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Discontinuance

. Kawaguchi v. Kawa Investments Inc.

In Kawaguchi v. Kawa Investments Inc. (Ont CA, 2021) the Court of Appeal considered when the service of a Notice of Discontinuance constituted an abuse of process:
(2) Did the motion judge err by setting aside the notice of discontinuance as an abuse of process?

[27] In Holterman v. Fish, 2017 ONCA 769, [2018] 3 C.T.C. 55, leave to appeal to S.C.C. refused, 37889 (July 5, 2018), this court discussed when a consent notice of discontinuance could be set aside at the request of the plaintiff, in exceptional circumstances that arose after the notice was delivered. The current appeal does not fall into that category.

[28] However, there is long-standing case law in Ontario, as well as in other provinces, that affirms that a court has the authority, in the appropriate circumstances, to set aside a notice of discontinuance that was properly delivered under the Rules as an abuse of process: see Angelopoulos v. Angelopoulos (1986), 1986 CanLII 2716 (ON SC), 55 O.R. (2d) 101 (H.C.), at 109-10; Toronto (City) v. Abasi, 1990 CarswellOnt 2289 (H.C.); Glasjam Investments Ltd. v. Freeman, 2014 ONSC 3878, at paras. 60-62; Smith v. Dueck, 1997 CarswellBC 792 (S.C.), at paras. 22-23; De Shazo v. Nations Energy Co., 2006 ABCA 400, 401 A.R. 142, at paras. 11-15; and DLC Holdings Corp. v. Payne, 2021 BCCA 31, 456 D.L.R. (4th) 337 at paras. 31-33.

[29] In Angelopoulos, Henry J. set aside a notice of discontinuance for abuse of process. In that case, the wife had commenced a family law proceeding against the husband. The wife then moved before a master for relief in accordance with the action. That proceeding resulted in a consent order that dealt with much of the requested relief, and also restrained the wife from attending at the premises of the parties’ jointly owned business. Following the order, the wife nevertheless continued to attend at and to disrupt the business.

[30] As pleadings remained open, the wife served a notice of discontinuance, with the intention to avoid the effect of the consent order and to be able to recommence the proceedings afresh. Henry J. held that while the Rules gave the plaintiff the absolute right to serve a notice of discontinuance, he had the power to set aside the notice as an abuse of process under r. 1.04, which provides:
1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

(2) Where matters are not provided for in these rules, the practice shall be determined by analogy to them.
[31] In my view, in the circumstances of this case, the motion judge was entitled to exercise the same jurisdiction under r. 1.04 as Henry J. did in Angelopoulos. By seeking an injunction to obtain interim relief based on the merits of the claim, the appellants took a significant step in the proceeding. They were successful against the main defendants in the action, which accomplished their goal of preventing the sale of the property until the authority of Lori Kawaguchi is determined at a trial. However, their claim against the respondents was found to have little or no merit. Unhappy with that result, and faced with the respondents’ indication that they intended to move for summary judgment, the appellants sought to be free to not pursue their claim against the respondents for the moment but to be able to recommence the same proceeding on the same facts at a future time. In those circumstances, the motion judge was entitled to conclude that the notice of discontinuance constituted an abusive use of the Rules.

[32] In oral argument on the appeal, appellants’ counsel postulated that if the injunction were to be lifted, the respondents could again accept a listing of the property for sale, and that was why the appellants should retain the ability to recommence the action against them. However, in those circumstances, the action would be based not on the same facts, but on the new facts just described. And I would add, it is most unlikely that these respondents would accept the listing again until the now-known corporate dispute is resolved.

[33] The principle against allowing a plaintiff to discontinue an action once the action has proceeded past a certain point has been in place in England and followed in Canada since the late 19th century: see Fox v. Star Newspaper Company, [1898] 1 Q.B. 636 (C.A.) at 639, aff’d [1900] A.C. 19 (H.L. (Eng.)); Schlund v. Foster (1908), 11 O.W.R. 175 (H.C.), aff’d 11 O.W.R. 314 (Div. Ct.); Blum v. Blum, 1964 CanLII 285 (ON CA), [1965] 1 O.R. 236 (C.A.), at 238-39; Hennig v. Northern Heights (Sault) Ltd. (1980), 1980 CanLII 1574 (ON CA), 30 O.R. (2d) 346 (C.A.), at 353-54; and Sampson v. City of Kingston, 1981 CarswellOnt 2747 (H.C.), at paras. 6-10. In Fox, Lord Chitty summarized the effect of the Rules of the Supreme Court, 1883 (U.K.), Order 26, r. 1, which dealt with discontinuance, as follows:
The principle of the rule is plain. It is that after the proceedings have reached a certain stage the plaintiff, who has brought his adversary into court, shall not be able to escape by a side door and avoid the contest. He is then to be no longer dominus litis, and it is for the judge to say whether the action shall be discontinued or not and upon what terms… The substance of the provision is that, after a stage of the action has been reached at which the adversaries are meeting face to face, it shall only be in the discretion of the judge whether the plaintiff shall be allowed to withdraw from the action so as to retain the right of bringing another action for the same subject-matter.
[34] This principle is continued under r. 23.01(1)(a), which allows a plaintiff to unilaterally discontinue its action until the close of pleadings. To discontinue its action after this stage, a plaintiff must obtain leave of the court or the consent of all parties (rr. 23.01(1)(b) and (c)). However, the case law demonstrates that in some circumstances, particularly where there are judicial orders or findings in the action, a court may find it to be an abuse of process for the plaintiff to seek to discontinue the action and to be able to recommence the same action, against the same defendant, on the same facts. In addition, in those circumstances, issues of res judicata and issue estoppel could potentially arise.

[35] I see no error in the motion judge’s exercise of his jurisdiction under r. 1.04 to set aside the notice of discontinuance in this case as an abuse of process.


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