In Ontario, a party that successfully obtains a judgment for the payment of money by a defendant is unable to collect payment if the defendant appeals that judgment. Once an appeal is launched from that judgment, the obligation of the defendant to pay the plaintiff is “stayed”, meaning that the judgment is not payable until after the appeal is completed. The stay rule makes sense because if an appeal succeeds then the amount payable under the judgment will no longer be payable.
However, the time and expense of litigating means that the stay rule can result in hardship for the party holding the judgment. The hardship is exacerbated by a backlogged court system where an appeal can cause considerable additional delay and expense for a party that already had to spend money and wait years to obtain a judgment. This creates unfair leverage for a defendant who is willing to make use of the appeal process and can then offer to settle by making immediate payment of a discounted amount.
In some limited circumstances, the court will ameliorate this unfairness by lifting the automatic stay, either completely or in part.
Robins Appleby lawyers David Taub and Samuel Mosonyi successfully argued a motion before the Ontario Court of Appeal and obtained an order partially lifting the stay with the result that $1.8 million of the judgment was immediately payable. The issue arose from a dispute over the valuation of a family company owned by two separated spouses. At issue in the trial was both the valuation of the company, as well as the parties' respective ownership interests in the company. The husband claimed that the wife owned 30% of the company while she claimed that she owned 50%. The husband relied on company records that he alone had controlled, while the wife relied on payment of dividends which had always been equal.
Ultimately, the wife succeeded in establishing that she owned 50% of the company. The Trial Judge also selected a value that was higher than the husband's claimed value, thus awarding the wife $5.4 million.
Notwithstanding that the husband conceded that he would at least be ordered to pay $1.8 million to the wife, he did not do so after the trial judgment was released. The husband appealed the decision arguing that the Trial Judge erred in finding that the wife owned 50% of the company and over-valued the company.
Mr. Taub and Mr. Mosonyi argued, on behalf of the wife, that it was improper for the husband to pay her nothing as his best case on appeal would still require him to pay at least $1.8 million for her shares. The husband opposed this position, arguing that the stay should remain in place under the usual rule.
A single judge of the Court of Appeal heard the motion and lifted the stay in the amount of $1.8 million in favour of the wife, after considering three factors that are commonly considered in cases where a party seeks to lift a stay:
- Financial hardship
- Ability to repay
- Merits of the appeal
This order was the largest amount for which a stay pending appeal has ever been lifted in Ontario. The husband appealed this decision to a 3-judge panel of the Court of Appeal. The review panel upheld the decision of the motion judge, but said that they would have decided for the wife at first instance simply because liability was not disputed and there was a minimum amount that the wife would receive on appeal, even if the husband was successful. Ultimately, common sense prevailed and a clear precedent now exists for parties in a position similar to the wife's.
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