Banque Nationale de Paris (Canada) et al. v. Canadian Imperial Bank of Commerce et al.

[Indexed as: Banque Nationale de Paris (Canada) v. Canadian Imperial Bank of Commerce]

52 O.R. (3d) 161

[2001] O.J. No. 53

Docket No. C33739

Court of Appeal for Ontario

Weiler, Rosenberg and MacPherson JJ.A.

January 12, 2001

• Application for leave to appeal to the Supreme Court of Canada dismissed November 1, 2001 (Gonthier, Major and Binnie JJ.). S.C.C. File No. 28508. S.C.C. Bulletin, 2001, p. 1965.

Estoppel--Res judicata--Issue estoppel--Privies--Privity of interest--Defendant bank realizing on security of bankrupt corporation--Plaintiffs bringing proceedings in Ontario to challenge defendant bank's security and propriety of its realization--Meanwhile defendant bank sued in Quebec by other creditors of bankrupt corporation--Plaintiffs joined as mis-en- cause in Quebec proceedings--Plaintiffs having privity of interest in Quebec proceedings--Plaintiffs bound by judgment in Quebec proceedings.

In August 1983, the respondent CIBC agreed to provide a line of credit to Arctic Gardens Inc. ("Arctic"), which was having cash flow problems. CIBC received security under s. 178 of the Bank Act, S.C. 1980-81-82-83, c. 40 and a general security agreement under the Personal Property Security Act, R.S.O. 1990, c. P.10. The appellants Banque National de Paris (Canada) ("BNP") and the Great Atlantic & Pacific Company of Canada Limited ("A&P") agreed to subordinate their pre-exisitng security. Arctic continued to suffer cash-flow problems, and in February 1984, CIBC appointed the respondent Zittrer, Siblin & Associates ("ZSA") to act informally as a receiver or liquidator. This "soft receivership" lasted until April 24, 1984, when, with the rejection of a bankruptcy proposal, Arctic was deemed to have made an assignment into bankruptcy as at March 1984. On April 25, CIBC appointed ZSA to realize on its security.

In December 1985, BNP and A&P sued CIBC and ZSA in Ontario for, among other things, a declaration that the CIBC's security in the assets of Arctic was void as against them. In March 1986, Blaiklock Inc., a creditor of Arctic, commenced proceedings in Quebec against the CIBC. After failing to quash these proceedings, CIBC applied for and obtained from the Quebec court the right to call BNP and A&P as mis-en-cause in Blaiklock's proceedings to determine the validity and priority of CIBC's proceedings and to determine whether CIBC should pay damages for the actions of ZSA during the soft receivership and later when it realized on CIBC's security.

Pending the determination in the Quebec proceedings, the parties entered into a standstill agreement with respect to the Ontario action. In Quebec, after a 42-day trial and an appeal by CIBC, BNP and A&P to the Quebec Court of Appeal, part of the CIBC's security was held to be invalid, BNP and A&P's security was held to rank prior to other creditors and CIBC was ordered to pay damages of $501,000 to the creditors. After the conclusion of the Quebec proceedings, BNP and A&P resumed the Ontario action and brought a motion to amend the statement of claim to allege misconduct in the soft receivership and an improvident realization. Notwithstanding CIBC's objection that both pleas were res judicata, Nordheimer J. allowed the amendment with respect to the soft receivership but not the amendment with respect to the improvident realization, holding that only the latter allegation was precluded by an issue estoppel. There was an appeal from this ruling by BNP and A&P and a cross-appeal by CIBC.

Held, the appeal should be dismissed, the cross-appeal should be allowed and the motion to amend the statement of claim should be dismissed.

The requirements for issue estoppel may be summarized as follows: (1) the same question has been decided; (2) the judicial decision said to create the estoppel was final; and (3) the parties to the earlier decision or their privies were the same persons as the parties to the present proceedings. In this appeal, the only real dispute was about the third condition, and the real contest between the parties concerned whether the same parties or their privies were involved in the Quebec action. BNP and A&P submitted that their involvement in the Quebec proceedings was limited to the validity of CIBC's s. 178 security. However, their involvement was not so limited. They were actively involved and provided assistance to Blaiklock; they were privies to Blaiklock. For the purposes of an issue estoppel, there can be privity of either blood, title or interest. In the immediate case, there was privity of interest, that is, there was a sufficient degree of identification between them and Blaiklock that it was just to ho ld them bound to the result of the proceedings in which Blaiklock was a party. They were intervenors in the Quebec proceeding to a limited extent and could have applied to broaden the scope of their intervention. They allowed Blaiklock to carry the battle in which they had a practical and legal concern. Justice and common sense compelled the conclusion that they abide by the decision and there was no unfairness or policy basis for not holding them bound. Accordingly, their motion to amend the statement of claim should be dismissed.

APPEAL and CROSS-APPEAL from order in motion for leave to amend statement of claim.

Cases referred to Angle v. M.N.R. (1974), 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248, 47 D.L.R. (3d) 544, 74 D.T.C. 6278, 2 N.R. 397; Bank of Montreal v. Mitchell (1997), 1997 CanLII 14484 (ON CA), 151 D.L.R. (4th) 574 (Ont. C.A.), affg (1997), 1997 CanLII 12306 (ON SC), 143 D.L.R. (4th) 697 (Ont. Gen. Div.); Carl-Zeiss-Stiftung v. Rayner & Keeler, Ltd. (No. 2), [1966] 2 All E.R. 536, [1967] 1 A.C. 853, [1966] 3 W.L.R. 125, 110 Sol. Jo. 425, [1965] R.P.C. 497 (H.L.); Gleeson v. J. Wippell & Co., [1977] 3 All E.R. 54, [1977] 1 W.L.R. 510, 121 Sol. Jo. 157; House of Spring Gardens Ltd. v. Waite, [1990] 2 All E.R. 990, [1990] 3 W.L.R. 347, Times, 19 April (C.A.); Minott v. O'Shanter Development Co. (1999), 1999 CanLII 3686 (ON CA), 42 O.R. (3d) 321, 168 D.L.R. (4th) 270, 40 C.C.E.L. (2d) 1, 99 C.L.L.C. 210-013 (C.A.); Saskatoon Credit Union Ltd. v. Central Park Enterprises Ltd. (1988), 1988 CanLII 2941 (BC SC), 22 B.C.L.R. (2d) 89, 47 D.L.R. (4th) 431 (S.C.) Statutes referred to Bank Act, S.C. 1980-81-82-83, c. 40, s. 178 Bankruptcy Act, R.S.C. 1952, c. 14, s. 20 Business Corporations Act, R.S.O. 1990, c. B.16 Personal Property Security Act, R.S.O. 1990, c. P.10

David S. Wilson, for appellants. Patrick O'Kelly and Craig Martin, for respondents.

The judgment of the court was delivered by

[1] ROSENBERG J.A.:--In April 1984, Arctic Gardens Inc. was deemed to have made an assignment in bankruptcy after its bankruptcy proposal was rejected at a meeting of creditors. Arctic had granted security over its inventory and other assets to a number of different persons, including the two appellants (respondents by cross-appeal) Banque Nationale de Paris (Canada) ("BNP") and The Great Atlantic & Pacific Company of Canada, Limited ("A&P") and the respondent Canadian Imperial Bank of Commerce. Some of that security applied to the same assets. CIBC appointed the respondent Zittrer, Siblin & Associates ("ZSA") as its agent to realize on the security. Lawsuits followed, first in Ontario, launched by these appellants, and then in Quebec, by an unsecured creditor, to determine the validity of CIBC's security, priorities and whether CIBC should pay damages for the actions of its agent ZSA while it was consulting to Arctic prior to its bankruptcy and then after the bankruptcy when it realized on the security. The Quebec action was tried first.

[2] Following a 42-day trial in the Quebec Superior Court, the creditors other than CIBC, and hence these appellants, achieved substantial success. Certain of CIBC's security was held to be invalid, the appellants' security was held to rank prior to the interests of the other creditors, and CIBC was ordered to pay over $4 million to the creditors. CIBC appealed to the Quebec Court of Appeal, which reduced the award payable by CIBC to $501,000. The appellants now seek to litigate in Ontario some of the same issues determined in the Quebec courts. The respondents say that at least two of these issues are res judicata and that issue estoppel applies to prevent the appellants from relitigating them. Nordheimer J. agreed in part. He refused to permit an amendment to the statement of claim adding an allegation of improvident realization but allowed an amendment adding an allegation of informal liquidation. The appellants and the respondents appeal from that decision. For the reasons that follow, I would dismiss the appeal, allow the cross-appeal and dismiss the motion to amend the statement of claim.

The Facts

Events leading up to the bankruptcy

[3] This appeal arises out of the affairs of Arctic Gardens Inc., a company incorporated under the Ontario Business Corporations Act, R.S.O. 1990, c. B.16, in the business of processing and selling frozen vegetables. The appellants are secured creditors of Arctic. In August 1983, Arctic was having cash-flow problems and the respondent CIBC agreed to provide a line of credit of $1 million. CIBC took security over, inter alia, the inventory of Arctic under s. 178 of the Bank Act, S.C. 1980-81-82-83, c. 40, and pursuant to a general security agreement registered under the Personal Property Security Act, R.S.O. 1990, c. P.10. The appellants agreed to subordinate their pre-existing security to CIBC.

[4] Arctic continued to suffer cash-flow problems and on February 20, 1984, CIBC appointed the respondent ZSA as a consultant to assist in supervising the operations of Arctic. On March 22, 1984, Arctic lodged a bankruptcy proposal in Montreal. On April 24, at a meeting of creditors, this proposal was rejected and Arctic was deemed to have made an assignment in bankruptcy as at March 22, 1984. The period of February 20 to April 24, 1984 is variously referred to as the soft liquidation, soft receivership or the informal liquidation. I shall use the term "informal liquidation". On April 25, CIBC appointed ZSA to realize its security over Arctic.

The litigation up to the motion to amend

[5] On December 24, 1985, the appellants commenced an action in Ontario against the respondents. In the statement of claim, the appellants sought, inter alia: a declaration that all inventory and totes and pallets of Arctic were subject to the security of BNP in priority to any interests of the respondents; a declaration that CIBC's s. 178 security was void as against the appellants; a declaration that the appellants were entitled to the proceeds of sale from the disposition of inventory and the totes and pallets by the respondents; occupation rent for the period that ZSA occupied certain of Arctic's premises; and damages equivalent to the value of the inventory and the totes and pallets of Arctic disposed of by the respondents.

[6] In November 1988, the appellants examined representatives of the respondents for discovery. The respondents refused to answer any questions concerning the sale or disposition of Arctic's inventory during the period of the informal liquidation. They also refused to answer any questions concerning the value of the inventory of Arctic disposed of by the respondents from April 25 to September 1984, the period of the formal liquidation, and conditions affecting the value of such inventory. The refusals were apparently based on the theory that such questions were not relevant to any of the claims pleaded.

[7] On June 22, 1990, the appellants moved to amend the statement of claim to include claims for the informal liquidation and for negligence and improvident realization of assets during the formal liquidation.

[8] Meanwhile, on March 25, 1986, a creditor of Arctic, Blaiklock Inc., brought a motion before the Quebec Bankruptcy Court under s. 20 of the Bankruptcy Act, R.S.C. 1952, c. 14, for leave to commence action against CIBC. The motion was granted and Blaiklock delivered its petition in September 1988. When CIBC was unsuccessful in quashing the Quebec proceeding, it moved to add the appellants as mis-en-cause to the Quebec action. Over the objections of the appellants, Meyer J. granted the application in the following terms:

ALLOWS petitioner CIBC to call BNP and A&P as mis-en-cause in the present file in order to allow the latter to take knowledge of the decision to be rendered by this Court on the validity of the security given to the CIBC and to them.

(Emphasis added)

[9] CIBC then moved to stay the Ontario action because it was expected that the Quebec action would go to trial first and would inter alia settle the validity of CIBC's s. 178 security. The parties entered into a standstill agreement whereby the Ontario action was held in abeyance until a judgment was rendered by the Bankruptcy Court in Montreal. The appellants' motion to amend was therefore adjourned.

The Quebec decision at trial

[10] The action by Blaiklock against the respondents commenced in 1992. The trial lasted 42 days and Trudeau J. rendered his decision on January 22, 1993. He held as follows:

(1) The s. 178 security held by CIBC was void as against Blaiklock and any other creditor and the trustee of Arctic;

(2) The taking of possession of Arctic by ZSA as agents for CIBC on February 20, 1984 (the informal liquidation) violated the contract between Arctic and CIBC;

(3) CIBC and ZSA were ordered to pay $1,555,000 in damages to Blaiklock "for the loss of the business as a going concern";

(4) CIBC and ZSA were ordered to pay Blaiklock $2,904,838 representing the value of the inventory;

(5) A&P and BNP had priority over Blaiklock and the other unsecured creditors with respect to the sum of $2,904,838 (the value of the inventory);

(6) CIBC's cross-claim against A&P and BNP for the value of certain inventory held by their agents and its costs of realizing on the security was dismissed, on the ground that it was "lis pendens" in the Ontario action;

(7) The claim by A&P and BNP to pay directly to them the sum of $316,855, representing the proceeds of the realization of the inventory, was dismissed on the ground of "lis pendens".

[11] CIBC appealed to the Quebec Court of Appeal as did A&P and BNP. The latter sought an order that the $2,904,838 be paid to them directly.

The decision of the Quebec Court of Appeal

[12] Brossard J.A. delivered the reasons of the Quebec Court of Appeal. The results of the judgment so far as is necessary for this appeal may be summarized as follows:

(1) All the claims against ZSA, being founded in "delict" (tort), were barred by prescription (limitation period).

(2) The claims against CIBC founded in delict were also barred by prescription, the claims based in contract were not.

(3) Blaiklock had failed to prove that the precipitous actions by CIBC resulting in the informal liquidation caused any loss to Arctic and thus the trial judge should not have awarded any damages for the value of the firm "as a going concern". Specifically, Brossard J.A. held that:

Both the judgment and the evidence as a whole lead me to conclude that the cause of the firm's failure was anything but CIBC's take-over.

We must therefore conclude that there is no evidence whatsoever of any causal link between the loss of Arctic Garden Inc.'s company and the action taken by CIBC on February 20, 1984, whatever fault there may have been in taking action without giving a notice of intention.

(4) CIBC's s. 178 security was invalid as against the other creditors because of a defect in registration.

(5) Accordingly, CIBC did not have the right to proceed unilaterally after the bankruptcy to enforce the security for its sole benefit and thus,

the entire inventory in CIBC's possession and managed and administered by CIBC in the course of Arctic Garden Inc.'s affairs, over which it had had control since February 20, 1984, should have been returned to the trustee and realized under the sole authority and jurisdiction of the trustee.

(6) The trial judge erred in holding that CIBC was liable for the book value of the inventory it took from Arctic.

(7) There was no evidence of improvident sale or negligence by CIBC.

(8) In enforcing its security without authority, CIBC received a preferential payment of $501,000 which it was liable to the trustee, for the benefit of all the creditors.

(9) A&P and BNP have priority over Blaiklock.

(10) The Quebec court could not determine the rights of CIBC and A&P and BNP that depend upon the provisions of the Ontario Personal Property Security Act. The court dismissed the cross-appeal by A&P and BNP to have CIBC reimburse them directly. Brossard J.A. held that,

In short, I am of the opinion that all the problems and issues between BNP and A&P on one hand and CIBC on the other, all of which are based on facts and managerial and administrative actions in Ontario, must be settled by the Ontario suit still pending, which was filed before this case, and in which the same problems and questions were raised.

Thus the formal order of the Court of Appeal contains the following clause:

RESERVES for the Canadian Imperial Bank of Commerce and for the Banque Nationale de Paris (Canada) and The Great Atlantic and Pacific Company of Canada Limited all their rights, other than those regarding the validity of the security of Canadian Imperial Bank of Commerce under section 178 of the Bank Act, in the suit pending between them before the courts of the Province of Ontario.

[13] An application for leave to appeal to the Supreme Court of Canada was dismissed in 1996. The appellants then renewed their motion to amend the statement of claim in the Ontario Action. Nordheimer J. heard that motion in January 2000 and he released his reasons on January 24, 2000.

The Reasons of the motions judge

[14] There were two motions before Nordheimer J. One motion was brought by the respondents to stay the proceedings because there were ongoing proceedings in the Quebec courts. The motions judge dismissed that motion and it is not an issue on this appeal. The appellants brought a cross-motion to amend the statement of claim to add the allegations concerning the informal liquidation and improvident disposition of the assets of Arctic. The respondents resisted the motion to amend on the basis that the issues sought to be raised by the amendments were res judicata. Alternatively, they argued that the applicable limitation period had intervened and therefore the amendments should not be allowed to add these claims.

[15] The motions judge did not give effect to the respondents' limitation period argument. As to res judicata, he held that there was a clear finding by the Quebec Court of Appeal that there was no improvident realization. Thus, issue estoppel applied and that amendment could not be permitted. However, with respect to the informal liquidation, the motions judge held that there was "nothing in the Quebec proceeding" dealing with that issue and therefore that amendment must be permitted. The appellants appeal from the disposition concerning the improvident realization amendment. The respondents cross-appeal against the disposition concerning the informal liquidation. They rely upon the limitation period and issue estoppel arguments. Because of my conclusion on the latter argument, I need not deal with the limitation period issue.

Analysis

[16] The requirements for issue estoppel were set out by the House of Lords in Carl-Zeiss-Stiftung v. Rayner & Keeler, Ltd. (No. 2), [1966] 2 All E.R. 536 at p. 565, [1967] 1 A.C. 853, and for the purposes of this appeal may be summarized as follows:

(1) the same question has been decided;

(2) the judicial decision said to create the estoppel was final;

(3) the parties to the earlier decision or their privies were the same persons as the parties to the present proceedings.

[17] Notwithstanding the finding by the motions judge, it became apparent in the course of argument that the only real dispute between the parties is with the third condition. I need only therefore deal briefly with the other two conditions.

The same question has been decided

[18] In my view, the Quebec Court of Appeal has decided both questions sought to be raised by the proposed amendments to the statement of claim. There is no dispute that the Court of Appeal held that there had been no improvident realization and that CIBC was liable only for the amount of $501,000. CIBC has paid this amount to the trustee in accordance with the judgment of the Court of Appeal. There is, of course, a dispute as to who is entitled to that amount, but that issue is not directly relevant to this appeal.

[19] As to the informal liquidation, in my view the Quebec Court of Appeal did deal with that issue and counsel for the appellant appeared to concede as much in oral argument. I have already set out the relevant findings from the reasons of Brossard J.A. He held that even if there was an informal liquidation it did not cause any loss.

[20] Further, these two issues did not arise merely collaterally or incidentally in the earlier proceedings. See Angle v. M.N.R. (1974), 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248 at pp. 253-255, 47 D.L.R. (3d) 544 at p. 555. Both were fundamental to the final judgment arrived at by the Quebec Court of Appeal.

Final decision

[21] The parties agree that the final decision requirement was met. An application for leave to appeal to the Supreme Court of Canada was dismissed and thus the judgment of the Court of Appeal was final.

Same parties or their privies

[22] Thus, the real contest between the parties concerned whether the same parties or their privies were involved in the Quebec action. The appellants submit that their compelled intervention in the Quebec proceedings was limited to the validity of the s. 178 security. They accept, of course, that the finding of invalidity was binding upon them. They also seem prepared to accept the finding, in their favour, that they rank ahead of Blaiklock and the other unsecured creditors. They argue, however, that they are not bound by any of the other determinations because of the limitation on their intervention imposed by the order of Meyer J. The motions judge dealt with this question, in relation to the improvident realization, as follows [at para. 33]:

In my view, that is a finding that is binding on these parties, all of whom were before the Quebec courts in that proceeding. It was asserted by the plaintiffs that they had a limited role in the Quebec proceeding and therefore it would be unfair to bind them to the determination of an issue in which they did not actively participate. I do not agree. The plaintiffs here were actively involved in the Quebec proceeding. Further, there is evidence that they provided assistance to Blaiklock in its prosecution of that proceeding such that they would be considered "privies" to Blaiklock -- see Sopinka, Lederman, Bryant, The Law of Evidence in Canada, 2nd ed. Toronto: Butterworths, 1999 at pp. 1087-1090.

[23] I agree with the conclusion reached by the motions judge, although I prefer to rest my decision solely on the basis that the appellants were privies to Blaiklock. As the motions judge noted, the appellants were actively involved in the Quebec action and provided assistance to Blaiklock. They closely identified their interests with that of Blaiklock, to the point where they entered into agreements with Blaiklock. Thus, in a letter dated July 21, 1986, Blaiklock confirmed that,

BNP and A&P have a first claim on all proceeds with respect to the business and all assets of Arctic, or to any monies to be awarded or received pursuant to the Section 20 contemplated action, or recovered in any claim by any creditor, including yourselves and ourselves, to the extent of the outstanding indebtedness of Arctic to you.

[24] The letter went on to discuss the outstanding Ontario action and included the following:

Based on the foregoing, we suggest it is to our mutual advantage to ensure that neither your Ontario Action, nor our contemplated Section 20 action, or any other claim or action arising from, relating to, or in any way connected with Arctic or any of its business or assets (collectively the Creditor Claim), proceed in a manner likely to benefit CIBC and ZSA.

[25] Blaiklock and the appellant later entered into a formal agreement confirming the priority of the appellants. In turn, the appellants acknowledged inter alia that Blaiklock's costs in the Quebec litigation up to $300,000 "will have priority, after payment to the [appellants] of the sum of $555,439.77 plus interest . . . on Judgment proceeds which may be payable by the Defendants in this litigation".

[26] In Carl-Zeiss at p. 550 All E.R., Lord Reid held that the requisite privity for the purposes of the rule can be a privity either of blood, of title or of interest. The relevant one in this case is privity of interest. In Gleeson v. J. Wippell & Co., [1977] 3 All E.R. 54 at p. 60, [1977] 1 W.L.R. 510, Megarry V.-C. suggested this test for privity of interest:

. . . 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.

[27] In House of Spring Gardens Ltd. v. Waite, [1990] 2 All E.R. 990 (C.A.) at p. 999, Stuart-Smith L.J. applied that test in the following manner:

Mr. Macleod was well aware of those proceedings. He could have applied to be joined in them, and no one could have opposed his application. He chose not to do so and he has vouchsafed no explanation as to why he did not. Counsel for Mr. Macleod says he was not obliged to do so; he was not obliged to go to a foreign jurisdiction; he could wait until he was sued here. He speaks as if Mr. Macleod was required to go half way round the world to some primitive system of justice. That is not so. He had to go to Dublin whose courts, as the judge said, are perfectly competent to deal with this matter. . . . Instead, he was content to sit back and leave others to fight his battle, at no expense to himself. In my judgment, that is sufficient to make him privy to the estoppel; it is just to hold that he is bound by the decision of Egan J.

(Emphasis added)

[28] Farley J. reached a similar conclusion in Bank of Montreal v. Mitchell (1997), 1997 CanLII 12306 (ON SC), 143 D.L.R. (4th) 697 (Ont. Gen. Div.) at p. 739 (affirmed (1997), 1997 CanLII 14484 (ON CA), 151 D.L.R. (4th) 574 (Ont. C.A.)):

For privity of interest to exist there must be a sufficient degree of connection or identification between the two parties for it to be just and common sense to hold that a court decision involving the party litigant that it should be binding in a subsequent proceeding upon the non-litigant party in the original proceeding, as discussed above, where that non-litigant party has sufficient interest in those original proceedings to intervene but instead chooses to stand by and have the battle in which he has a practical and legal concern fought by someone else, it is appropriate to have the non-litigant abide by that previous decision . . .

(Emphasis added)

[29] In my view, these appellants were properly found to have a privity of interest. Their interests were so much the same as the plaintiff in the Quebec litigation that they entered into a formal agreement for disposing of the proceeds. The appellants were intervenors in the Quebec proceedings to a limited extent, and could have applied to broaden the scope of their intervention. Instead, in the words of Farley J., they chose to "stand by and have the battle in which [they had] a practical and legal concern fought by someone else". Justice and common sense compel the conclusion that they abide by the previous decision. Issue estoppel has been applied in similar circumstances in Saskatoon Credit Union Ltd. v. Central Park Enterprises Ltd. (1988), 1988 CanLII 2941 (BC SC), 47 D.L.R. (4th) 431 at p. 439, 22 B.C.L.R. (2d) 89 (S.C.).

[30] Thus, even if because of the limited nature of their intervenor status, the appellants were not parties to the Quebec litigation on issues other than the validity of the s. 178 security, since they were privies to Blaiklock, they are bound by the determination of the informal liquidation and improvident realization questions in that litigation.

[31] Finally, I see no policy basis for not holding that the appellants are bound by the determinations in the Quebec proceedings. In Minott v. O'Shanter Development Co. (1999), 1999 CanLII 3686 (ON CA), 42 O.R. (3d) 321 at p. 340, 168 D.L.R. (4th) 270 (C.A.), Laskin J.A. held that,

Judicial discretion is required to achieve practical justice without undermining the principles on which issue estoppel is founded. Issue estoppel should be applied flexibly where an unyielding application of it would be unfair to a party who is precluded from relitigating an issue.

(Emphasis added)

[32] There is no unfairness in holding that the appellants are bound by the decision in the Quebec courts. I agree with the motions judge when he said that it would be "fundamentally inappropriate to permit parties that are connected to one proceeding in which a finding is made to re-litigate that issue in another proceeding dealing with the same events just because there may be different evidence available to the party on the issue". Although the appellants' formal intervention in the Quebec proceedings was limited, they were active in their support of Blaiklock because of the obvious advantage to them if it succeeded. They were then quite prepared to assert priority over Blaiklock and take the benefit of the trial judgment. I also agree with the motions judge that although the Quebec Court of Appeal reserved all of the issues between the appellants and CIBC, that did not prevent the operation of issue estoppel in the Ontario litigation. The impact of issue estoppel on the Ontario litigation, by reason of the Quebec litigation, was an issue for the Ontario courts.

Disposition

[33] Accordingly, I would dismiss the appeal with costs and allow the cross-appeal with costs and dismiss the motion to amend the statement of claim.

Order accordingly.