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Estoppel - Issue Estoppel

Damages - Legal Costs in Prior Proceedings as Damages

Privilege - Absolute Privilege

Privilege - Litigation Privilege

Salasel v Cuthbertson (Ont CA, 2015)

The first issue here was whether a plaintiff was precluded from claiming actual legal costs of a prior proceeding (to the extent that the earlier court had not awarded them) as damages in a subsequent proceeding. The lower court held that the earlier court's cost award set up an issue estoppel against such a claim.

On issue estoppel generally the Court of Appeal stated:
[11] To invoke issue estoppel, a party must meet three pre-conditions: (i) the issue in the proceeding must be the same as the one decided in the prior decision; (ii) the prior judicial decision must have been final; and, (iii) the parties to both proceedings must be the same or their privies: Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63 (CanLII), [2003] 3 S.C.R. 77, at para. 23. The appellants acknowledge that the decision of the Supreme Court of Canada in the Prior Proceedings was a final one, and they accept that for purposes of their claim for legal fees as damages that the parties in the Prior Proceedings and the present action were the same or privies.

.....

[18] The appellants argue that the cost awards in the Prior Proceedings were not fundamental to the injunctive relief granted to Mr. Rasouli and therefore it is open to them to bring an action to recover legal costs as damages. In my view, the appellants’ position is incorrect and, instead, the following portions of the motion judge’s reasons accurately state the law on this point:
[27] An award of costs may not be the very subject matter of the litigation, but it is not incidental in the sense that the prior court did not specifically turn its mind to the issue … [T]he costs rulings form part of the conclusions “that were necessarily…determined in the earlier proceedings”: Danyluk v Ainsworth Technologies Inc., 2001 SCC 44 (CanLII), [2001] 2 SCR 460, at para 24.



[30] I agree with the authors of Clerk and Lindsell on Torts (20th ed.), 28-130, where they state definitively that, “[a] successful claimant cannot bring a fresh action against the defendant in order to recover as damages his ‘extra costs’, that is, the difference between the costs which the defendant was ordered to pay and the costs actually incurred…”. Courts across Canada have come to similar conclusions: See Humble v Vancouver Municipal & Regional Employees Union, 1989 CarswellBC 1299, at paras 86, 92, aff’d [1991] BCJ No 2995 (BCCA). This issue was addressed squarely by the Manitoba Court of Queen’s Bench in P&G Cleaners Ltd. v Johnson, [1996] MJ No 566 (Man QB), at para 17, which concluded that issue estoppel applies:
On the previous proceedings related to dispensing with Mr. Johnson’s consent, the issue arose as to whether he was entitled to solicitor and client costs of those proceedings based on the wording of Clause 5(a) above. I held that he was not entitled to solicitor and client costs. That is the precise issue which the respondent is seeking to re-litigate in these proceedings and is res judicata.
....

[20] Finally, the appellants submit that the motion judge erred by failing to consider whether he should exercise his residual discretion not to apply the doctrine of issue estoppel to the appellants’ claim for “extra costs”. As recalled by the Supreme Court of Canada in Penner v. Niagara Regional Police Services Board, 2013 SCC 19 (CanLII), [2013] 2 S.C.R. 125, at para. 35, even where the pre-conditions for issue estoppel are established, courts retain the discretion not to apply issue estoppel to ensure that no injustice results. Applying issue estoppel may work an injustice if the prior proceedings were unfair to a party or, even where they were not, if significant differences existed in the purpose, process and stakes of the two proceedings. The discussion in Penner took place in the context of whether any such significant differences existed between prior administrative proceedings and subsequent civil court proceedings such that it would work an injustice to apply the result of the former to the latter.
The court also considered the admissibility into evidence of a letter from one counsel to the other sent prior to the commencement of the lawsuit, which the lower court ruled was 'absolutely' privileged (or what I would called 'litigation privileged'). In upholding this finding the Court of Appeal reasoned as follows:
[35] The doctrine of absolute privilege contains several basic elements: no action lies, whether against judges, counsel, jury, witnesses or parties, for words spoken in the ordinary course of any proceedings before any court or judicial tribunal recognised by law; the privilege extends to documents properly used and regularly prepared for use in the proceedings; and, a statement will not be protected if it is not uttered for the purposes of judicial proceedings by someone who has a duty to make statements in the course of the proceedings: Amato v. Welsh, 2013 ONCA 258 (CanLII), at para. 34.

[36] At issue in this case is a communication made by counsel for the respondent physicians before the actual commencement of legal proceedings. As noted by Cullity J. in Moseley-Williams v. Hansler Industries Ltd. (2004), 2004 CanLII 66313 (ON SC), 38 C.C.E.L. (3d) 111 (Ont. S.C.), aff’d [2005] O.J. No. 997 (Ont. C.A.), Ontario has adopted a broader application of the rule of absolute privilege to such pre-suit statements than jurisdictions such as British Columbia, Alberta and England. The scope of the Ontario rule was summarized comprehensively by the Divisional Court in 1522491 Ontario Inc. v. Steward, Esten Professional Corp., 2010 ONSC 727 (CanLII), 100 O.R. (3d) 596, at paras. 37 and 39 to 44:
[37] In Ontario, absolute privilege may extend to communications by a party's solicitor made before the actual commencement of proceedings.



[39] As Cullity J. points out in Moseley-Williams, the following statement from Fleming has been referred to with approval in Ontario decisions:
The privilege is not confined to statements made in court, but extends to all preparatory steps taken with a view to judicial proceedings.... But the statement or document must be directly concerned with actual contemplated proceedings.
[40] However, Cullity J. also found that the authorities do not appear to support an extension of the privilege to all occasions when the possibility of litigation is contemplated, or even when a threat of litigation is made, or when a lawyer is endeavouring to assert and protect a client's rights.

[41] Thus, when a defendant in these circumstances moves to dismiss the claim on the ground of absolute privilege, the decision the court has to make is whether the communication was made “for the purpose of, or preparatory to, the commencement of [judicial] proceedings”.

[42] Something more than merely a contemplation of the possibility of litigation is required. The court must decide whether the occasion is “incidental” or “preparatory” or “intimately connected” to judicial proceedings and not one that is too remote.

[43] It is in this sense that Cullity J. accepted that “... some inquiry into the purpose of their publication would appear to be unavoidable”… That case dealt with a motion for judgment under rule 20. On a rule 21.01(1)(b) motion, the “inquiry” is made on the assumed truth of the facts pleaded in the statement of claim.

[44] It must be stressed that “it is the occasion, not the communication, that is privileged. The privilege belongs to the occasion by reason of the setting.” [Citations omitted; emphasis in original.]
Determining whether an occasion is preparatory to, or intimately connected with, judicial or quasi-judicial proceedings involves, as Cullity J. aptly put the matter in Moseley-Williams, at paras. 57 and 58, an exercise of ascertaining where a line is to be drawn so that the degree of connection between the occasion and the judicial proceeding is not too remote.

[37] Against that background, let me turn to consider the three reasons the appellants advance in support of their submission that the motion judge erred in finding that the Underwood Letter was protected by absolute privilege.

Availability of absolute privilege in non-defamation actions

[38] First, the appellants submit that the doctrine of absolute privilege for pre-litigation communications only precludes the bringing of defamation claims in respect of the communication. That is not correct. As stated by this court in Samuel Manu-Tech Inc. v. Redipac Recycling Corp. (1999), 1999 CanLII 3776 (ON CA), 124 O.A.C. 125, at para. 20, the immunity afforded by absolute privilege “extends to any action, however framed, and is not limited to actions for defamation”. In that case, the intentional acts upon which the plaintiff by counterclaim was relying in support of its claim for intentional interference with contractual relations were affidavits sworn by the defendants to obtain receivership orders. This court upheld the decision of the motion judge striking out the counterclaim on the basis that the affidavits were protected by absolute privilege.

The degree of connection between the Underwood Letter and the litigation

[39] The second reason advanced by the appellants contains two inter-connected elements. They argue that absolute privilege did not attach to the Underwood Letter because at the time it was written no substantive steps had been taken to prepare for litigation in the sense that the respondent physicians had not made a decision to litigate, and it was the appellants, not the respondents, who first commenced a legal proceeding following the communication of the Underwood Letter.

[40] Certainly by the date of the Underwood Letter, a decision to litigate had been made by the appellants. As disclosed by the chronology of events set out above, by January 13, 2011, Ms. Salasel had informed the Hospital of her decision to commence an application in the Superior Court of Justice seeking to restrain the physicians from withdrawing life-support from her husband without her consent. The Hospital’s counsel passed that information along to the physicians’ counsel, Mr. Underwood. The decision to litigate the issue of consent had been made and communicated 11 days before Mr. Underwood sent his letter to counsel for the Rasouli family. The Underwood Letter not only communicated the physicians’ position on the appropriate treatment for Mr. Rasouli – a position not acceptable to the Rasouli family – but also advised that the physicians would co-operate in seeking a prompt determination of the dispute from the courts:
The doctors are prepared to defer the implementation of their decision provided that you proceed, immediately, to obtain an urgent appointment for a one day hearing of the intended application. That matter has been left in your hands and I await word from you as to the available date or dates.
The two applications were commenced shortly thereafter. When read in the context of the contemporaneous events, the Underwood Letter was written at a time when it was clear that the physicians would be required to respond to the litigation which Ms. Salasel intended to initiate against them.

[41] The appellants submit that absolute privilege should not attach to the Underwood Letter because the first legal proceeding had been commenced by the recipient of that letter, not the party whose counsel wrote it. I do not accept that submission. It is true that in several Ontario cases which held that absolute privilege attached to a pre-suit communication of a lawyer, the communication had come from plaintiff’s counsel who sent a letter attaching the intended statement of claim either to counsel for the opposite party or to a witness: Dingwall v. Law (1988), 1988 CanLII 4716 (ON SC), 63 O.R. (2d) 336 (Ont. H.C.) and Steward, Esten Professional Corp. By contrast, the Underwood Letter was not written on behalf of Ms. Salasel, the party who commenced the first of the Prior Proceedings, but by counsel for the respondent physicians who only started their application after Ms. Salasel had issued hers. I do not see that sequence of events as preventing absolute privilege from attaching to the Underwood Letter. Before the Underwood Letter was written, it was clear that judicial proceedings would take place over the issue of whether consent was required to withdraw mechanical ventilation. Shortly after the Underwood Letter was written, the proceedings commenced, with the application and “cross-application” seeking opposing relief in respect of the same issue. Since the privilege extends to communications directly concerned with actual contemplated proceedings, it would be inconsistent to afford the protection to communications by counsel for one party, but to deny it to communications by counsel for the other party.

The applicability of the principles set out in Amato v. Welsh

[42] Finally, the appellants submit that the motion judge erred by failing to consider the implications of the decision of this court in Amato v. Welsh, 2013 ONCA 258 (CanLII), 305 O.A.C. 155. That decision, the appellants argue, supports their position that absolute privilege should not be used as a rationale for protecting doctors from suits in which their patient alleges the physicians threatened to harm him. According to the appellants, the public policy considerations outlined in Amato preclude a finding, at least on a Rule 21.01(3)(d) motion, that an action based on the Underwood Letter is barred by reason of absolute privilege.

[43] Amato involved a motion to strike out a claim under Rule 21.01(1)(b) as disclosing no reasonable cause of action. In Amato the plaintiffs, former clients of the defendant lawyers, sued for negligence, breach of fiduciary duty and breach of the duty of loyalty during the course of the lawyers’ representation of the plaintiffs. The plaintiffs had invested funds in a scheme run by other clients of the lawyers. The Ontario Securities Commission (“OSC”) conducted a hearing into whether the investment set-up was a Ponzi scheme. In their action, the plaintiffs alleged that their lawyers failed to disclose at the OSC hearing the investments they had made, thereby diminishing their chances of recovering their investments. Although the lawyers did not question their clients’ right to sue in negligence, breach of fiduciary duty and breach of the duty of loyalty, the lawyers argued that those causes of action could only be founded on the allegation of the competing retainers the lawyers had with different clients, not on any statements the lawyers had made or failed to make during the OSC hearing. Consequently, the lawyers moved to strike out that portion of the plaintiffs’ pleading, arguing that it disclosed no reasonable cause of action because the statements made by the lawyers during the OSC hearing were protected by absolute privilege. This court viewed the interplay between a lawyer’s obligation arising out of the duty of loyalty to a client and the protection afforded to a lawyer by the doctrine of absolute privilege as central to the attack on the plaintiffs’ pleading. It concluded, at para. 69 of its reasons, that it was at least arguable that, in a proper case and on a full record, the duty of loyalty owed by a lawyer to a client could trump the immunity afforded by the doctrine of absolute privilege, and this court was not prepared to strike out the claim on a Rule 21.01(1)(b) motion.

[44] The appellants draw on Amato to advance two reasons why absolute privilege should not attach to the Underwood Letter. First, the appellants contend that just as Amato held that a duty of loyalty by a lawyer might trump the immunity afforded by absolute privilege, similarly a physician’s duty not to threaten to harm his patient could be held to trump absolute privilege. In my view, the appellants’ argument overlooks a material difference between the circumstances in Amato and those in the present case. In Amato the disputed statements were made by lawyers during the course of their retainer by the plaintiff clients, thereby giving rise to a possible conflict between the lawyers’ duty of loyalty to their clients and absolute privilege. By contrast, in the present case the statutory regime concerning consent to medical treatment established by the Health Care Consent Act, S.O. 1996, c. 2, Sched. A (“HCCA”) recognizes that disputes over appropriate medical treatment may arise between treating physicians and a patient’s substitute decision-maker, and the HCCA establishes a mechanism for resolving those disputes through applications to the Consent and Capacity Board: Cuthbertson, at para. 2. It is difficult to see how a duty of loyalty by the physician in respect of treatment decisions for a patient – akin to the duty of loyalty owed by a lawyer to a client discussed in Amato – could arise when the statutory regime governing treatment decisions specifically recognizes that the physician and the substitute decision-maker may disagree about a treatment plan.

[45] Placed in that context, the Underwood Letter communicated the physicians’ views on treatment and discussed some of the mechanics involved in resorting to the courts to resolve the dispute, as previously proposed by counsel for the Rasouli Family. The Underwood Letter did not create a potential conflict between the principles of duty of loyalty and absolute privilege, which was the concern of this court in Amato.

[46] Second, the appellants submit that the integrity of the justice system is not protected by extending immunity to a physician who threatens to end his patient’s life unless the intended victim has resort to that justice system to prevent the injustice of his own death. The appellants characterize the Underwood Letter as a threat. When considering whether the doctrine of absolute privilege applies to a particular communication, the analysis necessarily focuses on the occasion on which a communication was made, not on its content. Nevertheless, in assessing this particular submission advanced by the appellants, one cannot ignore the judicial statements made in the Prior Proceedings which described the dispute between the appellants and the respondent physicians over the treatment plan for Mr. Rasouli as one of public importance which merited judicial consideration. In the Superior Court of Justice decision, Himel J. stated, at para. 103:
It is clear from the evidence that the hospital, doctors and substitute decision-maker in this case all have as their priority the best interests of the applicant [Mr. Rasouli].
In its reasons, this court stated, at para. 16:
For reasons that follow, we would dismiss the appeal. In so concluding, we do not minimize the concerns raised by the appellants [the physicians]. They are serious and warrant careful consideration.


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