A Fair Fight: Issue Estoppel and Parallel Proceedings
Litigation has to be fair to both sides of a dispute. Finality is an important aspect of that fairness. Where parallel proceedings have differences in process, procedure, or purpose, is it fair to allow the same parties to litigate the same issues? Or does the fairness of finality take precedence over considerations of process and purpose?
In Penner v. Niagara (Regional Police Services Board), 2013 SCC 19, the Supreme Court of Canada considered when a civil court should bar claims on the basis that the issues in dispute were finally disposed of in a prior administrative proceeding. A 4-3 majority of the Court affirmed the flexible test for issue estoppel, set out in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, and its requirement that the judge exercise discretion not to apply the doctrine if it would result in unfairness or an unjust result.
Mr. Penner was arrested for disruptive behaviour in an Ontario courtroom. Shortly thereafter he initiated two proceedings alleging unlawful arrest and use of unnecessary force.
Mr. Penner filed a public complaint against the two arresting officers under the Police Services Act, R.S.O. 1990, c. P.15 (“PSA”). He also brought a civil action for damages in the Superior Court of Justice in which he named the same officers, their Chief of Police, and the Regional Municipality of Niagara Regional Police Services Board.
The Administrative Proceeding
The Chief of Police referred Mr. Penner’s PSA complaint to a disciplinary hearing, appointing a retired OPP superintendent to conduct the hearing on his behalf. At the hearing, both officers were found not guilty of misconduct. Mr. Penner, a meaningful participant at the hearing, successfully appealed to the Ontario Civilian Commission on Police Services. On further appeal by the constables, the Divisional Court reinstated the decision from the disciplinary hearing that there had been no misconduct.
The Civil Action
After the Divisional Court restored the decision from the disciplinary hearing, the defendants in the civil action moved to dismiss Mr. Penner’s claim on the basis of issue estoppel, arguing that the disciplinary proceeding had finally resolved key issues grounding the civil claim.
The test for issue estoppel was originally set out in Angle v. Minister of National Revenue,  2 S.C.R. 248 and involves asking:
1. whether the same question has been decided;
2. whether the decision said to create the estoppel is final; and
3. whether the parties to the decision were the same in both proceedings.
In Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, the Supreme Court refined the test, recognizing that judges retain the discretion not to apply issue estoppel in a given case if it would result in unfairness or injustice. Thus, the Danyluk test for issue estoppel involves two steps. First, a court must determine whether the moving party established the preconditions to the operation of issue estoppel set out in Angle. If the preconditions are met, the Court must then determine whether, as a matter of discretion, issue estoppel ought to be applied.
In Penner, the motion judge applied the Danyluk test and struck many of the civil claims. The Court of Appeal agreed in the result, finding that the preconditions for issue estoppel had been satisfied and that Mr. Penner’s civil claims were barred; however, it also held that the motion judge’s failure to explain why he refused to exercise his discretion not to apply the doctrine was an error. The Court of Appeal analyzed the purposes of the two proceedings and the intention of the legislature in creating the public complaints process under the PSA, ultimately concluding that the operation of issue estoppel would not be unfair or unjust.
The Supreme Court of Canada
A 4-3 majority of the Supreme Court held that the Ontario Court of Appeal erred.
The Penner Majority (Cromwell, Karakatsanis, Fish JJ. and McLachlin C.J.) agreed that all three preconditions of issue estoppel were met, but used its discretion not to apply the doctrine to bar Mr. Penner’s claims. In doing so, the Court affirmed the Danyluk test and clarified the application of that test in the context of prior administrative proceedings.
“Issue estoppel is about balancing judicial economy and finality and other considerations of fairness to the parties. It is a flexible doctrine that permits the court to respond to the equities of a particular case.”
At the Supreme Court, Mr. Penner argued that, among other things, the application of issue estoppel in his case was an injustice because of the greater public interest in police accountability. The Respondents contended that the civil suit was a collateral attack on the final decision of the complaints process and that Mr. Penner was precluded from relitigating the same issues in a different forum.
Affirming the flexible approach in Danyluk, the Penner Majority refused to apply the doctrine of issue estoppel. In doing so, the majority held that the Court of Appeal erred for three reasons: (1) it erred in its analysis of the significant differences between the purpose and scope of the disciplinary and civil proceedings; (2) it failed to consider the reasonable expectations of the parties about the impact of the proceedings on their broader legal rights; and (3) it failed to recognize the unfairness in using the decision of the Chief of Police’s designate to exonerate the Chief in Mr. Penner’s civil action.
For those reasons, the majority held that it was unfair to Mr. Penner to use issue estoppel to bar his civil claims.
On the issue of fairness, the Penner Majority identified two main ways in which unfairness may arise and warrant the use of discretion. First, the application of issue estoppel will be unfair if the prior proceedings were themselves unfair. Second, even if a prior proceeding was conducted fairly and properly, it may nonetheless be unfair to use the results for the purposes of barring a civil claim. The unfairness in this second sense may occur where the purposes, processes or stakes involved in the two proceedings are significantly different.
The Court of Appeal’s error was its failure to focus on fairness in the second sense. Although the disciplinary hearing was fair and Mr. Penner was a meaningful participant, it was unfair to use the result of that process to preclude Mr. Penner’s civil claims when accounting for the nature and scope of the respective proceedings and the parties’ reasonable expectations in relation to them:
“Given the legislative scheme and the widely divergent purposes and financial stakes in the two proceedings, the parties could not reasonably have contemplated that the acquittal of the officers at the disciplinary hearing would determine the outcome of Mr. Penner’s civil action. […] Further, the application of issue estoppel had the effect of using the decision of the Chief of Police’s designate to exonerate the Chief in the civil claim.
Applying issue estoppel against Mr. Penner to preclude his civil claim for damages in the circumstances of this case was fundamentally unfair.”
The Penner Minority (LeBel, Abella, and Rothstein JJ.) strongly disagreed, arguing that the majority had applied the wrong precedent when it relied on Danyluk. The minority relied on the SCC’s more recent articulation of the doctrine in British Columbia (Workers’ Compensation Board) v. Figliola, 2011 SCC 52.
Figliola moved away from the approach in Danyluk by not distinguishing between tribunal and court decisions when discussing the applicable principles of issue estoppel, including the exercise of discretion:
“The “twin principles” which underlie the doctrine of issue estoppel – “that there should be an end to litigation and … that the same party shall not be harassed twice for the same cause” […] are core principles which focus on achieving fairness and preventing injustice by preserving the finality of litigation. This, as the majority said in Figliola, is the case whether we are dealing with courts or administrative tribunals. Our colleagues’ approach undermines these principles and risks transforming issue estoppel into a free-floating inquiry into “fairness” and “injustice” for administrative tribunals and revives an approach that our Court refused to apply in Figliola.”
For the Penner Minority, fairness is linked to finality. Differences in process, procedure, or purpose should not be invoked to override the fundamental principle of finality:
“[…] The Court’s residual discretion not to apply issue estoppel should be governed by the interests of fairness in preserving the finality of litigation. It should not be exercised in a manner that would impose a particular model of adjudication, undermine the integrity of administrative tribunals, and deny their decisions the deference owed to them under the jurisprudence of this Court […]”
Penner is an important decision for at least two reasons. First, it clarifies the application of the principles of issue estoppel in the context of prior administrative proceedings by affirming the flexible approach to the application of the doctrine, as set out in Danyluk.
Second, it provides insight into the Court’s current approach to administrative proceedings more generally. In Penner, the majority was willing to allow the civil claims in part because of the differences between the two proceedings and the reasonable expectations of the parties. In contrast, the minority was concerned with finality, the integrity of administrative tribunals, and the impropriety of imposing a particular model of adjudication on litigants.
The stark difference in approach in such a closely divided judgment may make it difficult to predict how the Court will decide future cases involving parallel judicial and administrative proceedings, including those that do not involve issue estoppel. Penner is, therefore, potentially of great interest to the class action bar given that AIC Limited v. Dennis Fischer, the market timing class action, is currently under reserve. In Fischer (webcast available here), the Court has to decide whether or not to bar certification under the preferable procedure requirement of Ontario’s Class Proceedings Act in light of a prior settlement between the defendant and the Ontario Securities Commission. Although Fischer does not involve issue estoppel, the outcome in Penner may influence the Court’s analysis because of the weight attributed by the Penner Majority to the reasonable expectations of the parties and differences in process and purpose.
Date of Decision: April 5, 2013
fairness issue estoppel Ontario Divisional Court parallel proceedings twin principles