Abuzour et al. v. Heydary et al.

[Indexed as: Abuzour v. Heydary]

Ontario Reports

Court of Appeal for Ontario,

Huscroft J.A. (in Chambers)

April 13, 2015

126 O.R. (3d) 101 | 2015 ONCA 249

Case Summary

Civil procedure — Orders — Stay pending appeal — Court ordering LAWPRO to pay proceeds of insurance policy to applicants — Respondent not appealing that order — Three lawyers who were formerly employed by respondent and who did not have notice of motion moving unsuccessfully to vary order — Lawyers appealing dismissal of their motion — Original order for payment of insurance proceeds not stayed automatically by operation of rule 63.01(1) — Court having jurisdiction to grant discretionary stay under s. 134(2) of Courts of Justice Act — Stay pending hearing of lawyers' appeal being in interests of justice — Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134(2) — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 63.01(1).

In October 2014, LAWPRO was ordered to pay the proceeds of the respondents' insurance policy to the applicants. The respondents did not appeal that order. Three lawyers who were formally employed by the respondents moved to vary or [page102] set aside the order on the basis that it was made without adequate notice to them as affected non-parties. The motion was dismissed in January 2015. The lawyers appealed that order. LAWPRO brought a motion for directions concerning the October 2014 order, asking whether the order was automatically stayed and, if not, whether it should be stayed pending the lawyers' appeal in the interests of justice.

Held, the motion should be granted.

As the October 2014 order was not the order under appeal, it was not automatically stayed by operation of rule 63.01(1) of the Rules of Civil Procedure. The January 2015 order was not an order for the payment of money, and could not be stayed automatically under rule 63.01(1). The court had jurisdiction to grant a discretionary stay pursuant to s. 134(2) of the Courts of Justice Act. The lawyers' appeal was not frivolous or vexatious. The lawyers would suffer irreparable harm if LAWPRO paid out on the insurance policy before their appeal was determined, as they would then be left without any professional liability insurance to defend against claims that might be brought against them by the applicants. The balance of convenience favoured not paying out the proceeds while the appeal was pending. Fairness required that a stay be granted.

Cases referred to

Abuzour v. Heydary, [2015] O.J. No. 496, 2015 ONSC 551, [2015] I.L.R. I-5686 (S.C.J.), affg [2014] O.J. No. 5199, 2014 ONSC 6229, [2015] I.L.R. I-5670, 41 C.C.L.I. (5th) 202, 246 A.C.W.S. (3d) 833 (S.C.J.); BTR Global Opportunity Trading Ltd. v. RBC Dexia Investor Services Trust, [2011] O.J. No. 4279, 283 O.A.C. 321, 2011 ONCA 620; CPC International Inc. v. Seaforth Creamery Inc., 1996 539 (ON CA), [1996] O.J. No. 3537, 94 O.A.C. 5, 3 C.P.C. (4th) 100, 70 C.P.R. (3d) 29, 66 A.C.W.S. (3d) 220 (C.A.); 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; 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, 46 A.C.W.S. (3d) 40; Waxman v. Waxman, [2003] O.J. No. 73, 186 O.A.C. 217, 30 C.P.C. (5th) 110, 119 A.C.W.S. (3d) 514, 2003 22440 (C.A.)

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134(2) [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 63.01(1), 63.02(1)

MOTION for directions.

Mark Adilman, for applicants.

Megan Marrie, for moving party LAWPRO.

Brian N. Radnoff, for Jeff Landmann, Yan Wang and Darren Smith.

[1] HUSCROFT J.A. (in Chambers): — LAWPRO brings this motion for directions concerning the order of Penny J., dated October 28, 2014 [[2014] O.J. No. 5199, 2014 ONSC 6229 (S.C.J.)], which states: [page103]

THIS COURT ORDERS that LAWPRO pay to the Abuzours the available proceeds of the 2013 insurance policy of the Respondents, Javad Heydary and Heydary Hamilton Professional Corporation.

[2] That order was not appealed. A second order by Penny J., dated January 29, 2015 [[2015] O.J. No. 496, 2015 ONSC 551 (S.C.J.)], dismissing a motion to vary his October 28 order, is subject to an appeal by Jeff Landmann, Yan Wang and Darren Smith (Landmann, Wang and Smith), three lawyers formerly employed by the Heydary law firm.

[3] LAWPRO asks whether the October 28 order is automatically stayed by operation of rule 63.01(1) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. In the event that the October 28 order is not automatically stayed, LAWPRO asks whether it should be stayed in the interests of justice.

Background

[4] On October 28, 2014, Penny J. ordered LAWPRO to pay to the Abuzours the proceeds of an insurance policy held by Javad Heydary and Heydary Hamilton Professional Corporation. LAWPRO did not appeal this order.

[5] Landmann, Wang and Smith brought a motion to vary or set aside the October 28 order on the basis that it was made without adequate notice to them as affected non-parties.

[6] Justice Penny concluded that they had a serious financial interest in the proceeding and were affected by the relief sought because the order exhausted coverage under the insurance policy and put them at risk of being sued by the Abuzours. As a result, they should have been given notice of the motion and had the right to bring the motion to vary or set aside the October 28 order. However, Penny J. concluded that they failed to show sufficient cause to set aside or vary the October 28 order and dismissed their motion in his January 29, 2015 order.

[7] Landmann, Wang and Smith are appealing the January 29 order. LAWPRO agreed not to pay out on the insurance at their request.

[8] On February 10, 2015, Penny J. ordered an interim stay until March 27, 2015 or the date this court deals with the stay issue, whichever is sooner. Counsel representing LAWPRO, Landmann, Wang and Smith, and the Abuzours undertook to take no action on the matter pending release of my decision on the motion.

LAWPRO's Standing

[9] The Abuzours submit that LAWPRO does not have standing to bring this motion. LAWPRO simply holds insurance [page104] proceeds. It has not appealed either the October 28 or the January 29 order and is an interpleader rather than a party.

[10] The Abuzours note that Landmann, Wang and Smith did not bring the present motion and suggest that LAWPRO should have brought a motion for interim relief under s. 134(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[11] LAWPRO submits that the January 29 order and appeal impact on whether and when it is required to pay out on the insurance. LAWPRO submits that the court can make an order under s. 134(2) of the Courts of Justice Act even though it has not specifically brought its motion under that provision.

[12] Landmann, Wang and Smith submit that LAWPRO is a respondent and has an absolute right to bring the motion because it is threatened by an enforcement action.

[13] In my view, LAWPRO is affected by the October 28 and January 29 orders and is entitled to bring this motion seeking directions. The motion is properly before the court.

Is the October 28 Order Automatically Stayed under Rule 63.01(1)?

[14] Rule 63.01(1) provides as follows:

63.01(1) The delivery of a notice of appeal from an interlocutory or final order stays, until the disposition of the appeal, any provision of the order for the payment of money, except a provision that awards support or enforces a support order.

[15] It is uncontroversial that the October 28 order is an order for the payment of money. However, that order is not under appeal. The January 29 order dismissing a motion to vary or set aside the October 28 order is the order that is under appeal.

[16] Landmann, Wang and Smith argue LAWPRO's obligation to pay the Abuzours arises because of the combined effect of the October 28 order and the January 29 order dismissing the motion to vary or dismiss the October 28 order. Ultimately, they submit, their appeal of the January 29 order will require the court to determine whether the October 28 order should have been made. They could not appeal the October 28 order because they were not parties to that order as a result of the failure of the Abuzours to provide notice of the motion to them. They argue that they should not be in a worse position than they would have been if they had received notice of the motion giving rise to the October 28 order.

[17] The Abuzours submit that the October 28 order cannot be stayed automatically because it is not under appeal, whereas the January 29 order (the order under appeal) is not stayed [page105] automatically pursuant to rule 63.01(1) because it does not require payment or repayment of moneys to anyone.

[18] It is clear that Landmann, Wang and Smith were not party to the October 28 order because they were not provided with notice of the motion and that the failure of notice resulted in proceedings culminating in the January 29 order. It is also clear that the appeal of the January 29 order will determine the obligation to pay money under the insurance policy.

[19] However, these considerations do not affect the operation of the rule, which has always been interpreted narrowly: Longley v. Canada (Attorney General), [2007] O.J. No. 929, 2007 ONCA 149, 153 C.R.R. (2d) 224, at para. 11. The January 29 order contains no provisions requiring the payment of money and cannot properly be characterized as an order for the payment of money. It cannot be stayed automatically under rule 63.01(1) without undermining one of the primary purposes of the rule itself, which is to provide a measure of certainty. It would be counterproductive to encourage litigation over whether a particular order is tantamount to an order to pay money. It is appropriate that the rule is interpreted narrowly.

[20] I appreciate that, in the circumstances of this case, the Abuzours' failure to provide notice to Landmann, Wang and Smith of the motion resulting in the October 28 order not only occasioned further proceedings and expense, but also has the effect of denying them the benefit of an automatic stay that would have obtained had they received notice. In my view, this is a relevant consideration in determining whether a discretionary stay should be ordered. I consider this matter below.

Should a Stay of the October 28 Order be Granted?

[21] The grant of a stay under rule 63.02(1) is premised on the existence of an appeal. The October 28 order has not been appealed and as a result the court cannot grant a stay of that order under rule 63.02(1).

[22] However, the court has jurisdiction to grant a stay pursuant to s. 134(2) of the Courts of Justice Act. That section provides as follows:

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 any interim order that is considered just to prevent prejudice to a party pending the appeal.

[23] As Doherty J.A. explained in Waxman v. Waxman, [2003] O.J. No. 73, 2003 22440 (C.A.), at para. 19, s. 134(2) establishes a broad jurisdiction for the court to make interim orders necessary to avoid prejudice to a party pending an [page106] appeal. The term "party" in s. 134(2) is not restricted to a party to the action: CPC International Inc. v. Seaforth Creamery Inc., 1996 539 (ON CA), [1996] O.J. No. 3537, 3 C.P.C. (4th) 100 (C.A.), at paras. 6-7. Therefore, there is no impediment to granting relief to Landmann, Wang and Smith in the context of this motion.

[24] The test for granting interim relief under s. 134(2) is the same as for granting a stay pending appeal pursuant to rule 63.02(1). It is based on the test for an interlocutory injunction set out by the Supreme Court of Canada 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. It must be established that

(1) there is a serious question to be tried;

(2) the applicant would suffer irreparable harm if the application were refused; and

(3) the balance of convenience favours the applicant (i.e., the applicant would suffer greater harm if the stay were not granted than the respondent would suffer if the stay were granted).

[25] As Laskin J.A. has noted, "[the] 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": BTR Global Opportunity Trading Limited v. RBC Dexia Investor Services Trust, [2011] O.J. No. 4279, 2011 ONCA 620, 283 O.A.C. 321, at para. 16.

Serious Question

[26] What is a serious question? Sopinka and Cory JJ. put the matter this way in RJR-Macdonald, at p. 334 S.C.R.:

There are no specific requirements which must be met in order to satisfy this test. The threshold is a low one. The judge on the application must make a preliminary assessment of the merits of the case. The decision of a lower court judge on the merits of the . . . claim is a relevant but not necessarily conclusive indication that the issues raised in an appeal are serious[.]

Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable.

[27] The Abuzours submit that the serious issue threshold is not met and that the stay should be denied on this basis. They submit that Penny J. rejected all of the arguments raised by Landmann, Wang and Smith in his January 29 order in strong terms. [page107]

[28] In my view, this submission fails to appreciate the low threshold at the serious issue step. I need not conclude that the appellants have a strong argument or that they will succeed on appeal. Their appeal is neither vexatious nor frivolous, and that is enough at this stage to allow me to conclude that there is a serious issue to be tried.

Irreparable Harm

[29] Landmann, Wang and Smith submit that they will suffer irreparable harm if LAWPRO pays out on the insurance policy to the Abuzours before their appeal is determined. Once this occurs, they will be left without any professional liability insurance to defend against claims that may be brought against them by the Abuzours.

[30] The appellants' submission is supported by LAWPRO, which submitted that the only relevant insurance is the Heydary policy. Once it is paid out the insurance is exhausted, and this will leave up to $2.5 million in potential liability not covered.

[31] The Abuzours submit that neither LAWPRO nor Landmann, Wang and Smith have filed any evidence on the motion and that irreparable harm cannot be determined based on unsupported assumptions.

[32] I disagree. I think it is reasonable to conclude from the nature of the proceedings that the appellants would suffer irreparable harm if a stay is not granted in these circumstances.

Balance of Convenience

[33] The balance of convenience test requires the court to determine which party will suffer the greater harm from granting or refusing a stay. This is determined on the unique characteristics of individual cases.

[34] Landmann, Wang and Smith submit that the balance of convenience favours not paying out the proceeds of the policy while the appeal is pending. The money is being held by LAWPRO and at worst the Abuzours face a delay in obtaining it. Their appeal of the January 29 order has already been perfected so the delay will be minimal.

[35] LAWPRO submits that if the funds are paid out now and Landmann, Wang and Smith succeed on their appeal, there is no assurance that the Abuzours will be able to repay LAWPRO, and that such a result could render the appeal moot.

[36] The Abuzours submit that there is no evidence on the motion and as a result there is no basis that would allow the court to determine that the balance of convenience favours [page108] the grant of the stay. They characterize the concerns raised as speculative.

[37] The strongest argument in favour of granting a stay is one of basic fairness. The problem at the heart of these proceedings results from the failure of the Abuzours to provide proper notice to Landmann, Wang and Smith of the first motion before Penny J. Had notice been provided, they would have been able to appeal the October 28 order and that order would have been stayed automatically pursuant to rule 63.01(1).

[38] In my view, the overall justice of this case requires the grant of a stay. Landmann, Wang and Smith should not end up in a worse position than they would have been had they received proper notice of the first motion. Accordingly, the October 28 order of Penny J. is stayed pending appeal of the January 29 order.

Costs

[39] If the parties cannot agree on costs, they may make brief submissions in writing, not to exceed three pages, within ten days of this order.

Motion granted.

End of Document