Citation:
McCulloch v. Sherman et al and Apland,
2007 BCCA 66
Date: （略）
Docket: CA034683
Between:
Lancelot McCulloch
RESPONDENT
(PLAINTIFF)
And
Mark Sherman also known as Mark Thomas
Sherman also known as Alva Fitzgerald and
Terra Design Inc.
APPELLANTS
(DEFENDANTS)
And
Trisha Suzane Apland
(DEFENDANT)
Before:
The Honourable Madam Justice Rowles
(In Chambers)
S. A. Dawson
Counsel for the Appellants
A. N. Habib
Counsel for the Respondent
Place and Date of Hearing:
Vancouver, British Columbia
12 January, 2007
Place and Date of Judgment:
Vancouver, British Columbia
5 February, 2007
Reasons for Judgment of the Honourable Madam Justice Rowles:
I. Introduction
[1] The defendants apply for directions as to whether leave to appeal is required from an order dismissing their application to strike the plaintiff’s statement of claim under sub-rule 19(24)(b) and (d) of the Rules of Court, B.C. Reg. 221/90 as being frivolous or vexatious or an abuse of the process of the court. The reasons of the chambers judge for dismissing the defendants’ application to strike may be found at 2006 BCSC 1753.
[2] Before the chambers judge, the defendants argued that the plaintiff’s statement of claim alleges facts concerning the nature and effect of a trust agreement that are entirely inconsistent with the facts the plaintiff alleged as a defendant in earlier proceedings brought by Vancouver City Savings Credit Union (“VanCity”) to recover funds from borrowers and from guarantors of a loan and that the claim ought to be struck as an abuse of process.
[3] The chambers judge did not agree that the claim ought to be struck. After reproducing the pleadings in both actions, identifying the parties to the earlier VanCity action, and identifying the parties to and the effect of the consent dismissal order as against the guarantors of the loan in the VanCity action, the chambers judge held that it was not plain and obvious that the plaintiff’s claim was either frivolous or vexatious or an abuse of the process of the court. He further held that it was not plain and obvious that the doctrine of res judicata would apply to bar the plaintiff’s claim.
[4] At the end of his reasons, the chambers judge said:
[45] At this stage of the proceedings, a conclusion that the liabilities under the Trust Agreement have been settled would be based on pure speculation. It is unknown, for example, whether McCulloch [the plaintiff] settled the outstanding loan with VanCity and is now pursuing Sherman [one of the defendants] for the funds which were supposed to go towards reducing the overall loan and did not, as a result of the asset purchase agreement not completing. It is unknown whether Sherman paid anything for the interest in MBLCI (McCulloch says that Sherman did not pay the $200,000 that was agreed upon, but it is unclear if he might have paid less, such as the $120,000 as suggested by the VanCity pleadings.) Finally, the possibly determinative issue of whether the Trust Agreement was contingent on the completion of the larger restructuring agreement is unclear. All of these factual issues must be determined in order to clarify the parties’ respective liabilities pursuant to the Trust Agreement. [Underlining added.]
[5] The defendants’ position is that they have an appeal as of right from the order dismissing their application. They contend that the following cases support their position: Radke v. S.(M.) (Litigation Guardian of) (2006), 49 B.C.L.R. (4th) 82, 2006 BCCA 12 and Balla v. Fitch Research Corp. (2006), 52 B.C.L.R. (4th) 1, 2006 BCCA 212 (Donald J.A., in Chambers) and Robak Industries Ltd. v. Gardner, 2006 BCCA 512 (Finch C.J.B.C., in Chambers) The defendants concede that Balla “has not met with universal acceptance” and describe the application of Radke as “uneven.”
[6] Other cases to which I was referred include Tamarack Capital Advisors Inc. v. SEM Holdings Ltd. (2006), 54 B.C.L.R. (4th) 80, 2006 BCCA 349 (Thackray J.A., in Chambers), Lieberman v. Business Development Bank of Canada (2006), 56 B.C.L.R. (4th) 74, 2006 BCCA 363 (Saunders J.A., in Chambers), Hawkshead Investments Limited v. CICH Resources Limited, 2006 BCCA 403 (Low J.A., in Chambers), Lombard General Insurance Company of Canada v. Cominco Ltd., 2006 BCCA 457 (Kirkpatrick J.A., in Chambers), and McIlvenna v. I.C.B.C., 2006 BCCA 576 (Huddart J.A., in Chambers).
[7] For the reasons which follow, I am of the view that leave to appeal the order dismissing the defendants’ application to strike is required.
II. Discussion
[8] The relevant statutory provisions appear in sections 6 and 7 of the Court of Appeal Act, R.S.B.C., c.77:
6 (1) An appeal lies to the court
(a) from an order of the Supreme Court or an order of a judge of that court, …
. ***
7 (1) In this section, "interlocutory order" includes
***
(b) an order made under the Supreme Court Rules on a matter of practice or procedure.
(2) Despite section 6 (1), an appeal does not lie to the court from
(a) an interlocutory order,
***
without leave of a justice.
[9] The definition of interlocutory found in section 7(1) of the Court of Appeal Act is inclusive, not exhaustive. Until the decision in Radke, whether an order was to be regarded as interlocutory or final was generally determined in this jurisdiction by application of the test stated by Lord Alverstone C.J. in Bozson v. Altrincham Urban District Council [1903] 1 K.B. 547 at 548-49 (C.A.):
It seems to me that the real test for determining this question ought to be this: Does the judgment or order, as made, finally dispose of the rights of the parties? If it does, then I think it ought to be treated as a final order; but if it does not, it is then, in my opinion, an interlocutory order.
[Underlining added.]
[10] With the increasing number of cases in which parties seek to have a substantive issue or issues in the litigation determined, either by application or in a split trial, the fairness and utility of the application of the test in Bozson came to be questioned.
[11] In Radke, the plaintiff was injured in a motor vehicle accident that occurred when a young offender drove through a stop sign while being pursed by an RCMP officer driving a police vehicle. The defendants in the action included the RCMP officer, Her Majesty the Queen in Right of the Province, and the Attorneys-General of Canada and British Columbia. A consent order was made that the fault or liability issues would be tried separately and in advance of the damage issues. Following the trial on liability, the defendants filed both Notices of Appeal and Applications for Leave to Appeal and then brought applications to determine whether leave to appeal was required.
[12] The issue in Radke was “whether a judgment which decides only liability issues, but not damages, is a final order for which leave to appeal is not required, or an interlocutory order within Section 7(2)(a) of the Court of Appeal Act, R.S.B.C. 1996, c. 77, for which leave to appeal is required” (at para. 1).
[13] In Radke, this Court adopted the approach taken by the English Court of Appeal in White v. Brunton [1984] 2 All E.R. 606 in preference to the test in Bozson.
[14] In White v. Brunton the plaintiff brought an action for damages for breach of contract and for a declaration that the defendant, by an agreement, was bound to contribute to the costs associated with the construction of an access road. An order was made that a preliminary issue be tried, the issue being whether, on a true construction of the contract, the defendant was under any liability for the costs the plaintiff had incurred in the construction of the access road. The issue was determined in the defendant’s favour and the plaintiff sought leave to appeal. In holding that the plaintiff did not require leave, Sir John Donaldson M.R. said, at 608:
The court is now clearly committed to the application approach as a general rule and Bozson’s case can no longer be regarded as any authority for applying the order approach… It is plainly in the interests of the more efficient administration of justice that there should be split trials in appropriate cases, as even where the decision on the first part of a split trial is such that there will have to be a second part, it may be desirable that the decision shall be appealed before incurring the possibly unnecessary expense of the second part. If we were to hold that the division of a final hearing into parts deprived the parties of an unfettered right of appeal, we should be placing an indirect fetter on the ability of the court to order split trials. I would therefore hold that, where there is a split trial or more accurately, in relation to a non-jury case, a split hearing, any party may appeal without leave against an order made at the end of one part if he could have appealed against such an order without leave if both parts had been heard together and the order had been made at the end of the complete hearing.
[Underlining added.]
III. The defendants’ arguments
[15] On their application for directions, the defendants argue that under the application approach adopted in Radke, leave to appeal the dismissal of their motion brought under Rule 19(24) is not required. The defendants submit that if the order they sought had been granted, the order would have finally determined the action, if sustained on appeal. In other words, the defendants contend that when the application below had, and the appeal has, the potential to finally dispose of the action, the order dismissing their application may be appealed without leave. To support their argument, the defendants have focused on paragraph 19 of Radke, in which the Chief Justice said:
[19] This approach to the issue of “final or interlocutory” has sometimes been called the “application approach”. Rather than look to the order “as made”, one looks to the application that gave rise to the order. On this approach, a final order is one made on such an application or proceeding that, no matter who succeeds, the order will, if sustained, finally determine the matter in litigation….
[16] The defendants argue that the meaning of the “application approach” is made clear by inserting into the second sentence of paragraph 19 the words in square brackets: On this approach, [an order for which leave is not required] is one made on such an application or proceeding that, no matter who succeeds [below], the order will, if [the appeal is] sustained, finally determine the matter in the litigation.
[17] The defendants submit that the analysis in Balla v. Fitch Research Corp. provides support for that interpretation. In Balla, each party had brought an application for directions as to whether their respective appeals required leave. Mr. Balla sought directions as to whether leave was required to appeal an order dismissing an application for a declaration that an assessment of damages set aside by this Court was revived by subsequent events. The principal defendant in the action, Alliance Semiconductor Corporation, sought directions as to whether leave was required to appeal an order declaring that the Supreme Court of British Columbia had jurisdiction over the action. Balla held that leave to appeal was not required in respect of either of the orders, based on what was referred to as a “reciprocal principle” in the rationale in Radke.
[18] Finally, the defendants point out that Robak Industries Ltd. v. Gardner and McIlvenna v. I.C.B.C. are the only cases since Radke to have considered whether leave is required when an application to strike has been brought under Rule 19(24). McIlvenna, decided very shortly after Robak, makes no reference to Robak. The defendants contend that Robak and McIlvenna are in conflict and that Robak, which is consistent with Radke, must govern the question of whether leave is required on an application brought under the same rule.
IV. Analysis
[19] With respect to the defendants’ arguments, I am of the view that paragraph 19 of Radke, particularly when read in context, does not support the defendants’ position that leave to appeal is not required in this case. It is also my respectful view that the reasoning in Balla does not accord with the application approach described in White v. Brunton and adopted in Radke. Finally, the analysis of Huddart J.A. in McIlvenna, in my opinion, is not at odds with the reasoning of the Chief Justice in either Radke or Robak and, in fact, the reasoning in McIlvenna provides support for the plaintiff’s position that leave to appeal is required in this case.
[20] In Radke, counsel agreed to have the liability issues determined in advance of the damage issues. In keeping with the application approach as stated in White v. Brunton, this Court held that the defendants had an appeal as of right after the liability issue had been determined in what amounted to the first leg of a split trial. The application approach requires that the issue determined in a split trial or on an application be a substantive issue in the action which would give rise to a right of appeal if determined after a full trial, regardless of which way the issue is determined.
[21] The liability issues counsel agreed to have determined in advance of the damage issues in Radke clearly could have been appealed as of right, whichever way those issues were decided, if the liability and damage issues had been tried and determined together after a full trial.
[22] In Balla, the plaintiff sought a declaration that an assessment of damages set aside by this Court was revived by subsequent events. The defendant, Alliance Semiconductor Corporation, sought a declaration that the Supreme Court of British Columbia did not have jurisdiction over the action. In holding that leave was not required to appeal the orders, Donald J.A. concluded that there was a reciprocal principle in the rationale in Radke and that “if the application could be answered with dispositive effect one way, thereby giving the unsuccessful party a right of appeal, then, if it is answered the other way, a right of appeal should also be available” (at para. 10). On the question of whether leave to appeal was required in relation to the dismissal of the defendant’s application, Donald J.A. held that “if Alliance’s challenge to the jurisdiction had succeeded, Balla’s action would have been over – a final effect given the right of appeal. It follows then that if the application goes the other way, as it did, a corresponding right of appeal arises” (at para.10).
[23] With great respect, I am of the view that Balla does not accord with the application approach as stated in White v. Brunton and adopted in Radke.
[24] In Radke, the Chief Justice explained at paragraph 19 that on the application approach “a final order is one made on such an application or proceeding that, no matter who succeeds, the order will, if sustained, finally determine the matter in litigation” (underlining added). In both White v. Brunton and Radke, reference is made to the decision of the Court of Appeal of England in Salaman v. Warner [1891] 1 QB 734. In that case, Lord Esher M.R. said the following in relation to a question of whether an order of the Divisional Court should be regarded as final or interlocutory, at 735:
… If their decision, whichever way it is given, will, if it stands, finally dispose of the matter in dispute, I think that for the purposes of these rules it is final. On the other hand, if their decision, if given in one way, will finally dispose of the matter in dispute, but, if given in the other, will allow an action to go on, then it is not final, but interlocutory….
[25] In Balla, Alliance’s application challenging the jurisdiction of the British Columbia Supreme Court was one that had the potential to be decided either way. If decided one way, the substantive issues in dispute could not be determined in this jurisdiction, but if decided the other way, the action could go on. Applying what was said by Lord Esher M.R. in Salaman v. Warner, the order resulting from Alliance’s application would be considered interlocutory.
[26] Whether an order ought to be regarded as “final” when a defendant succeeds in an application for a declaration that the Supreme Court of British Columbia has no jurisdiction to determine the lis between the parties is a question that may not be amenable to determination under the application approach but that question is not before me and it is unnecessary to express an opinion about it.
[27] In Robak, the defendants were successful in the court below on their applications to strike out, under Rule 19(24)(a), part of the plaintiff’s damage claims on the ground that those claims could only be brought by way of a derivative action. On the plaintiff’s motion for directions, the Chief Justice held that leave to appeal was not required. The issue which went forward on the application to strike in Robak was one which would have finally resolved an issue in dispute, whichever way it went. If the issue of whether the impugned part in the damage claims could be maintained had been decided along with the other issues in a full trial, rather than in advance, the order allowing or dismissing that part of the damage claim could have been appealed by the unsuccessful party as of right. In holding that leave was not required in Robak, the Chief Justice said, at para. 5:
I hold the view that leave to appeal is not required in this case because the decision of the learned chambers judge is effectively a final determination of those allegations that were struck out. Applying what was said in Radke, or to paraphrase it, the question to be asked is whether the issue decided if it had not been heard separately would have formed a substantive part of the final trial. Applying that language in these circumstances it seems evident to me that if the pleadings had not been amended by court order and the case had gone to trial as pled, and if the trial judge had dismissed the impugned claim for the same reason as the chambers judge or for another reason, that would have formed a part of the final judgment in the case and it would have formed a ground of appeal if the plaintiff was dissatisfied with the result.
[28] In my opinion, Robak does not provide support for the defendants’ contention that when an application is brought under Rule 19(24), leave to appeal the resulting order is not required. Whether an application brought under Rule 19(24) may result in an order which finally determines a substantive issue in the action, whichever way the issue is determined, will depend on the nature of and foundation for the application.
[29] In McIlvenna v. I.C.B.C., the defendant brought a motion under Rule 34 for a decision on a point of law and a motion under Rule 19(24)(a) for an order striking out the statement of claim as disclosing no reasonable claim. The chambers judge in the court below found that he could not decide the point of law without a trial and dismissed the application to strike all but one of the claims made. The issue on the application for directions was whether the defendant required “leave to appeal the chamber judge’s refusal to strike the entire statement of claim and to decide the point of law” (at para. 4). The arguments of the parties are set out in the reasons of Huddart J.A. at paragraph 5:
The applicant submits the issues it raised before the chambers judge would form a substantive part of a final trial, and further, that a successful application would have permitted it to appeal without leave, because the orders would have finally disposed of the litigation. The respondent disagrees, maintaining that only a totally successful application would dispose finally of the litigation and that no matter raised in the applications to the chambers judge would dispose finally of a substantive issue in the action.
[30] As to the application on the point of law and the application under Rule 19(24), Huddart J.A. said at paragraphs 9 and 10:
Whether a point of law can be decided on the pleadings is clearly not a decision on an issue that could have formed a substantive part of the final hearing or trial. Such a decision is comparable to the exercise of discretion on a motion for a separate trial of an issue. Both are pre-hearing procedural decisions that require leave to appeal because they are interlocutory in nature. Had the chambers judge reached a decision on the point of law, the result might be different: Mulherin v United Steelworkers of America, Local 7884, [1986] B.C.J. No. 119 (C.A., in Chambers) (QL).
The same can be said of the dismissal of the motion under Rule 19(24)(a) to strike the statement of claim as disclosing no reasonable claim. Had the chambers judge decided the respondent’s negligent misstatement claim could not succeed on the pleaded facts, he would have determined a substantive issue in the proceeding and his order would have been final. But the converse is not true. In Radke at para. 19, the Chief Justice explained that on the application approach, an order is final where, if sustained, it will finally determine a matter in litigation, “no matter who succeeds.” ….
[31] Contrary to the submissions of the defendants in this case, I see nothing in the foregoing analysis in McIlvenna that is not in accord with Radke.
[32] As noted at the outset, the chambers judge in the court below found that it was not plain and obvious that the plaintiff’s claim was either frivolous or vexatious or an abuse of the process of the court and dismissed the defendants’ application under Rule 19(24). The application brought by the defendants in this case is analogous to the applications brought by the defendant in McIlvenna.
[33] I direct that the defendants require leave to appeal the order dismissing their application brought under Rule 19(24).
“The Honourable Madam Justice Rowles”
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