Livent Inc., Through its Special Receiver and Manager Doroniuk v. Deloitte & Touche et al.

[Indexed as: Livent Inc. (Receiver of) v. Deloitte & Touche]

Ontario Reports

Court of Appeal for Ontario,

Strathy C.J.O. (in Chambers)

May 24, 2016

131 O.R. (3d) 784 | 2016 ONCA 395

Case Summary

Appeal — Stay pending appeal — Court of Appeal dismissing defendants' appeal from judgment for plaintiffs — Defendants applying for leave to appeal to Supreme Court of Canada — Stay of judgment pending determination of that application being granted — Proposed appeal raising serious and important issues of duty of care owed by auditor of public company and applicable standard of care — Defendants suffering irreparable harm if stay not granted — Balance of convenience favouring defendants as they offered acceptable security for judgment. [page785]

The defendants had applied for leave to appeal to the Supreme Court of Canada from an order of the Court of Appeal dismissing their appeal from a judgment for the plaintiff. The defendants brought a motion to stay the judgment and the order pending the determination of that application.

Held, the motion should be granted.

The issues raised in the proposed appeal -- the duty of care owed by an auditor of a public company and the applicable standard of care -- were serious issues of public importance. Permitting the plaintiff to immediately enforce its judgment would be sufficiently disruptive of the defendants' business to amount to irreparable harm. The balance of convenience favoured the defendants as they had offered acceptable security for the judgment.

RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, [1994] S.C.J. No. 17, 111 D.L.R. (4th) 385, 164 N.R. 1, J.E. 94-423, 60 Q.A.C. 241, 54 C.P.R. (3d) 114, REJB 1994-28671, 46 A.C.W.S. (3d) 40, apld

Other cases referred to

BTR Global Opportunity Trading Ltd. v. RBC Dexia Investor Services Trust, [2011] O.J. No. 4279, 2011 ONCA 620, 283 O.A.C. 321, 206 A.C.W.S. (3d) 252; Circuit World Corp. v. Lesperance (1997), 1997 1385 (ON CA), 33 O.R. (3d) 674, [1997] O.J. No. 2081, 100 O.A.C. 221, 71 A.C.W.S. (3d) 900 (C.A., Chambers); Livent Inc. (Special Receiver and Manager of) v. Deloitte & Touche (2016), 128 O.R. (3d) 225, [2016] O.J. No. 51, 2016 ONCA 11, 31 C.B.R. (6th) 205, 24 C.C.L.T. (4th) 177, 393 D.L.R. (4th) 1, 342 O.A.C. 201, 262 A.C.W.S. (3d) 54, affg [2014] O.J. No. 1635, 2014 ONSC 2176, 11 C.B.R. (6th) 12, 10 C.C.L.T. (4th) 182, 26 B.L.R. (5th) 15, 242 A.C.W.S. (3d) 964 (S.C.J.); Longley v. Canada (Attorney General), [2007] O.J. No. 929, 2007 ONCA 149, 223 O.A.C. 102, 153 C.R.R. (2d) 224, 156 A.C.W.S. (3d) 280; Yaiguaje v. Chevron Corp., [2014] O.J. No. 194, 2014 ONCA 40, 315 O.A.C. 109, 62 C.P.C. (7th) 368, 236 A.C.W.S. (3d) 809

Statutes referred to

Supreme Court Act, R.S.C. 1985, c. S-26, ss. 40(1), 65.1 [as am.]

Authorities referred to

Sharpe, Robert J., Injunctions and Specific Performance, looseleaf ed. (Toronto: Canada Law Book)

MOTION to stay a judgment pending a determination of an application for leave to appeal.

Alan J. Lenczner and Matthew Fleming, for appellants.

Peter Howard and Aaron Kreaden, for respondent.

Endorsement

[1] Endorsement of STRATHY C.J.O. (in Chambers): — On March 17, 2016, I granted a stay, on terms, of the judgment of the Superior Court of Justice dated April 4, 2014 [Livent Inc. (Special Receiver and Manager of) v. Deloitte & Touche, [2014] O.J. No. 1635, 2014 ONSC 2176 (S.C.J.)] and of this court's order dated January 8, 2016 [(2016), 2016 ONCA 11, 128 O.R. (3d) 225, [2016] O.J. No. 51 (C.A.)], pursuant to s. 65.1 of the Supreme Court Act, R.S.C. 1985, c. S-26, pending determination of the appellants' [page786] application for leave to appeal to the Supreme Court of Canada. I advised the parties my reasons would follow. These are my reasons.

[2] The trial judge found the appellants liable for damages of $84,750,000, prejudgment interest of $33,285,770.55 and costs in an amount agreed on by the parties.

[3] This court dismissed the appellants' appeal on January 8, 2016. The appellants have filed an application for leave to appeal to the Supreme Court of Canada.

[4] This court discussed considerations on this kind of motion in Yaiguaje v. Chevron Corp., [2014] O.J. No. 194, 2014 ONCA 40. They are those set out in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, [1994] S.C.J. No. 17, at p. 334 S.C.R.: (1) whether there is a serious question to be determined on the proposed appeal; (2) whether the moving party will suffer irreparable harm if the stay is not granted; and (3) whether the balance of convenience favours a stay.

[5] It has been held that these factors are not to be treated as watertight compartments and the strength of one may compensate for weaknesses of another. The overarching consideration is whether the interests of justice call for a stay. In BTR Global Opportunity Trading Ltd. v. RBC Dexia Investor Services Trust, [2011] O.J. No. 4279, 2011 ONCA 620, Laskin J.A. described the test as follows, at para. 16:

The moving party . . . must show that it has raised a serious issue to be adjudicated, that it will suffer irreparable harm if a stay is not granted, and that the balance of convenience favours a stay. These three components of the test are interrelated in the sense that the overriding question is whether the moving party has shown that it is in the interests of justice to grant a stay.

See, also, Longley v. Canada (Attorney General), [2007] O.J. No. 929, 2007 ONCA 149, at paras. 14-15.

[6] I turn to these factors.

(1) Serious Question to be Determined

[7] As MacPherson J.A. explained in Yaiguaje, the "serious question" factor is modified in the context of stays pending appeal to the Supreme Court of Canada to require not simply an assessment of the merits of the proposed appeal, but also whether it raises an issue of public or national importance and thus meets the stringent requirements of s. 40(1) of the Supreme Court Act.

[8] Generally, this factor has been described as a "low threshold": see Circuit World Corp. v. Lesperance (1997), 1997 1385 (ON CA), 33 O.R. (3d) 674, [1997] O.J. No. 2081 (C.A., Chambers). [page787]

[9] In my view, the proposed appeal gets over the low threshold, even when the burden under s. 40(1) of the Supreme Court Act is taken into account. The duty of care owed by an auditor of a public company and the applicable standard of care can reasonably be considered issues of public importance. The appellants are able to present a serious argument for leave.

(2) Irreparable Harm

[10] The irreparable harm requirement refers to "harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other": RJR-Macdonald, at p. 341 S.C.R.; Fontaine, at para. 36. In Robert J. Sharpe, Injunctions and Specific Performance, looseleaf ed. (Toronto: Canada Law Book), it is stated, at para. 2.411, that "[i]t has been held that the courts should avoid taking a narrow view of irreparable harm."

[11] In this case, as in Yaiguaje, the evidence of irreparable harm is weak. Nevertheless, I am satisfied that permitting the respondent to immediately enforce its judgment, while the leave application is pending, would be sufficiently disruptive of the appellants' business to amount to irreparable harm. While it is weak, it is sufficient to require an assessment of the balance of convenience.

(3) Balance of Convenience

[12] The balance of convenience is just that -- a balancing of which party will suffer the greater harm from the stay being granted or refused. In this case, in my view, it goes in particular to the question of whether the interests of justice make up for the weakness of the irreparable harm factor.

[13] The respondent recognizes that, short of paying the judgment, the provision of acceptable security for the judgment would eliminate or substantially mitigate the risk of harm and tip the balance of convenience in favour of a stay. For this reason, the debate before me centred on the nature of security to be provided.

[14] In my view, the security ultimately offered by the appellants was reasonable and provides the respondent with satisfactory assurance that the judgment will be promptly paid in full if the application for leave fails.

[15] The appellants' liability insurance covers the full amount of the judgment. The appellants have purchased a currency hedge contract to cover any fluctuation in the value of the Canadian dollar (in which the judgment is expressed) against the U.S. dollar (in which the insurance is expressed). The appellants' [page788] insurers have undertaken to indemnify the appellants for the amounts payable to the respondent within 30 days of the dismissal of the leave application. The appellants have given a direction to the insurers to pay the funds directly to the respondent. I have added a term that this direction be irrevocable. There is evidence that there are no other outstanding claims under the applicable policies. With one exception, the insurance is with well-known institutional insurers. The exception is the appellants' captive liability insurer, which has given reasonable evidence of its solvency and of its statutory surplus. There is no reason to believe that the solvency of any insurer is at issue. I have made provision that the respondents may apply to the court to vary or discharge the stay in the event of a material change in circumstances, which would include a change in the solvency of any insurer. As a backstop to the insurance, in the unlikely event it is required, the appellants have provided financial evidence of their solvency.

[16] Counsel for the appellants acknowledged that the court retains jurisdiction over them for the purpose of enforcing compliance with the insurers' undertakings. Coupled with the evidence of the appellants' own financial position, this gives the respondent all the protection it can reasonably require pending the disposition of the leave application.

[17] For these reasons, it is my view that there is no reasonable likelihood that the claim will not be immediately paid in full by the insurers if leave is not granted. As in Yaiguaje, it can be anticipated that the Supreme Court of Canada will deal with the leave application in a timely manner, likely this fall.

[18] In the circumstances, the balance of convenience clearly favours the appellants.

[19] The motion is therefore granted and the judgment of the Superior Court of Justice dated April 4, 2014 and order of this court dated January 8, 2016 are stayed, on the terms set forth herein, pending the determination of the application for leave to appeal to the Supreme Court of Canada.

[20] Counsel are to provide a draft order incorporating these terms as well as a form of sealing order with respect to the confidential financial information filed on the motion. In my view, this is not an appropriate case for costs, but the parties may file written submissions if costs are sought.

Motion granted.

[page789]

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