DATE: 20030120

DOCKET: M29066-C38616-C38611-C38624

COURT OF APPEAL FOR ONTARIO

MORDEN, DOHERTY and FELDMAN JJ.A.

B E T W E E N:

MORRIS WAXMAN and MORRISTON INVESTMENTS LIMITED

Robert Harrison and Richard Swan

Plaintiffs/Respondents

For the appellants

• and -

CHESTER WAXMAN, CHESTER WAXMAN, in trust, CHESTERTON INVESTMENTS LIMITED, ROBERT WAXMAN, GARY WAXMAN, WARREN WAXMAN, I. WAXMAN & SONS LIMITED, THE GREYCLIFFE HOLDINGS LIMITED, ROBIX FINANCIAL CORPORATION LIMITED, CIRCUITAL CANADA INC., RKW STANDARDBRED ASSOCIATES INC., RKW STANDARDBRED MANAGEMENT INC., and GLOW METAL TRADING INC.

Alan Lenczner and Lorne Silver

For the respondents

Heard: November 7, 2002[^4]

Defendants/Appellants

A motion to vary the order of Goudge J.A. dismissing a motion for interim payment of costs dated October 8, 2002.

DOHERTY J.A.:

I

[1] This is a motion brought by the respondents in the appeal pursuant to s. 7(5) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (CJA). They seek to set aside the order of Goudge J.A. dismissing their motion for interim costs. The respondents ask for an order directing that the appellants pay interim costs to them in the amount of $5,000,000.

[2] I would dismiss the motion. In my view, the motion for interim costs was in substance no different than the motion brought by the respondents to lift the automatic stay of the money component of the trial judgments. Goudge J.A. addressed the relevant factors on the motion for an order lifting the stay. He dismissed that motion and no appeal has been taken by the respondents. That same assessment in the context of the motion for interim costs compels the dismissal of this motion as well.

II

[3] The appeals in which this motion are brought arise out of lengthy and complex litigation that began over fifteen years ago. The litigation pits Morris Waxman and his family (the respondents) against his brother Chester and his family (the appellants). Five separate actions were tried together before Sanderson J. over some 200 court days. The respondents were almost entirely successful at trial and the value of the judgments in their favour are said to be about $50,000,000. The appeals had been scheduled for hearing over several days in April 2003.

[4] The respondents moved for:

(i) an order under rule 63.01(5) lifting the automatic stay on the money components of the judgments under appeal;

(ii) an order for security for costs under rule 61.06; and

(iii) an order for interim costs.

[5] Goudge J.A. refused to lift the stay, order security for costs, or order interim costs. On this motion, the respondents challenged only the refusal to make an interim costs order.

[6] The litigation has been expensive. The respondents’ legal fees to this point in time exceed $6,000,000, of which some $2,600,000 remains unpaid. It is the unchallenged evidence of Mr. Morris Waxman and his son, Michael, that neither Morris nor his family can pay the outstanding legal accounts or the substantial fees associated with a proper response to the appeals “unless we collect on the judgments obtained”. There is no suggestion that counsel for the respondents would seek to be removed from the record if not paid prior to the completion of the appeal.

[7] Morris and Michael Waxman also raised concerns about the dissipation of assets by the appellants pending the appeal. Those concerns were challenged by the appellants.

[8] In his reasons, Goudge J.A. found that:

• He could not conclude that the appeals were devoid of merit.
• The respondents had not demonstrated sufficient cause to believe that the appellants would dissipate their assets to warrant a lifting of the automatic stay.
• Despite the respondents’ limited means and outstanding legal fees, there was no suggestion that the respondents would not be ably represented on the appeal.
• The respondents offered no proposal for the repayment of any funds they might obtain from the appellants prior to the appeal if the appeals were eventually successful.
• The respondents had not established that the appellants had insufficient assets to pay the costs of the appeal if ordered to do so at the conclusion of the appeals.

[9] These findings were open on the record and I do not understand the respondents to challenge them on this motion.[^1] They contend, however, that those findings did not justify a refusal to make an order directing that the appellants pay the respondents interim costs.

[10] In support of their claim for an interim costs order, the respondents rely on their present inability to pay their outstanding legal expenses and the additional legal expenses associated with the appeal. They also rely on the fact that the appellants’ past and ongoing legal expenses are being funded through I. Waxman & Sons Limited (IWS). IWS was the company through which Chester and Morris Waxman jointly ran the family business until 1983. The trial judge found that Chester cheated Morris out of his interest in the family business. Among other remedies, she directed that fifty percent of the shares of IWS should be transferred to Morris Waxman. That order has now been complied with by the appellants. The appellants, however, continue to maintain control over the affairs of the company. The respondents contend that it is unfair that the appellants have had, and continue to have, access to the assets of IWS to fund the litigation, when Morris Waxman, a fifty percent owner of that company, has had no such access. The respondents argue that the unfairness is rendered all the more palpable given the trial judge’s findings as to the manner in which Morris Waxman was cheated out of his interests in IWS by his brother.

III

[11] The respondents submit that the statutory authority for the order they seek can be found in s. 248(3) or s. 249(4) of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (OBCA), or in s. 131(1) or s. 134(2) of the CJA.

The OBCA

[12] Among the claims advanced at trial, the respondents sought relief under the oppression provisions of the OBCA. They were successful in that claim and the appellants have challenged that success as part of their appeal.[^2]

[13] The parties rely on two sections of the OBCA:

248(3) Court order – In connection with an application under this section, the court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing,

(a) an order restraining the conduct complained of;

(b) an order appointing a receiver or receiver-manager;

(c) an order to regulate a corporation’s affairs by amending the articles or by-laws or creating or amending a unanimous shareholder agreement;

(d) an order directing an issue or exchange of securities;

(e) an order appointing directors in place of or in addition to all or any of the directors then in office;

(f) an order directing a corporation, subject to subsection (6), or any other person, to purchase securities of a security holder;

(g) an order directing a corporation, subject to subsection (6), or any other person, to pay to a security holder any part of the money paid by the security holder for securities;

(h) an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract;

(i) an order requiring a corporation, within a time specified by the court, to produce to the court or an interested person financial statements in the form required by section 154 or an accounting in such other form as the court may determine;

(j) an order compensating an aggrieved person;

(k) an order directing rectification of the registers or other records of a corporation under section 250;

(l) an order winding up the corporation under section 207;

(m) an order directing an investigation under Part XIII be made; and

(n) an order requiring the trial of any issue [emphasis added].

249(4) – In an application made or an action brought or intervened in under this Part, the court may at any time order the corporation or its affiliate to pay to the complainant interim costs, including reasonable legal fees and disbursements, for which interim costs the complainant may be held accountable to the corporation or its affiliate upon final disposition of the application or action [emphasis added].

[14] Goudge J.A. addressed only s. 249(4). After expressing some doubt as to whether the section gave a single judge of the Court of Appeal the power to make an interim costs order, Goudge J.A. proceeded to apply the approach followed in the Superior Court on such applications. On this approach, the moving party has to demonstrate that but for an order under s. 249(4), it would be unable to pursue the oppression application: Alles v. Maurice (1992), 5 B.L.R. (2d) 146 (Ont. Gen. Div.). Goudge J.A. concluded:

Despite their debt to their lawyers, which will be significantly increased by the appeal, there is nothing before me to suggest that without an interim costs order it is possible that the respondents will be unrepresented on these appeals.

[15] I need not decide whether Goudge J.A. properly analyzed and applied the trial decisions interpreting s. 249(4). Neither s. 249(4), nor the more general provisions of s. 248(3) of the OBCA gives either a judge of the Court of Appeal, or the Court of Appeal, the power to make any order. Both sections empower the “court” to make various orders. Section 249(4) specifically empowers the “court” to order that the corporation, which is the subject of an oppression proceeding, pay the complainant’s interim costs, including reasonable legal fees. The word “court” is defined in s. 1 of the OBCA as “the Superior Court of Justice”. While it is true that by virtue of s. 13(2) of the CJA Goudge J.A. had “all the jurisdiction, power and authority of a judge of the Superior Court of Justice”, he was not asked to exercise the jurisdiction of a superior court judge and did not purport to do so. The motion was brought before him in his capacity as a judge of the Court of Appeal. Nor can it simply be assumed that he would have exercised that jurisdiction had he been asked to do so. Such requests raise institutional concerns which must be addressed on a case by case basis. Neither Goudge J.A. as a judge of the Court of Appeal, nor this court could make an order under s. 248(3) or s. 249(4) of the OBCA.

[16] The very specific definition of “court” in the relevant provisions of the OBCA provides a clear indication that those sections are meant to apply during the oppression proceedings in the Superior Court and not to appeals from orders made in those proceedings. Section 255 of the OBCA creates the right of appeal in oppression proceedings and does not give the appellate court the powers to make interim orders like those described in s. 248(3) and s. 249(4). I think the powers of the appellate court sitting on appeals from orders made or refused under the oppression provisions in the OBCA must be found in the applicable provisions of the CJA and the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

The Courts of Justice Act

[17] The respondents rely on s. 131(1) and s. 134(2) of the CJA:

131(1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

134(2) On motion, a court to which a motion for leave to appeal is made or to which an appeal is taken may make an interim order that is considered just to prevent prejudice to a party pending the appeal.

[18] The respondents seek the payment of costs arising out the trial proceedings as well as costs relating to the appeal. Section 131(1) gives courts the general jurisdiction to order costs in a proceeding or in a step in a proceeding. There is authority that interprets s. 131(1) as authorizing orders for payment of costs in a proceeding or a step in a proceeding which has not yet taken place “in very exceptional cases”: Organ v. Barnett (1992), 1992 7433 (ON SC), 11 O.R. (3d) 210 at 214-15 (Gen. Div.).[^3] Assuming, without deciding, that s. 131(1), or the equitable jurisdiction of the court permit an order for costs in respect of proceedings or a step in a proceeding which has not taken place, I do not read that section as permitting a judge of the Court of Appeal or the Court of Appeal to make original orders for costs in relation to trial proceedings.

[19] Section 134(2) confers a broad-based jurisdiction to make interim orders pending appeal: Falkiner v. Ontario (Director, Income Maintenance Branch, Ministry of Community and Social Services) (2000), 2000 15904 (ON CA), 189 D.L.R. (4^th) 377 at 384 (Ont. C.A.), per Osborne A.C.J.O. (in chambers). The section addresses those situations for which no specific remedy has been provided by the CJA or the Rules of Civil Procedure, and some form of judicial intervention is necessary to prevent prejudice to a party to the appeal. While it is impossible to provide an exhaustive list of the kinds of orders that can be made under s. 134(2), Morden A.C.J.O. described the thrust of the section in Peel (Regional Municipality) v. Great Atlantic & Pacific Co. of Canada Ltd. (1990), 1990 6956 (ON CA), 74 O.R. (2d) 161 at 163 (C.A.):

Generally, but not necessarily in all cases, the purpose of an order sought under this section [formerly 144(2), now 134(2)] is similar to a stay order; it is to prevent a situation arising where an appellant is successful on its appeal but, in the meantime, either the subject-matter of the proceeding has disappeared or in some other way the litigation and its ultimate result have been rendered nugatory.

[20] The order of Feldman J.A. staying the deportation order in Ahani v. Canada (Attorney General) (2002), 2002 23586 (ON CA), 155 O.A.C. 1 (C.A.) provides a recent example of the effective use of s. 134(2). Although the deportation order that Feldman J.A. stayed was not the subject matter of the appeal in Ahani, the appeal would been rendered nugatory had the deportation order been executed prior to the hearing of the appeal.

[21] The jurisdiction under s. 134(2) is broad, but it is not unlimited. The focus of any remedy provided under the section must be on preventing prejudice in the context of the appeal. The prejudice must relate to a party’s ability to meaningfully participate in the appeal or to the court’s ability to hear and decide the appeal on its merits in a timely fashion. Nor should s. 134(2) be construed as supplanting specific provisions of the CJA or the Rules of Civil Procedure governing orders lifting stays, imposing stays or orders for security for costs. The principles to be applied in determining the availability of those remedies are well established. Where the order sought under s. 134(2) is akin to an order lifting a stay, imposing a stay, or providing security for costs, the principles applicable to those remedies will play a central role in deciding whether any remedy should be granted under s. 134(2): Peel (Regional Municipality) v. Great Atlantic & Pacific Co., supra; Horsefield v. Registrar of Motor Vehicles (1997), 1997 2546 (ON CA), 118 C.C.C. (3d) 184 at 190 (Ont. C.A.), per Finlayson J.A. (in chambers); CPC International Inc. v. Seaforth Creamery Inc. (1996), 1996 539 (ON CA), 94 O.A.C. 5 (C.A.), per Charron J.A. (in chambers).

[22] Considering the very broad language of s. 134(2), it cannot be said that an order for interim costs could never be made pursuant to that section. If such an order would “prevent prejudice to a party pending appeal” and was “just” it could be made under s. 134(2). However, the circumstances in which such an order would be made would be rare. The civil process operates on the premise that the parties pay their own legal fees until the proceedings are over. It would take more than evidence of an inability to pay one’s lawyer to reverse that presumption.

[23] In cases involving an appeal from a money judgment, a motion brought by a respondent under Rule 134(2) for interim costs is tantamount to a motion to lift, at least in part, the automatic stay of the money judgment. That motion, regardless of the statutory basis upon which the motion is brought, will be decided according to the principles applicable to motions brought under Rule 63.01. Those principles are sufficiently flexible to take into consideration claims of hardship based on an inability to pay counsel and claims that an appellant is dissipating assets pending the appeal.

[24] The respondents’ motion for interim costs and their motion for an order lifting the automatic stay of the money judgment sought essentially the same relief. Both motions sought an advance payment from the appellant of monies which under the generally applicable Rules of Civil Procedure would not be payable until the appeal was decided. The motion brought under s. 134(2) is properly viewed as a restatement of the motion brought to lift the stay.

[25] The factors to be considered in deciding whether to lift an automatic stay are well known. Goudge J.A. identified those factors as the merits of the appeal, the hardships to the respondents if the stay was not lifted, and the ability of the respondents to repay to the appellants any amount obtained from them if the appellants were eventually successful on the appeal. I have set out above the relevant findings made by Goudge J.A. in the context of the motion for an order lifting the stay (see para. 8 above). He concluded, based on those findings, that a balancing of the relevant factors did not justify lifting the automatic stay. That finding has not been challenged.

[26] In my view, the findings made by Goudge J.A. and his balancing of the relevant factors are equally applicable to the motion for interim costs. I see no grounds upon which he could reasonably come to a different conclusion on the motion for interim costs than he did on the motion for an order lifting the stay.

[27] As I see no basis upon which to interfere with Goudge J.A.’s balancing of the relevant factors, I do not propose to re-examine them. I will, however, consider the material placed before the court that was not before Goudge J.A. The respondents contend that the appellants continue to control the assets of IWS and that they are using those assets to fund this litigation. The respondents allege that some $6,500,000 in cash has been removed from IWS by the appellants since the release of the trial decision. They submit that the appellants, and in particular Chester Waxman, are financially able to make the interim costs payment sought by the respondents without incurring any significant financial hardship.

[28] There was some evidence in support of these claims before Goudge J.A. Additional information which came into the hands of the respondents after Goudge J.A. had heard the motion was placed before the court on the argument of this motion. Subsequent to the oral argument, the respondents sought leave to put yet further material before the court which they contended was unavailable to them until after the oral argument. The appellants opposed the respondents’ attempt to further augment the motion record. I think that the material is probably admissible on the motion, but I need not come to any final conclusion on that issue. Even if all of the evidence submitted by the respondents is considered, the motion must still fail.

[29] This court is in no position to determine the propriety of any of the appellants’ dealings with the assets of IWS after the trial judgment. It would appear from the material filed by the respondents that issues relating to the propriety of those dealings are now before Farley J. in a separate proceeding. In addition, to the extent that the transactions are relied on to support dissipation of the assets of IWS, it is noteworthy that almost all of the assets transferred out of IWS remain under the direct control of Chester Waxman. Chester Waxman is also liable under the judgments obtained by the respondents. A transfer of the assets from IWS to Chester Waxman would not appear to materially affect the respondents’ ability to realize on their judgments should those judgments be upheld on appeal. Finally, while the material would appear to demonstrate that Chester Waxman could make a payment in the amount sought by the respondents, his financial ability to make such a payment does not justify an order requiring that the payment be made.

[30] The fact that IWS has funded and continues to fund the appellants’ legal costs in this litigation creates at least the impression of unfairness given the trial judge’s holding that Morris Waxman is a fifty percent owner of IWS. I cannot conclude, however, that the apparent unfairness inherent in only one of the two brothers accessing IWS resources for legal expenses amounts to “prejudice” to the respondents in the context of the appeal. The respondents have not demonstrated that the appellants’ resort to the assets of IWS to fund the litigation has either prevented the respondents from effectively responding to the appeal or dissipated the assets of IWS so as to undermine the effectiveness of any order that may be made on appeal.

IV

[31] I would dismiss the motion. If counsel cannot agree on the appropriate costs orders, they may make arrangements with Goudge J.A., who is managing the appeal, to exchange and file written submissions addressed to the panel.

RELEASED: “JAN 20 2003”

“JWM”

“Doherty J.A.”

“I agree: J.W. Morden J.A.”

“I agree K. Feldman J.A.”

[^4]: After the motion was heard on November 7, the respondents sought leave to place additional material before the panel. That material and the appellants’ responding material was received by December 17, 2002.

[^1]: The respondents have, however, put certain material before the court that was not before Goudge J.A. in support of their claim that certain corporate assets are being dissipated.

[^2]: Appeals from orders made under the OBCA lie to the Divisional Court pursuant to s. 255 of the OBCA. Under s. 6(2) of the C JA, this court has jurisdiction to hear the appeal in these circumstances. The parties have agreed that this court should exercise that jurisdiction.

[^3]: If this jurisdiction exists, it would appear to be based on the inherent equitable jurisdiction of the court (Jones v. Coxeter (1743), 26 E.R. 642) and not on any statutory provision. See M. Orkin, The Law of Costs, 2nd ed., looseleaf, (Aurora, Ont.: Canada Law Book, 1996) at pp. 2-22 to 24.2. The jurisdiction to award interim disbursements in an alimony action (Hill v. Hill (1988), 1988 4710 (ON SC), 63 O.R. (2d) 618 (H.C.J.) referred to in Organ v. Barnett) was based on the principle that the wife has authority to retain a lawyer at the expense of her husband for necessities in the conduct of a matrimonial proceeding. Until Organ v. Barnett there does not appear to have been any decision recognizing a general jurisdiction to award interim costs. Organ has been applied recently in British Columbia (Minister of Forests) v. Okanagan Indian Band (2001), 2001 BCCA 647, 208 D.L.R. (4th) 301, leave to appeal to S.C.C. granted [2001] S.C.C.A. No. 629. English authority does not appear to recognize a general equitable jurisdiction to order interim costs although it does recognize the authority to do so in certain specific circumstances, e.g. estate litigation: G. Morgan & E. Wurtzburg, A Treatise on the Law of Costs in the Chancery Division of the High Court of Justice, 2nd ed. (London: Stevens and Sons, 1882) at p.124.