Ontario – Action abuse of process – even against new defendant – where issues already arbitrated – #661

In Doria v Warner Bros. Entertainment Canada Inc. et al., 2022 ONSC 4454, Justice Koehnen granted the Defendants’ motion to strike the Plaintiff’s Statement of Claim pursuant to Rule 21.1(3)(d) of the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194 on the ground that it was an abuse of process because it sought to relitigate issues that were previously decided by an arbitrator. The Plaintiff argued that s. 139 of the Ontario Courts of Justice Act. R.S.O. 1990, c. C.43, allowed him to bring a subsequent proceeding for the same or similar relief against a person who was jointly liable and who was not bound by a previous judgment. Justice Koehnen found that s. 139 did not apply these circumstances, where the Plaintiff had a full opportunity to have his entire claim adjudicated in the arbitration, was awarded judgment, and had fully collected on the judgment. The Plaintiff’s complaint was that the arbitrator did not grant him his full damages. The fact that the Defendants were not parties to the arbitration and therefore not bound by the award was irrelevant.

In 2018, the Plaintiff rented out his home to a production company to film a television series, for which he was paid $27,500. During the course of filming, one of the hardwood floors was scratched. Thereafter, he commenced an arbitration against the production company and its insurer seeking damages of over $680,000. The Arbitrator awarded the Plaintiff just over $49,000.

The Plaintiff then brought an application to set aside the award for lack of jurisdiction, breach of procedural fairness, and reasonable apprehension of bias. That application was dismissed.

Thereafter, the Plaintiff brought this action against the Defendants, who were not parties to the arbitration. He said that he did not know the identity of the Defendants at the time of the arbitration and that as third parties they were not bound by the arbitration. In this action he sought damages for the loss of enjoyment in his home, and for damages he had sought but did not recover in the arbitration. The Plaintiff provided no explanation for why the loss of enjoyment claim was not raised in the arbitration.

Rule 21.03(3)(d) provides that a defendant may move to dismiss an action on the grounds that it is “frivolous or vexatious or is otherwise an abuse of the process of the court”. Justice Koehnen found that abuse of process can arise where, as here, issues that could have been determined in an earlier proceeding but were not raised without any explanation as to why they were not raised. He applied the Supreme Court of Canada expression of the doctrine of abuse of process in Toronto (City) v. CUPE Local 79, 2003 SCC 63 at para. 37:

“…Canadian courts have applied the doctrine of abuse of process to preclude relitigation in circumstances where the strict requirements of issue estoppel (typically the privity/mutuality requirements) are not met, but where allowing the litigation to proceed would nonetheless violate such principles as judicial economy, consistency, finality and the integrity of the administration of justice”.

The Plaintiff relied upon s. 139 of the Ontario Courts of Justice Act, which provides that, “where two or more persons are jointly liable in respect of the same cause of action, a judgment against or release of one of them does not preclude judgment against any other in the same or a separate proceeding”. He argued that this provision permits duplicative litigation.

Justice Koehnen disagreed. He found that the provision was to be read together with the previous provision, s. 138 of the Courts of Justice Act, which states that, “as far as possible, multiplicity of proceedings is to be avoided”. He considered the circumstances (and the relevant cases) and found that the two sections could be read harmoniously to allow duplicative litigation where it was fair and just (at paras. 23 to 36), for example:

  • where a plaintiff has obtained judgment in a first action against one defendant but has been unable to collect;
  • where a plaintiff has settled against one defendant for an amount less than its full damages, it may be fair and just to allow the plaintiff to pursue another defendant in a subsequent action for the difference between the amount for which the plaintiff settled and the plaintiff’s actual loss;
  • where a plaintiff has not “had its day in court” because it was not involved in the first action in which a particular point was determined;
  • where two different adjudicative bodies have carriage of different aspects of a dispute in which case courts have allowed both claims to proceed before different adjudicators; and
  • where a plaintiff has not succeeded in a first action against a first defendant but has a valid claim against another party who was not involved in the first proceeding.

Here, however the circumstances were different. Justice Koehnen found that the Plaintiff was permitted to pursue the full scope of any damages he sought in the arbitration. There was no suggestion that there was any limitation in the arbitration process or in the contract with the production company which was the respondent in the arbitration. The Plaintiff’s full claim was adjudicated upon and the Plaintiff collected the full amount to which he was entitled in the award. Justice Koehnen held that the issue was not the identity of the Defendant, but the fact that the Plaintiff’s claim for damages had been fully determined and that the Plaintiff did not like the result and hoped that a different adjudicator would reach a different conclusion. Such an action would “violate principles of judicial economy, consistency, finality and the integrity of the administration of justice”, which the Supreme Court of Canada held the doctrine of abuse of process was designed to safeguard. Justice Koehnen also invoked the principle of judicial economy to allow him to “weed out claims that should not proceed”.

He dismissed the action as an abuse of process.

Editor’s Note:

First, this appears to be a case of first instance and it will be interesting to see if the Plaintiff appeals. The outcome seems to have turned on Justice Koehnen’s findings that the Plaintiff had his full damages claim adjudicated in a forum to which he agreed, obtained an award (even though it was for less than the Plaintiff sought), and collected the entire amount he was entitled to be paid. This apparently extinguished his claim.

Second, the Plaintiff relied upon the decision of TELUS Communications Inc. v Wellman, 2019 SCC 19 in support of his interpretation of ss. 138 and 139 of the Ontario Courts of Justice Act. He argued that the court must “give effect to the legislative choice” embodied in s. 139 to permit duplicative litigation, despite s. 138. In Wellman, the Supreme Court of Canada stated that the Ontario Arbitration Act, properly interpreted, may lead to duplicative litigation, despite s. 138 of the Ontario Courts of Justice Act:

“[90] Lastly, while s. 138 of the Courts of Justice Act stipulates that courts “shall” avoid a multiplicity of proceedings, it tempers this language by indicating that the court must do so only “as far as possible”. Accordingly, where the application of an Ontario statute, properly interpreted, leads to a multiplicity of proceedings, the court must give effect to the will of the legislature, even if the consequence is to potentially create a multiplicity of proceedings. This is consistent with Seidel, where the Court recognized that even where a multiplicity of proceedings could result, the court must nonetheless give effect to the “legislative choice” embodied in the legislation in question (para. 50). Indeed, here, s. 7(5) of the Arbitration Act expressly contemplates bifurcation of proceedings, as it permits the court to order a partial stay, thereby potentially resulting in concurrent arbitration and court adjudication, where the two preconditions outlined in s. 7(5)(a) and (b) are met. In theory, the Arbitration Act could be amended to grant the courts broad discretion to refuse a stay where doing otherwise could result in a multiplicity of proceedings, but the legislature has not taken this step. For these reasons, while a multiplicity of proceedings can cause practical difficulties, this concern cannot be permitted to trump the language of the statute.”

However, Justice Koehnen found that this was not the case when the Ontario Courts of Justice Act was properly interpreted and that the Wellman case did not apply:

[33]           Wellman is not a case of duplicative litigation but a case of pursuing different remedies before different adjudicative bodies with different areas of competence. It involved a class action against Telus for certain charges. Telus took the position that a class action was inappropriate because the contracts with users called for arbitration. Telus moved to stay the class action. A wrinkle arose because consumer protection legislation precluded arbitration for consumer contracts. As a result, the court stayed that portion of the class action that applied to business customers but allowed the action to proceed with respect to consumer customers. Telus appealed. The Supreme Court of Canada upheld the partial stay which resulted in two proceedings because the applicable Arbitration Act permitted the court to “stay or partially stay” proceedings that were subject to arbitration. The court’s comments (sic) bifurcation or multiplicity must be interpreted in that light. The Supreme Court of Canada was not suggesting that a party who has had an issue fully adjudicated without limitation or restriction in an arbitration could now pursue a second claim in court to recover the difference between what the arbitrator awarded and what the plaintiff thought he was entitled to. Nor does the Arbitration Act provide for such a possibility.