Is estoppel valid in a foreclosure action?

In Hamada v. Northguard Mortgage Co., it was held that there may be special circumstances where it is not appropriate to strictly apply cause of action estoppel. In that case, the defendants had, in a previous action, obtained an order of foreclosure and judgment against the plaintiff on the basis of a mortgage executed by the defendant under a power of attorney. The plaintiff argued that the defendants had appropriated the proceeds of the mortgage for themselves when the defendants’ powers were limited to acting for the plaintiff’s benefit. This issue was not raised in the foreclosure action, though it could have been raised as a counterclaim. In the decision, Huddart, L.J.S.C (as she then was) found that the claim was not barred by the doctrine of res judicata.