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Estoppel - Issue Estoppel (5). 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).
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