Nova Scotia Court of Appeal
Citation: Coady v. Quadrangle Holdings Ltd., 2015 NSCA 13
Date: 20150206
Docket: CA 423353
Registry: Halifax
Between:
Blair Coady
Appellant
v.
Quadrangle Holdings Limited, James Matheson and
Industrielle Alliance Valeurs Mobilières Inc.
Respondents
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Judges: |
Farrar, Bryson and Scanlan, JJ.A. |
|
Appeal Heard: |
September 22, 2014, in Halifax, Nova Scotia |
|
Held: |
Appeal dismissed, per reasons for judgment of Bryson, J.A.; Farrar and Scanlan, JJ.A. concurring. |
|
Counsel: |
Scott Campbell, on behalf of William L. Ryan, Q.C., and Christopher Madill, for the appellant Bruce Outhouse, Q.C., and Justin Adams, for the respondent, Quadrangle Holdings Limited Melissa MacAdam on behalf of Robert Purdy, Q.C., for the respondent, Industrielle Alliance Valeurs Mobilières Inc.
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Reasons for judgment:
Introduction:
[1] Quadrangle Holdings Limited says that Blair Coady caused Shannon International Resources Inc. to misappropriate some of Quadrangle’s shares in Rally Energy Limited. Mr. Coady was an officer and director of both Shannon and Rally. Quadrangle pledged the Rally shares to Shannon as security for a promissory note from Quadrangle to pay for shares in Shannon.
[2] Rather than holding the Rally shares as security, Mr. Coady had them delivered to Lynch Investments Limited in Halifax which disposed of most of the Rally shares and credited the proceeds to a Shannon account. Quadrangle learned this in October of 2005.
[3] Initially a settlement agreement was reached with Shannon, and as a result Quadrangle did nothing. But Shannon became judgment-proof so in 2008 Quadrangle sued Mr. Coady in Nova Scotia. Mr. Coady brought a motion in the Nova Scotia Supreme Court for a stay arguing that Nova Scotia had no jurisdiction, and, in any event, that Alberta was the preferable forum. In an unreported decision, the Honourable Justice Kevin Coady declined to decide the jurisdiction issue, but granted a stay and found that Alberta was the preferable forum.
[4] Then Quadrangle sued Mr. Coady in Alberta. Justice McCarthy of the Court of Queen’s Bench decided that the claim could not be entertained there because it was statute barred under the Alberta Limitations Act, R.S.A. 2000, c. L-12, in 2011 (2012 ABQB 22).
[5] On October 4, 2012, Justice McCarthy’s order dismissing Quadrangle’s action against Mr. Coady was registered as an Order of the Supreme Court of Nova Scotia pursuant to the Enforcement of Canadian Judgments and Decrees Act, S.N.S. 2001, c. 30 (ECJDA).
[6] Quadrangle brought a motion before the Nova Scotia Supreme Court to revive the proceedings stayed by Justice Coady. Quadrangle also brought a second Nova Scotia action in which it seeks remedies against Industrielle Alliance Valeurs Mobilières Inc., successor to Lynch Investments, and James Matheson who is alleged to have given Lynch instructions to sell the Rally shares at Mr. Coady’s request. Quadrangle sought a lifting of the stay of the 2008 action and consolidation of that action with its 2011 action.
[7] The Honourable Justice Gerald P. Moir decided that the 2008 and 2011 Nova Scotia proceedings should be consolidated and that the stay of the 2008 proceedings should be lifted. He also decided that the law applicable to the alleged misappropriation of the Rally shares was Nova Scotia, (2013 NSSC 416).
Issues:
[8] Mr. Coady has appealed, reducing the issues in his factum to three:
1. Should leave to appeal be granted;
2. Did Justice Moir err in failing to conclude that the 2008 Nova Scotia claim is now res judicata by virtue of the ECJDA Order;
3. Did Justice Moir err in concluding that the substantive merits of the action are governed by Nova Scotia law?
Leave to Appeal
[9] This is an interlocutory appeal. Before the appeal can be approached on its merits this Court must first grant leave. Leave is ordinarily granted where an arguable issue is raised between the parties, (Hartling v. Nova Scotia (Attorney General), 2009 NSCA 130, ¶136).
[10] Quadrangle takes the position that the only substantive matter to be determined on appeal is whether the chambers judge properly exercised his discretion to lift the stay.
[11] Quadrangle argues that leave should not be granted with respect to Mr. Coady’s first ground of appeal – that registration of the Alberta order in Nova Scotia under the ECJDA results in the claims against Mr. Coady being res judicata. Quadrangle submits that this was not materially argued before the chambers judge and points out that Mr. Coady acknowledged to Justice Moir that he had jurisdiction to lift the stay.
[12] Quadrangle concedes that Mr. Coady’s restated second ground of appeal – whether Justice Moir erred in determining that the Nova Scotia claim was governed by Nova Scotia law – raises arguable issues.
[13] For reasons developed further below in connection with Mr. Coady’s grounds of appeal, arguable issues are raised with respect to the grounds of the appeal and leave should be granted so that this Court can properly consider them.
[14] The issues raised warrant a fuller description of the facts.
Facts
[15] By securities subscription agreement dated July 24, 2003 and accepted by Shannon on August 13, 2003, Quadrangle subscribed for 400,000 common shares in Shannon. In addition, Quadrangle received a warrant for each share and could acquire up to 400,000 further shares up to October 2004 at a price of 40 cents a share.
[16] It is a curiosity of the subscription agreement that it refers exclusively to American securities law, and in particular the Securities Act of 1933. Throughout the subscription agreement the phrase, “Act” refers to this American legislation. However, there is an exclusive jurisdiction clause providing that the agreement would be “…construed and enforced in accordance with and governed by the laws of the Province of Alberta, except for matters arising under the Act…”
[17] The subscription agreement also has an attornment clause whereby the parties consented to the exclusive jurisdiction of the courts of Calgary, Alberta “in connection with any dispute arising under this agreement”. The attornment clause also waived “any objection, including any objection based on forum non conveniens, to the bringing of any such proceedings in such jurisdictions”.
[18] Quadrangle did not have the required cash to exercise the warrants before they expired so on May 7, 2004 an agreement was concluded under which the warrants were exercised in return for a promissory note from Quadrangle for the sum of $160,000 US, payable on October 8, 2004.
[19] The note has a condition in it providing that it be “construed in accordance with the laws of the Province of Alberta”. It also contains an attornment clause providing that, “Jurisdiction for any dispute shall be the courts in and for Calgary, Alberta.”
[20] The chambers judge found that it was the intention of the parties that Alberta law govern the terms of the contract.
[21] The promissory note secures payment of the $160,000 by pledging to Shannon 500,000 shares of Rally stock. Under the terms of the pledge the Rally shares were to be held as security for the performance of Quadrangle’s obligations under the note. Quadrangle was required to deliver the shares to a brokerage account of Shannon’s. The note further grants a possessory and security interest in the shares pursuant to the laws of Alberta. The note forbids Shannon from registering the Rally shares in its name unless the shares were being foreclosed upon owing to a breach of the note by Quadrangle. As the chambers judge concluded:
[32] …Shannon had no right to part with possession, or to sell the shares, before October of 2004. The shares were to be returned to Quadrangle on redemption.
[22] In fact, what happened, as previously described, is that the Rally shares were sold and the proceeds deposited to one of Shannon’s accounts prior to the maturity of the note and without any breach of any terms of the note by Quadrangle.
The 2008 Action
[23] In his decision, Justice Moir summarizes Justice Coady’s decision deferring to Alberta on the basis of forum non conveniens.
[34] After discussing the applicable law, Justice Coady reviewed the evidence that tended towards Alberta: most witnesses and most of the corporations involved are located in Alberta, the "promissory note" contracts for Alberta, geographical factors point in favour of Alberta, and the contractual and corporate documentation were created in Alberta. He reviewed Quadrangle's points in favour of Nova Scotia. "They have said that the shares were transferred by James Matheson." But, Justice Coady did not have evidence "that he is alleged to be a major player." Quadrangle relied on its corporate registration in Nova Scotia, but it had "only been registered since 2008".
[35] The only other point made by Quadrangle was that, "the unauthorized trading took place in Nova Scotia".
That can be cited as a point in favour of the respondent. Not much evidence has been advanced on that … but I still find that that's a small point in a larger picture … .
[36] Justice Coady concluded:
In view of the foregoing, I find that the defendant has established that Alberta has a closer connection to the matters in issue than Nova Scotia and the balance of convenience favours Alberta.
Note that Justice Coady did not decide, and does not appear to have been asked to consider, whether the law of Alberta or Nova Scotia applies to the pleaded cause.
[37] Justice Coady found that there was no juridical advantage to proceeding in Nova Scotia. It was not drawn to Justice Coady's attention that the Queen's Bench of Alberta cannot hear a claim that would be prescribed under the Alberta limitations statute even if the Alberta limitation did not apply to the claim.
[38] At the end of the decision, Justice Coady said "I do not think that it is necessary to say anything about the Rule 14.25 application [to strike for absence of jurisdiction], given my prior rulings.”
[Emphasis added]
The Alberta Action
[24] Quadrangle sued Mr. Coady, Mr. James Matheson, Mr. Max Wandinger, and Industrielle Alliance in Alberta alleging similar causes of action to those in the 2008 Nova Scotia action. The defendants brought a motion for summary judgment on the basis that the action was statute barred under the Alberta Limitations Act. Justice McCarthy of the Alberta Court of Queen’s Bench found that as of October 2005, Quadrangle was aware that the Rally shares had been misappropriated. Citing ss. 3(1)(a) of the Alberta Limitations Act, he dismissed the action against Mr. Coady. That section provided that a defendant “is entitled to immunity from liability in respect of [a] claim” two years after the claimant knew, or ought to have known of an injury or conduct of the defendant to which the injury is attributable and that the injury warrants a proceeding. Section 12 of the Alberta Limitations Act makes it clear that Alberta limitation periods apply to any action commenced in Alberta, unless a shorter period might apply where another jurisdiction’s law was applicable.
[25] The essence of Justice McCarthy’s decision was, regardless of applicable law, that Quadrangle could not sue in Alberta owing to the limitation period in that province. As Justice Moir summarized:
[45] Justice McCarthy did not discuss the applicability of Alberta or Nova Scotia law. Because of s. 12 of the Alberta Limitations Act, he did not have to decide applicable law.
Position of the Parties on Appeal:
[26] Quadrangle characterizes the issues on appeal somewhat differently than does Mr. Coady. Quadrangle argues in its factum:
28. Quadrangle’s position is that there is only one substantive issue to be addressed in this Appeal – whether or not Justice Moir properly exercised his discretion to lift [the stay] of the proceedings. However, in the interests of completeness, Quadrangle will address all of the Appellant’s proposed issues.
[27] Quadrangle points out that its original motion before Justice Moir was to lift the stay of proceedings in the 2008 action. Quadrangle says the question on appeal is whether Justice Moir’s decision results in a patent injustice to Mr. Coady.
[28] Quadrangle did not argue before the chambers judge that it was necessary for him to decide which law applied to the dispute with Mr. Coady. Rather, it simply argued that changed circumstances (no action available in Alberta), warranted a lifting of Justice Coady’s stay. For his part, Mr. Coady argued before the chambers judge that the stay should not be lifted because Alberta law governed the dispute between the parties, and in any event that the request to lift the stay constituted a collateral attack on Justice Coady’s order.
[29] On appeal, Quadrangle says that although Justice Moir was not required to determine the governing law of the dispute in order to decide whether the stay should be lifted, nevertheless he did not err in doing so. Quadrangle points out that the determination of the applicable provincial law was made at the request of Mr. Coady, was based on an ample evidentiary record, and was fully argued by the parties before Justice Moir.
[30] While Quadrangle is correct that the granting or lifting of the stay is a matter of discretion, that discretion must be exercised on appropriate principles. Where a chambers judge exercises his discretion in an interlocutory matter, that discretion will not be disturbed on appeal unless wrong principles were applied – which would constitute an error of law – or a patent injustice would result: Innocente v. Canada (Attorney General), 2012 NSCA 36.
Should the Stay Have Been Lifted?
[31] As previously described, Justice Coady decided that Alberta was the preferable forum and granted a stay of the 2008 action. Justice Coady’s stay was unconditional. That is common in Canadian courts, in contrast to America and the United Kingdom (Vaughan Black, Conditional Forum Non Conveniens in Canadian Courts, 39 Queens L.J., (2013), p. 41.) One common stay condition is that a defendant waive the limitation period of the forum in which it seeks adjudication. This approach was implicitly approved by the House of Lords in Spiliada Maritime Corporation v. Cansulex Ltd., [1986] 3 All E.R. 843 where the House commented that expiry of a limitation period in a more convenient forum may be grounds to refuse a stay of an English action that was not time barred (pp. 860-63). The Supreme Court of Canada generally approved Spiliada in Amchem Products Incorporated v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897.
[32] Whether to lift Justice Coady’s stay was a matter of discretion for Justice Moir. He exercised that discretion in favour of Quadrangle because its case could not be heard in Alberta and that was not drawn to Justice Coady’s attention when the stay was granted. The action in Nova Scotia was timely, particularly in light of the ultimately false hope of an agreement with Shannon. None of the “forum shopping” or like concerns expressed by Lord Goff in Spiliada are present here. Accordingly, one cannot say that Justice Moir applied incorrect principles. Nor can it be a patent injustice that Quadrangle’s case be heard, rather than stifled, because of a limitation period in Alberta of which no one was apparently aware.
[33] Normally the foregoing would dispose of the appeal. But Mr. Coady’s characterization of the issues suggests that Justice Moir had no authority to lift the stay – in effect that he erred in law by failing to consider that Quadrangle’s suit was res judicata and also finding that Nova Scotia law – including the Nova Scotia limitation period – governed the lawsuit.
Is Res Judicata Available to Mr. Coady?
[34] Mr. Coady asserts that Justice Moir failed to consider the argument that the present action was res judicata as a result of registration of the Alberta order in Nova Scotia under the ECJDA. Quadrangle counters that Mr. Coady really didn’t argue this before Justice Moir. Quadrangle points out that the conclusion now contended for by Mr. Coady is contrary to his concession to Justice Moir that he had jurisdiction to lift the stay. In other words, it is inconsistent for Mr. Coady now to appeal on the basis of a res judicata plea which should have precluded Justice Moir from considering Quadrangle’s motion in the first place.
[35] Mr. Coady does not describe what type of res judicata is alleged arising from registration of the ECJDA order. Moreover, Quadrangle is correct that this was not fully argued before Justice Moir. Res judicata was argued in a very narrow sense as these submissions from Mr. Coady’s written brief to Justice Moir demonstrate:
Mr. Coady submits that Quadrangle’s claims against him were statute barred when Hfx. No. 291455 was commenced in January 2008. The Court of Queen’s Bench of Alberta has determined Quadrangle’s claims to be statute barred pursuant to the substantive governing law of the dispute – the laws of Alberta. An order to that effect has been recognized by the Supreme Court of Nova Scotia.
Accordingly, Mr. Coady submits that Quadrangle’s claim against him is res judicata, and the motion to lift the stay of proceedings should therefore be dismissed.
[Emphasis added]
[36] Likewise, under the “Law and Argument” portion of Mr. Coady’s brief to Justice Moir:
In order to decide whether or not the claim is statute-barred, the court must first determine the substantive governing law of the dispute between Quadrangle and Mr. Coady. Mr. Coady submits that two possible outcomes emerge:
(a) if the claim against Mr. Coady is governed by the laws of the Province of Nova Scotia, the six year limitation period governing Nova Scotia applies and the claim was not statute barred at the time this proceeding was commenced in Nova Scotia.
(b) if the claim against Mr. Coady is governed by the laws of the Province of Alberta, the claim is subject to the two year limitation period established by the Alberta Limitations Act, and the claim was statute barred at the time this proceeding was commenced in Nova Scotia. Any attempt to commence or continue litigation of this claim against Mr. Coady in the face of the Alberta dismissal is now estopped by res judicata.
[Emphasis added]
[37] Again, in his brief, Mr. Coady argued to Justice Moir:
The Order issued by the Court of Queen’s Bench of Alberta has since been registered as an Order of the Supreme Court of Nova Scotia. Accordingly, Quadrangle’s claims against Mr. Coady are res judicata in Nova Scotia.
But this submission was part of a summary to the effect that “Mr. Coady submits that a choice of law clause clearly and unequivocally evidences Quadrangle’s agreement that the laws of the Province of Alberta would govern this dispute.”
[38] Also in Mr. Coady’s brief he argues:
It must also be remembered that the Plaintiff commenced his litigation in Nova Scotia beyond the two year limitation period that is imposed by the governing law of the dispute (Alberta). The date of the plaintiff’s discoverability has been judicially determined by the Alberta court, which determination has not been appealed in Alberta by the plaintiff and which determination is res judicata in Nova Scotia by virtue of the registration of the Alberta Order as an Order of the Supreme Court of Nova Scotia.
[Emphasis added]
[39] All the foregoing quotations clearly demonstrate that Mr. Coady linked his res judicata argument to the assertion that the Court of Queen’s Bench of Alberta had determined Alberta law to be the substantive governing law of the dispute or that Alberta law governed the dispute. But, in fact, Justice McCarthy did not make any such determination. Rather, the Alberta action was dismissed because it was barred by the Alberta Limitations Act regardless of the applicable substantive law.
[40] Quadrangle objects that Mr. Coady should be precluded from raising a new issue on appeal which he did not argue before the chambers judge. Quadrangle relies upon R. v. Perka, [1984] 2 S.C.R. 232, where Justice Dickson (as he then was) said:
A party cannot, however, raise an entirely new argument which has not been raised below and in relation to which it might have been necessary to adduce evidence at trial.
[41] In reply, Mr. Coady says that even if res judicata is being argued now as a new issue, the evidentiary record is sufficient to put the argument forth. That argument was successful in Nelson v. Little Estate, 2005 SKCA 120 where the court observed:
[6] As to the preliminary issue, there is a general rule against raising an entirely new argument for the first time on appeal: Perka v. The Queen, 1984 CanLII 23 (SCC), [1984] 2 S.C.R. 232, at p. 240 and Hawkeye Tanks & Equipment Inc. v. Farr-Mor Fertilizer Services Ltd. et al. (2002), 2002 SKCA 44 (CanLII), 219 Sask. R. 148 (Sask. C.A.) at paras. [8] to [11], and the authorities cited therein. The rule, however, is not absolute. In this case, the respondents are not in any way prejudiced by a consideration of the new issues since they do not involve the introduction of any new evidence, and they have had adequate time to prepare and present submissions respecting the new issues. The interests of justice are best served by allowing the issues to be raised.
[42] On the other hand, res judicata is a rule of evidence (Sopinka, Lederman and Bryant, The Law of Evidence in Canada, 3rd ed., (Markham: LexisNexis), 2009 at page 1284, and Donald J. Lange, The Doctrine of Res Judicata in Canada, 3rd ed., (Markham: LexisNexis), 2010 at pages 12-13.) Lange argues that if res judicata is not pleaded it should not be raised as a ground on appeal, (page 15).
[43] In Dhillon v. Dhillon, [2006] BCCA 524, the majority found:
[21] The fact that res judicata was not pleaded as a defence, and that there was no application to introduce it as a defence, explains why the reasons for judgment are silent on this issue. The appellants cannot now raise res judicata in this appeal, having not pleaded it or formally applied to raise it at trial. I will, nevertheless, deal with res judicata in order to give a full answer to the appellants.
[44] Mr. Coady’s present position is opposed to his submission before Justice Moir. It was Mr. Coady who urged Justice Moir to determine the governing law of the dispute. Mr. Coady’s res judicata argument now asserts, in effect, that it was an error for Justice Moir to have done so. Moreover, Mr. Coady’s present res judicata argument is broader than the submissions before Justice Moir, predicated as they were on the law of Alberta governing the dispute. But for completeness, Mr. Coady’s res judicata argument will be considered.
Does Registration Under the ECJDA Render the Issues Res Judicata?
[45] The ECJDA provides as follows:
Interpretation
2 In this Act,
(aa) "Canadian judgment" means a judgment, decree or order made in a civil proceeding by a court of a province or territory of Canada other than the Province
[…]
(iii) that declares rights, obligations or status in relation to a person or thing,
[…]
(b) "enforcement" includes requiring that a Canadian judgment be recognized by any person or authority whether or not further relief is sought;
Effect of registration
6 Subject to Sections 7 and 8, a registered Canadian judgment may be enforced in the Province as if it were an order or judgment of, and entered in, the Supreme Court of Nova Scotia. 2001, c. 30, s. 6.
[…]
Power to stay of limit enforcement of judgment
8 […]
(3) Notwithstanding subsection (2), the Supreme Court of Nova Scotia shall not make an order staying or limiting the enforcement of a registered Canadian judgment solely on the grounds that
(a) the judge, court or tribunal that made the judgment lacked jurisdiction over the subject-matter of the proceeding that led to the judgment, or over the party against whom enforcement is sought, under
(i) principles of private international law, or
(ii) the domestic law of the province or territory where the judgment was made,
(b) the Supreme Court of Nova Scotia would have come to a different decision on a finding of fact or law or on an exercise of discretion from the decision of the judge or court that made the judgment; or
(c) a defect existed in the process or proceeding leading to the judgment.
[46] Mr. Coady does not say what he means when he argues that registration of the Alberta judgment under the ECJDA is a “virtually unqualified defence of res judicata”. The concept of res judicata has two branches – cause of action estoppel and issue estoppel. In Montreal Trust Co. of Canada v. Hoque, 1997 NSCA 153 Cromwell J.A. as he then was, described cause of action estoppel:
[68] At the core of cause of action estoppel is the notion that final judgments are conclusive as to all of the essential findings necessary to support them. This is seen in the cases concerned with collateral attack, supra, and is reflected in the restrictive approach to res judicata founded on default judgments.
[69] In my respectful view, Dr. Hoque cannot be permitted to allege in this action anything which is inconsistent with the final orders of foreclosure. In other words, all of the matters essential to the granting of the final orders of foreclosure are not now open to be relitigated in these proceedings. This is not a mere technical rule but an application of a fundamental principle of justice: once a matter has been finally decided, it is not open to reconsideration other than by appeal or other proceedings challenging the initial finding.
[47] As the last sentence in this quotation suggests, a challenge to the Alberta order should ordinarily be taken on appeal. But the parties are not challenging the Alberta decision, nor do they now disagree that Justice McCarthy did not decide the governing law of the dispute in order to dismiss Quadrangle’s action in Alberta. Both parties agree that Justice McCarthy’s decision is a final decision affecting the same parties in that jurisdiction. But is that res judicata of the same issues before Justice Moir?
[48] In Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, Justice Binnie described “the same issue test” in the context of issue estoppel.
[54] A cause of action has traditionally been defined as comprising every fact which it would be necessary for the plaintiff to prove, if disputed, in order to support his or her right to the judgment of the court: Poucher v. Wilkins (1915), 33 O.L.R. 125 (C.A.). Establishing each such fact (sometimes referred to as material facts) constitutes a precondition to success. It is apparent that different causes of action may have one or more material facts in common. In this case, for example, the existence of an employment contract is a material fact common to both the ESA proceeding and to the appellant’s wrongful dismissal claim in court. Issue estoppel simply means that once a material fact such as a valid employment contract is found to exist (or not to exist) by a court or tribunal of competent jurisdiction, whether on the basis of evidence or admissions, the same issue cannot be relitigated in subsequent proceedings between the same parties. The estoppel, in other words, extends to the issues of fact, law, and mixed fact and law that are necessarily bound up with the determination of that “issue” in the prior proceeding.
[49] For its part, Quadrangle cites Wolfe v. Pickar, 2011 ONCA 347, for the proposition that a foreign judgment is not res judicata if it has not pronounced on the merits of the case. Arguably decisions registered under the ECJDA enjoy greater protection than this. Nevertheless, relying upon Vancouver Island Helicopters v. Robertshaw Controls Co. (1980), 30 O.R. (2d) 283 (H.C.) at 287, Lange provides that, “The dismissal of an action in one province on the basis of the expiry of the limitation period is not a dismissal on the merits and does not bar another action in another province with a longer limitation period.” [Emphasis added]
[50] Mr. Coady argues that “the Nova Scotia courts are not permitted to ‘look behind’ the Alberta dismissal in question or even consider the reasons or merits for the dismissal.” He says that by virtue of ss. 6 and 8(3) of the ECJDA the court cannot even examine the reasons to see what issues were decided in reaching its formal order.
[51] These submissions cannot succeed. Precluding the court from challenging another court’s decision cannot preclude determining what was actually decided.
[52] As Lange notes, there is “overwhelming authority, old and new, that the court may look to the documentation behind the formal judgment to determine what was decided for the purpose of res judicata” (Lange, pp. 17-18). Justice Cartwright makes this point in Pratt v. Johnson, [1959] 16 D.L.R. (2d) 385 (SCC), at p. 399:
When a plea of res judicata is raised, to decide what questions of law and fact were determined in the earlier judgment the Court is entitled to look not only at the formal judgment but at the reasons and the pleadings. The cases dealing with this question are collected in Halsbury, 3rd ed., vol. 15, pp. 184, 207 and 208; and I think it necessary to refer only to the following passage in the judgment of the Court of Appeal delivered by Slesser L.J. and concurred in by Clauson L.J. and du Parcq L.J. in Marginson v. Blackburn Borough Council [(1939] 2 K.B. 426 at 437]:
In our view, however, Lewis J. was entitled to have regard to the reasons given by the learned county court judge, and we have not hesitated to avail ourselves of that assistance. We are dealing here not so much with what has been called estoppel by record, but with the broader rule of evidence which prohibits the reassertion of a cause of action which has been litigated to a finish-estoppel by res judicata. In such a case the question arises, what was the question of law or fact which was decided? And for this purpose, it may be vital in many cases to consider the actual history of the proceedings. Thus, in re Graydon, on a question whether a judgment of the county court constituted an estoppel, Vaughan Williams J. refers to an inference to be drawn from the observations of the learned county court judge when asked for leave to appeal; and in Ord v. Ord, also on a question of res judicata, references to proceedings before the judge were considered by Lush J.. But, even if there were no authority to show that this had in fact been done, we can see in principle no objection, when the question before the Court is what was actually decided at an earlier trial, to have recourse to that information which is to be derived from reading a record of the proceedings.
[Emphasis added]
[53] To similar effect is Justice Cromwell in Wright v. Nova Scotia’s Long Term Disability Plan Trust Fund, 2006 NSCA 101:
[42] Turning to the second point first, I am not persuaded that the judge erred in considering the material he did in his attempt to determine what the appeal board had actually decided. In making that determination, “ ... the court may look to the documentation behind the formal judgment to determine what was decided for the purpose of res judicata. It is the substance of the matter actually decided which should control whether res judicata applies, not the form of the judgment.”: Donald J. Lange, The Doctrine of Res Judicata in Canada, 2nd ed., (Ontario: Butterworths, 2004) at pp. 14-15 In this case, we have in the record the full disability Plan claims file, the medical appeal board file, the board’s decision and the trial evidence. Contrary to the appellant’s submission, I do not think that the trial judge was restricted to examining only the Plan documents and the appeal board’s written decision in order to determine what issue or issues the appeal board decided.
[Emphasis added]
[54] The ECJDA was intended to ensure that courts do not approach interprovincial orders as truly “foreign” judgments under the common law. Its “underlying principle is that it is inconsistent with interprovincial comity for Canadian courts to pass judgment on the actions of the courts of other provinces.” (Walker, Janet. Castel & Walker: Canadian Conflict of Laws, 6th ed., loose-leaf (updated May 2014), (Markham, Ont: LexisNexis, 2005) at page 14-112.) However, in this case, Quadrangle is not attempting to limit the effect of the Alberta dismissal or even to treat it differently than a decision from a Nova Scotia court. In contrast, Mr. Coady is attempting to use it as evidence of res judicata and, for that reason, it is wholly appropriate to consider the reasons for the decision to determine what it in fact decided. The ECJDA does not alter the rules of evidence in this regard.
[55] All Justice McCarthy decided was that Quadrangle could not sue Mr. Coady in Alberta. This is obvious from the relevant language of the registered order:
The Application by Blair Coady for Summary Judgment dismissing the claims against Blair Coady based upon the Limitations Act is granted.
[56] Registration of the order in Nova Scotia does not bar the action by Quadrangle against Mr. Coady everywhere for all purposes and all time. It simply affirms that Quadrangle could not sue Mr. Coady in Alberta. It says nothing about whether it could be done in Nova Scotia. Justice McCarthy did not decide which law properly applied to resolution of the dispute. It does not offend the purposes of the legislation or the principle of comity to confine Justice McCarthy’s decision to what he actually decided.
Governing Law
[57] Justice Moir began his legal analysis of this subject in this way:
80 So, the question is whether Alberta or Nova Scotia law applies according to the common law principles for determining applicable law where there is no agreement on the subject. This takes us to Tolofson v. Jensen, [1994] 3 S.C.R. 1022.
[58] Tolofson reaffirmed the ordinary rule that the territoriality principle usually determines the law applicable to a wrong committed in another province.
[59] Mr. Coady’s challenge of Justice Moir’s choice of law decision is well described in Quadrangle’s factum:
…the Appellant places particular emphasis on Justice Moir’s characterization of Quadrangle’s claim against him and seems to suggest that characterization ought to be limited to the pleadings. The Appellant then argues that Quadrangle’s claim sounds in equity instead of tort, which in turn, is used as the basis for urging this Court to adopt the “closest and most real connection test”.
[60] As a further alternative, Mr. Coady submits that if the tort of conversion applies, the normal rule of lex loci delecti (law of the place of the tort), should be replaced by a “closest connection” test.
Conversion
[61] Mr. Coady complains of the judge’s characterization of the claim as one of conversion, citing case law that emphasizes conversion as a tort protecting a possessory interest in personal property of the plaintiff, (DaimlerChrysler Canada Inc. v. Associated Bailiffs & Co. Ltd., 2005 CanLII 24234 (ON SC) and J.G. Fleming, The Law of Torts, 8th ed. (Sydney: Law Book Company, 1992) at pp. 64‑65.)
[62] Mr. Coady says that there is no pleading of possession or an immediate right to possession of the Rally shares so the tort of conversion cannot apply. He goes on to reformulate the cause of action as one in equity, and fundamentally of unjust enrichment. Then Mr. Coady argues for “the closest and most real connection to the obligation in question” as the choice of law test. Relying on the commercial agreements between Quadrangle and Shannon, Mr. Coady argues that Alberta emerges as the place of closest and most substantial connection to the alleged wrongs. This argument is augmented by reference to Justice Coady’s decision declining jurisdiction on the basis of forum non conveniens.
[63] The choice of law analysis involves three steps:
1. Characterization of the question or issue to be decided;
2. Selection of the “connecting factor” which connects the legal question with the law of a particular place; and
3. Application of the law selected to the facts of the case.
(Davies v. Collins, 2011 NSCA 79, citing Castel, Castel & Walker, Canadian Conflicts of Laws, 6th ed. (Markham, Ont., LexisNexis 2005) (updated 2010).) Justice Moir addressed all three factors.
[64] Consideration of the pleadings is part of the first step in the choice of law analysis, but it is not the exclusive inquiry undertaken by the court. As the Ontario Court of Appeal recently observed in Aldo Group Inc. v. Moneris Solutions Corporation, 2013 ONCA 725 at ¶32:
[32] In my view, the motion judge did not err in his approach to the characterization of Aldo’s claim. The motion judge expressly stated and applied the Weber test, adapted to the circumstances. He began with a plain reading of Aldo’s pleading. Consistent with Weber, having considered the alleged wrongs as pleaded, the motion judge also considered the underlying factual dispute. The motion judge specifically acknowledged that Aldo’s claim engages the imposition and collection of the Assessments by MasterCard. He considered that Aldo’s claim against Moneris engages the question of whether the security breach constituted an ADC Event for the purposes of the Assessments, and that the claim against MasterCard draws on the same events. In so doing, the motion judge turned his mind to the contractual context giving rise to the conduct Aldo impugns. It is true that the motion judge did not consider the underlying facts in a vacuum, but I do not believe that the essential character of Aldo’s claim can be discerned solely by reference to the facts; some attention must also be paid to the legal context.
[Emphasis added]
[65] Justice Moir considered the essential character of the complaint of Quadrangle against Mr. Coady and characterized it as a conversion. In doing so he took into account the pleadings but did not confine himself to the actual words used, but rather placed those pleadings in the overall context of the uncontested facts before him in evidence. He made no error in his characterization of the question or issue to be decided by him.
[66] As a general rule, a party must plead all facts material to the cause or causes of action alleged against a defendant. The purpose of pleading is so the defendant will know the case she has to meet when preparing for and participating in a trial or hearing and will not be surprised by any attempt of the plaintiff to prove a material fact, (Civil Procedure Rule 38.02(2).) But this is not a motion to strike the pleading. Quadrangle’s plea that its Rally shares were misappropriated at Mr. Coady’s instruction, to Shannon’s benefit, is plain enough. Quadrangle can still amend its pleadings. The characterization of tortious conduct, otherwise adequately described, should not overwhelm the choice of law analysis by means of an undeclared application to strike.
[67] Mr. Coady says that the material facts pleaded cannot support conversion as a matter of law because conversion is essentially confined to the protection of a right of possession. In fact, Canadian law does not confine a party to a possessory remedy where negotiable instruments have been misappropriated by a defendant. In Klar, Tort Law, 5th ed. (Toronto: Carswell, 2012), at p. 104, the authors observed:
Although currency cannot generally be converted, money which specifically has been collected and set aside, promissory notes and cheques can be. Share certificates can be converted.
[68] In Fridman, The Law of Torts in Canada, 3rd ed., (Toronto: Carswell, 2010), at p. 97, the authors describe conversion this way:
The term “chattels”, however, is broader in its meaning than “goods”. The statutory meaning applicable in the law of sale is not appropriate where conversion is involved. Thus, shares and stock are not goods for the purposes of sales law. The wrongful sale or hypothecation of another’s shares or stock will be conversion. Other intangibles, such as cheques, insurance policies, or guarantees, can also be converted, even though they do not come within the ambit of the law relating to the law of goods. In such instances, however, the law treats the value of the document as being more than the nominal worth of the piece of paper that is involved. It is the ultimate value of the document that is the subject-matter of the action. So, in one case, a defendant who improperly obtained the plaintiff’s list of customers was liable to him.
[69] Justice Moir did not err in his characterization of the issue to be decided.
“Closest Connection” Test
[70] Mr. Coady’s ultimate argument is that even if conversion applies, the traditional choice of law rule – the place where the tort occurs – should be displaced by a “closest and most real connection” test.
[71] In Tolofson the Supreme Court settled the choice of law test for a tort as the lex loci delicti (law of the place of the tort). But Mr. Coady argues that there is difficulty in applying that test because it is hard to know where the tort occurred (i.e. its situs). Mr. Coady refers to two Supreme Court of Canada decisions which he says intimate different rules for different torts: Éditions Écosociété Inc. v. Banro Corp., 2012 SCC 18; Breeden v. Black, 2012 SCC 19. Neither of these were “choice of law” cases. Choice of law was discussed in the context of the choice of forum. Both were defamation claims, with damages potentially in multiple jurisdictions. They are described as exceptions to the Tolofson choice of law test applied by Justice Moir.
[72] Mr. Coady advocates the “closest and most real connection” test, drawing heavily on the contractual documents (to which Mr. Coady is not a party). He submits that Alberta has the “closest connection” to the tort of conversion.
[73] Justice Moir was well aware of the challenge of determining the place or situs of the tort. In deciding that the misappropriation of shares (conversion) occurred in Nova Scotia Justice Moir observed:
[87] "The difficulty lies in locating the situs ...": Club Resorts, para. 88. Mr. Coady appears to have been in Alberta most of the time when Mr. Matheson consulted him about trading the pledged Rally shares. Mr. Matheson appears to have been on the Bedford Highway in Halifax. Lynch Investments had information that Shannon had an office on the Bedford Highway. It took instructions from Mr. Matheson, apparently given in Halifax and certainly received here. The share certificate was in Halifax. The trades were made here.
[88] This evidence shows that the transactions alleged to be tortious took place in Halifax. The law applicable to the alleged misappropriation is that of Nova Scotia, not Alberta. Our Limitation of Actions Act applies, not the Alberta Limitations Act. The claims are not statute barred.
[74] Mr. Coady attributes palpable and overriding error to Justice Moir as he “over-emphasized the connections to Halifax and simultaneously dismissed any role of the Promissory Note to the entire factual matrix.” That is an over-simplification of what Justice Moir actually said:
“…the choice of law clause in the subscription agreement and the "promissory note" do not have any impact on the determination of whether Alberta law or Nova Scotia law applies...”
[Emphasis added]
[75] This is not a dismissal of the subscription agreement and promissory note from the “factual matrix”, but, rather, correctly observes that Mr. Coady cannot rely on a choice of law clause in a contract to which he is not a party.
[76] Justice Moir distinguished between contractual and tortious claims, and the difference in parties entailed by that distinction:
[86] The notion that Alberta law applies to the claim in breach of contract against Shannon but not to the claim in conversion against joint tortfeasors is not "unprincipled". It is grounded in principle if the contract imposes Alberta law for breach of contract, but not tort, and the tort occurred outside Alberta. As discussed earlier, the contract does not provide for tortious liability, and anyway, the defendants are not parties to it. So, where did the alleged misappropriation occur?
[77] Mr. Coady then supplements his submissions by resorting to Justice Coady’s comments on forum non conveniens in his 2008 decision (¶23, above). But Justice Coady lacked the record before Justice Moir and did not decide choice of law. He was certainly unaware of the inability of Alberta to entertain Quadrangle’s claim. Alberta could not be the more convenient forum. Owing to its Limitations Act, it was no forum at all.
[78] As required by Davies, Justice Moir characterized the question to be decided, applied the appropriate connecting factor (place of the tort), and applied the appropriate law. Justice Moir’s reliance on Tolofson was not an error of law. Tolofson is the leading authority on the choice of law applicable to torts. His application of that law to the facts is reviewed on a palpable and overriding standard. Considering the factors that Justice Moir took into account in deciding that the principal tort claimed occurred in Nova Scotia (¶73 above), he made no palpable and overriding error. I would dismiss the appeal.
[79] I would dismiss the appeal and award costs to Quadrangle of $4,500.00, inclusive of disbursements, payable by Mr. Coady.
Bryson, J.A.
Concurred in:
Farrar, J.A.
Scanlan, J.A.