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Estoppel - Cause of Action Estoppel
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. Patrick Street Holdings Ltd. v. 11368 NL Inc. [mutuality]
In Patrick Street Holdings Ltd. v. 11368 NL Inc. (SCC, 2026) the Supreme Court of Canada considered 'cause of action estoppel'.
Here the court considers the cause of action estoppel element of 'mutuality':(b) The Parties to the 2019 Application Were Parties to the 2016 Applications
[99] This requirement, dealing with mutuality, asks whether the parties to the decision said to create the estoppel were the same as the parties in the present litigation. In my view, this requirement is clearly met. The parties to the 2016 applications were J-3 and Mr. Cook, as applicants, and Patrick Street and 11368, as respondents. The parties to the 2019 application were 11368, as an applicant, and Patrick Street, as a respondent. 11368 and Patrick Street were thus parties in both the prior and subsequent litigation.
[100] Mutuality exists notwithstanding that Patrick Street was a respondent in both sets of applications, whereas 11368 was a respondent in one and an applicant in the other. Provided that both parties in the subsequent litigation were parties in the previous litigation, “[t]he position of the parties on the record in the two cases is irrelevant” (Handley, at p. 130; see also Canadian Shredded Wheat Co. Ltd. v. Kellogg Co. of Canada Ltd., 1939 CanLII 35 (SCC), [1939] S.C.R. 329).
[101] On appeal, Patrick Street argues that 11368 had “limited participation” in the 2016 applications and subsequent appeal. Similarly, in the context of her analysis of issue estoppel, the dissenting justice in the Court of Appeal acknowledged that Patrick Street and 11368 were both involved in the 2016 and 2019 applications, but held that 11368’s “roles were different” (para. 636).
[102] In my respectful view, these perspectives are misplaced. The primary concern at this stage of the test is ensuring that a party is not bound to an outcome it did not have a reasonable chance to advocate for in the same capacity as the one in which it is estopped. It is true that the mutuality requirement will not be met where parties or their privies brought or defended a previous proceeding in respect of a different right, which may arise where a party brings a first action as a personal representative and is then subsequently sued in its personal capacity (Lederman, Fuerst and Stewart, at ¶19.137). However, 11368 and Patrick Street appeared in their own capacity in both sets of proceedings. I thus conclude that the mutuality requirement is met in this case. . Patrick Street Holdings Ltd. v. 11368 NL Inc. [res judicata as a rule of evidence]
In Patrick Street Holdings Ltd. v. 11368 NL Inc. (SCC, 2026) the Supreme Court of Canada considered 'cause of action estoppel'.
Here the court broadly considers res judicata, it's elements of cause of action estoppel and issue estoppel, and the closely-related doctrine of abuse of process by re-litigation:[32] Res judicata is one of several common law doctrines — including the doctrine of collateral attack and the doctrine of abuse of process by relitigation — that exist to prevent abuse of the judicial decision-making process (Danyluk, at para. 20; Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 22). The doctrine provides that a dispute, once decided finally between parties, is not subject to relitigation by those parties (Danyluk, at para. 20; Hoque v. Montreal Trust Co., 1997 NSCA 153, 162 N.S.R. (2d) 321, at para. 21).
[33] There are two branches of res judicata: cause of action estoppel and issue estoppel (Angle v. M.N.R., 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248, at p. 254; Toronto (City), at para. 23). Cause of action estoppel bars the relitigation of a cause of action by either party, whereas issue estoppel precludes a litigant from rearguing an issue that was “fundamental to the decision arrived at” in a prior proceeding (Angle, at p. 255, citing Hoystead v. Commissioner of Taxation, 1925 CanLII 607 (UK JCPC), [1926] A.C. 155 (P.C.), at p. 165).
[34] Res judicata is and has long been a rule of evidence (S. N. Lederman, M. K. Fuerst and H. C. Stewart, Sopinka, Lederman & Bryant: The Law of Evidence in Canada (6th ed. 2022), at ¶19.86). Historically, when res judicata became part of English law in the 12th century, it was referred to as estoppel by matter of record — that is, estoppel arising from the written record of a court (Angle; W. S. Holdsworth, A History of English Law (3rd ed. 1944), vol. IX, at p. 147; W. Freedman, Res Judicata and Collateral Estoppel: Tools for Plaintiffs and Defendants (1988), at p. 7). Matters “solemnly recorded” by the court had to be “accepted as proof, so that no averment to contradict them [could] be received” (Holdsworth, at p. 147). In this sense, estoppel by matter of record permitted the admission of a court’s decision as proof of the findings contained therein (p. 147). A plea of estoppel involved producing the decision said to give rise to the estoppel in the subsequent proceeding to allow a court to conclude that the matters at issue in the prior proceeding were the same matters at issue in that proceeding (A. Caspersz, Estoppels and the Substantive Law (4th ed. 1915), at p. 460).
[35] While now referred to as res judicata, the doctrine remains a rule of evidence that applies to estop a party from introducing evidence to contradict a result that has been decided in a prior proceeding (Lederman, Fuerst and Stewart, at ¶19.86).
[36] While res judicata is a rule of evidence, it is designed to advance the interests of justice (Danyluk, at para. 19). The doctrine is founded on two overarching principles of public policy: a litigant’s interest in fairness, and society’s interest in the conclusion of disputes and the finality of judicial decisions (Toronto (City), at para. 38; Grandview v. Doering, 1975 CanLII 16 (SCC), [1976] 2 S.C.R. 621, at p. 636, citing Fenerty v. The City of Halifax (1920), 1920 CanLII 389 (NS CA), 50 D.L.R. 435 (N.S.S.C.), at pp. 437-38; K. R. Handley, Spencer Bower and Handley: Res Judicata (5th ed. 2019), at p. 4).
[37] With respect to the first principle, res judicata seeks to prevent the economic and psychological hardship resulting from a litigant being “twice vexed in the same cause” (Toronto (City), at para. 50, citing G. D. Watson, “Duplicative Litigation: Issue Estoppel, Abuse of Process and the Death of Mutuality” (1990), 69 Can. Bar Rev. 623, at p. 633; see also Penner v. Niagara (Regional Police Services Board), 2013 SCC 19, [2013] 2 S.C.R. 125, at para. 28). It is both unreasonable and unjust to permit a claim to be litigated afresh between parties to a dispute where the claim has been finally decided in a prior proceeding (Handley, at p. 4, citing New Brunswick Ry. Co. v. British and French Trust Corporation, [1939] A.C. 1 (H.L.)). In this way, res judicata focuses on the interests of the parties (Toronto (City), at para. 32).
[38] In addition to the individual focus of res judicata, the doctrine plays an important societal function. Our legal system places a high value on the finality of judicial decisions, an objective achieved by limiting the ability of parties to reopen disputes (Danyluk, at para. 18; British Columbia (Workers’ Compensation Board) v. Figliola, 2011 SCC 52, [2011] 3 S.C.R. 422, at para. 34; Tsaoussis (Litigation Guardian of) v. Baetz (1998), 1998 CanLII 5454 (ON CA), 41 O.R. (3d) 257 (C.A.), leave to appeal refused, [1999] 1 S.C.R. xiv). Finality is critical not only for the certainty of the parties, but also for the integrity of the judicial process (Hoque, at para. 77). Res judicata also serves to maintain respect for and public confidence in the administration of justice by guarding against inconsistent results and inconclusive proceedings (Danyluk, at para. 18). Indeed, res judicata gives judicial decisions an authority they would not have if they were subject to constant reassessment and variation (Tsaoussis).
[39] To advance the objective of finality, res judicata “requires litigants to put their best foot forward to establish the truth of their allegations when first called upon to do so” (Danyluk, at para. 18). As I will explain below, in the context of cause of action estoppel, res judicata requires a litigant to have advanced all arguments at the first proceeding that it could have had it exercised reasonable diligence. In this sense, a litigant is entitled only to one kick at the can (para. 18).
[40] Importantly, res judicata advances the objective of finality regardless of the correctness in law or fact of the prior decision that gives rise to the estoppel (Handley, at p. 6). This gives effect to the principle that a judicial decision made by a competent court is final and conclusive unless corrected on appeal (p. 6). For this reason, the correctness of a prior decision is not a relevant factor in determining whether res judicata applies to bar relitigation.
[41] While not its primary purpose, res judicata performs an additional societal function in facilitating access to justice. It does so by preventing duplicative litigation that drains court resources and the resources of the litigants (Danyluk, at para. 18).
[42] Closely related to the doctrine of res judicata is the doctrine of abuse of process by relitigation. Both res judicata and abuse of process by relitigation advance the policy grounds of finality and fairness (Toronto (City), at para. 38). However, abuse of process “transcends the interests of litigants and focuses on the integrity of the entire system” (Ontario v. O.P.S.E.U., 2003 SCC 64, [2003] 3 S.C.R. 149, at para. 12).
[43] The doctrine of abuse of process derives from a court’s inherent jurisdiction to manage its own procedures, and it applies based on a judge’s appreciation of the impact of relitigation on the repute of the administration of justice. Abuse of process by relitigation is often invoked where the strict preconditions to apply one of the branches of res judicata are not met, but where permitting relitigation of an issue or cause of action would nonetheless constitute a misuse of a court’s procedures (Toronto (City), at para. 37). In this sense, while abuse of process is “unencumbered” by the technical requirements of res judicata, it should be applied as a last resort to protect the repute of the administration of justice (para. 37, citing Canam Enterprises Inc. v. Coles (2000), 2000 CanLII 8514 (ON CA), 51 O.R. (3d) 481 (C.A.), at para. 55, per Goudge J.A., dissenting). It is “only when the rules of res judicata run out that it is useful to turn to” the doctrine of abuse of process (A. Zuckerman, Zuckerman on Civil Procedure: Principles of Practice (3rd ed. 2013), at p. 1244). . Patrick Street Holdings Ltd. v. 11368 NL Inc.
In Patrick Street Holdings Ltd. v. 11368 NL Inc. (SCC, 2026) the Supreme Court of Canada considered 'cause of action estoppel'.
Here the court summarizes the case:[1] This appeal affords an opportunity to examine the contours of cause of action estoppel. Cause of action estoppel prevents the relitigation of a cause of action that was or should have been argued in a prior proceeding. This doctrine has individual and societal purposes; it guards against abuse of the judicial decision-making process and protects parties from duplicative litigation (Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 20). In these ways, cause of action estoppel plays a vital role in the Canadian legal system.
[2] In this case, cause of action estoppel arises in the context of several interrelated proceedings dealing with the proceeds from the exercise of a power of sale under a defaulted mortgage. The main question before us is whether the appellant, Patrick Street Holdings Limited, is barred by operation of cause of action estoppel from arguing that it is entitled to be paid $4 million out of the proceeds from the power of sale of a property encumbered by several mortgages and other claims. Patrick Street claims that this amount is payable under a mortgage it held on the property. A preliminary question relates to the obligation to plead cause of action estoppel at first instance.
[3] In 2016, two parties holding encumbrances on the property applied for a review of Patrick Street’s accounting of the sale proceeds (“2016 applications”). The application judge rendered a decision in 2017, in which he excluded several claims from the accounting, notably a $4 million mortgage held by Patrick Street. In 2019, the mortgagor of the property sold under the power of sale, the respondent, 11368 NL Inc., brought an application seeking an order that an unrelated encumbrance be paid out and that 11368 receive the surplus from the sale proceeds (“2019 application”). Patrick Street argued that the application judge in 2017 had not definitively determined that it was not entitled to payment from the sale proceeds under the $4 million mortgage.
[4] The same application judge rejected Patrick Street’s argument and relied on his findings from 2017 to do so. A majority of the Newfoundland and Labrador Court of Appeal upheld his decision, finding that the doctrine of res judicata had been properly raised before the application judge and that the same doctrine, along with the doctrine of abuse of process by relitigation, applied to bar Patrick Street from relitigating its claim for entitlement to payment from the sale proceeds under the $4 million mortgage.
[5] In my view, the majority of the Court of Appeal was correct to uphold the application judge’s decision on the 2019 application. This Court has long recognized an obligation on parties to plead and raise res judicata at first instance (Davies v. McMillan (1892), Cameron 306 (S.C.C.), at p. 317; Cooper v. The Molsons Bank (1896), 1896 CanLII 22 (SCC), 26 S.C.R. 611, at p. 620). 11368 satisfied this obligation, properly pleading res judicata in its written submissions and raising the doctrine before the application judge in 2019.
[6] Moreover, the majority of the Court of Appeal was correct to conclude that cause of action estoppel precludes Patrick Street from challenging the application judge’s original decision on Patrick Street’s accounting by raising a new argument to support its claim for entitlement to payment under the $4 million mortgage. The cause of action at issue in the 2016 proceedings concerned the need to determine the validity, value, and priority of encumbrances on the property through a judicial accounting. This is the same cause of action that was at issue in 11368’s 2019 application. Accordingly, Patrick Street’s failure in 2016 to advance all reasonably available arguments in defence of its claim for entitlement to be paid from the sale proceeds is fatal to its ability to raise those arguments in defence of this position in 2019.
[7] Because cause of action estoppel provides a full answer to this appeal, it is unnecessary to address 11368’s arguments respecting the applicability of issue estoppel and abuse of process by relitigation to the facts of this case. I would accordingly dismiss the appeal. . Canadian Energy Services L.P. v. Secure Energy (Drilling Services) Inc.
In Canadian Energy Services L.P. v. Secure Energy (Drilling Services) Inc. (Fed CA, 2025) the Federal Court of Appeal dismissed a patent appeal, here from "a judgment of the Federal Court ... declaring inventorship and ownership of a patent for a polymeric drilling fluid used in drilling for oil".
Here the court considers 'cause of action estoppel':[95] Cause of action estoppel, though broader in scope than issue estoppel, also does not apply here. Cause of action estoppel precludes the relitigation of all subject matter germane to the claim or defence which could have been brought forward by the exercise of reasonable diligence but was not: Donald J. Lange, The Doctrine of Res Judicata in Canada, 5th ed. (Toronto: LexisNexis, 2021) at 139. .... . 402 Mulock Investments Inc. v. Wheelhouse Coatings Inc.
In 402 Mulock Investments Inc. v. Wheelhouse Coatings Inc. (Ont CA, 2022) the Court of Appeal nicely summarizes res judicata and its elements, which include cause of action estoppel:[16] Res judicata prevents the re-litigation of previously adjudicated and finally decided matters. There are two branches of res judicata: cause of action estoppel and issue estoppel: Dosen v. Meloche Monnex Financial Services Inc. (Security National Insurance Company), 2021 ONCA 141, 457 D.L.R. (4th) 530, at para. 31.
[17] Cause of action estoppel precludes the parties from litigating claims that have been determined in a prior action: Dosen, at para. 31. It applies where the basis of the cause of action was argued or could have been argued in the prior action through the exercise of reasonable diligence. The same parties must be involved in the subsequent litigation and the underlying decision must be final: The Catalyst Capital Group Inc. v. VimpelCom Ltd., 2019 ONCA 354, 145 O.R. (3d) 759, at paras. 50-51.
[18] Issue estoppel precludes the re-litigation of issues that have been previously decided in another proceeding: Dosen, at para. 32. Three preconditions are required. First, the same issue must have been decided. Second, the judicial decision giving rise to the estoppel must be final. Third, the parties to the judicial decision must be the same persons as those in the proceeding in which the estoppel is raised, or their privies: Toronto (City), at para. 23. If the criteria are met, the court must determine whether, as a matter of discretion, issue estoppel ought to be applied: Danyluk, at para. 33. . Dosen v. Meloche Monnex Financial Services Inc. (Security National Insurance Company)
In Dosen v. Meloche Monnex Financial Services Inc. (Security National Insurance Company) (Ont CA, 2021) the Court of Appeal stated the test for cause of action estoppel:[13] The motion judge applied the test for cause of action estoppel set out recently by this court in The Catalyst Capital Group Inc. v. VimpelCom Ltd., 2019 ONCA 354, 145 O.R. (3d) 759, leave to appeal refused, [2019] S.C.C.A. No. 284. She stated:There is a specific test that has to be met to establish this type of estoppel and it has four requirements to it as follows:There is a final decision of a court of competent jurisdiction in a prior action. This is conceded by the responding parties and is not at issue here;
The second requirement is the parties to the subsequent litigation were parties to, or in privy with the parties to the prior action;
The third requirement, the cause of action in the prior action is not separate and distinct and;
Fourthly, the basis of the cause of the action and the subsequent action was argued or could have been argued in the prior action, if the parties had exercised reasonable diligence. [Emphasis in original.] . The Catalyst Capital Group Inc. v. VimpelCom Ltd.
In The Catalyst Capital Group Inc. v. VimpelCom Ltd. (Ont CA, 2019) the Court of Appeal the court states as follows on the doctrine of cause of action estoppel:[49] The purpose of cause of action estoppel is to prevent the re-litigation of claims that have already been decided. As expressed by Vice Chancellor Wigram in Henderson v. Henderson (1843), 67 E.R. 313, at p. 319, it requires parties to “bring forward their whole case.” The court thus has the power to prevent parties from re-litigating matters by advancing a point in subsequent proceedings which “properly belonged to the subject of the [previous] litigation”.
[50] For cause of action estoppel to apply, the basis of the cause of action and the subsequent action either must have been argued or could have been argued in the prior action if the party in question had exercised reasonable diligence: Grandview v. Doering, 1975 CanLII 16 (SCC), [1976] 2 S.C.R. 621, at p. 638. That said, I accept Catalyst’s submission that it is not enough that the cause of action could have been argued in the prior proceeding. It is also necessary that the cause of action properly belonged to the subject of the prior action and should have been brought forward in that action: Hoque v. Montreal Trust Co. of Canada, 1997 CanLII 1465 (NS CA), 1997 NSCA 153, 162 N.S.R. (2d) 321, at para. 37, leave to appeal refused, [1997] S.C.C.A. No. 656; Pennyfeather v. Timminco Ltd., 2017 ONCA 369 (CanLII), at para. 128, leave to appeal refused, [2017] S.C.C.A. No. 279.
[51] Like issue estoppel, cause of action estoppel also requires a final judicial decision and that the parties to that decision were the same persons or the privies to the parties to the present proceeding: Pennyfeather, at para. 128; Canam Enterprises Inc. v. Coles (2000), 2000 CanLII 8514 (ON CA), 51 O.R. (3d) 481 (C.A.), at para. 21, rev’d on other grounds, 2002 SCC 63 (CanLII), [2002] 3 S.C.R. 307. As these requirements were not seriously contested before us, I will not discuss them further.
....
[55] ... In Hoque, at para. 37, Cromwell J.A. (as he was then) outlined several factors that are relevant to whether a matter should have been raised in a prior proceeding. These include the following:1) Whether the second proceeding is a collateral attack against the earlier judgment;
2) Whether the second proceeding relies on evidence that could have been discovered in the past proceeding with reasonable diligence; and
3) Whether the second proceeding relies on a new legal theory that could have been advanced in the past proceeding. ....
[58] Nor am I persuaded that the different legal claims Catalyst has advanced in this action bar the operation of cause of action estoppel. I acknowledge that the existence of a “separate and distinct” cause of action is a factor that might weigh against applying cause of action estoppel: Hoque, at para. 37. However, as Sharpe J. (as he was then) held in Las Vegas Strip Ltd. v. Toronto (City) (1996), 1996 CanLII 8037 (ON SC), 30 O.R. (3d) 286 (Gen. Div.), at p. 297, aff’d (1997), 1997 CanLII 3841 (ON CA), 32 O.R. (3d) 651 (C.A.), the law does not permit the manipulation of the underlying facts to advance a new legal theory. Similarly, this court has held that cause of action estoppel bars “a subsequent lawsuit relating to the same loss being advanced on a different cause of action”: Lawyers’ Professional Indemnity Co. v. Rodriguez, 2018 ONCA 171 (CanLII), 139 O.R. (3d) 641, at para. 47, leave to appeal refused, [2018] S.C.C.A. No. 128 (Emphasis added).
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