What is the test for a stay pending an appeal in an insolvency proceeding?
DGDP applied for a stay of two orders approving the sale transaction of assets and granting the gross overriding royalty from the prospective purchaser to DGDP. Prior to the granting of those orders, DGDP had opposed the validity of the revised purchase and sale agreement, and brought its own application to direct the prospective purchaser to grant a gross overriding royalty to DGDP under different terms. That application was dismissed.
In August 2021, the Court of Appeal dismissed DGDP’s application for leave to appeal from the decision of the Court dismissing its application. The Court held that the supervising judge was not prohibited from approving the sale, and was well-positioned to understand the impact of the order on DGDP’s interests. Accordingly, the stay of the two orders was sought pending DGDP’s application for leave to appeal to the Supreme Court of Canada.
Pursuant to section 65.1 of the Supreme Court Act, a judge of the Court of Appeal may, on request of the party who has filed and served an application for leave to appeal, or before such filing and service, order that the proceedings be stayed with respect to the judgment from which leave to appeal is being sought. The tripartite test for a stay pending appeal was set out in RJR-MacDonald Inc. v. Canada (Attorney General). The applicant has the burden of showing that:
- there is a serious question to be tried, or an arguable issue that is not frivolous or vexatious;
- there will be irreparable harm if the stay is not granted; and
- the balance of convenience favours granting the stay.
Generally, whether there is a serious question to be tried assesses whether the applicant’s position is reasonably arguable and not frivolous or vexatious. However, in the context of a leave motion to the Supreme Court of Canada, there is an additional consideration of whether the Court might regard the matter as one of public and national importance. Moreover, where there has already been an adjudication on the merits, rather than, for example, an interlocutory injunction application, the bar must be higher.
In the August 2021 decision DGDP wished to appeal, it was held that the issues at play were “of little significance to bankruptcy practice generally and this action in particular”. DGDP argued that in the August 2021 decision, the Court mischaracterized the issues, but the Court of Appeal was unconvinced. It held that the decision was not obviously of public or national importance.
As to the second criterion, irreparable harm is limited to harm that cannot be compensated by an award of costs or damages or otherwise satisfactorily redressed, rectified, or made right at some later point in time. The August 2021 decision held that DGDP would obtain an advantage from the gross overriding royalty, as the royalty was considered to be a form of repayment. DGDP disagreed with that characterization, but the Court of Appeal concluded that, given that the issue of repayment is a solely financial matter in a commercial dispute, DGDP had not established irreparable harm if the stay were not granted. Monetary disputes may be compensated by an award of damages or costs, or can be otherwise redressed or rectified, and do not constitute irreparable harm.
Finally, in assessing the balance of convenience, the issue is whether “the interests of the appellants in a stay outweigh the interests of the other stakeholders and the estate as a whole”. Here, the Court found that the balance of convenience favoured the receiver’s position. If the transaction was not closed expeditiously, this would render it likely unfeasible to do so in the future, and the entirety of the receivership proceedings could collapse due to the financial realities facing the estate, to the detriment of the whole body of stakeholders. In comparison, if a stay was not granted, DGDP would be repaid in full through the gross overriding royalty and thus suffer no prejudice.
The Court concluded that DGDP did not meet the test for a stay pending leave to appeal to the Supreme Court of Canada. Accordingly, the application was dismissed.
Counsel: Ian Aversa and Sam Babe of Aird & Berlis LLP and Terry Czechowskyj, Q.C. of Miles Davison LLP for the Applicant; Keely Cameron and Chris Simard of Bennett Jones LLP for the Respondent Third Eye Capital Corporation; Robyn Gurofsky and Jessica Cameron of Borden Ladner Gervais LLP for the Respondent PricewaterhouseCoopers Inc in its capacity as Court-Appointed Receiver for Accel Canada Holdings Limited and Accel Energy Canada Limited
Judge: Justice Feehan