Date: 20010716
Docket No.: CA 172420
NOVA SCOTIA COURT OF APPEAL
[Cite as: Smith’s Field Manor Development Ltd. v. Campbell, 2001 NSCA 114]
BETWEEN:
KAREN TURNER-LIENAUX and SMITH’S FIELD MANOR DEVELOPMENT LIMITED
Applicants/Appellants
- and -
Respondent
______________________________________________________________
DECISION
______________________________________________________________
Counsel: Charles D. Lienaux, secretary of Smith’s Field Manor Development Ltd., for the applicants/appellants Smith’s Field Manor Development Ltd. and Karen Turner-Lienaux
Alan V. Parish, Q.C. and C. Gavin Giles, for the respondent
Application Heard: July 5, 2001
Decision Delivered: July 16, 2001
BEFORE THE HONOURABLE JUSTICE LINDA LEE OLAND
IN CHAMBERS
OLAND, J.A. (In Chambers):
[1] Following a 38 day trial, Justice Suzanne M. Hood of the Supreme Court of Nova Scotia dismissed all the claims brought by the appellants against the respondent. Those claims related to the development, financing, and eventual receivership, foreclosure and sale of a seniors retirement residence known as “The Berkeley” in Halifax. Among other things, the appellants alleged breaches of fiduciary duty by the respondent. Their claims included allegations of criminal and equitable fraud, receipt of undisclosed benefits and fees, and causation of the receivership.
[2] The trial judge ordered two of the appellants, Smith’s Field Manor Development Limited (Smith’s Field) and Karen Turner-Lienaux (Turner-Lienaux), to jointly and severally pay solicitor and client costs together with disbursements and the third appellant, Byrne Architects Incorporated, to pay lump sum party and party costs of $10,000.00 inclusive of disbursements, to the respondent. She also ordered that $105,000.00 and all accrued interest held on deposit by the court as security for costs be paid forthwith to the respondent as a credit against the solicitor and client costs and disbursements owed him when taxed.
[3] Smith’s Field and Turner-Lienaux (hereafter collectively, the appellants) have appealed the decision and order of the learned trial judge. The hearing of their appeal is scheduled for March 2002. They now apply for a stay of execution pending appeal pursuant to Civil Procedure Rule 62.10.
[4] Charles D. Lienaux, secretary to Smith’s Field and husband to Turner-Lienaux, presented the appellants’ stay application. It was supported by an affidavit he deposed and Mr. Lienaux was cross-examined in Chambers on certain of its contents.
Analysis
[5] Civil Procedure Rule 62.10 provides that an appeal does not operate as a stay of execution, although the court has jurisdiction to grant a stay. Freeman, J.A. noted in Westminer Canada Ltd. v. Amirault (1993), 125 N.S.R. (2d) 171 (C.A.) at p. 174 that:
Stays deprive successful parties of their remedies, and they are not granted routinely in this province. They are equitable remedies and the party seeking the stay must satisfy the court it is required in the interests of justice.
[6] For their application to succeed, the appellants must demonstrate that they satisfy the three part primary test or, alternatively, the secondary test, set out in Purdy v. Fulton Insurance Agencies Ltd. (1990), 100 N.S.R. (2nd) 341 (N.S.C.A.).
The Primary Test
(i) Arguable Issue
[7] The first part of the primary test requires the applicant for a stay to show that there is an arguable issue raised on appeal. Cromwell, J.A. stated in MacCulloch v. McInnes, Cooper & Robertson (2000), 186 N.S.R. (2d) 398; 581 A.P.R. 398 (C.A.) at p. 399:
What is required is a notice of appeal which contains realistic grounds which, if established, appear of sufficient substance to be capable of convincing a panel of the court to allow the appeal: see Freeman, J.A., in Coughlan et al. v. Westminer Canada Ltd. et al. (1993), 125 N.S.R. (2d) 171; 349 A.P.R. 171 (C.A.). It is not my role as a Chambers judge hearing a stay application to enter into a searching examination of the merits of the appeal or to speculate about its probable outcome but simply to determine whether the arguable issue threshold has been reached.
[8] The notice of appeal sets out 28 grounds of appeal. Several allege that the trial judge erred in law by disregarding material evidence or by excerpting evidence out of context. Others allege that she erred in law in her rulings on various aspects of the case before her and in her reasons for judgment.
[9] I have reviewed the notice of appeal and the decision of the trial judge and have considered the written and oral submissions of the parties on this part of the primary test. The arguable issue threshold is not a difficult one to meet. I am satisfied that one or more grounds in the notice of appeal raises an arguable issue.
(ii) Irreparable Harm
[10] The second part of the primary test requires the applicant for a stay to satisfy the court that if the stay is not granted and the appeal is successful, the appellants will have suffered irreparable harm that is difficult to, or cannot be compensated for, by a damage award.
[11] The trial judge found the appellants jointly and severally liable to the respondent for solicitor and client costs. In his submission on this application, the respondent anticipates solicitor and client costs approaching three-quarters of a million dollars.
[12] Mr. Lienaux’s evidence given by way of affidavit and viva voce under cross-examination in Chambers establishes that the appellant Smith’s Field has no assets or income. Moreover, the only assets owned by the appellant Turner-Lienaux are her matrimonial home at 332 Purcell’s Cove Road in Halifax and personal chattels such as household furniture and furnishings including silver, crystal, and china.
[13] According to appraisals prepared in November 1989, the fair market value of the home at that time was $620,000.00 or $702,000.00 depending on the valuation approach used. The residence is presently encumbered by four mortgages for a principal amount totalling over $710,000.00. The fourth mortgage was given to secure some $200,000.00 borrowed from several individuals for the trial and for pre-trial proceedings; that amount includes all the $105,000 ordered to be paid for security for costs. Payments are being made only on the first mortgage which is in the principal amount of approximately $180,000. The second and third mortgages have been in dispute for some years. The loans secured by the fourth apparently have no repayment terms. The monthly payments on the first mortgage are approximately $2,040.00.
[14] Turner-Lienaux’s chattels are charged by a chattel mortgage held by the fourth mortgagee. No valuation has been made of those items; however Mr. Lienaux estimated their total purchase price to be about $25,000.
[15] While Turner-Lienaux is employed, her monthly net income of some $2,200.00 is garnisheed some $600.00 a month. Almost a year remains before that garnishment will end. Mr. Lienaux gave evidence that his pre-tax income for this year to July 2, 2001 was less than $20,000.00, he is seeking employment, his and Turner-Lienaux’s monthly living expenses (including the payments on the first mortgage) total approximately $4,500.00, and they have no ability to borrow any further funds.
[16] The focus of the appellants’ argument on irreparable harm is the potential loss of Turner-Lienaux’s matrimonial home. They emphasize its waterfront location, architect-designed renovations, and custom furnishings and fittings and urge that were the home sold and the appellants successful on the appeal, Turner-Lienaux would suffer irreparable harm. They rely on Lienaux et al. v. Toronto-Dominion Bank (1994), 137 N.S.R. 150 (C.A.) as authority for this argument. In that decision Clarke, C.J.N.S. heard an application by Turner-Lienaux and Mr. Lienaux for a stay. The mortgage lender had obtained summary judgment giving it the right to sell this property pursuant to foreclosure proceedings. Chief Justice Clarke concluded that the residence has a unique character that would be very hard to duplicate in a similar location and in many respects a quality and style that would make its loss difficult to compensate in damages. He determined that all three elements in the primary test in Fulton Insurance, supra had been met and granted the stay.
[17] In their submission on irreparable harm the appellants also suggest that Turner-Lienaux could rent the home to pay the first mortgage. They say that if the respondent should execute on rental income, the mortgage would fall into arrears leading to possible foreclosure and sale.
[18] The respondent submits that the appellants have not made out any irreparable harm. He argues that s. 4 of the Sale of Land Under Execution Act, R.S.N.S. 1989, c. 409 provides that the land of a judgment debtor may be sold under execution only after the judgment has been registered for one year in the appropriate registry of deeds. In Chambers, he offered his undertaking not to take any proceedings under that Act pending the determination of the appeal. The respondent also urged that every home is unique to its owner and that there is nothing so special about the Turner-Lienaux residence that it deserves protection from the risks of litigation.
[19] The respondent further argues that s. 45(1) of the Judicature Act, R.S.N.S. 1989, c. 240 provides that household furnishings and furniture reasonably necessary for a debtor and her family are exempt from seizure for execution. As to Turner-Lienaux’s income, he submits that any recovery pursuant to execution will be limited by the fact that it is already subject to garnishment.
[20] I am of the view that in the particular circumstances of this proceeding, the appellants have not established irreparable harm as required by the second requirement of the primary test in Fulton Insurance, supra. The financial situation surrounding the matrimonial home appears to be a serious one. There was no evidence of the property’s present appraised or assessed value. However, even if the dispute over the second and third mortgages is resolved in Turner-Lienaux’s favour, it is apparent that the residence is substantially encumbered. Even before issuance of the decision of the trial judge, it would seem that making the payments on the first mortgage and meeting living expenses might well be a challenge.
[21] However, any sale or loss of the residence that might be suffered pending appeal is not likely to arise from enforcement of the order after trial granted by Justice Hood. The equity in the matrimonial home, whatever it may be, is Turner-Lienaux’s major asset. Even if he wishes to sell that home towards satisfying his judgment, the respondent must abide by the provisions of the Sale of Land Under Execution Act. Section 4 precludes him from selling until a year after registration of the judgment. The amount of the judgment cannot be ascertained until the solicitor and client costs and disbursements awarded the respondent are taxed. Neither party indicated that that has been done. The order after trial is dated July 4, 2001, less than two weeks ago, and it may be some time before taxation of the accounts pertaining to this lengthy trial can be finally concluded. In any event, the respondent has undertaken not to proceed until the disposition of the appeal, even if that should require him to wait beyond the one year period stipulated in the Sale of Land Under Execution Act. It is also to be noted that the appellants did not provide any evidence nor did they argue that the decision and order in favour of the respondent constitutes an event of default under any of the mortgages charging the home.
[22] In these circumstances, pending the disposition of the appeal there is virtually no risk that any harm which arises from execution of the judgment would befall the residence. It is to be remembered that the appellants are seeking a stay of execution. Unless whatever harm alleged is connected to the enforcement of the decision and order under appeal, it usually will not constitute irreparable harm as required by the second part of the primary test in Fulton Insurance, supra on such an application.
[23] This situation is distinguishable from that in Lienaux, supra where Clarke, C.J.N.S. concluded that the possible sale of this residence met the test of irreparable harm. There, if the stay pending appeal had not been granted, the mortgage lender would have been entitled to move to sell the home. Here, the respondent must comply with the procedure in the Sale of Land Under Execution Act and has undertaken not to proceed to sell the home to satisfy the order issued by the trial judge until following the disposition of the appeal of that order.
[24] The appellants’ arguments on irreparable harm were directed to Turner-Lienaux’s matrimonial home. It is apparent that on a practical level, the respondent would not make any substantial recovery by executing against her other assets. The full value of that appellant’s household furniture and furnishings appears to be encumbered by the chattel mortgage to the fourth mortgagee. Her income is already garnisheed to an earlier judgment creditor. The appellants did not submit that execution of the order on these assets or income would constitute irreparable harm.
[25] As to the appellants’ suggestion that the respondent might execute upon rental income if the residence were rented to service the first mortgage, there was no evidence that any serious consideration has been given to leasing the matrimonial home. The affidavit in support did not mention any intention to rent. I note that the property had not been rented earlier, even though Turner-Lienaux has had to borrow $200,000 for the trial and related litigation. Having in mind as well that this submission was limited to a very brief written argument in the third of the appellants’ pre-hearing submissions and was not raised in oral argument, I conclude that rental of the home is but a possibility that Turner-Lienaux might come to consider and one that is not appropriate to address at this time.
[26] As indicated earlier, Smith’s Field has no income or assets. It has nothing against which the respondent could execute and the appellants did not allege any irreparable harm on its behalf.
[27] In summary, it is my view that Turner-Lienaux and Smith’s Field have failed to demonstrate that they or either of them would suffer irreparable harm if the stay of execution were not granted.
(iii) Balance of Convenience
[28] Since all three parts of the primary test must be satisfied before a stay will be granted and I have found that the second requirement of irreparable harm was not, it is not necessary for me to address this third part of the primary test.
Exceptional Circumstances
[29] If the primary test is not met, the alternative or secondary test in Fulton Insurance, supra provides that a stay of execution of judgment pending disposition of the appeal may be granted if the appellant satisfies the court that there are exceptional circumstances that would make it fit and just that the stay be granted in this case.
[30] It is to be noted that where a stay involves a judgment for costs or any other monetary sum, the appellant is normally required to meet the primary test and if the appellant fails to do so, it would be rare to find exceptional circumstances justifying the exercise of judicial discretion in favour of granting a stay: See Lienaux et al. v. Toronto-Dominion Bank (1997), 161 N.S.R. (2d) 236 (C.A.) at p. 240. There is little jurisprudence on what constitutes exceptional circumstances. In Coughlan et al. v. Westminer Canada Ltd. et al. (1993), 125 N.S.R. (2d) 171 Freeman, J.A. commented at p. 175:
The secondary test applies when circumstances are exceptional. If, for example, the judgment appealed from contains an error so egregious that it is clearly wrong on its face, it would be fit and just that execution should be stayed pending the appeal.
[31] The appellants submit that the trial judge’s award of solicitor and client costs constitutes exceptional circumstances that support the issuance of a stay. In her decision, the judge observed that solicitor and client costs are awarded in rare and exceptional circumstances. In her view, the appellants’ conduct in pursuing what she determined to be unfounded allegations against the respondent was reprehensible and warranted rebuke through such an award. In refusing to award costs against Mr. Lienaux personally, she commented that the solicitor and client costs awarded against the appellants was the only award which had any chance of providing the costs indemnity to the respondent which in her view he deserves.
[32] The appellants contend that the award of solicitor and client costs made by the trial judge was punitive rather than compensatory in nature and should be stayed. They rely upon Hiltz and Seamone Co. v. Nova Scotia (Attorney General) (1998), 167 N.S.R. (2d) 353 (C.A.) wherein the appellant sought stays of execution with respect to awards of $200,000 in general damages and $100,000 in punitive damages. Cromwell, J.A. denied a stay in relation to the payment of general damages but found there were exceptional circumstances which justified a stay of the order with respect to punitive damages. The appellants point out that he wrote at p. 356:
Different considerations [sic] come into play with respect to the award of punitive damages. Such damages are not awarded to compensate the successful plaintiff for any loss suffered, but rather to punish and deter the defendant’s wrongful conduct. . . . That being the case, it seems to me that the rationale for the general rule that judgment should be enforceable pending appeal is considerably weaker as regards awards of punitive damages. This consideration is particularly significant in a case such as this in which the respondent Hiltz and Seamone Company Limited has received a significant compensatory award and where, as here, there is no evidence that non-payment of the punitive damages pending appeal will cause the respondent any irreparable harm or hardship.
[33] Generally an award of solicitor and client costs of itself does not constitute exceptional circumstances justifying a stay. In Hiltz and Seamone, supra Justice Cromwell went on to state at p. 356:
In reaching this conclusion, I do not wish to suggest that an award of punitive damages should, of itself, necessarily be considered an exceptional circumstance justifying the stay of such an order. I base my decision on all of the circumstances which I have outlined.
[34] In Earle v. Coltsfoot Publishing Co. et al. (2000), 183 N.S.R. (2d) 396 (C.A.), the appellants were found liable for defamation and ordered to pay general damages of $20,000, aggravated damages of $10,000 and punitive damages of $30,000. Among other things, they applied for a stay of the payment of the punitive damages pending appeal. In doing so, they relied heavily on Hiltz and Seamone, supra.
[35] In dismissing their application for a stay, Glube, C.J.N.S. in Chambers stated at p. 240 that it was clear in Hiltz and Seamone that Justice Cromwell had negated the position that an award of punitive damages would always be considered an extraordinary circumstance. In that case, unlike the case before her, the award of general damages was large and there had been no question that if that appellant was unsuccessful on the appeal, the punitive damages would be paid.
[36] Solicitor and client costs were also considered in Coughlan et al. v. Westminer Canada Ltd. et al. (1993), 125 N.S.R. (2d) 171(C.A.). Freeman, J.A. concluded that an award of over $6,000,000, made up chiefly of solicitor and client costs, even when coupled with a very lengthy trial, extreme ill-will between the parties, and a risk that the appellants would have difficulty recovering the amounts they had been ordered to pay in the event they succeeded on appeal, did not constitute exceptional circumstances within the secondary test in Fulton Insurance, supra. He was not prepared to find that that test was met automatically merely because the amount is substantial, although he did observe at p. 178 that there may be cases when the amount of the award in itself is an unusual circumstance making it fit and just that a stay be ordered.
[37] In my view, the award of solicitor and client costs here does not constitute exceptional circumstances that would make it fit and just that a stay be granted in this case. As indicated above, Hiltz and Seamone does not establish that an award of punitive damages of itself is to be considered such an exceptional circumstance. Furthermore, it appears from the trial judge’s comments recounted in § 30 above that her award of solicitor and client costs may not have been purely punitive but may have been intended to have compensatory attributes as well. In Hiltz and Seamone, supra that respondent’s receipt of a significant compensatory award by way of general damages was a factor . Here, this respondent, the defendant at trial, did not recover any compensatory award. While the award of solicitor and client costs when taxed is anticipated to be a significant amount, that of itself is not sufficient to meet the secondary test.
Disposition
[38] The appellants have failed to discharge the heavy burden on them to demonstrate that they satisfy either the primary test or the secondary test in Fulton Insurance, supra for a stay of execution pending appeal. I would therefore dismiss their application pursuant to Civil Procedure Rule 62.10. The respondent is entitled to his costs of the application which I fix at $1,000.00 together with disbursements.
Oland, J.A.