Court File and Parties

COURT FILE NO.: 438/08 08-CV-7658-00CL

DATE: 2008-10-03

SUPERIOR COURT OF JUSTICE - ONTARIO (DIVISIONAL COURT)

RE: BPHL HOLDINGS INC. (APPLICANT) v. 2058756 ONTARIO LIMITED, MALIK S. KHALID and MALIK S. KHALID, as trustee for M.S. KHALID FAMILY TRUST and CENTRAL DIAGNOSTIC INC., (RESPONDENTS)

BEFORE: Justice D. Aston

COUNSEL: Jack Berkow/Antonio Dimilta, for the Applicant J. Lancaster, for the Respondents

HEARD AT TORONTO: October 1, 2008

ENDORSEMENT

Aston J.

[1] The appellant, Malik Khalid, on his own behalf, as trustee for M.S. Khalid Family Trust, and on behalf of Central Diagnostics Inc. has appealed to the Divisional Court from the order of Lederman J, dated August 8, 2008. The respondent 2058756 Ontario Limited holds title to two properties as a bare trustee for the appellants and the applicant BPHL Holdings Inc. ("BPHL"). The application brought under the Ontario Business Corporations Act ("OBCA") was to wind up the numbered corporation and compel the sale of the two parcels of property as part of that process. The application claimed alternative relief under the Partition Act.

[2] This motion is for a stay of the Order under appeal pending the disposition of that Appeal.

[3] The application was first before the applications judge on August 6, 2008. No one attended on behalf of the respondents and the matter was adjourned to the following day. On August 7, 2008, once again no one attended on behalf of the respondents. The applications judge then directed the respondents to appear at 9:30 a.m. the following day "to advise as to whether responding material is to be filed or on the terms of the proposed draft Order (Schedule A). Otherwise Order will issue on August 8". On August 8, 2008, a solicitor appeared on behalf of the respondents to request an adjournment. The applications judge adjourned the application sine die but also ordered the listing for sale of the two properties in Kingston and Brockville, reserving to the parties the right to return to court concerning any actual Offer to Purchase, any dispute about the listing or in relation to the distribution of net proceeds of sale. The appellants submit that the Order requiring the properties to be listed for sale must be a final Order because it deprives the appellants of the ability to challenge whether the property is to be sold and limits them to issues over the terms of sale and distribution of sale proceeds.

[4] The test for granting a stay pending appeal engages three considerations:

(i) does the appeal raise serious issues;

(ii) will the moving party suffer irreparable harm if it is compelled to comply with, or be subject to, the Order before its rights can be determined on the appeal; and

(iii) does the balance of convenience favour granting the relief sought when weighed against harm or prejudice to the other side.

These criteria are not considered as three separate hurdles but are considered together in determining whether the interests of justice call for a stay. A weakness on one factor or criteria may be compensated for by the strength of some other factor.

[5] The question of a serious issue involves a preliminary examination of the merits of the moving party's appeal. The threshold is low and the court at this stage does not engage in any extensive view of the merits so long as the court is satisfied that the issues raised on appeal are not frivolous or vexatious.

[6] In this case, the grounds for appeal are:

(i) the refusal to grant an adjournment of all issues when there was no demonstrable urgency and the respondent had good reason to need more time, having only been served less than two weeks before the first return date;

(ii) ordering the two parcels of land sold without first making any finding under s.207 or 248 of the OBCA. (The appellant maintains that the part of the Order requiring the sale of the properties is a final Order which could only be made ancillary to a finding that the applicant was entitled to relief under the OBCA, a finding that was not made. Furthermore, the Order could not be an interim or interlocutory Order because no such relief was sought in the Notice of Application.)

(iii) the failure of the applications judge to give any reasons, either for the adjournment request or for the Order which he granted; and

(iv) that some of the material evidence before the applications judge was inadmissable and the evidentiary record was incomplete.

[7] In response, BPHL Holdings Inc. submits that the applications judge did not make a final Order but rather exercised his broad latitude to grant an adjournment on terms, which included the listing of the two properties for sale. BPHL points to the wide discretion of a judge generally with respect to adjournment requests but also to the specific Practice Direction for the commercial list in Toronto. Furthermore, it is apparent "reading between the lines" of the short serial adjournments, August 6th and 7th, that the applications judge found some urgency in the relief sought. BPHL submits there is no onus on a judge to give reasons if there is no conflicting evidence and therefore no need to express factual findings.

[8] It is not necessary for me to determine whether the Order was a final Order or an interlocutory Order nor to consider whether the applications judge derived jurisdiction from the Partition Act and not merely the OBCA. I find there are in fact serious issues to be decided on the Appeal and the Appeal is not frivolous or vexatious.

[9] On the consideration of irreparable harm, the appellant submits that the apparently meritorious appeal will become moot if the stay is not granted. The appellant has perfected the appeal and undertakes to consent to any Order that would expedite the hearing of the Appeal. The properties may well be sold by the time any Appeal is heard and it will be too late to recover them. The appellant also submits that this is the wrong time to be selling these particular properties and he alludes to other "irreparable harm" he may sustain in paragraphs 13 to 19 of his affidavit in support of this motion. BPHL submits that there is no irreparable harm because this is simply a dispute over money between parties to a commercial agreement. It submits there is no harm that cannot be compensated by damages. Furthermore, it submits there is no irreparable harm because Khalid has the opportunity to purchase either property himself should he wish to do so.

[10] BPHL further submits that the balance of convenience aspect of the test fails because of the possible harm or prejudice to BPHL. There is some evidence that the Order was made because of a risk a third party, Taggart, would exercise its own right to force a sale of one of the properties by public tender at a (likely) lower price. Taggart had signed a forbearance agreement on the strength of the promise or probability that the property would be listed for sale. There were substantial arrears of municipal taxes and utilities to the extent that the utilities were in danger of being cut off. BPHL also submits that the ability of the parties to come back to court concerning any dispute over the listing, any offer that is received, or any distribution of the sale proceeds means the rights of the parties are protected and that there is no balance of convenience in favour of the stay.

[11] I do not find the grounds for appeal compelling. I am dubious the appellants will suffer irreparable harm. I do not find the balance of convenience favours the appellants particularly. On an overall consideration of the three aspects of the test, I am not satisfied a stay is warranted. The motion is therefore dismissed.

[12] The appellants are ordered to pay costs fixed in the amount of $9,300.00 inclusive of GST and disbursements, as agreed.

DATE: October 3, 2008

Aston J.