Once a party obtains a final order or judgment from a Court, they may sometimes face the prospect of a motion from the opposing party to stay enforcement of that order or judgment.  Such stays are generally difficult to obtain, however.  Two recent Superior Court of Justice decisions are useful reminders of the legal tests that apply to such motions and the difficulties parties face in obtaining a stay of enforcement.

Motion for a Stay of Enforcement From Judgment of a Property Dispute Resolved By Arbitration

Among other things, the case of 2650795 Ontario Inc. v. 2524991 Ontario Corporation et al. concerned a motion to stay the enforcement of an arbitrator’s award.  The case involved interrelated proceedings arising from a dispute between numbered companies over an apartment complex in which they both held an interest.  The dispute was referred to arbitration, and the arbitrator ultimately issued an award requiring one of the companies, 2524991 Ontario Corporation (“252”), to make a payment to the other (2650796 Ontario Inc. (“265”)) for its interest in the property, among other things.  After the award was issued, 252 attempted to sell the property and use the proceeds from the sale to satisfy the award, but 265 allegedly refused to cooperate in the sale.  265 sought judgment on the arbitrator’s award and subsequent awards, while 252 commenced an action against 265 alleging oppression under the Business Corporations Act.  252 also sought a stay of enforcement of the arbitrator’s award pending the hearing of its oppression action.

Motion for a Stay of Enforcement of a Judgment Obtained in Relation to Amounts Owing for Legal Services

The case of Cao v. Monkhouse Law Professional Corporation concerned a court order requiring the plaintiff to pay $45,000 to the defendant’s law corporation in relation to legal services provided by the corporation to the plaintiff.  After issuing the order, the plaintiff commenced an action against the defendant for breach of contract.  The defendant sought dismissal of that action, and the plaintiff sought a stay of enforcement of the order, which required her to make payment pending the conclusion of her lawsuit.

Court’s Discretion to Stay Enforcement of a Judgment Arises Under the Courts of Justice Act

In each case, the Superior Court of Justice began its analysis by referring to section 106 of the Courts of Justice Act.  That section allows a court to “stay any proceeding in the court on such terms as are considered just.”

Section 106 applies to a stay of a final order or judgment of the court (see, for example, 1852998 Ontario Ltd. v. Halton Condominium Corp.).  Thus, a motion under section 106 is available to a party seeking to stay the enforcement of a judgment.  The word “proceeding,” as used in the section, “extends not only to execution, but the proceedings supplemental to execution and the enforcement of the judgment” (see Buttarazzi v. Buttarazzi).

A Two-Part Test Applies in Determining Whether to Stay Enforcement of a Judgment

In each case, the Court referenced the earlier Divisional Court decision of 1247902 Ontario Inc. v. Carlisle Power Systems Ltd.  That case clarified that a stay of execution of a judgment may be granted “in rare circumstances.”  The party seeking the stay must establish that:

• Continuing the proceeding through execution “would amount to injustice because it would be oppressive, vexatious or an abuse of the Court’s process;” and
• The stay would not “cause an injustice to the party entitled to judgment.”

A Stay of Enforcement Should Only Be Granted In Rare Circumstances

This test sets the bar higher for obtaining a stay of enforcement of a judgment than otherwise for an ordinary stay of proceedings.  In the Carlisle case, the Divisional Court commented on the reasons for this:

“judgments ought to be considered final, and creditors should have unencumbered rights of enforcement.” 

Further, allowing a defendant to “raise equitable grounds at that stage would derogate from the notice of finality,” “would frustrate commercial enterprise,” and “would encourage a whole new area of litigation.”  Accordingly, as the Court noted in that case, the discretion to grant a stay of enforcement of a judgment “ought to be used very sparingly.”

In the Cao case, the Court ultimately declined to grant the stay of enforcement.  Cao argued that permitting enforcement of the order against her would be “oppressive, vexatious or an abuse of process” because the law corporation planned to have her residence sold to satisfy its judgment, and she owned that house “jointly with her elderly parents.”  Further, the law corporation had sought to undertake examinations in aid of execution against her and had moved to find her in contempt for failing to attend them, actions which she also alleged were “oppressive and vexatious.”

The Court rejected these arguments.  It noted that, by failing to attend the examinations in aid of execution, the law corporation may have had limited ability to determine whether Cao had other assets “on which the debt owing to it can be realized.”  Further, the fact that the law corporation sought to enforce its final order was not in and of itself “abusive or vexatious.”  As the Court in Carlisle noted, judgment creditors “should have unencumbered rights of enforcement.”  Lastly, the Court noted that a stay would cause an injustice to the law corporation since that corporation had waited for years to be paid.  Accordingly, Cao’s motion for a stay of enforcement was dismissed.

A different result was reached in the case of 2650795 Ontario Inc.  The Court concluded that allowing enforcement of the judgment would cause an injustice to 252 because “it would be oppressive and an abuse of process, in the circumstances.”  Specifically, as the Court noted, proposal 252 to sell the property and use the proceeds to satisfy the judgment was reasonable.  The refusal of 265 to cooperate in the sale of the subject property was “inconsistent with the common intention of the parties,” as expressed at the arbitration, to have a payment made to 265 regarding its interest in that property.

Further, the Court concluded that granting the stay would not cause an injustice to 265.  To that end, it indicated that the award granted to 265 was “subject to post-judgment interest” that continued to accrue and, pending trial of the oppression action brought by 252, 265 would continue to have security over the subject property through its ownership stake and the judgment itself.  The Court thus granted the motion for a stay of enforcement.

Contact the Toronto Litigation Lawyers at Milosevic & Associates For Representation in Complex Corporate Commercial Litigation 

The team at Milosevic & Associates in Toronto is available to provide strategic legal advice in relation to many kinds of business disputes, including judgment enforcement and complex corporate commercial litigation.  Contact us online or by phone at (416) 916-1387 for a consultation.