Monday, July 25, 2016

Supreme Court Unwilling to Reject Canada Labour Code's Unjust Dismissal Scheme

The Supreme Court of Canada recently released its decision Wilson v. Atomic Energy of Canada Ltd. 2016 SCC29.  This case involved the question of whether an  federally regulated employer could terminate the employment of a non-unionized employee without just cause.


In this case, the appellant Joseph Wilson worked for Atomic Energy of Canada Ltd. (“AECL”) for 4½ years until he was dismissed in November of 2009.  He had a clean disciplinary record.  Wilson filed an unjust dismissal complaint under the Canada Labour Code (the “Code”) claiming that his dismissal was in reprisal for having filed a complaint of improper procurement practices on the part of AECL.  AECL said Wilson was terminated on a non-cause basis and was provided with a generous dismissal package.


A labour adjudicator was appointed to hear the complaint.  AECL sought a preliminary ruling on whether a dismissal without cause, together with a severance package, meant that the dismissal was just.  The adjudicator concluded that an employer could not resort to severance payments, no matter how generous, to avoid a determination under the Code about whether the dismissal was unjust.  Because AECL did not rely on any cause to fire him, Wilson’s complaint was allowed. 


On appeal to the Federal Court of Canada, a judge found that the adjudicator’s decision was unreasonable because in his view nothing in the Code prevented employers from dismissing non-unionized employees without cause.   The Federal Court of Appeal agreed but reviewed the issue on a standard of correctness. 


The appeal was heard by the Supreme Court of Canada.  In a 6 to 3 decision, the court held that the appeal should be allowed and that the adjudicator’s decision should be restored. 


The 6 judges of the majority wrote three separate reasons for their decision. 


Justice Abella wrote that at common law, a non-unionized employee could be dismissed without cause if he or she was given reasonable notice or pay in lieu of notice.  However, in 1978, Parliament added a series of provisions to Part III of the Code, i.e. an "unjust dismissal" scheme which consisted of protections like those available to employees covered by a collective agreement and which applied to non-unionized employees who had completed 12 consecutive months of continuous employment.  A dismissed employee could ask the employer for a written statement setting out the reasons for the dismissal.  The employer was required to provide the statement within 15 days.  If an adjudicator determined that the dismissal was unjust, he or she had broad authority to grant an appropriate remedy including requiring the employer to pay the person compensation or to reinstate the person. 


Both Wilson and AECL accepted that the standard of review of the adjudicator’s reasons was “reasonableness” because he was interpreting a statute within his expertise.  Applying that standard, Justice Abella found that the adjudicator’s decision was reasonable and consistent with the approach overwhelmingly applied to the unjust dismissal sections of the Code since they were enacted.  It made no sense, as the Federal Court of Appeal had done, to attempt to “calibrate” reasonableness by applying a potentially indeterminate number of varying degrees of deference within it.  Such an approach unduly complicated an area of law in need of greater simplicity.


Justice Abella then provided what she called "general comments" on the need for greater simplicity with respect to the standards of review of the decisions of administrative bodies.  However, Justices McLachlin, Karakatsanis, Wagner and Gascon, held that although Justice Abella’s efforts to stimulate a discussion on how to clarify or simplify the standard of review jurisprudence was appreciated, it was unnecessary to endorse any particular proposal to redraw the current standard of review framework at this time. 


In separate reasons, Justice Cromwell agreed that the standard of review in the case was reasonableness and that the adjudicator’s decision was reasonable but held that reasonableness is a single standard and must be assessed in the context of the particular type of decision making involving all relevant factors.  He held that the standard of review jurisprudence does not need yet another overhaul and he disagreed with the approach developed by Justice Abella in obiter


Justices Moldaver, Cote and Brown dissented.   They held in a dissenting opinion written by Justice Moldaver, that in the specific context of this case, a correctness review was justified.

The respondent's case was valiantly argued by my colleagues Ronald Snyder and Eugene Derenyi.




Thursday, June 2, 2016

English Court Issues Stand-Alone "Notifcation Injunction"

On April 29, 2016, in the case of Holyoake v. Candy [2016] EWHC 970 (Ch), the England and Wales High Court granted that country's first stand-alone “notification injunction”.  Such an injunction requires a defendant to give notice to the plaintiff or claimant before disposing of or dealing with particular assets.  Previously, notification orders were given as ancillary remedies to freezing orders or Mareva injunctions.  However, in this case, Justice Nugee  of the High Court was willing to grant a notification injunction without the usual combined order preventing the defendants from actually dealing with those assets.


The underlying facts related to a loan made by CPC, a company controlled by wealthy English property developers, Nick and Christian Candy, to Mr. Holyoake.  Holyoake alleged an unlawful means conspiracy against CPC and its directors and complained that as a result of being compelled to enter into further disadvantageous agreements, he ultimately repaid over
£37 million to CPC in respect of an initial loan of £12 million.


Following concerns that CPC might dissipate assets in order to make enforcement of an order difficult, Holyoake and other claimants applied for a notification injunction.  They did not seek a full freezing (Mareva) injunction on the basis that they were “seeking no more relief than they considered reasonably necessary to protect their position”.  They argued that if they were notified that the defendants were about to enter into a transaction, they could consider at that stage whether to apply for a freezing injunction or to take other protective steps.


The judge found that the court did have jurisdiction to grant a stand-alone notification injunction and that the test for such an injunction was the same as a freezing injunction, namely the claimant must show a good arguable case and a risk of dissipation of assets.  Justice Nugee found that there was a good arguable case and gave guidance on the meaning, stating that it was “a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have better than 50 per cent chance of success”. 

In respect of the risk of dissipation of assets, the judge ruled that a claimant must be able to show that there are objective factors from which risk can be inferred.  In this regard, the judge took into account that CPC had an unusually complex and particularly opaque offshore corporate structure.  He also referred to two unexplained high value transactions which could be innocent but, in the absence of an explanation could also be instances of dissipation.  One was a transfer of property from Christian Candy to his wife and the other was a purchase of a £26 million yacht by Nick Candy for his wife.  All in all, these transactions together with CPC’s corporate structure meant, objectively there was a risk of dissipation.  The court granted the notification injunction.


English commentators are unsure as to how these stand-alone notification injunctions will be used in the future.  However, in applying for such an injunction, it is clear that the claimant will have to give an undertaking in damages i.e. undertake to the court to compensate the defendant if it is later found that the claimant was not entitled to the relief granted.  In a freezing order, the consequences of a wrongly made order can be extremely wide-ranging and financially disastrous.  However, the scope for serious damages in result of a wrongly made notification injunction is dramatically less serious.  Accordingly, many suggest that in circumstances where claimants are unable to pursue a freezing order due to their inability to give a cross undertaking, they should be able to successfully apply for a notification injunction.

Take note.  These stand-alone notification injunctions may be coming soon to a courthouse near you.



Monday, May 9, 2016

SCC: World Bank Group has Immunity in SNC-Lavalin Corruption Trial

In a recent decision, the Supreme Court of Canada granted jurisdictional immunity to institutional members of the World Bank Group where Canadians had been charged under the Corruption of Foreign Public Officials Act (“CFPOA”) - see World Bank Group v. Wallace, 2016 SCC 15.


The court's decision was jointly written by Justices Moldaver and Cote.  The Supreme Court provided an introduction to its decision by stating that because corruption was a significant obstacle to international development,  worldwide cooperation was needed to fight corruption.  When international financial organizations, such as the World Bank Group, shared information gathered from informants across the world with the law enforcement agencies of its member states,  they achieved what neither could do on their own.  In consideration of this cooperation, member states often agreed to grant such international organizations immunities and privileges to preserve their independent operation. 


In this case, the World Bank Groups’ Integrity Vice Presidency (“INT”) investigated allegations that representatives of the Montreal based company SNC-Lavlin Inc. (“SNC-Lavlin”) were planning to bribe officials of the Government of Bangladesh to obtain a contract related to the construction of the Padma Multipurpose Bridge, a project valued at US$2.9 billion.  The World Bank Group shared some of the information from its investigation with the RCMP.  On the basis of this information and other information gathered by the RCMP, the Mounties obtained wiretap authorizations.  The RCMP charged, among others, former employees of SNC-Lavlin with offences under the CFPOA. 


The accused challenged the RCMP wiretap authorizations and applied for a third party production order to compel senior investigators of the World Bank Group to appear before a Canadian court to produce documents. 


Justice Nordheimer of the Ontario Superior Court of Justice granted the application.  The World Bank Group appealed that decision to the Supreme Court of Canada with leave.  The Supreme Court allowed the appeal on both issues which were argued before it.   


The World Bank Group is an international organization headquartered in Washington, D.C.  It is composed of five separate organizations.  Canada has ratified the Articles of Agreement and the conventions establishing the various member organizations of the World Bank Group. 


The World Bank Group provides loans, guarantees, credits and grants for development projects and programs in “developing” countries.  Of the US$2.9 billion cost for the Padma Bridge Project, the World Bank Group was to lend the Government of Bangladesh US1.2 billion.  SNC-Lavlin was one of several companies bidding for a contract to supervise the construction of the bridge.


The INT is responsible for investigating allegations of fraud, corruption and collusion, in relation to projects financed by the World Bank Group.  In 2010, the INT received the first of a series of emails suggesting that there was corruption in the process for awarding the project's supervision contract.  The tipsters alleged SNC-Lavlin employees were negotiating to pay a portion of the contract amount to Bangladeshi officials in exchange for favourable treatment.   


The INT contacted the RCMP and shared the tipsters’ emails, investigative reports and other documents with the RCMP.  The RCMP then sought a wiretap authorization to intercept private communications pursuant to the provisions of the Criminal Code.   The authorization was granted along with two further authorizations. 


As a result, several individuals were charged with offences under the CFPOA.  The World Bank Group cancelled its financing for the Padma Bridge Project and barred SNC-Lavlin from participating in World Bank Group-funded projects for 10 years. 


The accused sought to challenge the wiretap authorization and sought an order requiring production of certain INT records.  However, the Articles of Agreement provided that the two affected member organizations of the World Bank Group and their officers and employees would be immune from legal process with respect to acts performed by them in their official capacity. 


The two issues that were raised on the application were:


  1. Whether the World Bank Group could be subject to a production order issued by a Canadian court given the immunities accorded to its members; and


  1. If so, whether in the context of a challenge to the wiretap authorizations, the documents sought met the test for relevance.


At trial, Justice Nordheimer found that the World Bank Group had waived the immunities granted to it by participating in the RCMP investigation.  On the second issue, he concluded that the documents were likely relevant to issues that could arise on the production application and ordered that the documents be produced for review by the court.


The Supreme Court of Canada held that the Articles of Agreement provided the legal foundation for the World Bank Group's integrity regime and by extension the INT.  Accordingly, the immunities outlined in those Articles of Agreement shielded the documents and personnel of the INT.  The court held that that "immunity" should be given a broad interpretation.  It also held that any waiver of the immunity must be express, i.e. while personnel immunity can be waived, the object and purpose of the treaty favoured an express waiver requirement.


With respect to the issue of relevance of the documents sought to be produced, the Supreme Court held that Justice Nordheimer erred in that respect as well.  To obtain third party records in such an application, the accused must show a reasonable likelihood that the records will be of probative value to the narrow issues in play.  The “reasonable likelihood" threshold is appropriate to the context and fair to the accused.


In this case, although Justice Nordheimer correctly placed the burden on the accused, he did not properly assess the relevance of the documents being sought.  While the documents sought might be relevant to the ultimate truth of the investigation in the affidavits sworn by the RCMP, they were not reasonably likely to be of probative value to what the RCMP sergeant knew or ought to have known when he swore his information to obtain the wiretap authorization since he did not consult them.  





Tuesday, April 12, 2016

Court of Appeal: No Duty to Mitigate if Employment for Fixed Term

On April 8, 2016, the Ontario Court of Appeal affirmed that an employee whose employment is subject to a fixed term, is upon early termination of his employment, entitled to payment of an amount equal to his salary and benefits for the unexpired term of the contract, with no duty to mitigate.


In the case of Howard v. Benson Group Inc. 2016 ONCA 256 the Ontario Court of Appeal overturned the summary judgment decision of Justice Donald MacKenzie of the Superior Court of Justice.  Benson had employed Howard pursuant to the terms of a written employment agreement.  The agreement provided for a fixed five year term but also provided that Benson could terminate Howard’s employment at any time “in accordance with the terms and conditions of this agreement”.  Specifically, a paragraph of the agreement provided that upon termination, Howard would only be entitled to receive  amounts in accordance with the Employment Standards Act of Ontario. 


Accordingly, when Benson terminated Howard’s employment almost two years into the contract, it argued that its liability was limited to two weeks salary in lieu of notice.  The motion judge found that the clause was unenforceable due to ambiguity and awarded Benson common law damages for wrongful dismissal, subject to a duty to mitigate.


The Ontario Court of Appeal (Justices Cronk, Pepall and Miller) disagreed with the motion judge.  Justice Miller wrote the decision of the court.  Justice Miller held that the applicable standard of review in this case was one of correctness.  In other words, where the motion judge’s decision contained an "extricable question of law" it was reviewable on the correctness standard. 


Justice Miller held that where an employment agreement states unambiguously that the employment is for a fixed term it will oust the implied term of an agreement that reasonable notice must be given for termination without cause.  If the parties to such a fixed term contract do not specify a pre-determined notice period, the employee is entitled, on early termination, to the wages he would have received to the end of the term.  Justice Miller cited an Ontario Court of Appeal case called Bowes v. Goss Power Products Ltd. 2012 ONCA 425  for such authority. 


Because the impugned clause was void for uncertainty, Howard’s employment agreement unambiguously remained a fixed term contract. 


With respect to Howard’s duty to mitigate his damages, Justice Miller found that the leading case from the Ontario Court of Appeal was Bowes.  Bowes held that a contractually fixed term of notice is distinguishable from common law reasonable notice.  Where the agreement stipulates a fixed term of notice or payment in lieu, it should be treated as fixing liquidated damages or a contractual amount.  In such cases, there was no obligation on the employee to mitigate his damages.  Thus, the duty to mitigate does not apply to liquidated damages or contractual amounts.


The Court of Appeal allowed the appeal and remitted the matter to the motion judge for determination of the quantum of damages to which Howard was entitled.



Wednesday, March 23, 2016

Ontario Court of Appeal: No Right to Require Proof of a Will in Solemn Form

In a decision released March 8, 2016 – Neuberger v. York, 2016 ONCA 191 – the Ontario Court of Appeal rejected the argument that Ontario's  Rules of Civil Procedure (“Rules”) give a person the right to require that a will be proved "in solemn form" before it is subject to probate. 


Chaim and Sara Neuberger had two daughters – Edie and Myra.  Chaim's long-standing intention was to provide for his daughters equally on his death.  Chaim died on September 25, 2012 at age 86.  Sara predeceased him.  He left a real estate empire estimated to be worth over $100 million.  Edie and Myra survived him.  Each daughter has adult children.


Chaim executed primary and secondary wills in 2004 and again in 2010.  Both sets of wills left his estate to his two daughters and their children.  However, the sets of wills differed in one significant way which allegedly resulted in Myra’s share exceeding Edie’s share by approximately $13 million.  As a result of this unequal sharing, which was contrary to Chaim's stated intention, Edie and her son Adam commenced separate actions challenging the 2010 wills. 


Justice Susan Greer of the Ontario Superior Court of Justice dismissed the will challenges on a motion on the basis that they were barred by the equitable doctrines of estoppel by representation and estoppel by convention.  Justice Greer held that Edie was estopped from challenging the validity of the 2010 wills because she delayed in bringing her challenge and had no reasonable explanation for the delay.  Justice Greer also held that the actions that Edie had taken as estate trustee and the prejudice that would ensue from having to unwind the estate freeze and that the respondents would suffer as having taken steps on the basis of the 2010 wills. 


Justice Greer also held that Adam should not be allowed to challenge the 2010 wills because he had no independent knowledge of the estate, its assets, previous wills and pertinent information about the estate planning nor did he have a close relationship with his grandfather or a real explanation as to why he left it so late to come forward.


The Court of Appeal (Justices Gillese, van Rensburg and Miller) disagreed with the conclusion reached by Justice Greer and allowed the appeal.  The decision of the Court of Appeal was written by Justice Gillese.


Justice Gillese examined the nature of the court’s role and jurisdiction in probate cases.  She accepted Justice Maurice Cullity’s explanation that the court’s jurisdiction in probate is inquisitorial.  In other words, the court does not simply adjudicate upon a dispute between the parties.  The court’s function and obligation is to ascertain and pronounce what documents constitute the testator’s last will and that are entitled to be admitted to probate.


Justice Gillese then looked at rules 74 and 75 of the Rules.  She held that subrule 75.06(3) plays an important role in contentious estate proceedings.  The subrule provides:  “any person who appears to have a financial interest in an estate may apply for directions, or move for directions in another proceeding under this rule, as to the procedure for bringing any matter before the court.” 


In addition, rule 75.01 provides:  “…any person appearing to have a financial interest in an estate may make an application under rule 75.06 to have a testamentary instrument that is being put forward as the last will of the deceased proved in such manner as the court directs.” 


Justice Gillese did not accept the proposition that as a general principle an interested person is entitled, as of right, to require that a will be proved in solemn form.  Rather the rule provides such a person the ability to make an application to have the will “proved in such manner as the court directs”.   The two rules read together provide that a court has discretion whether to order that a will be proved, as well as discretion over the manner in which the will is proved. 


In the Justice Gillese's  view, an “interested person” must meet some minimal evidentiary threshold before a court will accede to a request that a will be proved.  Otherwise, estates would be exposed to needless expense and litigation. She held that the correct approach was that the applicant must adduce "some evidence" which, if accepted, would call into question the validity of the will or testamentary instrument that was being propounded.


Justice Gillese accepted that some decisions have indicated that next of kin are entitled as of right to have the will proved in solemn form.  However, such cases are reflective of a presumption that applies in situations where no certificate of appointment of estate trustee has been issued, rather than a hard and fast rule. 


The Court of Appeal also rejected Justice Greer's reasoning dealing with the equitable doctrines of estoppel by representation and estoppel by convention.  Justice Greer had relied on three cases as authority for the power to invoke estoppel to bar the will challenge.  However, Justice Gillese held that one of the cases did not offer any authority or support for the notion that the doctrines applied to probate matters.  She found that there is nothing in the jurisprudence to support the extension of the equitable doctrines of estoppel by convention or representation to matters involving validity of a will.   



Friday, March 11, 2016

Court of Appeal Rejects Lawyer's Application to Set Aside Fraudulent Misrepresentation Finding

In a recent decision - Meridian Credit Union Limited v. Ahmed Baig, 2016 ONCA 150  - the Ontario Court of Appeal affirmed a motion judge’s decision to grant summary judgment against the party who had made the motion despite the fact that the responding party had not made a cross-motion for judgment.  The court also upheld a finding by the motion judge that the defendant  was personally liable for fraudulent misrepresentation; failed to disturb the motion judge’s finding that the defendant could be held vicariously liable for his lawyer’s fraudulent misrepresentation; and refused leave of the lawyer, and his law firm, to introduce fresh evidence on appeal .  The court dismissed the lawyers' argument that they had a right to be heard and refused to set aside the findings of fraudulent misrepresentation the motion judge had made against them.


In this case, Meridian Credit Union Limited (“Meridian”) was a creditor in a court-appointed receivership.  The defendant, Ahmed Baig (“Baig”), agreed to purchase a building located on Bay Street in Toronto from the receiver for $6.2 million.  Unknown to the receiver and prior to closing, Baig agreed to resell the property to Yellowstone Property Consultants Corp. (“Yellowstone”) for $9 million.   The receiver claimed that had it known of this resale transaction, it would not have recommended that the court approve the sale to Baig.


Meridian subsequently discovered the resale transaction.  It had not recovered the full amount owing to it in the receivership.  The receiver assigned its cause of action against Baig to Meridian and Meridian then commenced an action against Baig for breach of contract and fraudulent misrepresentation.


The receiver had agreed to sell the property to Baig in trust for a corporation to be incorporated.  Before that transaction closed, Baig agreed to resell the property to Yellowstone.  Baig did not tell the receiver about the second agreement with Yellowstone.


Baig then retained the law firm of Miller Thomson to assist him with the transaction.  Peter Kiborn, who practiced law at Miller Thomson, acted for Baig in structuring the transaction.  Both Baig and Kiborn wanted to prevent the receiver from discovering the sale to Yellowstone because they believed that the $2.8 million difference in price would jeopardize court approval.  As a result, Kiborn informed the receiver that title was to be directed to Yellowstone on closing.   The receiver assumed that Yellowstone was Baig’s corporation incorporated for the purpose of the agreement.  Neither Baig or Kiborn,  or anyone else at Miller Thomson,  ever corrected that misunderstanding. 


At the summary judgment motion before Justice Frederick Myers of the Superior Court of Justice, Baig brought a motion for summary judgment dismissing Meridian’s claim.  Justice Myers dismissed that motion.  Instead he found Baig liable for fraudulent misrepresentation.  The Court of Appeal found that Justice Myers did not err by granting summary judgment against Baig.  Baig’s lawyers had submitted that all of the relevant evidence was before the court and had explicitly invited Justice Myers to render a decision in favour of either party.  Two recent decisions from the Court of Appeal make it clear that it is permissible for a motion judge to grant judgment in favour of the responding party even in the absence of a cross-motion for such relief. 


Justice Myers found Baig liable for two reasons.  He concluded Baig was liable for misrepresentations made by Miller Thomson – the documents delivered as part of the closing contained untrue statements.  Kiborn knew that these statements were false and he intended for the receiver to rely on them.  On the motion, Justice Myers noted a concession made by Baig’s lawyer, that Baig could be held liable for tortious misrepresentations made by his lawyers Miller Thomson.


Second, Justice Myers found Baig liable for his own personal conduct.  He held that Baig’s failure to correct the misimpression that Yellowstone was a corporation created by Baig amounted to a fraudulent misrepresentation.


Baig subsequently commenced an action against both Kiborn and Miller Thomson, claiming among other things, contribution and indemnity.  Miller Thomson and Kiborn obtained leave to intervene on the appeal.  In addition, they sought leave to introduce fresh evidence on the appeal.  The interveners sought to set aside the finding of Justice Myers that they had made fraudulent misrepresentations on the grounds that the motion judge breached the rules of natural justice and procedural fairness by making findings about them in their absence. 


The appeal was heard before Justices LaForme, Strathy and Huscroft.  The court’s decision was written by Justice LaForme.


The Court of Appeal dismissed Baig’s appeal and denied the interveners’ application for the following reasons.  The Court of Appeal reviewed the recent Supreme Court of Canada decision in Hyrniak v. Mauldin concerning proving civil fraud and noted that the record disclosed that Baig had engaged in actions that amounted to misrepresentation.  Both he and his counsel had actively concealed the agreement to sell to Yellowstone and had fraudulently misrepresented that Yellowstone was the corporation incorporated to close the sale with the receiver.  In certain circumstances, silence and half-truths can amount to a misrepresentation. 


At the appeal, Baig’s counsel attempted to withdraw his concession at the motion that Baig would be liable for any tortious misrepresentation made by his lawyers.  Justice LaForme found that it was inappropriate for Baig to withdraw such concession and argue for the first time on appeal that there was no basis for him to be held liable because he was protected by the corporate veil.  In any case, Justice LaForme found that Baig had made the fraudulent misrepresentations in his personal capacity.  Because that finding was upheld, Justice LaForme found it was not necessary to address whether Baig would be liable for his lawyers’ actions.


With respect to the interveners’ arguments, Justice LaForme denied their application to introduce fresh evidence on the appeal.  He held that the fresh evidence about why they did not intervene in the summary judgment motion was irrelevant to the issues raised and could not have affected the results of the motion. 


Justice LaForme also rejected the interveners’ argument that they had a right to be heard because Justice Myers had made adverse findings against them.  To the contrary, he held that they did not have a right to be heard or to receive notice.  As non-parties to the action, Miller Thomson and Kiborn were not directly impacted by the summary judgment order.  They were not bound by Justice Myers’ finding that they made fraudulent misrepresentations.  They were free to defend their reputations and argue in the action made against them by Baig that they never made fraudulent misrepresentations. 


Their main complaint was that Justice Myers’ publicly available reasons could damage their reputations.  Justice LaForme found that the authorities did not support the right in a civil action to notice of a non-party witness or to adduce evidence and make submissions whenever an adverse finding may be made.  Such procedural entitlements would impose too great a burden on the courts and threaten the finality of decisions.   Justice LaForme held that non-parties are limited to whatever procedural rights they have under the rules. 


Justice LaForme held that Miller Thomson and Kiborn were fully aware of the action and its potential impact on the claim against them.  In spite of this, they chose not to intervene, adopting a wait and see approach.  Now that a finding had been made with which they took issue, they believed that the finding should be set aside.  He held that non-parties should not be able to lurk in the shadows and then spring up to challenge a decision whenever the outcome or findings of fact may affect them in some manner they do not like.  



Friday, March 4, 2016

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.