Precedent Overruled -- Can Issue Estoppel Be Reconsidered? Maybe

What happens if an issue is decided between parties in ongoing litigation and the precedent upon which the decision is based is overturned?

This interesting issue was considered in Smith Estate v. National Money Mart Company, 2008 CanLII 27479 (ON S.C.)
where the Court concluded that revisiting the decided point might be possible; issue estoppel might not apply depending on fairness. In other words issue estoppel MAY not apply if the initial decision is based on an overruled precedent.

The Court writes:

[175] The longer answer involves assuming Money Mart is correct and that Dell Computer and Rogers Wireless changed the law. In Canada (A.G.) v. Hislop, 2007 SCC 10 (CanLII), [2007] 1 S.C.R. 429, the Supreme Court of Canada stated that its decisions operate retroactively and not just prospectively. On this assumption, by application of the changed law declared by the Supreme Court, Money Mart would be entitled to a stay and a referral of this action to arbitration. It is in these circumstances that the exception to issue estoppel recognized in Hockin v. Bank of British Columbia would apply.

[176] In Hockin v. Bank of British Columbia, in an action brought by employees against their employer, the Bank of British Columbia, it was alleged that the Bank had no claim to funds it had removed from its employees` pension plan. Justice Spencer held that the Bank had the right to remove the funds. Justice Spencer`s judgment was affirmed by the British Columbia Court of Appeal. The matter proceeded to trial before Justice Paris and relying on the Court of Appeal`s decision as raising an issue estoppel, he dismissed the employees` action. The employees appealed, and during the hearing of their appeal, the Supreme Court of Canada released its judgment in Schmidt v. Air Products of Canada Ltd., 1994 CanLII 104 (S.C.C.), [1994] 2 S.C.R. 611, which overturned Justice Spencer's judgment as a precedent. In these circumstances, the British Columbia Court of Appeal ruled that as a matter of fairness, there should be no issue estoppel based on the now overruled precedent. The court stated in paragraph 35 of its judgment:

35. The injustice to the appellants [the employees] is obvious. If they were denied a hearing on the merits, they would be told by the courts that, even though their case is before the Court of Appeal, and even though the Supreme Court of Canada has said the very issue in this case was wrongly decided by the court in 1990, and the law now is that on the wording of this plan the employees are entitled to any surplus in the fund, they will nevertheless be denied this result because of a principle of law that has as one of its cornerstones the interests of justice.

[177] For present purposes, the court's last comment is the most important. The doctrine of issue estoppel is meant to do justice and is not meant to be an instrument for injustice. The court has the discretion to employ or not employ the doctrine of issue estoppel in the interests of justice. The application of an issue estoppel and the application of the exceptions to an issue estoppel are matters of the court's discretion.

James Morton
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