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Court Lifts Automatic Stay Pending Appeal in the "Interests of Justice"

In Ontario, the delivery of a notice of appeal automatically stays any order, final or interlocutory, for payment of money, other than a support order or a support enforcement order – rule 63.01(1) of the Rules of Civil Procedure (Rules).  Judgment debtors knowing that an appeal may have little or no merit, will often deliver a notice of appeal as a matter of course in order to buy themselves more time to delay or frustrate the ability of a judgment creditor to enforce the judgment.

The Rules also provide that:  “A judge of the court to which the appeal is taken may order, on such terms as are just, that the stay provided by subrule (1) does not apply’ – rule 63.01(5). 

In the case of Antunes v. Limen Structures Ltd. 2016 ONCA 61, Justice Lauwers of the Ontario Court of Appeal, made an order pursuant to rule 63.01(5), lifting the automatic stay in respect of an award of wrongful dismissal damages, prejudgment interest and costs.  He reserved the costs of the motion to the panel who would hear the appeal.

Antunes successfully sued Limen Structures for wrongful dismissal.  Justice C. Brown rendered judgment on June 2, 2015 awarding Antunes damages for wrongful dismissal in the amount of $105,000 plus prejudgment interest and costs.  Justice Brown also found that Antunes was entitled under his employment contract to 5% of Limen Structures’ shares and awarded “other damages” in the amount of $500,000 representing the value of the shares. 

Limen Structures filed a notice of appeal in respect of the award of damages for $500,000 but did not appeal the award of wrongful dismissal damages, prejudgment interest or costs.  However, the effect of the notice of appeal was an automatic stay of the entire judgment pending appeal pursuant to rule 63.01(1).

Antunes brought a motion to lift the automatic stay in respect of the wrongful dismissal damages, prejudgment interest and costs since those were not appealed.  In response, Limen Structures filed a supplementary notice of appeal appealing from those amounts.  The supplementary notice of appeal would have been out of time if it had been the original notice of appeal, but the Rules entitle an appellant to amend a notice of appeal without leave before the appeal is perfected.

 

On the motion before Justice Lauwers, Antunes argued that the financial condition of Limen Structures had deteriorated and continued to deteriorate.  He submitted that by the time the appeal was argued the company would be insolvent and its assets dissipated.  In fact, Limen Structures’ lawyer had stated to Antunes’ lawyer on many occasions that the company did not have the financial ability to pay the judgment.  In addition, Limen Structures’ financial statements showed an operating loss in excess of $5 million and an accumulated deficit of $2.9 million with secured loans to related parties of greater than $3.4 million. 

Finally, Antunes doubted the honesty of Limen Structures.  Based on the trial judge’s reasons, she was also satisfied that at the time of entering into the contract and at the time of terminating the employment of Antunes, the company had failed to act honestly in its contractual performance.

Justice Lauwers reviewed the test for lifting the stay.  He accepted that the stay of execution imposed by rule 63.01 was intended to offer some protection to an appellant against payments which it might not eventually be obliged to make.  The test for lifting the stay requires the court to consider a number of factors including the grounds of appeal, the parties’ position at trial, what has happened since the trial, the general circumstances of the case including the trial judge’s reasons, the probable delay between trial and appeal that cannot be controlled by the parties. 

The Court of Appeal in a previous case (SA Horeca Financial Services v. Light 2014 ONCA 811) stated:  “In considering whether to lift a stay the court should have regard to three principal factors:  (1)  financial hardship to the respondent if the stay is not lifted; (2)  ability of the respondent to repay or provide security for the amount paid; and (3)  the merits of the appeal.” 

In applying that test to this case, Justice Lauwers observed that at trial, Antunes testified and was found by the trial judge to be credible.  By contrast, Limen Structures had called no evidence at trial.  The trial judge was critical of the company’s failure to call its President with whom Antunes had negotiated the employment contract. 

On the issue of hardship, Antunes had been unable to find employment for almost a year and a half from the date of termination.  That employment was short-lived and since he had only found short-term consulting work.  As a result, he was unable to repay or provide security for the amount of the wrongful dismissal damages.  His lawyer offered to offered to hold the money in his trust account pending the outcome of the appeal. 

At all times, Limen Structures had asserted its inability to pay.  Justice Lauwers accepted that businesses can find themselves in financial difficulties for many reasons having nothing to do with the wrongful dismissal claim of a former employee.  But he took into account the “scorched earth” trial and appeal tactics taken by the company. 

In respect of the merits of the wrongful dismissal appeal, Justice Lauwers found that the company’s challenge was not one of law but of the weight that the trial judge had accorded to the factors which determined the length of the period of reasonable notice.  To succeed on that ground, the company would be required to demonstrate that the trial judge had made a palpable and overriding error. 

In conclusion, Justice Lauwers held that the merits of the wrongful dismissal appeal were weak, as was implicitly acknowledged by the company’s late amending of its notice of appeal to add the wrongful dismissal appeal in response to the motion.  Antunes had demonstrated financial hardship.  

Despite the fact that Antunes would be unable to repay any amounts if required, Justice Lauwers found that “the interests of justice” favoured the exercise of his discretion in favour of Antunes.  He did not require Antunes’ lawyer to hold any amount in trust.  Justice Lauwers ordered the stay in respect of the award of wrongful dismissal damages, prejudgment interest and costs lifted.

Regards,
 
Blair