Can-Euro Investments Ltd. v. Industrial Alliance Insurance and Financial Services Inc.

Can-Euro Investments Ltd. v. Industrial Alliance Insurance and Financial Services Inc. Court Court of Appeal Date 2013-06-25 Citation 2013 NSCA 76 Docket CA 398349 Judge/Registrar/Adjudicator Oland, Linda L. (Honourable Justice); Fichaud, Joel E. (Honourable Justice) (CA); Farrar, David P.S. (Honourable Justice) (CA) Document Type Decision Relations Library Sheet - Can-Euro Investments Ltd. v. Industrial Alliance Insurance and Financial Services Inc. - 2013 NSCA 76 - 2013-06-25 - Library Sheet Decision Content NOVA SCOTIA COURT OF APPEAL Citation: Can-Euro Investments Ltd. v. Industrial Alliance Insurance and Financial Services Inc., 2013 NSCA 76 Date: 20130625 Docket: CA 398349 Registry: Halifax Between: Can-Euro Investments Limited Appellant v. Industrial Alliance Insurance and Financial Services Inc. Respondent and Boyne Clarke and David Coles, Q.C. Interveners Judges: Oland, Fichaud and Farrar, JJ.A. Appeal Heard: June 14, 2013, in Halifax, Nova Scotia Held: Appeal dismissed, with costs of $2,000 payable by the Appellant to the Respondent, per reasons for judgment of Fichaud, J.A., Oland and Farrar, JJ.A. concurring Counsel: Nobody appearing at the hearing for the Appellant Ian Dunbar, for the Respondent Augustus Richardson, Q.C., for the Interveners Reasons for judgment: [1] The transaction that underlies this appeal reached this Court once before in 2009. On that occasion we dismissed Can-Euro’s appeal from the decision of the Supreme Court of Nova Scotia. The issue now is whether the 2009 litigation left an opening for Can-Euro’s current claim. Background [2] The 2009 Decision of the Supreme Court is reported as Can-Euro Investments Ltd. v. Industrial Alliance Insurance, 2009 NSSC 20. At paras 8-80, Justice Beveridge (now Beveridge, J.A. of the Court of Appeal) set out the facts in detail. I adopt the narrative from the 2009 NSSC Decision, but will summarize the chronology, and add the more recent facts that again bring the parties to the courts. [3] The Appellant Can-Euro Investments Limited. (“Can-Euro”) is a land developer. The Respondent Industrial Alliance Insurance and Financial Services Inc. (“Industrial Alliance”) is a Quebec company, registered to operate in Nova Scotia, and offers commercial mortgage financing. [4] In early 2008, Can-Euro sought to finance its property, “The Summit”, in Dartmouth. In March, 2008, Can-Euro’s mortgage broker asked Industrial Alliance for mortgage financing. [5] On April 4, 2008, Industrial Alliance, by a commitment letter, offered to provide mortgage financing to Can-Euro. On April 8, 2008, Dr. Otto Gaspar, Can-Euro’s President, made handwritten revisions to the commitment letter’s proposed terms and returned the revised document to Industrial Alliance. Over the next three weeks, Can-Euro and Industrial Alliance attempted to come to agreement on Dr. Gaspar’s proposed revisions. By April 29, 2008, they apparently had succeeded, and Industrial Alliance confirmed the outstanding terms of its commitment. Those final terms included: (a) Industrial Alliance’s advance of $12,504,725 would be secured by a first mortgage against Can-Euro’s Summit property, for a term of 60 months to mature on May 1, 2013. (b) Can-Euro would pay Industrial Alliance $12,500 as a non-refundable processing fee, and $125,000 (1% of the Mortgage principal) as a commitment fee (“Commitment Fee”); (c) The conditions of the commitment included a satisfactory title report and that Can-Euro have a Shared Facilities Agreement, governing the shared use of a private road and heating system, between The Summit and two other Can-Euro properties, Horizon Estates and Gardentone Estates. (d) Can-Euro had the option of fixing the interest rate before funds were advanced, provided that Can-Euro selected a mortgage funding date. If the funding date lapsed, the rate would be re-fixed. [6] Can-Euro exercised the interest rate option, and selected a funding date of May 19, 2008. The interest rate was fixed at 4.08%. [7] As the funding date approached, several conditions remained unsatisfied by Can-Euro: (a) an existing first mortgage to the Royal Bank had not been discharged (b) three unreleased builders’ liens were registered against the property and (c) the Shared Facilities Agreement had not been executed. [8] Late on May 16, 2008, Industrial Alliance sent to Can-Euro the draft mortgage documentation. In the 2009 NSSC Decision, Justice Beveridge (para 112) held that this was tardy, and violated Industrial Alliance’s obligation to assist Can-Euro to close on May 19. But Justice Beveridge found (paras 112-13): [112] ... However, in my opinion, the failure to provide the draft mortgage and related documents was meaningless in terms of the ability, or claimed inability of Can-Euro to close the transaction on May 19. [113] On the evidence before me, Can-Euro apparently did little or nothing to realistically put itself in a position to close the mortgage transaction on May 19. There were liens registered against the property. They were not released. There was a collateral mortgage in favour of the Royal Bank. The documents tendered on this application clearly suggest that Can-Euro did not even contact the Royal Bank until on or about May 16, 2008 to have this mortgage released or postponed to the proposed first mortgage in favour of Industrial Alliance. The formal process necessary to re-finance or restructure Can-Euro’s indebtedness to the Royal Bank did not commence until May 21, 2008. [9] On May 16, 2008, Industrial Alliance’s counsel informed Can-Euro’s mortgage broker that Industrial Alliance would extend the funding date from May 19 to May 23, 2008, so Can-Euro could satisfy the outstanding conditions. [10] By May 23, 2008, it was clear that the issues of the Shared Facilities Agreement and prior RBC Mortgage would not be resolved by that day’s end, and that the mortgage documents would not be executed in time. Justice Beveridge found: [71] It was obvious to all the parties that there would be no closing on May 23, 2008. The mortgage documents were not executed. The issue of the existing mortgage in favour of RBC was outstanding. The shared facilities agreement was not resolved to the satisfaction of Industrial Alliance or its solicitor. [11] On May 23, 2008, Industrial Alliance advised Can-Euro that the interest rate of 4.08% could not be extended again, and that a new interest rate would have to be fixed. [12] By May 28, 2008, the concerns respecting execution of the mortgage documentation, RBC mortgage, the outstanding lien and the shared facilities agreement had been resolved. But the parties still disagreed on the interest rate. Industrial Alliance offered to close at 4.334%, recalculated according to the Commitment Letter, with an extended Close-Out-Date of June 2, 2008. [13] Can-Euro disagreed with any rate higher than 4.08%. [14] The financing transaction failed. Industrial Alliance kept the commitment fee of $125,000 as liquidated damages. [15] On July 17, 2008, Can-Euro applied in the Supreme Court of Nova Scotia for specific performance to compel Industrial Alliance to advance mortgage funds at 4.08%, or, alternatively, for an order that Industrial Alliance return the commitment fee and other fees and pay damages. Justice Beveridge’s 2009 NSSC Decision said: [4] ... The parties have since agreed that the only issue they ask the court to determine is whether Industrial Alliance breached its contract in refusing to advance funds at the interest rate of 4.08%. ... [81] As noted earlier the parties have stipulated that the only question for me to resolve is whether or not Industrial Alliance breached its contractual obligations by refusing to fund the mortgage at an interest rate of 4.08%. Although simply stated, the positions of the parties generate a host of issues to be resolved in answering this simple question. [16] At the 2009 hearing, Can-Euro was represented by Mr. David Coles, Q.C.. Mr. Coles, and his firm Boyne Clarke, are Interveners in the current appeal. [17] Justice Beveridge ruled that Industrial Alliance was not liable to Can-Euro. His Decision of January 23, 2009 said: [150] Industrial Alliance committed no breach of its contractual obligations in refusing to advance funds at the interest rate of 4.08%. To be in breach of its contractual obligations, there must have been a legally enforceable obligation to close at 4.08% beyond May 23, 2008. In my opinion, there was not. [151] The requirements of promissory estoppel are not made out, nor is there any basis to suggest a lack of good faith on behalf of Industrial Alliance. [152] The application by Can-Euro is dismissed with costs to the defendant. ... [18] The 2009 NSSC Decision did not address Can-Euro’s alternative claim for return of fees. But the ensuing Order of February 18, 2009, consented as to form by counsel, stated: AND WHEREAS IT WAS AGREED THAT the Justice hearing the application would make a determination as to liability only with any consideration of remedy / damages, including any return of fees paid, to be determined at a separate hearing. [19] Can-Euro appealed the 2009 NSSC Decision to the Court of Appeal, which dismissed the appeal: 2009 NSCA 114. [20] On September 30, 2010, Can-Euro filed a Notice of Action (“2010 Action”) to begin its current claim against Industrial Alliance. The 2010 Action relates to the same transaction that was subject to the 2009 NSSC Decision. Can-Euro’s current Notice of Action pleads breach of Industrial Alliance’s “duty of good faith” and “other breaches”, “breach of contract and/or unjust enrichment” and causes of action “in contract, equity and tort”, and claims return of the Commitment Fee, return of the processing fee, interest, the discounted present value of profit, described as “[e]xemplary damages”, and solicitor-client costs. [21] On March 3, 2011, Industrial Alliance moved, under Rule 88.02, to strike the 2010 Action as an abuse of process. Justice Pickup of the Supreme Court of Nova Scotia heard the motion in chambers on September 6, 2011 and issued a decision on November 19, 2011. Justice Pickup struck the 2010 Action on the bases of issue estoppel and cause of action estoppel, and as an abuse of process by re-litigation, without prejudice to Can-Euro’s right to sue for recovery of fees paid. (2011 NSSC 381). Later I will discuss the judge’s reasons. [22] Can-Euro has appealed Justice Pickup’s ruling to the Court of Appeal. [23] Dr. Otto Gaspar, Can-Euro’s President, filed the appellant’s factum and proposed to present Can-Euro’s submissions in person at the Court of Appeal’s hearing. Shortly before the hearing, Dr. Gaspar passed away. A solicitor, Mr. Douglas Livingstone, wrote to the Court, copied to Can-Euro, stating: ... In light of the passing of Otto Gaspar, Can-Euro’s surviving officers and directors (who are not presently in Canada and who have little detailed knowledge of the matter) indicate that Can-Euro will be relying on its factum and not presenting oral submissions at the appeal hearing. At the hearing in this Court on June 14, 2013, nobody appeared for Can-Euro and counsel for Industrial Alliance and the Interveners relied on their written submissions. Issues [24] Can-Euro’s factum states one issue: Did the Honorable Chambers Judge err in law and / or matter of mixed law and fact insofar as he decided to strike out the new action filed by Can-Euro and to dismiss this claim as an abuse of process? Standard of Review [25] This Court applies (1) correctness to an issue of law, including an extractable legal point from an issue of mixed fact and law and (2) palpable and overriding error (meaning an error that is both clear and determinative) to an issue of either fact or mixed fact and law with no extractable legal error. Housen v. Nikolaisen, [2002] 2 S.C.R. 235, paras 8-10, 19-25, 31-36; H.L. v. Canada (Attorney General), [2005] 1 S.C.R. 401, paras 4, 65, 69, 72-74. Analysis [26] Can-Euro makes three submissions. The first turns on principles of res judicata, or issue estoppel and cause of action estoppel. The second assumes that separate hearings on liability issues are required procedurally. The third is based on the agreement of counsel at the 2008 hearing before Justice Beveridge. [27] First: Can-Euro submits that the 2010 Action involved different issues than those determined in the 2009 NSSC Decision. [28] Justice Pickup explained how Can-Euro framed the difference on the chambers motion: [21] Can-Euro says it attempted to borrow $12,500,000.00 from Industrial Alliance at two different times: a) the first borrowing relates to the closing which Can-Euro attempted to schedule on May 19, 2008 at the fixed interest rate of 4.08%; b) the second was an attempt at borrowing during the week of May 26, 2008. [22] Can-Euro says that these are two separate and distinct events and that each borrowing failed for different reasons unconnected to the other. In other words, Can-Euro argues that these are mutually exclusive claims. They say that the first claim was an action for specific performance and equitable remedy. They say the second attempt at borrowing during the week of May 26, 2008 also failed, but for different reasons. They say that the problem with the second borrowing was that Industrial Alliance would not set an interest rate even after Can-Euro was ready, willing and able to close as of May 26, 2008. [23] Can-Euro submits that the present notice of action deals only with the second borrowing attempt which is a separate and distinct cause of action. They say that as a result this action is not res judicata. [29] Justice Pickup disagreed with Can-Euro’s suggested dichotomy. He concluded: [24] With respect, I am not satisfied that there are two separate and distinct events as argued by Can-Euro. There was one commitment letter and all of these issues flowed from that initial agreement to fund Can-Euro. ... [38] I am satisfied that unlike the situation in Hoque, supra [Hoque v. Montreal Trust Co. of Canada, [1997] N.S.J. No. 430 (C.A.), leave to appeal denied [1997] S.C.C.A. No. 656], it is evident from a review of the new notice of action that it arises out of the precise fact situation dealt with by Justice Beveridge in his decision on liability. It all flows from the commitment letter and the agreement to fund Can-Euro. These new claims being made by Can-Euro all arise out of its failed mortgage transaction with Industrial Alliance and should have been raised at the time of the initial application. [30] Can-Euro makes a similar submission on this appeal. Its factum says: 95. It is submitted that the subsequent action of September 2010 is not based on the option agreement which confirmed the rate of 4.08%. The subsequent action is based on the fact that the loan was not funded the last week of May 2008 at the applicable rate, whatever this rate may be. [31] In Hoque, supra, Justice Cromwell for the Court reviewed the principles that govern issue estoppel and cause of action estoppel: [20] Res judicata has two main branches: cause of action estoppel and issue estoppel. They were explained by Dickson, J. (as he then was), in Angle v. Minister of National Revenue, [1975] 2 S.C.R. 248; 2 N.R. 397; 47 D.L.R. (3d) 544 at 555 [D.L.R.]: “... The first, ‘cause of action estoppel’, precludes a person from bringing an action against another when that same cause of action has been determined in earlier proceedings by a court of competent jurisdiction. ... The second species of estoppel per rem judicatam is known as ‘issue estoppel’, a phrase coined by Higgins, J., of the High Court of Australia in Hoysted et al. v. Federal Commissioner of Taxation (1921), 29 C.L.R. 537 at pp. 560‑561: ‘I fully recognize the distinction between the doctrine of res judicata where another action is brought for the same cause of action as has been the subject of previous adjudication, and the doctrine of estoppel where, the cause of action being different, some point or issue of fact has already been decided (I may call it "issue‑estoppel").’” [21] Res judicata is mainly concerned with two principles. First, there is a principle that "... prevents the contradiction of that which was determined in the previous litigation, by prohibiting the relitigation of issues already actually addressed." : see Sopinka, Lederman and Bryant, The Law of Evidence in Canada (1991), at p. 997. The second principle is that parties must bring forward all of the claims and defences with respect to the cause of action at issue in the first proceeding and that, if they fail to do so, they will be barred from asserting them in a subsequent action. This "...prevents fragmentation of litigation by prohibiting the litigation of matters that were never actually addressed in the previous litigation, but which properly belonged to it.": ibid at 998. Cause of action estoppel is usually concerned with the application of this second principle because its operation bars all of the issues properly belonging to the earlier litigation. [22] It is the second aspect which is relied on by the appellants. Their principal submission is that all matters which could have been raised by way of set‑off, defence or counterclaim in the foreclosure action cannot now be litigated in Dr. Hoque's present action. [23] Res judicata requires that the previous court decision be final and between the same parties or their privies. Both of these requirements are met here. The final orders of foreclosure were not appealed or otherwise challenged. As to privity, it is not argued that there was no privity as between Dr. Hoque and his trustee in bankruptcy who was the named defendant in the foreclosure actions. It is not disputed that all of the claims now asserted by Dr. Hoque vested in his trustee at the time of his assignment in bankruptcy. ... [30] The submission that all claims that could have been dealt with in the main action are barred is not borne out by the Canadian cases. With respect to matters not actually raised and decided, the test appears to me to be that the party should have raised the matter and, in deciding whether the party should have done so, a number of factors are considered. ... [37] Although many of these authorities cite with approval the broad language of Henderson v. Henderson, supra, to the effect that any matter which the parties had the opportunity to raise will be barred, I think, however, that this language is somewhat too wide. The better principle is that those issues which the parties had the opportunity to raise and, in all the circumstances, should have raised, will be barred. In determining whether the matter should have been raised, a court will consider whether the proceeding constitutes a collateral attack on the earlier findings, whether it simply asserts a new legal conception of facts previously litigated, whether it relies on "new" evidence that could have been discovered in the earlier proceeding with reasonable diligence, whether the two proceedings relate to separate and distinct causes of action and whether, in all the circumstances, the second proceeding constitutes an abuse of process. [38] In the present case, the foreclosure proceedings resulted in a default judgment. It is that default judgment which Montreal Trust submits bars Dr. Hoque's action. There is authority for the view that res judicata should be applied in a more limited way when the judgment giving rise to the plea was obtained on default. ... [64] My review of these authorities shows that while there are some very broad statements that all matters which could have been raised are barred under the principle of cause of action estoppel, none of the cases actually demonstrates this broad principle. In each case, the issue was whether the party should have raised the point now asserted in the second action. That turns on a number of considerations, including whether the new allegations are inconsistent with matters actually decided in the earlier case, whether it relates to the same or a distinct cause of action, whether there is an attempt to rely on new facts which could have been discovered with reasonable diligence in the earlier case, whether the second action is simply an attempt to impose a new legal conception on the same facts or whether the present action constitutes an abuse of process. [Cromwell, J.A.’s emphasis] [32] This Court has applied Hoque: Kameka v. Williams, 2009 NSCA 107, at para 18 (and para 90, concurring reasons); Saulnier v. Bain, 2009 NSCA 51, para 6. See also Danyluk v. Ainsworth Technologies Inc., [2001] 2 S.C.R. 460, at paras 20-24, per Binnie, J. for the Court. [33] Can-Euro’s 2010 Action derives from the same transaction that was subject to the 2009 NSSC Decision. There was no temporal bright line between May 19 and the week of May 23, as Can-Euro suggests. Rather, there was a factual continuum through the entire period. The May 19 date had been extended to May 23, the conditions for closing on May 23 were not satisfied, and the parties did not agree to a further extension of the interest rate after May 23. The contractual obligations derived from the Commitment Letter. The question posed by the 2010 Action is whether these facts give Can-Euro a cause of action against Industrial Alliance. In my view, under Hoque’s principles, the causes of action in the 2010 Action either were raised or should have been raised in Can-Euro’s claim that culminated in the 2009 NSSC Decision. [34] Justice Pickup did not err in his application of the principles of res judicata, issue estoppel and cause of action estoppel. [35] Second: Can-Euro points out that the remedies of specific performance and damages were mutually exclusive, and (according to its factum) “the Court would not have been allowed to decide on the alternative claim before having decided on the first claim” which “required two separate hearings”. [36] I respectfully disagree. Claims for alternative remedies, like specific performance and damages, commonly are determined after a single hearing. The arguments are presented in the alternative, and the judge chooses between the alternative remedies, if any, after reaching a conclusion on liability. A party who wishes separate hearings on particular issues should seek a severance order from the judge. Except for the agreement between counsel discussed in the Third point, below, there was no such severance. [37] Third: Can-Euro submits that, at the hearing before Justice Beveridge, the parties’ counsel agreed that the causes of action cited in the 2010 Action would be reserved for future litigation. Can-Euro’s factum cites the recital to Justice Beveridge’s Order (quoted above, para 18), and says: 79. It is respectfully submitted that this agreement which was included in the recital of the Order of Justice Pickup and the Originating Notice are the most important documents which answer all and any of the questions which have to be decided. This agreement allows Can-Euro to ask not only for damages but also for any kind of remedies, including any return of fees paid, to be determined at a separate hearing. Damages can only be based on a breach of contract and this proves that the parties considered and were aware of other breaches of contract, in addition to the 4.08% liability issue which was decided by Justice Beveridge. These other breaches of contract still had to be decided. [38] It is important to note the terms of the agreement between counsel at the 2009 hearing. Mr. Coles was Can-Euro’s counsel. Mr. Peter Bryson (since appointed as a judge of the Court of Appeal) was counsel for Industrial Alliance. Justice Beveridge heard the motion on October 9, 2008. On September 23, 2008, Mr. Coles had written to Mr. Bryson: Further to our recent exchange of voice mail messages and our telephone discussion of today’s date, I write to confirm that as matters stand, in accord with the Originating Notice, we will be arguing liability on October 9th and the Plaintiff will be arguing for specific performance by your client on that application. Should liability be found as against your client such that damages may be awarded, but the Court declines to offer specific performance, then a subsequent hearing date will be obtained to argue damages. ... Therefore, I understand the parties will proceed to argue liability and the availability of specific performance on October 9th. Should a damage hearing be necessary following upon the decision of the Court on the matters before it on October 9th a subsequent date with new Affidavits will be set. Then on September 30, 2008, Mr. Coles again wrote to Mr. Bryson: I write to confirm our telephone discussion of today’s date that is agreed that on October 9th the Court will hear argument on liability. Questions of relief - specific performance and/or damages - will be addressed on a future date subsequent to the Court’s decision on liability. [39] At the hearing on October 9, 2008, Mr. Coles told Justice Beveridge: What the ... the originating notice application that set this down in first instance effectively called for a determination of liability with us arguing the availability of specific performance contemporaneous with today. And then set up in the alternative should specific performance not be granted, a subsequent date which would be the quantum of damage hearing because that, obviously, involves a whole series of different evidence in terms of availability and loans and so on. Through discussions with my friend we were agreed that, look, we’re going to take remedy right off the table today and simply deal with liability. ... [40] Justice Beveridge’s interpretation of the agreed separation of issues is quoted above (para 15) from his 2009 Decision. [41] In the decision under appeal, Justice Pickup found: [33] ... I am satisfied that all of the liability issues raised in the originating notice in the original matter were resolved in favour of Industrial Alliance. The main causes of action in the original originating notice dealt with breach of contract and bad faith, all of which were dealt with by Justice Beveridge. There is no suggestion in either the order or the decision arising out of the hearing before Justice Beveridge that any liability issues between the parties remain outstanding. Moreover, in comments recited earlier from Mr. Coles who represented Can-Euro, it is clear that Justice Beveridge was dealing with liability and remedy was for another day. In submissions to Justice Beveridge by Mr. Coles and in correspondence between Mr. Coles and Mr. Bryson, it is clear that the hearing before Justice Beveridge was to deal with liability and remedy would be determined subsequently. Comments of counsel, Justice Beveridge’s decision and the issued order, are all consistent in that regard and lead to no other logical conclusion. [34] I am satisfied that issue estoppel prevents Can-Euro from relitigating whether Industrial Alliance is liable to it in respect of the failed mortgage transaction. [42] Can-Euro’s submitted interpretation to the Court of Appeal is that, because remedies were reserved for a future hearing, then whatever causes of action might generate those remedies also were reserved. [43] I respectfully disagree. Can-Euro’s submitted interpretation was not a term of the 2009 agreement between counsel that was adopted by Justice Beveridge. The parties’ counsel agreed to have all issues of liability determined at the 2009 hearing. The subsequent remedies hearing would occur only if Can-Euro established liability at the first hearing. As Can-Euro did not establish liability, there would be no subsequent hearing on remedies. That is clear from Mr. Coles’ letters before the hearing of October 9, 2008, and from the comments of counsel to Justice Beveridge at that hearing. Justice Pickup’s interpretation of that evidence contains no palpable and overriding error. [44] The sole exception relates to Can-Euro’s claim for return of fees paid. The parties’ counsel, by consenting to the form of Order (above, para 18), agreed with the Order’s recital that Can-Euro’s claim for return of fees paid could be determined at a future hearing. At the hearing before Justice Pickup, Industrial Alliance’s counsel stipulated that Can-Euro’s claim for return of fees (I quote from the transcript) is still alive ... The return of fees is still out there, My Lord. ... We think that there is a claim, if properly pleaded, for the return of the fees. Based on this stipulation, there is no error in Justice Pickup’s conclusion that Can-Euro may still pursue a claim for return of fees paid. Conclusion [45] I would dismiss the appeal, with costs of $2,000 payable by Can-Euro to Industrial Alliance for the appeal. Fichaud, J.A. Concurred: Oland, J.A. Farrar, J.A.