J. found that Robson had acted fraudulently, not every finding of fact made against a party in one proceeding is binding on that party in subsequent proceedings. A party is bound by those findings which pursuant to issue estoppel or the related doctrine of abuse of process, the party is foreclosed from re-litigating in the subsequent litigation. Issue estoppel was described in McIntosh v. Parent, 1924 401 (ON CA), [1924] 4 D.L.R. 420 at 422 (Ont. C.A.):
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].
[14] McIntosh, supra, has been approved by the Supreme Court of Canada: Danyluk v. Ainsworth Technologies (2001), 2001 SCC 44, 201 D.L.R (4th) 193 at para. 24.
[15] In Danyluk, Binnie J. described issue estoppel as applying to factual or legal questions that were “‘fundamental to the decision arrived at’ in the earlier proceeding.” Later, at para. 54, Binnie J. put it this way:
The estoppel, in other words, extends to the issues of fact, law, and mixed fact and law that are necessarily bound up with the determination of that “issue” in the prior proceeding.
[16] As is evident from the relief sought and the facts pleaded in the proceedings before Lax J., those proceedings related exclusively to Robson’s ownership of the shares while an undischarged bankrupt. Fraud was not pleaded either expressly or by implication. Nor did the appellant’s right to the relief sought depend on whether Robson had acted fraudulently. If Robson owned the shares at the relevant time, the appellants were entitled to the relief sought regardless of whether Robson had deliberately concealed his ownership of the shares from the trustee. While it is clear that, by the end of the proceedings, the appellant claimed that Robson had dishonestly concealed his ownership of the shares from the appellant, the truth of that assertion was not “necessarily bound up” with the determination of Robson’s ownership of the shares.
[17] It cannot be said that Robson and the appellant joined issue on the question of whether Robson had acted fraudulently in his dealings with the appellant prior to his discharge from bankruptcy. Robson had no notice prior to the proceeding before Lax J. that the appellant would ask her to make a finding that Robson had acted fraudulently. Robson chose to act for himself and he chose not to take part in the proceedings after the appellant’s case was completed. He did not advance a defence or take part in the defence advanced by his co-defendants. The finding of fraud made by Lax J. was based in no small measure on her assessment of the evidence led by the co-defendants. It would be unfair to prevent Robson from litigating the fraud question in this proceeding based on a finding of fraud in a prior proceeding when he had no notice that fraud was an issue and did not participate in the part of the trial that was central to the trial judge’s finding of fraud.
[18] The doctrine of issue estoppel does not reach the finding of fraud made against Robson by Lax J. Consequently, the appellant cannot rely on that finding to establish fraud by Robson in these proceedings. This conclusion does not prevent the appellant from attempting to establish by evidence that Robson acted fraudulently in his dealings with the trustee prior to his discharge. This, of course, would require that the appellant launch a new motion to annul the discharge.
[19] For these reasons, I would dismiss the appeal.
IV
[20] I should refer to one other matter raised on this appeal. On May 2, 2006, a new bankruptcy order was made against Robson. The appellant was the moving party, and the debt arising from the judgment of Lax J. was one of the primary debts relied upon in that proceeding.
[21] Robson took the position that the bankruptcy order automatically stayed this appeal. When questioned by the court, Robson could not identify any statutory provisions supporting his position. Section 69.3 of the Bankruptcy and Insolvency Act provides that a bankruptcy order stays proceedings taken against the debtor “for the recovery of a claim provable in bankruptcy”. This appeal does not involve the recovery of “a claim provable in bankruptcy” and is not stayed by the bankruptcy order of May 2, 2006.
V
[22] This is not a case for costs against the appellant. Robson represented himself. His submissions were of no assistance. There is no basis upon which this court could, in the proper exercise of its jurisdiction, make a costs order in favour of a self-represented litigant.
RELEASED: “DOC” “MAY 30 2006”
“Doherty J.A.”
“I agree Dennis O’Connor A.C.J.O.”
“I agree J. MacFarland J.A.”